item 14 principal accounting fees services information required item set forth section headed “independent auditors’ fees services” proxy statement incorporated herein reference part iv item 15 item 14 principal accounting fees services dale matheson carrhilton labonte llp served independent registered public accounting firm audited financial statements fiscal years ended december 31 2008 2007 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors approved services independent accountants provided us past two fiscal years item 15 item 14 principal accounting fees services dale matheson carrhilton labonte llp served independent registered public accounting firm audited financial statements fiscal years ended december 31 2009 2008 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors approved services independent accountants provided us past two fiscal years item 15 item 14 principal accounting fees services marcum llp served independent registered public accounting firm audited financial statements fiscal years ended december 31 2014 december 31 2014 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors audit committee approved services independent accountants provided us past two fiscal years tapimmune inc consolidated financial statements december 31 2015 reports independent registered public accounting firms consolidated balance sheets consolidated statements operations comprehensive loss consolidated statement stockholders’ equity deficit consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm audit committee board directors shareholders tapimmune inc audited accompanying consolidated balance sheets tapimmune inc “company” december 31 2015 2014 related consolidated statements operations comprehensive loss changes stockholders’ equity deficit cash flows years ended financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audit included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tapimmune inc december 31 2015 2014 consolidated results operations cash flows years ended conformity accounting principles generally accepted united states america accompanying financial statements prepared assuming company continue going concern discussed note 2 financial statements company suffered losses operations require identifying new sources capital fund operations matters raise substantial doubt company’s ability continue going concern management’s plans concerning matters also discussed note 2 consolidated financial statements accompanying financial statements include adjustments might result outcome uncertainty marcum llp new york ny april 14 2016 tapimmune inc consolidated balance sheets accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements operations comprehensive loss accompanying notes integral part consolidated financial statements tapimmune inc consolidated statement stockholders’ equity deficit accompanying notes integral part consolidated financial statements tapimmune inc condensed consolidated statements cash flows accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements cash flows accompanying notes integral part consolidated financial statements tapimmune inc notes consolidated financial statements december 31 2015 note 1 nature operations tapimmune inc “company” nevada corporation incorporated 1992 biotechnology company focusing immunotherapy specializing development innovative peptide genebased immunotherapeutics vaccines treatment oncology infectious disease unlike vaccine technologies narrowly address initiation immune response tapimmune’s approach broadly stimulates cellular immune system enhancing function killer tcells thelper cells restoring antigen presentation tumor cells allowing recognition killing immune system phase study mayo clinic rochester mn evaluating safety immune responses set proprietary her2neu antigens successfully completed results led decision proceed phase ii clinical studies 2016 separate phase study also conducted mayo foundation “mayo” ovarian breast cancer folate receptor alpha folate receptor alpha expressed nearly 50 breast cancers addition 95 ovarian cancers treatment options surgery chemotherapy leaving important urgent clinical need new therapeutic time recurrence relatively short type cancer survival prognosis extremely poor recurrence usa alone approximately 30000 ovarian cancer patients newly diagnosed every year folate receptor antigens applicable ovarian triple negative breast cancer diseases treatment options beyond surgery chemotherapy therefore company hopeful might ideal candidate orphan drug status indications study successfully completed results led decision proceed multiple phase ii studies 2016 addition enhancing visibility cancer infected cells patient’s immune system critical aspect effective vaccine regard tapimmune’s polystart nucleic acidbased technology provides fourfold increase target cell specific naturally processed antigenic epitopes cells surface increased cell surface presentation corresponding increases activated helper andor longlived killer tcell populations effectively seek work destroy patient’s cancer cells consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2015 company working capital deficiency incurred significant losses since inception development business ability company continue going concern dependent raising additional capital fund clinical trials ongoing research development maintenance protection patents accommodation certain debt obligations ultimately generating future profitable operations planned expenditures relating current future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities management addressing going concern remediation seeking new sources capital restructuring retiring debt conversion equity debt settlement arrangements creditors cost reduction programs seeking possible joint venture participation management’s plans intended return company financial stability improve continuing operations company continuing initiatives raise capital private placements related party loans institutional sources meet immediate working capital requirements historically company raised capital issuances various financial instruments company recently completed significant restructuring outstanding debt equity instruments equity additional capital required expand programs including preclinical work progress clinical trials lead vaccine candidates strategic partnerships needed continue product development portfolio fund development costs measures successful may contribute reduce risk going concern uncertainties company next twelve months certainty company able arrange sufficient funding satisfy current debt obligations continue development products marketability note 2 summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america “gaap” principles consolidation financial statements include accounts company whollyowned subsidiary genemax pharmaceuticals inc “gpi” significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include valuation allowance deferred tax assets determining fair value stockbased compensation stock based transactions fair value components derivative liabilities warrants accrued liabilities fair value measurements fair value certain company’s financial instruments including cash equivalents accrued compensation accrued liabilities approximate cost short maturities company measures fair value certain financial assets liabilities recurring basis fair value hierarchy used rank quality reliability information used determine fair values financial assets liabilities carried fair value classified disclosed one following three categories • level 1quoted prices unadjusted active markets identical assets liabilities • level 2inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities • level 3unobservable inputs supported little market activity significant fair value assets liabilities financial instruments concentration credit risk fair values cash accounts payable current monetary liabilities approximate carrying values due immediate shortterm maturity financial instruments company’s operations financing activities conducted primarily united states dollars result company subject significant exposure market risks changes foreign currency rates unless otherwise noted management’s opinion company exposed significant interest credit risks arising assets liabilities classified financial instruments prior period reclassifications certain prior period amounts combined december 31 2014 consolidated financial statements reclassified comparability december 31 2015 presentation reclassifications effect previously reported net loss stockbased compensation stockbased compensation measured grant date based fair value award fair value award ultimately expected vest recognized expense straightline basis requisite service period generally vesting period expense recognized portion award expected vest reduced estimated forfeiture rate forfeiture rate determined time grant revised necessary subsequent periods actual forfeitures differ estimates expected term expected term options represents period company’s stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility company computes stock price volatility expected terms based historical common stock trading prices riskfree interest rate company bases riskfree interest rate implied yield available u treasury zerocoupon issues equivalent remaining term expected dividend company never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore uses expected dividend yield zero valuation models company recognizes fair value stock options granted nonemployees stockbased compensation expense period related services received research development costs company acquired development marketing rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs company spent 1711000 research development year ended december 31 2015 compared 189000 prior fiscal year income taxes company follows asset liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized income period includes date allowances deferred tax assets derivative liability company evaluates convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instrument classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date management must determine whether instrument embedded feature indexed company’s stock entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions exercise affects accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain free standing warrants contain contingently puttable cash settlement loss per common share basic loss per share computed dividing loss attributable common stockholders weighted average number common shares outstanding period applicable diluted earnings per share reflect potential dilution securities could share earnings loss company common shares potentially issuable conversion outstanding convertible debentures warrants stock options antidilutive included calculation recently issued accounting pronouncements accounting standard update asu 201415 presentation financial statementsgoing concern subtopic 20540 disclosure uncertainties entity’s ability continue going concern amendments update effective annual period ending december 15 2016 annual periods interim periods thereafter early application permitted company currently evaluating impact update consolidated financial statements note 3 net loss per share applicable common shareholder net loss per share applicable common stockholders options warrants convertible debt outstanding considered antidilutive years ended december 31 2015 2014 due net losses following securities included diluted net loss per share calculation effect antidilutive periods presented note 4 research agreements crucell holland b v “crucell” research license option agreement 2003 amended 2008 company acquired research license option agreement crucell use adenoviris technology company made use technology current work asked received work product crucell acquired johnson 2010 december 31 2015 company accrued 492000 amounts owed amended agreement note 5 derivative liability summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants categorized within level 3 fair value hierarchy years ended 2015 2014 follows foregoing assumptions recalculated every reporting period subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations financial assets liabilities measured fair value recurring basis financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet derivative liability warrants transfers level 1 2 3 year ended december 31 2015 following table presents changes level 3 liabilities measured fair value year ended december 31 2015 valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based u treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate company could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements company continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statements operations net cash settlement value time future transactions company consolidates merges another entity depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based u treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction note 6 promissory notes company outstanding promissory notes amount 30000 december 31 2014 30000 promissory notes bear 10 annual interest due 2012 december 31 2015 notes default request payment note 7 promissory note related party company outstanding promissory note amount 23000 december 31 2014 23000 owed officer director company promissory note bears interest charges fixed repayment terms note 8 capital stock split increase authorized shares february 18 2014 company completed reverse stock split thereby issuing 1 new share 100 outstanding shares company’s common stock amended company’s articles incorporation increase authorized shares common stock 150000000 shares common stock 500000000 shares share capital series convertible preferred stock company designated 1250000 series convertible preferred shares series par value 0001 share series automatically converted five shares company’s common stock upon occurrence 1100 reverse stock split series b convertible preferred stock company designated 1500000 series b convertible preferred shares series b par value 0001 terms series b follows • rank pari passu common stock respect rights liquidation winding dissolution • dividend rights except may declared board sole absolute discretion • shall right cast one thousand 1000 votes share held record matters submitted vote holders corporation’s common stock • shall automatically convert seven 7 shares common upon occurrence 1100 reverse stock split shares outstanding preferred shares december 31 2015 share transactions private placements january 2015 company entered securities purchase agreement certain investors sale 7320000 units purchase price 020 per unit total purchase price approximately 1250000 net finders’ fee offering expenses approximately 214000 unit consisting one share company’s common stock ii one series warrant purchase one share common stock iii one series b warrant purchase one share common stock iv one series c warrant purchase one share common stock v one series warrant purchase one share common stock vi one series e warrant purchase one share common stock series b c e warrants hereby collectively referred “january 2015 warrants” series warrants exercisable 150 per share five year term series b warrants exercisable 040 per share six month term series c warrants exercisable 100 per share five year term series warrants exercisable 075 per share extent series b warrants exercised five year term date series b warrants exercised series e warrants exercisable 125 per share extent series c warrants exercised five year term date series c warrants exercised pursuant placement agent agreement company agreed issue warrants purchase 366000 common shares substantially terms january 2015 warrants pay 7 finders fee gross proceeds sale securities march 2015 company entered securities purchase agreement certain accredited investors sale 5000000 units purchase price 020 per unit total purchase price approximately 950000 net finders’ fee offering expenses approximately 50000 unit consisting one share company’s common stock ii one series warrant purchase one share common stock iii one series b warrant purchase one share common stock iv one series c warrant purchase one share common stock v one series warrant purchase one share common stock vi one series e warrant purchase one share common stock series b c e warrants hereby collectively referred “march 2015 warrants” march 2015 warrants substantially terms january 2015 warrants pursuant placement agent agreement company agreed issue warrants purchase 125000 common shares substantially terms march 2015 warrants pay 35 finders fee gross proceeds sale securities initial fair value warrants issued pursuant asc 48010 distinguishing liabilities equity asc 81540 contracts entity’s equity common stock purchase warrants classified derivative liability company cannot control ability gross settle financial instruments registered securities fair value warrants issued pursuant january march 2015 stock purchase agreement 9313000 weighted average inputs include contractual term 50 years volatility 158 risk free rate 12 may 2015 restructuring agreement may 2015 company entered restructuring agreement investors january 2015 march 2015 private placements • exercise price series warrants changed 150 per warrant 010 per warrant • exercise price series b warrants changed 040 per warrant 020 per warrant • warrant series b existing prior restructuring agreement replaced two warrants series • exercise price series c warrants changed 100 per warrant 050 per warrant • warrant series c existing prior restructuring agreement replaced two warrants series result restructuring agreement company issued additional 12320000 series b warrants 12320000 series c warrants fair value warrants issued pursuant may 2015 restructuring agreement 6133000 weighted average inputs include contractual term 246 years volatility 141 risk free rate 15 management compensation november 2015 company entered employment agreement dr glynn wilson company’s chief executive officer president chairman company part agreement company granted dr wilson 315000 shares unregistered common stock fully vested december 31 2015 shares issued accordingly fair value common stock approximately 191000 accounted accrued liability share purchase warrants summary company’s share purchase warrants december 31 2015 changes period presented year ended december 31 2015 warrant holder exercised 4820000 series warrants 010 per warrant total 482000 year ended december 31 2015 warrant holders exercised 24639995 series b warrants 020 per warrant total 4928000 year ended december 31 2015 warrant holders exercised 7620000 series c warrants 050 per warrant total 3810000 fair value derivative liabilities associated warrants amount 16835000 credited additional paidin capital stock compensation plan march 19 2014 company adopted 2014 omnibus stock option plan “2014 plan” 2014 plan amended february 2015 provide grants consultants november 2015 increase number shares reserved issuance plan 50 million shares 70 million shares options granted plan shall prices terms determined board directors share purchase options summary company’s stock options december 31 2015 2014 changes years presented following weighted average assumptions used blackscholes optionpricing model value stock options granted 2015 stock based compensation costs 945000 expected recognized next 186 years note 9 income taxes company income tax expense due operating losses incurred years ended december 31 2015 2014 approximately 16 million nonqualified stock options cancelled 2015 due terminations resulted reversal deferred tax asset approximately 052 million cancellations result book income december 31 2015 effects temporary differences give rise significant portions deferred tax assets december 31 2015 2014 follows company assesses likelihood deferred tax assets realized extent realization likely valuation allowance established based upon history losses management believes likely future benefits deferred tax assets realized established full valuation allowance years ended december 31 2015 2014 valuation allowance decreased 16 million december 31 2015 company research development tax credit carryforwards 117000 offset future federal income taxes research development tax credit carryforwards begin expire 2029 company approximately 24123000 federal 4336000 state nols may available offset future taxable income federal net operating loss carryforwards utilized expire 2029 2035 state net operating loss carryforwards utilized expire 2035 accordance section 382 internal revenue code usage company’s net operating loss carryforwards may limited event change ownership full section 382 analysis prepared nols could subject limitation section 382 years ended december 31 2015 2014 expected tax expense benefit based u federal statutory rate reconciled actual tax provision benefit follows asc 740 prescribes recognition threshold measurement attribute financial statement recognition measurement tax positions taken expected taken tax return benefits recognized tax position must morelikelythannot sustained upon examination taxing authorities december 31 2015 2014 unrecognized tax benefits company recognizes accrued interest penalties income tax expense amounts accrued payment interest penalties december 31 2015 2014 company currently aware issues review could result significant payments accruals material deviation position next year note 10 contingencies commitments company entered office property lease one year expiring july 2016 minimum rental payments due agreement december 31 2015 17500 durin year ended december 31 2015 company exercised option license certain intellectual property rights mayo foundation license assignment agreement company agreed 1 make upfront license fee payments 100000 350000 partial consideration march 21 2016 june 21 2016 respectively 2 pay annual license maintenance fees 50000 beginning july 21 2017 every year thereafter company starts paying 6 royalty sales licensed product 3 pay milestone fees licensed product developed company achievement certain events contingencies case fundamental transaction investors january march 2015 financings could require company pay black scholes value remaining warrants item 15 item 14 principal accounting fees services information required item set forth section headed “independent auditors’ fees services” proxy statement incorporated herein reference part iv item 15 item 14principal accounting fees services dale matheson carrhilton labonte llp served independent registered public accounting firm audited financial statements fiscal years ended december 31 2010 2009 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors approved services independent accountants provided us past two fiscal years item 15 item 14 principal accounting fees services dale matheson carrhilton labonte llp served independent registered public accounting firm audited financial statements fiscal years ended december 31 2012 2011 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors approved services independent accountants provided us past two fiscal years item 15 item 14 principal accounting fees services marcum llp served independent registered public accounting firm audited financial statements fiscal years ended december 31 2016 december 31 2015 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors audit committee approved services independent accountants provided us past two fiscal years part iv item 15 item 14principal accounting fees services dale matheson carrhilton labonte llp served independent registered public accounting firm audited financial statements fiscal years ended december 31 2011 2010 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors approved services independent accountants provided us past two fiscal years item 15 item 14principal accounting fees services dale matheson carrhilton labonte llp served independent registered public accounting firm audited financial statements fiscal years ended december 31 2013 2012 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors approved services independent accountants provided us past two fiscal years item 15 item 14 principal accounting fees services information required item set forth section headed “independent auditors’ fees services” proxy statement incorporated herein reference part iv item 15 item 14 principal accounting fees services marcum llp served independent registered public accounting firm audited financial statements fiscal year ended december 31 2014 dale matheson carrhilton labonte llp served independent registered public accounting firm audited financial statements fiscal year ended december 31 2013 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors approved services independent accountants provided us past two fiscal years item 15 item 14 principal accounting fees services marcum llp served independent registered public accounting firm audited financial statements fiscal years ended december 31 2017 december 31 2016 aggregate fees professional services rendered us auditor set forth audit fees audit fees aggregate fees billed professional services rendered independent auditors audit annual financial statements review financial statements included quarterly reports services provided connection statutory regulatory filings engagements audit related fees audit related fees aggregate fees billed independent auditors assurance related services reasonably related performance audit review financial statements described preceding category tax fees tax fees billed independent auditors tax compliance tax advice tax planning fees include fees billed independent auditors products services described immediately preceding three categories policy preapproval services performed independent auditors audit committee’s policy preapprove audit permissible nonaudit services performed independent auditors audit committee approved services independent accountants provided us past two fiscal years part iv item 15 item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2019 december 31 2018 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors company overview clinicalstage immunooncology company specializing development commercialization novel cellbased immunotherapies innovative peptidebased vaccines treatment hematological malignancies solid tumor indications developed lead product candidates multitaaspecific cell technology based selective expansion nonengineered tumorspecific cells recognize tumor associated antigens taas tumor targets kill tumor cells expressing targets cells designed recognize multiple tumor targets produce broad spectrum antitumor activity advancing two pipelines product candidates part multitaaspecific cell program autologous cells treatment lymphoma multiple myeloma mm selected solid tumors allogeneic cells treatment acute myeloid leukemia aml acute lymphoblastic leukemia genetically engineer multitaaspecific cell therapies believe product candidates easier less expensive manufacture reduced toxicities current engineered chimeric antigen receptor cart cell receptorbased therapies may provide patients meaningful clinical benefit also developing innovative peptidebased immunotherapeutic vaccines treatment metastatic solid tumors pursuing posttransplant aml lead indication first companysponsored multitaaspecific cell program multitaaspecific cell therapy well tolerated ongoing phase 12 clinical trial conducted strategic partner baylor college medicine bcm reported march 2019 eleven thirteen patients adjuvant disease setting dosed multitaaspecific cell therapy receiving allogeneic stem cell transplant survived ranging 6 weeks 25 years postinfusion nine remaining patients continuing complete remission ccr survival six patients active disease ranged 4 21 months compared historical survival rate approximately 45 months patients receive standard care posttransplant submitted investigational new drug ind application united states food drug administration fda initiate phase 2 clinical trial multitaaspecific cell therapy refer mt401 postallogeneic hematopoietic stem cell transplant patients aml adjuvant active disease setting may become pivotal pending results interim analysis dose administered multicenter trial current maximum tolerated dose ongoing phase 12 trial adjuvant setting patients randomized either multitaaspecific cell therapy approximately 90 days posttransplant versus standard care observation active disease patients receive mt401 following relapse posttransplant part singlearm group february 2020 announced fda permitted us initiate phase 2 clinical trial beginning safety leadin portion trial recently reported interim data ongoing phase 12 clinical trial multitaaspecific cell therapy treatment pancreatic adenocarcinoma conducted bcm trial observed clinical benefit correlated postinfusion detection tumorreactive cells patient peripheral blood within tumor biopsy samples patients tumorresection arm trial cells exhibited activity targeted antigens nontargeted taas indicating induction antigen spreading date observed cytokine release syndrome neurotoxicity trial also evaluating multitaaspecific cell therapies phase 2 clinical trial treatment breast cancer phase 1 clinical trials treatment lymphoma mm sarcoma conducted bcm december 2019 multitaaspecific cell therapies generally well tolerated patients enrolled clinical trials hematological solid tumor indications incidents cytokine release syndrome neurotoxicity frequently associated cd19 cart therapies based observations clinical trials aml pancreatic cancer lymphoma mm believe multitaaspecific cell therapies potential mediate meaningful antitumor effect well significant vivo expansion cells may initiate additional phase 2 clinical trials investigating indications 2020 addition planned phase 2 trial posttransplant aml patients financial overview critical accounting policies consolidated financial statements prepared conformity us gaap require use estimates judgments assumptions affect reported amounts assets liabilities disclosure contingent liabilities date financial statements reported amounts expenses periods presented believe accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods critical accounting estimates affect consolidated financial statements judgments assumptions used consistent described note 3 notes consolidated financial statements form 10k research development expenses date research development expenses related primarily development clinical platform identification development product candidates clinical research development expenses consist expenses incurred performing research development activities cost clinical trials including compensation sharebased compensation expense benefits research development employees consultants facilities expenses overhead expenses cost supplies manufacturing expenses fees paid third parties outside expenses clinical costs expensed incurred costs timing clinical trials development product candidates depend variety factors include limited following • per patient clinical trial costs • number patients participate clinical trials • number sites included clinical trials • length time required enroll eligible patients • number doses patients receive • dropout discontinuation rates patients • potential additional safety monitoring studies requested regulatory agencies • duration patient followup • efficacy safety profile product candidates • ability successfully manufacture patient doses addition potential success product candidate depend numerous factors including clinical trial outcomes acceptance regulatory authorities competition manufacturing capability commercial viability determine programs pursue much fund program response ongoing scientific assessments competitive developments clinical trial results well assessment product candidates commercial potential anticipate research development costs continue increase next several years due increased spending clinical development manufacturing product candidates general administrative expenses general administrative expenses consist primarily salaries related costs including sharebased compensation personnel executive finance accounting business development legal human resources functions significant costs include facility costs otherwise included research development expenses legal fees relating patent corporate matters insurance costs professional fees consultancy accounting audit investor relations anticipate general administrative expenses increase future support continued research development activities potential commercialization product candidates income taxes recognize income tax expense years ended december 31 2019 2018 income expense income expense net consists interest income change fair value warrant liabilities results operations years ended december 31 2019 2018 following table summarizes results operations rounded thousand except per share amounts years ended december 31 2019 2018 together changes items revenue generate revenue years ended december 31 2019 2018 respectively sales licensing product candidates year ended december 31 2019 recognized 213000 revenue associated grant awarded mayo foundation us department defense phase 2 clinical trial tpiv200 mayo paid us clinical supplies manufactured us provided clinical trial funded grant refer grant mayo grant year ended december 31 2018 also recognized 206000 grant income mayo grant operating expenses operating expenses incurred fiscal year ended december 31 2019 227 million compared 1484 million prior year significant changes expenditures operating expenses outlined follows research development expenseintellectual property acquired research development intellectual property acquired decreased 1160 million year ended december 31 2018 0 year ended december 31 2019 representing fair market value assets acquired us connection merger completed october 2018 merger accounted asset acquisition assets acquired consisted intellectual property received regulatory approval total purchase price immediately expensed process research development intellectual property acquired research development expense research development expenses increased 61 128 million year ended december 31 2019 compared 80 million year ended december 31 2018 increase 48 million 2019 primarily attributable following increase 19 million headcountrelated expenses increased number research development personnel increase 19 million clinical consulting professional expenses increase 14 million research development stockbased compensation expenses increase 11 million process development expenses increase 01 million expenses decrease 16 million clinical trial expenses due stages ongoing clinical trials decreased number active patients trials general administrative expenses general administrative expenses decreased 59 100 million year ended december 31 2019 244 million prior period decrease 144 million primarily attributable decrease 128 million stockbased compensation expenses due executive stock option grants issued fiscal year 2018 well following increase 08 million headcountrelated expenses increased number administrative personnel also incurred full year expenses fiscal year 2019 personnel hired second half fiscal year 2018 increase 10 million legal professional fees increase 03 million officerelated expenses insurance general administrative expenses decrease 37 million mergerrelated expenses fiscal year 2019 income expense change fair value warrant liabilities change fair value warrant liabilities year ended december 31 2019 18000 compared 40000 fiscal year ended december 31 2018 interest income interest income approximately 11 million year ended december 31 2019 attributable interest income relating funds held us treasury notes us government agencybacked securities interest income year ended december 31 2018 approximately 03 million net loss recorded net loss 214 million net loss per share basic diluted 047 year ended december 31 2019 compared net loss 1480 million net loss per share basic diluted 775 year ended december 31 2018 weighted average number shares outstanding basic diluted 456 million year ended december 31 2019 compared 191 million year ended december 31 2018 decrease net loss 2019 compared 2018 due research development intellectual property acquired 2018 connection merger decrease stockbased compensation 2019 offset 2019 increased spending due continued expansion research development activities increased clinical trials manufacturing activities overall growth corporate infrastructure anticipate continue incur net losses future invest research development activities including clinical development multitaaspecific cell product candidates addition general administrative expenses decreased 2019 mainly due decrease stockbased equity awards related existing new executives key consultants liquidity capital resources generated revenues sales licensing product candidates since inception limited revenue associated grants financed operations primarily public private offerings stock debt including warrants exercise thereof following table sets forth cash equivalents working capital december 31 2019 2018 cash flows following table summarizes cash flows years ended december 31 2019 2018 operating activities net cash used operating activities year ended december 31 2019 183 million use cash primarily related net loss 214 million addition effect changes asset liability accounts including increase prepaid expenses deposits 14 million decrease accounts payable accrued liabilities 10 million decrease interest receivable 52000 net increase lease liabilities 02 million net cash used operating activities year ended december 31 2018 145 million use cash primarily related net loss 1480 million addition effect changes asset liability accounts including increase prepaid expenses deposits 01 million increase accounts payable accrued liabilities 12 million increase interest receivable 01 million investing activities net cash used investing activities 04 million 01 million purchase property equipment years ended december 31 2019 2018 respectively financing activities net cash provided financing activities 816000 year december 31 2019 due primarily exercise stock warrants stock options net cash provided financing activities 712 million year december 31 2018 due primarily following may 2018 private placement transaction common stock purchase agreement may 18 2018 closed sale 1300000 shares common stock 240 per share pursuant common stock purchase agreement existing accredited investor private placement rule 506 regulation aggregate gross proceeds approximately 31 million may 2018 exercise warrants held existing institutional investors may 18 2018 certain existing institutional investors agreed exercise existing warrants agreed reduce exercise price portion warrants 600 900 1500 720 respectively per share 250 per share provided investors exercise warrants cash immediately investors exercised warrants purchase 782506 shares aggregate proceeds approximately 20 million october 2018 private placement transaction october 17 2018 concurrent completion merger issued certain accredited investors private placement transaction aggregate 17500000 shares common stock warrants purchase 13437500 shares common stock exercise price 500 per share fiveyear term aggregate proceeds approximately 700 million future capital requirements date generated revenues commercial sale approved drug products expect generate substantial revenue least next several years fail complete development product candidates timely manner fail obtain regulatory approval ability generate future revenue compromised know generate revenue product candidates expect generate significant revenue unless obtain regulatory approval commercialize product candidates expect expenses increase connection ongoing activities particularly continue research development continue initiate clinical trials seek marketing approval product candidates addition obtain approval product candidates expect incur significant commercialization expenses related sales marketing manufacturing distribution anticipate need substantial additional funding connection continuing operations unable raise capital needed attractive terms could forced delay reduce eliminate research development programs future commercialization efforts december 31 2019 cash equivalents approximately 439 million based revised clinical research development plans revised timing expectations related progress programs expect cash equivalents december 31 2019 enable us fund operating expenses capital expenditure requirements second quarter 2021 based estimate assumptions may prove wrong could utilize available capital resources sooner currently expect furthermore operating plan may change may need additional funds sooner planned order meet operational needs capital requirements product development commercialization numerous risks uncertainties associated development commercialization product candidates extent may enter additional collaborations third parties participate development commercialization unable estimate amounts increased capital outlays operating expenditures associated current anticipated clinical trials future funding requirements depend many factors • initiate continue clinical trials product candidates • continue research development product candidates seek discover additional product candidates seek regulatory approvals product candidates successfully complete clinical trials • establish sales marketing distribution infrastructure scaleup manufacturing capabilities commercialize product candidates may receive regulatory approval • evaluate strategic transactions may undertake • enhance operational financial information management systems hire additional personnel including personnel support development product candidates product candidate approved commercialization efforts product candidates early stages clinical preclinical development outcome efforts uncertain cannot estimate actual amounts necessary successfully complete development commercialization product candidates whether may achieve profitability time ever generate substantial product revenue expect finance cash needs combination equity debt financings collaboration arrangements plan continue fund operations capital funding needs equity andor debt financing may also consider new collaborations selectively partner technology extent raise additional capital sale equity convertible debt securities ownership interests stockholders diluted terms may include liquidation preferences adversely affect rights existing stockholders’ common stock incurrence indebtedness would result increased fixed payment obligations could involve certain restrictive covenants limitations ability incur additional debt limitations ability acquire license intellectual property rights operating restrictions could adversely impact ability conduct business raise additional funds strategic partnerships alliances licensing arrangements third parties may relinquish valuable rights technologies product candidates grant licenses terms unfavorable us may also required pay damages liabilities associated litigation legal proceedings involving company offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors tax loss credit carryforwards december 31 2019 approximately 738 million federal 474 million state net operating loss carryforwards may available offset future taxable income federal net operating loss carryforwards 419 million utilized expire 2029 2037 federal net operating loss carryforwards 319 million generated 2018 thereafter subject 80 limitation taxable income expire carry forward indefinitely state net operating loss carryforwards 219 million utilized begin expire 2035 state net operating loss carryforwards 255 million generated 2018 thereafter subject 80 limitation taxable income expire carry forward indefinitely change ownership greater 50 section 382 internal revenue code places significant annual limitations use net operating loss carryforwards december 31 2019 2018 recorded 100 valuation allowance deferred tax assets approximately 246 million 200 million respectively management believes uncertain fully realized determine future able realize portion net operating loss carryforwards adjustment valuation allowance deferred tax assets would increase net income period make determination inflation affects cost raw materials goods services use recent years inflation modest however fluctuations energy costs commodity prices affect cost raw materials components competitive environment somewhat limits ability recover higher costs resulting inflation raising prices although cannot precisely determine effects inflation business management’s belief effects future revenues operating results significant believe inflation material impact results operations periods presented except respect payrollrelated costs arising related governmentimposed regulations item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2008 period inception july 27 1999 december 31 2008 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors including limited set forth “risk factors” elsewhere annual report plan operations management believes estimated 5000000 conjunction significant debt reduction creditor negotiation equity debt settlement required next two years expenses associated balance preclinical development completion toxicology trials tap cancer vaccine prophylactic vaccine adjuvant various operating expenses encouraged recent success stories small cap biotech arena larger biotech pharmaceutical companies taken significant positions invested joint development projects smaller companies like capital markets currently challenging hopeful early success promising technology enable us raise required funding proceed 2008 challenging year capital markets able secure significant funding smaller bridge funding completed december 2007 able continue important patent work resulting granting significant patent mid way 2008 also able complete initial testing research vaccine stocks data hand able set clear preclinical vaccine construction manufacturing plan timeline right fda accredited partners unfortunately markets continued deteriorate able secure funding required enter contracts relationships place contracts planned funding secured work could begin fairly quickly past several years 2008 exception company obtained financing related unrelated parties challenging conditions company successful date raising sufficient funding sustain operations renegotiating replacing debt instruments extending terms conditions default occurred forms financing costly market risk perspective legal operation expense perspective consequence debt restructuring substantial dilution potential dilution shareholders stock based payments commitments required continue renew debt arrangements example 2008 promissory notes expired well year beyond initial term call would caused company severe distress even bankruptcy consideration extension continued support additional warrants issued discount lowest bid price time note holders expected short term loans repaid could asked collateral security note holders indicated outstanding debt significant burden businesses challenging capital market carried significant risk loans crucial company order keep afloat make payments would ultimately left company assets entered management working consulting firm past months determine workable solution company going forward company’s growth limited significant debt burden consulting firm engaged negotiate various creditors effort restructure certain debt including notes mentioned payables thereby placing company stronger foundation subsequent fundraising management confident workable solution achieved fund raising required initiate preclinical manufacturing contracts short term requirement roughly 1000000 15m 2m required next 12 months get us point initiate phase 1 study single phase 1 study cost approximately 1m outside internal development contracted manufacturing management actively seeking partnerships joint venture opportunities suitable companies generated cash flows fund operations activities due primarily nature lengthy product development cycles normal biotech industry therefore must raise additional funds future continue operations intend finance operating expenses issuances common stock believe anticipated future private placements equity capital successful may adequate fund operations next 24 months thereafter expect need raise additional capital meet longterm operating requirements future success viability dependent ability raise additional capital private offerings stock loans private investors additional financing may available upon acceptable terms adequate funds available acceptable terms may able conduct proposed business operations successfully could significantly materially restrict delay overall business operations results operations following sets table sets consolidated losses periods indicated year ended december 31 2008 compared year ended december 31 development stage company recorded net loss 2195939 year ended december 31 2008 compared 3891411 year ended december 31 2007 operating expenses operating expenses incurred fiscal year ended december 31 2008 2278598 compared 3891411 prior year significant changes expenditures outlined follows · consulting fees 233283 fiscal year ended december 31 2008 compared 171854 prior fiscal year increase due primarily new agreements current year investor relations marketing services · stockbased consulting fees 151500 year ended december 31 2008 compared 309500 prior year current prior year charges result fair valuation shares issued consultants options granted earned consultants periods · depreciation 7482 year ended december 31 2008 compared 5970 prior year increase resulting full depreciation current year furniture equipment purchased prior fiscal year · general administrative expenses 115693 year ended december 31 2008 compared 132587 prior year decrease resulting primarily reduction operations current year due resource restrictions · interest finance charges 778179 fiscal year ended december 31 2008 compared 1380075 prior fiscal year current year consisted 113634 accrued interest notes payable 206820 representing fair value warrants attached debt issued year 340048 nonmonetary charge related fair value beneficial conversion feature warrants 2007 convertible debt 117677 representing fair value warrants issued relate outstanding debt prior year consisted accrued interest accretion discount 2006 convertible debt amortization fair value warrants 2006 convertible debt 1016000 costs classified interest charges resulting conversion debt fair value warrants issuable new promissory notes signed current year 1016000 nonmonetary charge related unaccreted fair value beneficial conversion feature warrants 2007 convertible debt converted unaccreted charge required recognized immediately · management fees 353162 year ended december 31 2008 compared 286632 prior year difference resulting primarily change executive compensation second half prior year additional directors’ fees current year · stockbased management fees 172668 year ended december 31 2008 compared 654722 prior year current prior year charges result fair valuation options granted management earned period · professional fees 284288 year ended december 31 2008 compared 524502 prior year decrease prior year results decrease operations current year additional work relating financing arrangements fees relating review reinstatement patent applications incurred prior year · research development costs fiscal year ended december 31 2007 182343 compared 425569 prior fiscal year decrease results research consulting service agreements effect prior fiscal year net loss year ended december 31 2008 2195939 009 per share compared net loss 3891411 019 per share prior period weighted average number shares outstanding 23900839 year ended december 31 2008 compared 20815273 prior year liquidity capital resources following table sets forth cash working capital december 31 2008 2007 subject availability additional financing intend spend approximately 3000000 next twelve months carrying plan operations december 31 2008 987 cash hand working capital deficit 3032512 working capital december 31 2008 sufficient enable us pay general administrative expenses pursue plan operations next twelve months anticipate require additional funding approximately 3000000 management currently making significant efforts secure needed financing yet secured commitments respect financing able obtain financing amounts required terms acceptable us may forced scale back abandon plan operations various conditions outside control may detract ability raise capital needed execute plan operations including overall market conditions international local economies recognize united states economy suffered period uncertainty capital markets depressed levels established twelve months ago certainty levels stabilize reverse factors could material impact upon ability raise financing result upon shortterm longterm liquidity going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional equity financing factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business december 31 2008 accumulated losses 20812106 since inception financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern net cash used operating activities operating activities year ended december 31 2008 used cash 714425 compared 1248810 year ended december 31 2007 operating activities period inception july 27 1999 december 31 2008 used cash 11445979 operating activities primarily used cash result operating organizational activities consulting fees management fees professional fees research development net cash used investing activities year ended december 31 2008 investing activities used cash nil compared 22426 year ended december 31 2007 period inception july 27 1999 december 31 2008 investing activities provided cash 204747 net cash provided financing activities revenues since inception financed operations primarily private placements stock financing activities year ended december 31 2008 provided cash 547873 compared 1318339 year ended december 31 2007 period inception july 27 1999 december 31 2008 financing activities provided net cash 11242219 primarily sale equity securities critical accounting policies consolidated financial statements accompanying notes prepared accordance united states generally accepted accounting principles applied consistent basis preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods regularly evaluate accounting policies estimates use prepare consolidated financial statements general management’s estimates based historical experience information third party professionals various assumptions believed reasonable facts circumstances actual results could differ estimates made management see note 2 consolidated financial statements year ended december 31 2008 summary significant accounting policies offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2009 period inception july 27 1999 december 31 2009 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors including limited set forth “risk factors” elsewhere annual report plan operations management believes result significant debt settlement restructuring july 2009 company well positioned balance sheet restructured make possible go equity market raise estimated 5000000 necessary next two years expenses associated balance preclinical development completion toxicology trials tap cancer vaccine prophylactic vaccine development various operating expenses 2008 2009 challenging years capital markets however able secure 1000000 enabling us complete restructure ensure important patent work continued along pursue business development initiatives resulted collaboration agreement aeras global tuberculosis foundation new license agreement crucell holland giving us access best breed technology necessary components improve possible outcome vaccine manufacturing process last two years working diligently finding partners believe work closely form collaborative arrangements mutually beneficial february 1 2010 announced collaboration intent aeras global tb foundation aeras leading nonprofit product development partnerships dedicated development effective tuberculosis tb vaccine regimens prevent tuberculosis age groups affordable available adopted worldwide according world health organization 2007 estimated 137 million chronic active cases tb 93 million new cases 18 million deaths tb mostly developing countries aeras global tb vaccine foundation tapimmune entered rd collaboration effort overall goal evaluate efficacy tap concert novel tb vaccine candidates aeras based rockville maryland operates stateoftheart manufacturing laboratory facility identified additional partnership opportunities encourage shareholders keep eye news coming months scope kinds collaborations cannot emphasized enough world class institutions identified uniqueness potential technology platform opportunities pursuing generated cash flows operations fund operations activities due primarily nature lengthy product development cycles normal biotech industry therefore must raise additional funds future continue operations intend finance operating expenses issuances common stock andor debt although currently funds continue operations four months believe future investment successful adequate fund operations next 24 months thereafter expect need raise additional capital meet longterm operating requirements future success viability dependent ability raise additional capital private offerings stock loans private investors additional financing may available upon acceptable terms adequate funds available acceptable terms may able conduct proposed business operations successfully could significantly materially restrict delay overall business operations results operations following sets table sets consolidated losses periods indicated year ended december 31 2009 compared year ended december 31 development stage company recorded net loss 4461970 year ended december 31 2009 compared 2195939 year ended december 31 2008 operating expenses operating expenses incurred fiscal year ended december 31 2009 5382372 compared 2278598 prior year significant changes expenditures outlined follows · consulting fees 552339 fiscal year ended december 31 2009 compared 233283 prior fiscal year increase due primarily business development services including relating financing debt restructuring place prior period · stockbased consulting fees 506042 year ended december 31 2009 compared 151500 prior year current prior year charges result fair valuation shares issued consultants options granted earned consultants periods · general administrative expenses 85146 year ended december 31 2009 compared 115693 prior year decrease resulting primarily reduction operations current year due resource restrictions including closure vancouver location · interest finance charges 1188934 fiscal year ended december 31 2009 compared 778179 prior fiscal year current prior period interest charges primarily accretion interest fair value warrants issued promissory notes · management fees 260242 year ended december 31 2009 compared 353162 prior year difference resulting primarily change executive compensation second half prior year additional directors’ fees current year additionally board directors management reorganized year june 1 2009 portion fees paid accrued chief executive officer allocated research development · stockbased management fees 2019660 year ended december 31 2009 compared 172668 prior year current prior year charges result fair valuation options granted management earned period · professional fees 673227 year ended december 31 2009 compared 284288 prior year increase prior year results significant activity relating debt restructuring continuing patent applications current year · research development costs fiscal year ended december 31 2009 93041 compared 182343 prior fiscal year decrease results research consulting service agreements effect prior fiscal year board directors management reorganized year june 1 2009 portion fees paid accrued chief executive officer allocated research development fiscal year ended december 31 2009 recorded net gain settlement debt 961056 nil prior year gain recognized conjunction retirement debt obligations conversion equity debt settlement arrangements creditors cumulative net gain includes fair value common stock warrants issued part transaction foreign exchange decreased loss 38069 fiscal year ended december 31 2009 gain 82659 prior year interest income increased 2814 fiscal year ended december 31 2009 nil prior year loss disposal assets increased 5399 fiscal year ended december 31 2009 nil prior year net loss year ended december 31 2009 4461970 023 per share compared net loss 2195939 090 per share prior period weighted average number shares outstanding 19704002 year ended december 31 2009 compared 2390084 prior year liquidity capital resources following table sets forth cash working capital december 31 2009 2008 december 31 2009 december 31 2008 cash reserves 141431 987 working capital deficit 629388 3032512 subject availability additional financing intend spend approximately 3000000 next twelve months carrying plan operations december 31 2009 141431 cash hand working capital deficit 629388 working capital december 31 2009 sufficient enable us pay general administrative expenses pursue plan operations next twelve months anticipate require additional funding approximately 3000000 management currently making significant efforts secure needed financing yet secured commitments respect financing able obtain financing amounts required terms acceptable us may forced scale back abandon plan operations various conditions outside control may detract ability raise capital needed execute plan operations including overall market conditions international local economies recognize united states economy suffered period uncertainty capital markets depressed levels established twelve months ago certainty levels stabilize reverse factors could material impact upon ability raise financing result upon shortterm longterm liquidity going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional equity financing factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business december 31 2009 accumulated losses 25274076 since inception financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern net cash used operating activities operating activities year ended december 31 2009 used cash 1121726 compared 714425 year ended december 31 2008 operating activities period inception july 27 1999 december 31 2009 used cash 12619522 operating activities primarily used cash result operating organizational activities consulting fees management fees professional fees research development net cash used investing activities year ended december 31 2009 investing activities used cash nil compared nil year ended december 31 2008 period inception july 27 1999 december 31 2009 investing activities provided cash 204747 net cash provided financing activities revenues since inception financed operations primarily private placements stock financing activities year ended december 31 2009 provided cash 1262170 compared 547873 year ended december 31 2008 period inception july 27 1999 december 31 2009 financing activities provided net cash 12556206 primarily sale equity securities critical accounting policies consolidated financial statements accompanying notes prepared accordance united states generally accepted accounting principles applied consistent basis preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods regularly evaluate accounting policies estimates use prepare consolidated financial statements general management’s estimates based historical experience information third party professionals various assumptions believed reasonable facts circumstances actual results could differ estimates made management see note 2 consolidated financial statements year ended december 31 2009 summary significant accounting policies offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2015 december 31 2014 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors company overview cancer vaccines immunooncology company specializing development innovative peptide genebased immunotherapeutics vaccines treatment cancer combine set proprietary technologies improve ability cellular immune system destroy diseased cells peptide antigen technologies dna expression technologies polystart enhance shareholder value taking account development timelines plan focus advancing clinical programs including folate receptor alpha program breast ovarian her2neu peptide antigen program phase ii clinical trials parallel plan complete preclinical development polystart technology integral component primeandboost vaccine methodology immunotherapy industry cancer immunooncology become rapidly growing sector pharmaceutical biotech industry approval success checkpoint inhibitors yervoy opdivo bristol myers squibb keytruda merck together development car tcell therapies juno kite provided much momentum sector addition new evidence points increasing use combination immunotherapies treatment cancer provided greater opportunities successful development tcell vaccines combination approaches products technology development clinical phase human clinical trials folate alpha breast ovarian cancer mayo foundation folate receptor alpha expressed 80 triple negative breast cancers addition 90 ovarian cancers treatment options surgery chemotherapy leaving important urgent clinical need new therapeutic time recurrence relatively short types cancer survival prognosis extremely poor recurrence united states alone approximately 30000 ovarian cancer patients 40000 triple negative breast cancer patients newly diagnosed every year 24 patient phase clinical trial completed vaccine well tolerated safe 20 21 evaluable patients showed positive immune responses providing strong rationale rational progressing phase ii trials gmp manufacturing phase ii trials progressing well towards commercial formulation final analyses clinical plans near completion july 27 2015 exercised option agreement mayo foundation signing worldwide exclusive license agreement commercialize proprietary folate receptor alpha vaccine technology cancer indications obligations agreement license fees 350000 upon signing 100000 march 27 2016 250000 june 27 2016 clinical development commercial milestones 6 royalty net sales obligations include 50000 license maintenance fee starting second anniversary signing license part agreement ind folate receptor alpha phase trial transferred mayo us amendment phase ii clinical trials lead product september 15 2015 announced collaborators mayo foundation awarded grant 133 million u department defense grant commencing september 15 2015 cover costs 280 patient phase ii clinical trial folate receptor alpha vaccine patients triple negative breast cancer work closely mayo foundation clinical trial providing clinical manufacturing expertise well providing gmp vaccine formulations vaccine formulations developed multiple phase ii clinical programs triple negative breast ovarian cancer combination immunotherapeutics december 9 2015 announced received orphan drug designation u food drug administration’s office orphan products development oopd cancer vaccine tpiv 200 treatment ovarian cancer tpiv 200 ovarian cancer clinical program receive benefits including tax credits clinical research 7year market exclusivity upon receiving marketing approval tpiv 200 multiepitope peptide vaccine targets folate receptor alpha overexpressed multiple cancers phase human clinical trials her2neu breast cancer mayo foundation patient dosing completed final safety analysis patients treated complete shown safe addition 19 20 evaluable patients showed robust tcell immune responses antigens vaccine composition providing solid case advancement phase ii 2016 additional secondary endpoint incorporated phase trial two year follow recording time disease recurrence participating breast cancer patients phase ibii studies plan add class peptide licensed mayo foundation april 16 2012 four class ii peptides management believes combination class ii her2neu antigens gives us leading her2neu vaccine platform folate receptor alpha vaccine lead product plans initiating formulation studies progress her2neu vaccine towards phase ii clinical trial 2016 preclinical polystart converted previously filed u provisional patent application polystart full patent application extend technology constructs boost strategies current clinical programs breast ovarian cancer financings current available funding come financings conducted august 2014 january march 2015 warrants issued connection january march 2015 financings august 2014 financing august 2014 entered securities purchase agreement single institutional investor sale 1886792 units purchase price 106 per unit total purchase price 1832500 net finders’ fee unit consists one common share one share purchase warrant exercisable 117 period 5 years august 2014 received subscription proceeds 265000 units unit consists one share common stock one share purchase warrant exercisable 250 period 3 years also issued 5250 shares common stock finders’ fee relating subscription proceeds january 2015 financing january 2015 entered securities purchase agreement certain investors sale 7320000 units purchase price 020 per unit total purchase price approximately 1250000 net finders’ fee offering expenses approximately 214000 unit consisting one share company’s common stock ii one series warrant purchase one share common stock iii one series b warrant purchase one share common stock iv one series c warrant purchase one share common stock v one series warrant purchase one share common stock vi one series e warrant purchase one share common stock series b c e warrants hereby collectively referred “january 2015 warrants” series warrants exercisable 150 per share five year term series b warrants exercisable 040 per share six month term series c warrants exercisable 1 00 per share five year term series warrants exercisable 075 per share extent series b warrants exercised five year term date series b warrants exercised series e warrants exercisable 125 per share extent series c warrants exercised five year term date series c warrants exercised pursuant placement agent agreement agreed issue warrants purchase 366000 common shares substantially terms january 2015 warrants march 2015 financing march 2015 entered securities purchase agreement certain accredited investors sale 5000000 units purchase price 020 per unit total purchase price approximately 950000 net finders’ fee offering expenses approximately 50000 unit consisting one share company’s common stock ii one series a1 warrant purchase one share common stock iii one series b1 warrant purchase one share common stock iv one series c1 warrant purchase one share common stock v one series d1 warrant purchase one share common stock vi one series e1 warrant purchase one share common stock series a1 b1 c1 d1 e1 warrants hereby collectively referred “march 2015 warrants” march 2015 warrants substantially terms january 2015 warrants pursuant placement agent agreement agreed issue warrants purchase 125000 common shares substantially terms march 2015 warrants restructuring january march 2015 financings may 2015 entered restructuring agreement investors january 2015 march 2015 financings • exercise price series a1 warrants changed 150 per warrant 010 per warrant • exercise price series b series b1 warrants changed 040 per warrant 020 per warrant • warrant series b series b1 existing prior restructuring agreement replaced two warrants series • exercise price series c series c1 warrants changed 100 per warrant 050 per warrant • warrant series c series c1 existing prior restructuring agreement replaced two warrants series result restructuring agreement issued additional 12320000 series b warrants 12320000 series c warrants seeliquidity capital resources warrant descriptions • series a1 warrants series a1 warrants five year term exercise prices 010 cashless exercise freely tradable upon exercise series a1 warrants antidilution protection provides exercise price series a1 warrants would adjust price securities sold us warrant exercise price • series b series b1 warrants series b b1 warrants six month term exercise price 020 series b series b1 warrants exercised prior expiration • series c series c1 warrants series c series c1 warrants 5 year term exercise price 050 mandatory exercise stock trades 100 10 trading days warrants antidilution protection subsequent securities issuances us prices exercise price would require adjustment warrant exercise price excluding warrant exercises • series d1 warrants series d1 warrants term 5 years date exercise series b series b1 warrants exercise price 075 warrants antidilution protection subsequent securities issuances us prices exercise price would require adjustment warrant exercise price excluding warrant exercises • series e series e1 warrants series e series e1 warrants term 5 years date exercise series c series c1 warrants exercise price 125 warrants antidilution protection subsequent securities issuances us prices exercise price would require adjustment warrant exercise price excluding warrant exercises • warrant holder contingent put right warrants provide request warrant holder delivered time commencing earliest occur x public disclosure fundamental transaction consummation fundamental transaction z warrant holder first becoming aware fundamental transaction date ninety 90 days public disclosure consummation fundamental transaction company successor entity case may shall purchase warrant holder date request paying holder cash amount equal black scholes value fundamental transaction means company subsidiaries shall directly indirectly one related transactions 1 consolidate merge whether company subsidiaries surviving corporation person 2 sell lease license assign transfer convey otherwise dispose substantially respective properties assets person 3 allow person make purchase tender exchange offer accepted holders 50 outstanding shares voting stock company including shares voting stock company held person persons making party associated affiliated persons making party purchase tender exchange offer 4 consummate stock share purchase agreement business combination including without limitation reorganization recapitalization spinoff scheme arrangement person whereby person acquires 50 outstanding shares voting stock company including shares voting stock company held person persons making party associated affiliated persons making party stock share purchase agreement business combination 5 reorganize recapitalize reclassify common stock ii effect consummate stock combination reverse stock split similar transaction involving common stock iii make public announcement disclosure respect stock combination reverse stock split similar transaction involving common stock including without limitation public announcement disclosure x potential possible actual stock combination reverse stock split similar transaction involving common stock board shareholder approval thereof intention company seek board shareholder approval stock combination reverse stock split similar transaction involving common stock ii “person” “group” terms used purposes sections 13d 14d 1934 act rules regulations promulgated thereunder shall become “beneficial owner” defined rule 13d3 1934 act directly indirectly 50 aggregate ordinary voting power represented issued outstanding voting stock company assuming fundamental transaction occurs estimate using black scholes value method required terms warrants assuming warrant holders exercise rights require us purchase warrants aggregate amount would obligated pay would approximately 26 million • variable rate transaction prohibition two year period commencing closing date january 2015 march 2015 financings dated january 12 2015 march 9 2015 respectively company subsidiary prohibited entering agreement related subsequent issuance securities involving variable rate transaction variable rate transaction means transaction company subsidiary issues sells securities convertible shares common stock either conversion exercise exchange rate price based upon andor varies trading prices quotations shares common stock time initial issuance convertible securities b conversion exercise exchange price subject reset future date initial issuance convertible securities upon occurrence specified contingent events directly indirectly related business company market common stock pursuant customary “weighted average” antidilution provision ii enters agreement including without limitation equity line credit whereby company subsidiary may sell securities future determined price standard customary “preemptive” “participation” rights • failure timely deliver securities fail issue warrant holder within three 3 trading days receipt applicable exercise notice certificate number shares common stock warrant holder entitled upon holder’s exercise warrant addition remedies available warrant holder shall pay cash holder trading day third 3rd trading day issuance shares common stock timely effected amount equal 1 product aggregate number shares common stock issued warrant holder timely basis warrant holder entitled b closing sale price common stock trading day immediately preceding last possible date could issued shares common stock warrant holder without violating exercise provision warrant addition within three 3 trading days receipt applicable exercise notice shall fail issue deliver certificate warrant holder without restrictive legend holder entitled upon holder’s exercise third 3rd trading day warrant holder purchases open market transaction otherwise shares common stock deliver satisfaction sale warrant holder portion number shares common stock sale number shares common stock equal portion number shares common stock issuable upon exercise warrant holder anticipated receiving us addition remedies available warrant holder shall within three 3 business days holder’s request holder’s discretion either pay cash warrant holder amount equal warrant holder’s total purchase price including brokerage commissions reasonable outofpocket expenses shares common stock purchased “buyin price” point obligation issue deliver certificate credit warrant holder’s balance account dtc number shares common stock warrant holder entitled upon holder’s exercise hereunder case may issue shares common stock shall terminate ii promptly honor obligation issue deliver warrant holder certificate certificates representing shares common stock credit holder’s balance account dtc number shares common stock holder entitled upon warrant holder’s exercise pay cash holder amount equal excess buyin price product number shares common stock multiplied b “b” set formula recent developments highlights company headquarters august 2015 relocated headquarters seattle washington jacksonville florida closer proximity research clinical development collaborators mayo foundation jacksonville two key advisors business clinical resident florida option plan amendment november 6 2015 board directors approved amendment company’s 2014 omnibus stock ownership plan provided increase number shares reserved issuance plan 5 million shares 7 million shares board expansion added three new directors mr david laskow pooley march 19 2015 dr john bonfiglio july 23 2015 mr frederick g wasserman january 27 2016 add experience various strategic areas employment agreement november 12 2015 entered new employment agreement chief executive officer responsible continued operations many years mayo license july 21 2015 exercised option regarding mayo license polystart patent february 11 2016 united states patent trademark office issued notice allowance phase 1 trials phase trials her2neu vaccine tpiv 100 folate receptor alpha vaccine tpiv 200 successfully completed mayo clinic results vaccines provide rationale starting phase ii clinical activities fast track designation february 3 2016 announced u food drug administration fda granted fast track designation cancer vaccine tpiv 200 treatment ovarian cancer current state company clinicalstage immunotherapy company specializing development innovative peptide genebased immunotherapeutics vaccines treatment cancer plan conduct multiple phase ii clinical trials vaccines largest studies triplenegative breast cancer totally funded 133 million grant us department defense collaborators mayo foundation jacksonville fl believe development pipeline strong provides us opportunity continue expand collaborations leading institutions corporations third quarter 2015 strengthened cash position raising additional 25 million working capital giving us confidence ability continue developing products path commercialization structure financing gives us additional opportunities raise additional capital exercise shortterm longterm warrants strength science development approaches becoming widely appreciated particularly clinical program generated positive interim data clinical programs breast ovarian cancer continue discussions major pharmaceutical organization leading us cancer institute phase ii clinical trial ovarian cancer using folate receptor alpha vaccine combination checkpoint inhibitor continue focused entry phase ii triple negative cancer trials including application fast track orphan drug status well planning phase ii her2neu breast cancer trials also continue prosecute polystart patent filings develop new constructs facilitate collaborative efforts current clinical indications others already indicated interest combination therapies believe fundamental programs corporate activities positioned us capitalize acceptance immunotherapy leading therapeutic strategy cancer infectious disease resulting exploding valuations market tapimmune’s pipeline potential immunotherapies development phase clinical programs her2neu breast ovarian cancer completed strong immune responses 90 patients treated provided rationale catalyst advance programs phase ii clinical trials 2016 major inflection valuation events believe light assets significantly undervalued past year number highly visible transactions billion dollar acquisitions taken place validate work believe treatment successfully reaches commercialization treatment applicable 50 her2neu breast cancer market 21 billion annual market believe ovarian cancer treatment reaches commercialization applicable 95 market decision resources one world’s leading research firms pharmaceuticals healthcare believes triple next 10 years least 15 billion annually addition exciting clinical developments peptide vaccine technology may coupled recently developed inhouse polystart nucleic acidbased technology designed make vaccines significantly effective producing four times required peptides immune systems recognize act nucleic acidbased systems also incorporate “tap” stands transporter associated antigen presentation respect validation technologies important note majority technologies published leading peerreviewed journals believe recent grant award us department defense mayo foundation strong validation approach key component success comprehensive patent strategy continually updates extends patent coverage key products highly unlikely early patents extend ultimate product marketing extending patent life important strategy ensuring product protection three active patent families supporting 1 filed patents polystart expression vector owned tapimmune filed 2014 ip covers use tap 2 filed patents her2neu class ii class antigens exclusive license mayo foundation 3 filed patents folate receptor alpha antigens exclusive license mayo foundation pathway successful product development takes time believe put place significant resources technical corporate fundamentals success strength product pipeline access leading scientists institutions gives us unique opportunity make major contribution global health care respect broader market major driver positive influence activities emergence general acceptance potential new generation immunotherapies promise change standard care cancer immunotherapy sector greatly stimulated approval provenge® prostate cancer yervoy™ metastatic melanoma progression areas checkpoint inhibitors adoptive tcell therapy multiple approaches reaching phase ii phase iii status believe combination technologies well positioned leading player emerging market important note many late stage immunotherapies currently development represent competition programs instead offer synergistic opportunities partner antigen based immunotherapeutics polystart andor tap expression systems thus use naturally processed tcell antigens discovered using samples derived cancer patients plus polystart expression technology improve antigen presentation tcells could produce effective cancer vaccines right also enhance efficacy immunotherapy approaches cart pd1 inhibitors example technology product pipeline side management believes company fundamentally strong poised leading company highly attractive multibillion dollar expanding market position reinforced recruitment topclass managers advisors investors share vision financial overview critical accounting policies consolidated financial statements accompanying notes prepared accordance united states generally accepted accounting principles applied consistent basis preparation financial statements conformity u generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods regularly evaluate accounting policies estimates use prepare consolidated financial statements general management’s estimates based historical experience information third party professionals various assumptions believed reasonable facts circumstances actual results could differ estimates made management use estimates preparation financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stock based transactions fair value components convertible notes payable foreign exchange gains losses accrued liabilities matters impacting ability continue going concern contingencies also involve use estimates assumptions fair value measurements fair value certain financial instruments including cash equivalents accrued compensation accrued liabilities approximate cost short maturities measure fair value certain financial assets liabilities recurring basis fair value hierarchy used rank quality reliability information used determine fair values financial assets liabilities carried fair value classified disclosed one following three categories • level 1quoted prices unadjusted active markets identical assets liabilities • level 2inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities • level 3unobservable inputs supported little market activity significant fair value assets liabilities stockbased compensation stockbased compensation measured grant date based fair value award fair value award ultimately expected vest recognized expense straightline basis requisite service period generally vesting period expense recognized portion award expected vest reduced estimated forfeiture rate forfeiture rate determined time grant revised necessary subsequent periods actual forfeitures differ estimates expected term expected term options represents period stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility compute stock price volatility expected terms based historical common stock trading prices riskfree interest rate base riskfree interest rate implied yield available u treasury zerocoupon issues equivalent remaining term expected dividend never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore use expected dividend yield zero valuation models recognize fair value stock options granted nonemployees stockbased compensation expense period related services received derivative liability evaluate convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instruments classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date management must determine whether instrument embedded feature indexed stock entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions application exercise affects accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain free standing warrants contain contingently puttable cash settlement results operations year ended december 31 2015 compared year ended december 31 2014 discussion results operations financial condition amounts pershare amounts rounded nearest thousand dollars recorded net loss 34066000 078 year ended december 31 2015 compared 30883000 200 year ended december 31 2014 operating expenses operating expenses incurred fiscal year ended december 31 2015 6159000 compared 3371000 prior year significant changes expenditures outlined follows • general administrative expenses increased 4448000 year ended december 31 2015 3182000 prior period increase primarily due higher salaries administration professional fee business development investor relations management fee travel expenses significantly higher noncash consulting management fees paid stockbased compensation 1705000 year ended december 31 2015 1391000 prior period increase stockbased compensation prior year primarily due us issuing stock options management board members current year • research development costs fiscal year ended december 31 2015 1711000 compared 189000 prior fiscal year due higher technology licensing fee due mayo clinic increased house research activity current year weighted average number shares outstanding 43947067 year ended december 31 2015 compared 15465213 prior year liquidity capital resources revenues since inception financed operations primarily public private offerings stock debt including warrants exercise thereof following table sets forth cash working capital december 31 2015 2014 net cash used operating activities operating activities year ended december 31 2015 used cash 4343000 compared 2187000 year ended december 31 2014 operating activities primarily used cash result operating organizational activities consulting fees management fees professional fees research development net cash provided financing activities financing activities year ended december 31 2015 provided cash 10778000 compared 2281000 year ended december 31 2014 financings additional details financing activities periods reflected report provided 2014 financing fiscal year 2014 raised 2097500 issued warrants acquire aggregate 2151792 shares common stock 2015 financings first quarter fiscal year 2015 raised 2200000 issued warrants acquire aggregate 61600000 shares common stock including warrants issued pursuant restructuring 2015 financings warrant exercises june 16 2015 december 9 2015 37080000 shares issued upon exercise certain warrants issued connection 2015 financings providing 922 million proceeds following table reflects remaining outstanding warrants august 2014 january march 2015 financings including placement agent warrants future capital requirements capital requirements 2016 depend numerous factors including success research development resources devote develop support technologies success pursuing strategic licensing funded product development relationships external partners subject ability raise additional capital including possible joint ventures andor partnerships expect incur substantial expenditures develop technologies including continued increases costs related research nonclinical testing clinical studies well costs associated capital raising efforts public company require substantial funds conduct research development nonclinical phase ii clinical testing licensed patented technologies develop sublicensing relationships phase ii iii clinical testing plans include seeking equity debt financing alliances partnership agreements entities interested technologies business transactions would generate sufficient resources ensure continuation operations research development programs current available cash equivalents insufficient satisfy liquidity requirements believe existing cash equivalents allow us fund operating plan end 2016 expect continue seek additional funding operations required additional capital may available reasonable terms unable obtain additional financing may required reduce scope delay eliminate planned clinical testing research development activities could harm business sale additional equity debt securities may result additional dilution shareholders raise additional funds issuance debt securities preferred stock securities could rights senior common stock could contain covenants would restrict operations also require additional capital beyond currently forecasted amounts numerous risks uncertainties associated research development commercialization product candidates unable estimate exact amounts working capital requirements future funding requirements depend many factors including limited • number characteristics product candidates pursue • scope progress results costs researching developing product candidates conducting nonclinical clinical trials including research development expenditures expect make connection license agreements mayo foundation • timing costs involved obtaining regulatory approvals product candidates • ability maintain current research development licensing agreements establish new strategic partnerships licensing arrangements financial terms agreements • ability achieve milestones licensing arrangements payment obligations may • costs involved preparing filing prosecuting maintaining defending enforcing patent claims including litigation costs outcome litigation • timing receipt amount sales royalties future products based estimates assumptions may prove wrong may need obtain additional funds sooner greater amounts currently anticipate potential sources financing include strategic relationships public private sales shares debt sources may seek access public private equity markets conditions favorable due longterm capital requirements committed sources financing time uncertain whether additional funding available need terms acceptable us raise funds selling additional shares common stock securities convertible common stock ownership interest existing stockholders diluted able obtain financing needed may unable carry business plan result may significantly limit operations business financial condition results operations would materially harmed going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional equity financing factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business december 31 2015 accumulated losses 133508000 since inception financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors tax loss credit carryforwards december 31 2015 2014 approximately 24123000 federal 4336000 state nols may available offset future taxable income federal net operating loss carryforwards utilized expire 2029 2035 state net operating loss carryforwards utilized expire 2035 greater 50 change ownership section 382 internal revenue code places significant annual limitations use net operating loss carryforwards december 31 2015 2014 recorded 100 valuation allowance deferred tax assets approximately 10826000 12471000 respectively management believes uncertain fully realized determine future able realize portion net operating loss carryforwards adjustment net operating loss carryforwards would increase net income period make determination inflation affects cost raw materials goods services use recent years inflation modest however fluctuations energy costs commodity prices affect cost raw materials components competitive environment somewhat limits ability recover higher costs resulting inflation raising prices although cannot precisely determine effects inflation business management’s belief effects revenues operating results significant believe inflation material impact results operations periods presented except respect payrollrelated costs arising related government imposed regulations item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2018 december 31 2017 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors company overview clinicalstage immunooncology company specializing development commercialization novel cellbased immunotherapies innovative peptidebased vaccines treatment hematological malignancies solid tumor indications multitaa cell technology based selective expansion nonengineered tumorspecific cells recognize tumor associated antigens “taa” ie tumor targets kill tumor cells expressing targets infused patients population cells recognizes multiple tumor targets produce broad spectrum antitumor activity genetically engineer cells compared current engineered chimeric antigen receptor “car” cell receptor “tcr”based approaches products significantly less expensive manufacture appear markedly less toxic yet associated meaningful clinical benefit result believe portfolio cell therapies compelling therapeutic product profile compared current genemodified car tcrbased therapies addition folate receptor alpha program tpiv200 breast ovarian cancers her2neu program tpiv100110 phase ii clinical trials parallel developing proprietary nucleic acidbased antigen expression technology named polystart™ improve ability immune system recognize destroy diseased cells immunooncology utilizes patient’s immune system combat cancer one actively pursued areas research biotechnology pharmaceutical companies today interest excitement immunotherapy driven compelling efficacy data cancers historically bleak outcomes potential achieve cure functional cure patients harnessing power immune system important component fighting cancerous cells body multitaa cell therapy platform identifies selects effectively cells specific peptide antigens target eg wt1 magea4 prame survivin nyeso1 ssx2 invitro manufacturing process promotes proliferation rare cancerkilling cells augments antitumor properties provide benefit patients following infusion using multiantigen targeted approach proprietary technology kill heterogeneous tumor cell populations effectively singleantigen targeted approaches thereby reducing likelihood tumor escape potentially increasing durability patient’s response therapy recent developments change headquarters february 15 2019 announced change corporate headquarters jacksonville florida houston texas presentations american society blood marrow transplantation center international blood marrow transplant research asbmt cibmtr february 2023 2019 four abstracts including three oral presentations presented transplantation cellular therapy tct meetings american society blood marrow transplantation center international blood marrow transplant research asbmt cibmtr studies summarize data achieved using multitumor antigen specific cells developed baylor college medicine laboratories dr swati naik dr ann leen dr premal lulla dr juan vera exclusively licensed us presentations 60th american society hematology annual meeting ash 2018 december 13 2018 three presentations including one oral presentation presented 60th american society hematology annual meeting studies describe results achieved using multitumor antigen specific cells developed baylor college medicine laboratories dr swati naik dr premal lulla dr ann leen dr juan vera exclusively licensed marker merger agreement october 17 2018 company completed previously announced acquisition marker cell therapy inc formerly known marker therapeutics inc privatelyheld delaware corporation “marker cell” accordance terms agreement plan merger reorganization dated may 15 2018 “merger agreement” among company timberwolf merger sub inc delaware corporation whollyowned subsidiary company “merger sub” marker october 17 2018 pursuant merger agreement merger sub merged marker cell “merger” marker cell surviving corporation becoming whollyowned subsidiary company connection merger company changed name marker therapeutics inc marker cell changed name marker cell therapy inc effective time merger former marker cell stockholders received aggregate 13914255 shares company’s common stock equaled number shares company’s common stock issued outstanding immediately prior effective time merger ii aggregate 5046003 warrants equaled number company’s warrants stock options issued outstanding immediately prior effective time merger issuance shares company common stock former stockholders marker cell connection merger related transactions approved company’s stockholders 2018 annual meeting stockholders “2018 annual meeting” held october 16 2018 connection merger company filed amendment articles incorporation nevada increase authorized shares common stock 41666667 shares 150000000 shares change company’s name marker therapeutics inc “certificate amendment” company reincorporated nevada corporation delaware corporation filed certificate incorporation delaware finally certificate merger filed delaware merge marker cell therapy inc fka marker therapeutics inc merger sub marker cell therapy inc surviving corporation wholly owned subsidiary company name change reincorporation merger effective october 17 2018 beginning market open october 18 2018 shares company’s common stock commenced trading nasdaq capital market new ticker symbol “mrkr” securities purchase agreements october 17 2018 concurrent completion merger company issued certain accredited investors private placement transaction “financing” aggregate 17500000 shares common stock warrants purchase 13437500 shares common stock exercise price 500 per share fiveyear term aggregate proceeds 70 million pursuant terms securities purchase agreements dated june 8 2018 among company certain accredited investors taking account issuance shares financing described immediately following effective time merger pro forma ownership issued outstanding shares company common stock fully diluted basis assuming issued outstanding warrants options exercised approximately follows marker cell’s former stockholders 275 company stockholders prior merger 275 private placement stockholders 45 following completion merger financing 45328510 issued outstanding shares company’s common stock products technology development following chart sets forth products technologies development multitaa cell products advancing two multitaa cell products clinical development 1mixed antigen peptide pool “mapp” cells product currently studied patients lymphoma multiple myeloma selected solid tumors phase 1 mapp autologous product targets nyeso1 prame magea4 survivin ssx2 antigens 2leukemia antigen peptide pool “lapp” cells product currently studied patients aml mds phase 1 lapp allogeneic product targeting wt1 nyeso1 prame survivin antigens stem cell donor used source cells manufactured therapy blood source antigens stimulation differ lapp mapp products manufacturing process product otherwise identical singleantigen specific therapy eliminate tumor cells expressing targeted antigen residual tumor cells express antigen may survive expand addition tumor cells may also downregulate mutate targeted antigen thus becoming invisible cell therapy phenomena create transformed tumor impervious therapy process referred antigennegative tumor escape solution problem tumor heterogeneity develop cell products simultaneously attack multiple tumorexpressed antigens thereby enable complete initial tumor targeting thus minimizing subsequent opportunity cancer engage escape mechanisms note data suggest strategy may responsible recruitment activation unique cancerkilling cells patient’s immune repertoire participate cancer eradication minimizing possibility tumor cell escape proprietary multitaa cell platform may meaningful advantages current cart tcr cell therapy approaches compared current genemodified cell therapies programs characterized following · demonstrated clinical benefit without need lymphodepletion infusion bcm’s phase lymphoma study saw complete responses “crs” 50 60 evaluable patients believe significant patient cr subsequently relapsed disease whereas typically 30 patients cr reported cart studies relapse within one year patient results date observed therapeutic responses appear highly durable patients relapsefree beyond five years · nongenemodified unlike cart tcr approaches therapy requires genetic modification cells costly complex process significantly complicates manufacturing patient product believe therapy manufactured fraction cost genemodified cell product substantially reduced complexity manufacturing · low incidence rate adverse events 78 patients treated date seen one grade iii adverse reaction considered possibly related therapy appears compare favorably published cd19 cart studies wherein 95 patients associated grade iii higher adverse events treatment believe notable cases cytokinerelease syndrome “crs” related serious adverse events “saes” patients treated mapp lapp therapy date · capable addressing broad repertoire cancer cells cart tcr therapies generally target single epitope manufacturing process selects cells specific multiple peptides derived several targeted antigens deep gene sequencing products shows typical patient dose usually consists approximately 4000 unique cell clonotypes targeting five different tumorassociated antigens layman’s terms five antigen targets recognized wide range cells facilitating robust killing targeted cancer cells · appears drive endogenous immune responses see evidence “epitope spreading” patients meaning therapy potentially inducing enhanced response patient’s cells specific expanded set tumorassociated antigens beyond targeted infused product correlative analyses show expansion endogenous cells present product months following infusion product phenomenon also known “antigen spreading” potentially important generating durable response patient enables killing tumors express antigens initially targeted product folate receptor products folate receptor alpha “fra” overexpressed 80 breast cancers addition 90 ovarian cancers treatment options surgery radiation therapy chemotherapy creating important urgent clinical need new therapeutic strategy time recurrence relatively short ovarian cancer survival prognosis extremely poor recurrence united states alone approximately 30000 ovarian cancer patients 40000 triplenegative breast cancer patients newly diagnosed every year fra vaccine called tpiv200 intended treat conditions composed mixture five fra immunogenic peptides adjuvanted lowdose granulocytemacrophage colonystimulating factor “gmcsf” gmp manufacturing scale tpiv200 production supply additional phase ii clinical trials developed commercialquality lyophilized formulation tpiv200 peptides single vial reconstitution injection multigram peptide production scaleup successfully concluded gmp manufacturing recent clinical lot tpiv200 peptides supply used company’s ongoing phase ii study platinumsensitive ovarian cancer well 280patient phase ii study sponsored mayo foundation funded us department defense “dod” treating triplenegative breast cancer also made various improvements vaccine manufacturing process resulting believe superior formulation vaccine amenable largescale manufacturing commercialization thus good manufacturing practice “gmp” manufacturing development phase ii trials completed phase human clinical trial folate receptor alpha breast ovarian cancers mayo foundation july 27 2015 exercised option agreement mayo foundation signing worldwide exclusive license agreement commercialize proprietary fra vaccine technology cancer indications part agreement ind folate receptor alpha phase trial transferred mayo foundation company phase ii clinical trials lead peptide vaccine product results initial 21patient phase clinical trial fra vaccine reported twentyone patients breast ovarian cancer undergone standard surgery adjuvant treatment treated one cycle cyclophosphamide following patients vaccinated intradermally tpiv200 day one 28day cycle maximum six vaccination cycles march 15 2018 announced publication clinical data trial results show 90 patients developed robust durable antigenspecific immune responses fra without regard hla type aligns intended mechanism action vaccine tpiv200 vaccine safe welltolerated 20 21 evaluable patients showed positive immune responses providing strong rationale progressing phase ii trials data showed 16 patients observation stage showed persistent immune responses source published online 15mar2018 doi 10115810780432ccr172499 phase ii development tpiv200 triplenegative breast cancer triplenegative breast cancer “tnbc” one difficult cancers treat represents clear unmet medical need september 15 2015 announced collaborators mayo foundation awarded grant 133 million dod grant led dr keith knutson mayo clinic jacksonville florida covers costs 280patient phase ii clinical trial fra vaccine patients tnbc working closely mayo foundation clinical trial providing clinical manufacturing expertise well providing gmp vaccine formulations contract phase ii study tpiv200 treatment triplenegative breast cancer began enrolling patients late 2017 enrollment continues details regarding trial found wwwclinicaltrialsgov identifier numbers nct03012100 ru011501i june 21 2016 announced initiation randomized fourarm phase ii trial tnbc sponsored conducted company frv002 enrolling women stage iiii disease completed initial surgery chemoradiation therapy openlabel 80patient clinical trial designed evaluate dosing regimens pretreatment efficacy immune responses study evaluating two doses tpiv200 high dose low dose tested without cyclophosphamide prior vaccination key data trial expected included future biologics license application submission fda marketing clearance completed enrollment late 2017 treating following patients independent data safety monitoring board “dsmb” reviews safety ongoing phase ii study safety issues identified date details regarding trial found wwwclinicaltrialsgov identifier number nct02593227 phase ii development tpiv200 ovarian cancer december 9 2015 announced received orphan drug designation us food drug administration’s office orphan products development “oopd” cancer vaccine tpiv200 treatment ovarian cancer tpiv200 ovarian cancer clinical program receive benefits including tax credits clinical research sevenyear market exclusivity upon receiving marketing approval tpiv200 multiepitope peptide vaccine targets folate receptor alpha overexpressed multiple cancers including 90 ovarian cancers february 3 2016 announced us fda designated investigation multipleepitope tpiv200 vaccine maintenance therapy subjects platinumsensitive advanced ovarian cancer achieved stable disease partial response following completion standardofcare chemotherapy fast track development program april 21 2016 announced participation ovarian cancer study sponsored memorial sloan kettering cancer center “mskcc” new york city collaboration astrazeneca pharmaceuticals ovarian cancer patients responsive platinum commonly used chemotherapy ovarian cancer study openlabel phase ii study tpiv200 40 patients designed look effects combination therapy astrazeneca’s checkpoint inhibitor durvalumab antipdl1 interim results first 27 patients presented aacrrivkin symposium september 2018 safety combination established heavilypretreated patients subset patients exhibited durable disease stabilization orr pfs combination treatment superior expected efficacy singleagent pd1pdl1 blockade however postimmunotherapy followup suggestive improved clinical benefit standard therapies majority patients postprogression went receive subsequent standard therapy durable clinical benefit creating rationale exploration agents combination chemotherapy although business relationship astrazeneca paying onehalf costs clinical study addition providing tpiv200 study details regarding trial found wwwclinicaltrialsgov identifier numbers nct02764333 january 10 2017 announced initiation companysponsored phase ii study platinumsensitive ovarian cancer patients frv004 multicenter doubleblind efficacy study designed evaluate tpiv200 compared gmcsf alone randomized placebocontrolled fashion first maintenance period primary surgery chemotherapy opened multiple clinical sites enrollment 120 patients completed ahead schedule 120th subject given study drug december 10 2018 safety reviewed independent dsmb quarterly interim efficacy analysis planned 2019 50 patients progressed details regarding trial found wwwclinicaltrialsgov identifier number nct02978222 tpiv 100110 her2neu peptides gmcsf human epidermal growth factor receptor 2 “her2neu” amplificationoverexpression results effective therapeutic target breast gastric cancer overexpressed her2 detected predominantly malignancies epithelial origin breast gastric esophageal colorectal salivary gland pancreatic epithelial ovarian endometrial bladder carcinomas well gallbladder extrahepatic cholangiocarcinomas her2 overexpressed approximately 25 breast cancers expression associated unfavorable pathologic features aggressive disease treated targeted therapies relative forms breast cancer outcome patients her2 positive breast cancer significantly improved past decades advent antiher2 therapies substantial number resected patients still subsequently develop metastatic disease continued prevalence cancers represents high unmet medical need justifying targeted development immunotherapeutic strategies added class irestricted peptide also licensed mayo foundation april 16 2012 four class iirestricted peptides tpiv100 resulting tpiv 110 five peptides mixed gmcsf management believes combination class ii her2neu antigens gives us leading her2neu vaccine platform amended ind incorporate fifth peptide use tpiv110 subsequent studies goal producing even robust vaccine activating cd4 helper cd8 killer cells transition her2neu vaccine june 7 2016 announced company exercised option agreement mayo foundation signed worldwide license agreement proprietary her2neu vaccine technology license gives company right develop commercialize technology cancer indication her2neu antigen overexpressed part agreement ind her2neu phase trial transferred mayo foundation company phase ii clinical trials tpiv100 second product phase human clinical trial her2neu breast cancer mayo foundation phase study using vaccine containing four her2neu peptides combination gmcsf called tpiv100 initiated 2012 mayo clinic primary readout completed 2015 final safety analysis patients treated showed vaccine safe context addition 19 20 evaluable patients showed robust tcell immune responses antigens vaccine composition providing case advancement phase ii data study presented san antonio breast cancer symposium december 10 2015 additional secondary endpoint incorporated phase trial twoyear followon recording time disease recurrence participating breast cancer patients details regarding trial found wwwclinicaltrialsgov identifier number nct01632332 march 14 2017 announced partners mayo clinic received 38 million grant dod conduct phase ib study her2targeted vaccine candidate tpiv100 early form breast cancer called ductal carcinoma situ “dcis” second company vaccine tested fullyfunded study sponsored mayo foundation working closely mayo foundation clinical trial providing clinical manufacturing expertise well providing gmp vaccine formulations contract study successful her2neu vaccine may eventually augment even replace standard surgery chemotherapy potentially could become part routine immunization schedule preventing breast cancer healthy women study expected enroll 40 45 women dcis commence enrollment first quarter 2019 phase ii development her2neu tpiv110 vaccine october 10 2018 announced mayo clinic awarded grant 11 million dod grant intended cover costs large randomized doubleblind phase ii study company’s her2neutargeted breast cancer vaccine tpiv110 maintenance adotrastuzumab emtansine tdm1 compared gmcsf alone combination standard one year tdm1 maintenance therapy treating 190 women her2neupositive breast cancer working closely mayo foundation clinical trial providing clinical manufacturing expertise well providing gmp vaccine formulations contract study ask whether administration vaccine tdm1 maintenance therapy patients residual disease postneoadjuvant chemotherapy effectively blocks disease recurrence development metastatic breast cancer prevention recurrence metastasis expectation mortality associated breast cancer decreased products technology preclinical polystart addition clinical developments peptide vaccine technology coupled polystart™ nucleic acidbased technology designed make vaccines significantly effective producing four times required peptides immune systems recognize act financial overview critical accounting policies consolidated financial statements prepared conformity us gaap require use estimates judgments assumptions affect reported amounts assets liabilities disclosure contingent liabilities date financial statements reported amounts expenses periods presented believe accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods critical accounting estimates affect consolidated financial statements judgments assumptions used consistent described note 3 notes consolidated financial statements form 10k research development expenses date research development expenses related primarily development clinical platform identification development product candidates clinical research development expenses consist expenses incurred performing research development activities cost clinical trials including compensation sharebased compensation expense benefits research development employees consultants facilities expenses overhead expenses cost supplies manufacturing expenses fees paid third parties outside expenses clinical costs expensed incurred costs timing clinical trials development product candidates depend variety factors include limited following ·per patient clinical trial costs ·the number patients participate clinical trials ·the number sites included clinical trials ·the length time required enroll eligible patients ·the number doses patients receive ·the dropout discontinuation rates patients ·potential additional safety monitoring studies requested regulatory agencies ·the duration patient followup ·the efficacy safety profile product candidates ·the ability successfully manufacture patient doses addition potential success product candidate depend numerous factors including clinical trial outcomes acceptance regulatory authorities competition manufacturing capability commercial viability determine programs pursue much fund program response ongoing scientific assessments competitive developments clinical trial results well assessment product candidates commercial potential general administrative expenses general administrative expenses consist primarily salaries related costs including sharebased compensation personnel executive finance accounting business development legal human resources functions significant costs include facility costs otherwise included research development expenses legal fees relating patent corporate matters insurance costs professional fees consultancy accounting audit investor relations anticipate general administrative expenses increase future support continued research development activities potential commercialization product candidates income taxes recognize income tax expense years ended december 31 2018 2017 income expense income expense net consists interest income change fair value warrant liabilities debt extinguishment gain results operations years ended december 31 2018 following table summarizes results operations rounded thousand except per share amounts years ended december 31 2018 2017 together changes items revenue generate revenue years ended december 31 2018 2017 respectively sales licensing product candidates year ended december 31 2018 recognized 206000 revenue associated grant awarded mayo foundation us department defense phase ii clinical trial tpiv200 mayo paid us clinical supplies manufactured us provided clinical study funded grant year ended december 31 2017 also recognized 183000 grant income operating expenses operating expenses incurred fiscal year ended december 31 2018 1484 million compared 117 million prior year significant changes expenditures outlined follows research development expenseintellectual property acquired research development intellectual property acquired increased 1160 million year ended december 31 2018 represented fair market value assets acquired us connection merger accounted asset acquisition assets acquired consisted intellectual property received regulatory approval total purchase price immediately expensed process research development intellectual property acquired research development expense research development expenses increased 51 80 million year ended december 31 2018 53 million year ended december 31 2017 research development expenses highly dependent phases research projects therefore fluctuate period increase research development expenses 27 million year ended december 31 2018 compared period 2017 primarily due increases prior period expenses relating planned clinical trials general administrative expenses general administrative expenses increased 280 244 million year ended december 31 2018 64 million prior period increase 180 million primarily attributable following o125 million stockbased compensation expenses employees outside consultants o07 million headcountrelated expenses o40 million legal accounting professional expenses relating merger agreement inclusive 02 million settle shareholder litigation filed connection proxy statement o02 million investor relations expenses o02 million costs associated sarbanes oxley cybersecurity initiatives income expense change fair value warrant liabilities change fair value warrant liabilities fiscal year ended december 31 2018 40000 compared 6000 fiscal year ended december 31 2017 increase 40000 fiscal year ended december 31 2018 reflected corresponding loss income expense consolidated statement operations interest income interest income approximately 03 million year ended december 31 2018 attributable interest income relating significant portion net proceeds received equity financing october held us treasury notes us government agencybacked securities debt extinguishment gain debt extinguishment gain approximately 05 million year ended december 31 2017 due extinguishment liabilities recorded prior period net loss recorded net loss 1480 million 775 basic diluted per share year ended december 31 2018 compared net loss 110 million 116 basic diluted per share year ended december 31 2017 weighted average number shares outstanding 191 million basic diluted year ended december 31 2018 compared 95 million basic diluted year ended december 31 2017 increase net losses 2018 compared 2017 due research development intellectual property acquired continued expansion research development activities increased clinical trials manufacturing activities overall growth corporate infrastructure anticipate continue incur net losses future invest research development activities including clinical development addition general administrative expenses increased 2018 due increase headcount stockbased equity awards related existing new executives key consultants liquidity capital resources generated revenues sales licensing product candidates since inception limited revenue associated grants financed operations primarily public private offerings stock debt including warrants exercise thereof following table sets forth cash equivalents working capital december 31 2018 2017 cash flows following table summarizes cash flows years ended december 31 2018 2017 financings may 2018 private placement transaction common stock purchase agreement may 18 2018 closed sale 1300000 shares common stock 240 per share pursuant common stock purchase agreement existing accredited investor private placement rule 506 regulation pursuant terms common stock purchase agreement aggregate gross proceeds approximately 31 million may 2018 exercise warrants held existing institutional investors also may 18 2018 certain existing institutional investors holders various warrants purchase shares company common stock closed warrant exercise agreements agreed reduce exercise price portion investors’ previously purchased series c series e series f warrants 600 900 1500 720 respectively per share 250 per share provided investors exercise warrants cash immediately 782506 shares aggregate proceeds approximately 20 million june 2017 private placement transaction june 26 2017 completed private placements units certain accredited investors private placement transaction sold 1503567 shares common stock 397 per share fiveyear warrants purchase equal number shares common stock exercise price 397 per share 0125 per warrant one common share one warrant sold together unit total 4095 per unit issued sold aggregate 1503567 million units aggregate gross proceeds 62 million incurred 08 million agency fees legal costs connection offering reduced exercise price warrants purchase aggregate 653187 shares common stock issued investors private placement closed august 2016 600 per share 397 per share october 2018 private placement transaction october 17 2018 concurrent completion merger issued certain accredited investors private placement transaction aggregate 17500000 shares common stock warrants purchase 13437500 shares common stock exercise price 500 per share fiveyear term aggregate proceeds 700 million pursuant terms securities purchase agreements dated june 8 2018 among us certain accredited investors funding requirements primary uses capital expect continue compensation related expenses thirdparty clinical research development services laboratory related supplies clinical costs legal regulatory expenses facility costs general overhead costs successful development product candidates highly uncertain time cannot reasonably estimate know nature timing costs efforts necessary complete development product candidates also unable predict ever material net cash inflows commence sale product candidates due numerous risks uncertainties associated developing medical treatments including limited uncertainty ·successful enrollment successful completion clinical trials ·receipt marketing approvals applicable regulatory authorities ·making arrangements thirdparty manufacturers ·obtaining maintaining patent trade secret protection regulatory exclusivity ·launching commercial sales products approved whether alone collaboration others market acceptance products approved ·successfully negotiating reimbursement products various thirdparty payors ·the ability successfully manufacture patient doses change outcome variables respect development product candidates would significantly change costs timing associated development product candidates product candidates early stages clinical preclinical development outcome efforts uncertain cannot estimate actual amounts necessary successfully complete development commercialization product candidates whether may achieve profitability time ever generate substantial product revenue expect finance cash needs combination equity debt financings collaboration arrangements plan continue fund operations capital funding needs equity andor debt financing may also consider new collaborations selectively partnering technology extent raise additional capital sale equity convertible debt securities ownership interests stockholders diluted terms may include liquidation preferences adversely affect rights existing stockholders incurrence indebtedness would result increased fixed payment obligations could involve certain restrictive covenants limitations ability incur additional debt limitations ability acquire license intellectual property rights operating restrictions could adversely impact ability conduct business raise additional funds strategic partnerships alliances licensing arrangements third parties may relinquish valuable rights technologies product candidates grant licenses terms unfavorable us actions could harm business results operations future prospects outlook based clinical research development plans timing expectations related progress programs expect cash equivalents investment securities december 31 2018 enable us fund operating expenses capital expenditure requirements least second quarter 2020 based estimate assumptions may prove wrong could utilize available capital resources sooner currently expect furthermore operating plan may change may need additional funds meet operational needs capital requirements product development commercialization sooner planned numerous risks uncertainties associated development commercialization product candidates extent may enter additional collaborations third parties participate development commercialization unable estimate amounts increased capital outlays operating expenditures associated current anticipated clinical trials future funding requirements depend many factors ·initiate continue clinical trials product candidates ·continue research development product candidates seek discover additional product candidates seek regulatory approvals product candidates successfully complete clinical trials ·establish sales marketing distribution infrastructure scaleup manufacturing capabilities commercialize product candidates may receive regulatory approval ·strategic transactions may undertake ·enhance operational financial information management systems hire additional personnel including personnel support development product candidates product candidate approved commercialization efforts offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors tax loss credit carryforwards december 31 2018 approximately 570 million federal 373 million state net operating loss “nol”s may available offset future taxable income federal net operating loss carryforwards 416 million utilized expire 2029 2037 federal net operating loss carryforwards 154 million generated 2018 subject 80 limitation taxable income expire carry forward indefinitely state net operating loss carryforwards 218 million utilized begin expire 2035 state net operating loss carryforwards 154 million generated 2018 subject 80 limitation taxable income expire carry forward indefinitely change ownership greater 50 section 382 internal revenue code “code” places significant annual limitations use net operating loss carryforwards december 31 2018 2017 recorded 100 valuation allowance deferred tax assets approximately 200 million 119 million respectively management believes uncertain fully realized determine future able realize portion net operating loss carryforwards adjustment valuation allowance deferred tax assets would increase net income period make determination inflation affects cost raw materials goods services use recent years inflation modest however fluctuations energy costs commodity prices affect cost raw materials components competitive environment somewhat limits ability recover higher costs resulting inflation raising prices although cannot precisely determine effects inflation business management’s belief effects future revenues operating results significant believe inflation material impact results operations periods presented except respect payrollrelated costs arising related governmentimposed regulations item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2010 period inception july 27 1999 december 31 2010 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors including limited set forth “risk factors” elsewhere annual report plan operations management believes result restructuring recent financings along exclusive licensing option agreement mayo clinic rochester minnesota clinical development vaccine technology treat her2neu positive breast cancer expect ind commencement phase 1 clinical trials filed near future technology entering clinic targets novel set her2neu antigens discovered breast cancer patients preexistent immunity antigens clinical cancer research 16382534 2010 technology complements tapimmune’s tap technology envision part final vaccine product technology currently completing preclinical development currently herceptin® trastuzumab intravenously delivered monoclonal antibody used treatment her2neu breast cancer sales product 2009 approximately us5 billion source roche ag’s pharmaceutical division vaccine approach potential treat broader her2neu positive clinical population market potential significant august 2010 announced second research technology license option agreement mayo clinic rochester mn development new smallpox vaccine research progress laboratories gregory poland md mayo clinic select potent peptide antigens smallpox virus combination tap technology preclinical studies plos pathogens 1 28998 2005 tap technology improved efficacy vaccinia virus vaccine 100 fold tapimmune believes approach provides potential development vaccine smallpox broader application cost effective better shelflife existing viralbased products tapimmune plans evaluate tap technology improving efficacy vaccines designed combat range additional viral threats biodefense infectious disease field expand technology platform tapimmune also plans additional partnerships development dna plasmid expression vectors deliver tap genes target cells past 12 months tapimmune completed financings excess 2 million enabled company continue grow technology platform including collaborative projects expand well protect ip portfolio made significant progress last 12 months establishment excellent research development collaborations recruitment worldclass advisors help guide technical commercial programs start clinical programs expect reach number important milestones 2011 cancer infectious disease generated cash flows operations fund operations activities due primarily nature lengthy product development cycles normal biotech industry therefore must raise additional funds future continue operations intend finance operating expenses issuances common stock andor debt although currently funds continue operations four months believe future investment successful adequate fund operations next 24 months thereafter expect need raise additional capital meet longterm operating requirements future success viability dependent ability raise additional capital private offerings stock loans private investors additional financing may available upon acceptable terms adequate funds available acceptable terms may able conduct proposed business operations successfully could significantly materially restrict delay overall business operations results operations following table sets consolidated losses periods indicated reflects audited restated december 31 2009 numbers see note 1a financial statements referenced form 8k filed april 6 2011 year ended december 31 2010 compared year ended december 31 2009 development stage company recorded net loss 5090651 year ended december 31 2010 compared 5228739 year ended december 31 2009 operating expenses operating expenses incurred fiscal year ended december 31 2010 5184489 compared 5382372 prior year significant changes expenditures outlined follows · consulting fees 88231 fiscal year ended december 31 2010 compared 552339 prior fiscal year decrease due primarily absence business development services including relating financing debt restructuring place prior period · stockbased consulting fees 1200736 year ended december 31 2010 compared 506042 prior year current prior year charges result fair valuation shares issued consultants options granted earned consultants periods · general administrative expenses 203066 year ended december 31 2010 compared 85146 prior year increase resulting primarily increased investor relations travel expenses · interest finance charges 1242978 fiscal year ended december 31 2010 compared 1188934 prior fiscal year current prior period interest charges primarily accretion interest fair value warrants issued convertible notes · management fees 329177 year ended december 31 2010 compared 260242 prior year difference resulting primarily change executive compensation second half prior year additional directors’ fees current year additionally board directors management reorganized last year june 1 2009 portion fees paid accrued chief executive officer allocated research development · management compensation stockbased 1087915 year ended december 31 2010 compared 2019660 prior year current prior year charges result fair valuation options granted management earned period · professional fees 742338 year ended december 31 2010 compared 284288 prior year increase prior year results significant activity relating debt restructuring continuing patent applications current year · research development costs fiscal year ended december 31 2010 290048 compared 93041 prior fiscal year increase results research consulting service agreements effect crucell mayo foundation current fiscal year board directors management reorganized year june 1 2009 portion fees paid accrued chief executive officer allocated research development fiscal year ended december 31 2010 recorded net gain settlement debt 53589 194287 prior year current year gain recognized due write accrued interest charges credit received consulting services compared retirement debt obligations conversion equity debt settlement arrangements creditors last fiscal year foreign exchange loss decreased 1237 fiscal year ended december 31 2010 loss 38069 prior year interest income nil fiscal year ended december 31 2010 compared 2814 prior year loss disposal assets decreased nil fiscal year ended december 31 2010 nil prior year net loss year ended december 31 2010 5090651 013 per share compared net loss 5228739 027 per share prior period weighted average number shares outstanding 39803173 year ended december 31 2010 compared 19704002 prior year liquidity capital resources following table sets forth cash working capital december 31 2009 2008 subject availability additional financing intend spend approximately 5000000 next twelve months carrying plan operations december 31 2010 23516 cash hand working capital deficit 3372489 working capital december 31 2010 sufficient enable us pay general administrative expenses pursue plan operations next twelve months anticipate require additional funding approximately 5000000 management currently making significant efforts secure needed financing yet secured commitments respect financing able obtain financing amounts required terms acceptable us may forced scale back abandon plan operations various conditions outside control may detract ability raise capital needed execute plan operations including overall market conditions international local economies recognize united states economy suffered period uncertainty capital markets depressed levels established twelve months ago certainty levels stabilize reverse factors could material impact upon ability raise financing result upon shortterm longterm liquidity going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional equity financing factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business december 31 2010 accumulated losses 31131496 since inception financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern net cash used operating activities operating activities year ended december 31 2010 used cash 925041 compared 1121726 year ended december 31 2009 operating activities period inception july 27 1999 december 31 2019 used cash 13544563 operating activities primarily used cash result operating organizational activities consulting fees management fees professional fees research development net cash used investing activities year ended december 31 2010 investing activities provided cash nil compared 204747 year ended december 31 2009 period inception july 27 1999 december 31 2010 investing activities provided cash 204747 net cash provided financing activities revenues since inception financed operations primarily private placements stock financing activities year ended december 31 2010 provided cash 807126 compared 1262170 year ended december 31 2009 period inception july 27 1999 december 31 2010 financing activities provided net cash 13363332 primarily sale equity securities critical accounting policies consolidated financial statements accompanying notes prepared accordance united states generally accepted accounting principles applied consistent basis preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods regularly evaluate accounting policies estimates use prepare consolidated financial statements general management’s estimates based historical experience information third party professionals various assumptions believed reasonable facts circumstances actual results could differ estimates made management see note 2 consolidated financial statements year ended december 31 2010 summary significant accounting policies offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2012 period inception july 27 1999 december 31 2012 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors plan operations vaccine component gene based tap technology potential significantly improve efficacy prophylactic immunotherapeutic vaccines addresses fundamental mechanism cell recognition response believe unlike vaccine technologies address initiation immune responses tap expression also unique ability enhance effector function mature killer cells enhancement effector function potentially complementary anyall vaccine approaches designed enhance cellular responses therefore envisage establishing multiple collaborative partnerships progress genebased tap development research clinic exploitation key mechanism highlighted two collaborations mayo clinic rochester mn progress 2012 management believes result recent personnel additions moving state art facility exclusive licensing option agreements mayo clinic rochester minnesota start term phase 1 clinical trials together subject raising adequate funding company well positioned significant growth 2013 august 2011 fda allowed ind investigational new drug application company signed sponsored research agreement mayo clinic phase 1 her2neu breast cancer clinical trial started first quarter 2012 trial use patented technology developed mayo clinic tapimmune exclusive option license technology recent clinical trials her2neu vaccines shown considerable promise significant room improvements technology evaluating phase clinical trial offers vaccine broader coverage making applicable much larger population women breast cancer anticipate technology used therapeutically together tap expression technology reaches clinical development combination improved her2neu targeted vaccine currently herceptin® trastuzumab intravenously delivered monoclonal antibody used treatment her2neu breast cancer sales product 2009 approximately us5 billion source roche ag’s pharmaceutical division vaccine approach potential treat broader her2neu positive clinical population market potential significant genebased tap vaccines also potential significantly improve efficacy prophylactic vaccines viral pandemics agents biodefense novel approach development smallpox vaccine collaboration mayo clinic research studies progressed well testing unique patentable smallpox antigens combination tap technology expect completed third quarter 2012 feasibility studies complete would move larger preclinical animal studies phase safety trials study also act platform extensive use genebased tap vectors biodefense seeking nondilutive avenues finance advance program way biodefense focused grants contracts exclusive option license patented mayo technology derived collaboration opening new laboratories offices 1551 eastlake avenue seattle january 23 2012 represented significant advance company several fronts first sublease service agreements puget sound blood center research institute enables scientific team access wide array functioning core labs shared equipment relevant aspects development genebased product candidates second arrangement allows us speed development tapbased products towards clinic third capabilities produce test range proprietary tapbased expression vectors cancer infectious disease expand external collaborations fourth development new tap constructs laboratories allows us significantly enhance intellectual property portfolio us patent 7994146 issued 2011 represents recent example strategy opening new facilities consistent strategy managing costs using small core internal team leverages external resources continue build technical team 2013 guidance mark reddish dr bob florkiewicz seek recruit worldclass immunologists molecular biologists mark recognized leader vaccine technology development impressive track record taking leading immunotherapy products early research development areas cancer vaccines biodefense formerly vice president product development principal investigator biodefense id biomedical bothell wa prior acquisition company glaxo smithkline 16 billion biomira inc renamed oncothyreon responsible preclinical development cancer vaccines program bob respect broader market major driver positive influence activities emergence general acceptance potential new generation immunotherapies promise change standard care cancer immunotherapy sector greatly stimulated approval provenge® dendreon nasd dndn prostate cancer yervoy™ bms metastatic melanoma anticipation results phase iii trials mage3 gsk treatment lung cancer progression approaches multiple cancer indications phase ii phase iii management believes tapimmune well positioned leading player emerging market important note late stage immunotherapies development necessarily represent competition programs rather offer us opportunities tap expression technology potentially synergistic many vaccine approaches addition tap expression vector patients already receiving therapeutic vaccine could enhance efficacy vaccines tap designed help killer tcells kill tumor cells concept enhancing effector stage immune response differentiates tap technology wide list immunotherapies currently development offers great opportunity collaborations partnerships accordingly believe use tap expression vectors represents next logical step development effective immunotherapies 2012 continued made significant progress resources progress developing vectors expression antigens tap boost strategy led new intellectual property intend file second quarter 2013 technology product pipeline side management believes company fundamentally strong poised leading company highly attractive expanding market position reinforced recruitment topclass managers advisors investors share vision results operations year ended december 31 2012 compared year ended december 31 2011 discussion company’s results operations financial condition amounts pershare amounts rounded nearest thousand dollars development stage company recorded net loss 5660000 year ended december 31 2012 compared 2029000 year ended december 31 2011 operating expenses operating expenses incurred fiscal year ended december 31 2012 6025000 compared 3316000 prior year significant changes expenditures outlined follows · consulting fees 183000 fiscal year ended december 31 2012 compared 179000 prior fiscal year increase due primarily higher business development services entered current period · stockbased consulting fees 2316000 year ended december 31 2012 compared 872000 prior year current prior year charges result fair valuation shares issued consultants options granted earned consultants periods · general administrative expenses 1012000 year ended december 31 2012 compared 306000 prior year increase resulting primarily increased payroll higher rent investor relations travel expenses · interest finance charges 745000 fiscal year ended december 31 2012 compared 679000 prior fiscal year current prior period interest charges primarily accretion interest fair value warrants issued convertible notes · management fees 296000 year ended december 31 2012 compared 248000 prior year difference resulting primarily due higher management fees paid current management · management compensation stockbased 124000 year ended december 31 2012 compared 390000 prior year current prior year charges result fair valuation options granted management earned period · professional fees 350000 year ended december 31 2012 compared 438000 prior year decrease prior year results due lower legal fees incurred relating debt issuance current period · research development costs fiscal year ended december 31 2012 999000 compared 204000 prior fiscal year due higher technology licensing fee accrued payment due mayo clinic increased research activity current period fiscal year ended december 31 2011 company recorded gain settlement debt amount 318000 relating early settlement 2010 convertible notes settlement trade payables shares company also recorded gain extinguishment derivative share purchase warrants amount 291000 determined fair value warrants date settlement less consideration attributed settlement warrants relating 2010 notes net loss year ended december 31 2012 5660000 009 per share compared net loss 2029000 004 per share prior period weighted average number shares outstanding 65526927 year ended december 31 2012 compared 45994617 prior year liquidity capital resources following table sets forth cash working capital december 31 2012 2011 subject availability additional financing intend spend approximately 5000000 next twelve months carrying plan operations december 31 2012 51000 cash hand working capital deficit 5468000 working capital december 31 2012 sufficient enable us pay general administrative expenses pursue plan operations next twelve months anticipate require significant debt restructuring reduce working capital deficit additional funding approximately 5000000 management currently making significant efforts secure needed financing yet secured commitments respect financing able obtain financing amounts required terms acceptable us may forced scale back abandon plan operations various conditions outside control may detract ability raise capital needed execute plan operations including overall market conditions international local economies recognize united states economy suffered period uncertainty capital markets depressed certainty levels stabilize reverse despite optics improving economy factors could material impact upon ability raise financing result upon shortterm longterm liquidity going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional equity financing factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business december 31 2012 accumulated losses 49382000 since inception financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern net cash used operating activities operating activities year ended december 31 2012 used cash 1565000 compared 1310000 year ended december 31 2011 operating activities period inception july 27 1999 december 31 2012 used cash 16420000 operating activities primarily used cash result operating organizational activities consulting fees management fees professional fees research development net cash used investing activities year ended december 31 2012 investing activities used cash nil compared nil year ended december 31 2011 period inception july 27 1999 december 31 2012 investing activities provided cash 205000 net cash provided financing activities revenues since inception financed operations primarily private placements stock debt financing activities year ended december 31 2012 provided cash 1366000 compared 1537000 year ended december 31 2011 period inception july 27 1999 december 31 2011 financing activities provided net cash 16265000 primarily sale equity securities critical accounting policies consolidated financial statements accompanying notes prepared accordance united states generally accepted accounting principles applied consistent basis preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods regularly evaluate accounting policies estimates use prepare consolidated financial statements general management’s estimates based historical experience information third party professionals various assumptions believed reasonable facts circumstances actual results could differ estimates made management see note 2 consolidated financial statements year ended december 31 2012 summary significant accounting policies offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2016 december 31 2015 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors cancer vaccines clinicalstage immunooncology company specializing development innovative peptide genebased immunotherapeutics vaccines treatment cancer metastatic disease also developing proprietary technology improve ability cellular immune system recognize destroy diseased cells dna expression technology named polystart preclinical development enhance shareholder value taking account development timelines plan focus advancing clinical programs including folate receptor alpha program breast ovarian cancer her2neu peptide antigen program phase ii clinical trials parallel plan complete preclinical development polystart technology integral component primeandboost vaccine methodology immunotherapy industry cancer immunooncology become rapidly growing sector pharmaceutical biotech industry approval success checkpoint inhibitors yervoy opdivo bristol myers squibb keytruda merck co together development car tcell therapies juno therapeutics kite pharma provided much momentum sector addition new evidence points increasing use combination immunotherapies treatment cancer provided greater opportunities successful development tcell vaccines combination approaches products technology developmentclinical phase human clinical trials folate alpha breast ovarian cancer mayo clinic folate receptor alpha expressed 80 triplenegative breast cancers addition 90 ovarian cancers treatment options surgery radiation therapy chemotherapy leaving important urgent clinical need new therapeutic time recurrence relatively short types cancer survival prognosis extremely poor recurrence united states alone approximately 30000 ovarian cancer patients 40000 triplenegative breast cancer patients newly diagnosed every year tpiv 200 folate receptor alpha 24patient phase clinical trial completed vaccine well tolerated safe 20 21 evaluable patients showed positive immune responses providing strong rationale progressing phase ii trials gmp manufacturing phase ii trials progressing well towards commercial formulation final analyses clinical plans near completion july 27 2015 tapimmune exercised option agreement mayo clinic signing worldwide exclusive license agreement commercialize proprietary folate receptor alpha vaccine technology cancer indications part agreement ind folate receptor alpha phase trial transferred mayo tapimmune amendment phase ii clinical trials lead product september 15 2015 announced collaborators mayo clinic awarded grant 133 million us department defense grant commencing september 15 2015 cover costs 280patient phase ii clinical trial folate receptor alpha vaccine patients triplenegative breast cancer tapimmune work closely mayo clinic clinical trial providing clinical manufacturing expertise well providing gmp vaccine formulations vaccine formulations developed multiple phase ii clinical programs triplenegative breast ovarian cancer combination immunotherapeutics december 9 2015 announced received orphan drug designation us food drug administration’s office orphan products development oopd cancer vaccine tpiv 200 treatment ovarian cancer tpiv 200 ovarian cancer clinical program receive benefits including tax credits clinical research sevenyear market exclusivity upon receiving marketing approval tpiv 200 multiepitope peptide vaccine targets folate receptor alpha overexpressed multiple cancers february 3 2016 announced us food drug administration “fda” designated investigation multipleepitope folate receptor alpha peptide vaccine tpiv 200 gmcsf adjuvant maintenance therapy subjects platinumsensitive advanced ovarian cancer achieved stable disease partial response following completion standard care chemotherapy fast track development program phase ii study indication ready initiation end 2016 currently enrolling companysponsored triplenegative breast cancer study eight clinical sites nationwide study enroll 80 patients openlabel designed look dosing regimens immune responses efficacy also announced start ovarian cancer study sponsored memorial sloan kettering cancer center new york city collaboration astrazeneca pharmaceuticals study currently enrolling platinum resistant ovarian cancer patients designed look effects combination therapy astrazeneca’s checkpoint inhibitor “durvalumab” study enroll 40 patients open label although business relationship astrazeneca paying half clinical study plus providing tpiv 200 study phase human clinical trials her2neu breast cancer mayo clinic patient dosing completed final safety analysis patients treated complete shown safe addition 19 20 evaluable patients showed robust tcell immune responses antigens vaccine composition providing solid case advancement phase ii 2015 additional secondary endpoint incorporated phase trial two year follow recording time disease recurrence participating breast cancer patients phase ibii studies plan add class peptide licensed mayo clinic april 16 2012 four class ii peptides management believes combination class ii her2neu antigens gives us leading her2neu vaccine platform folate receptor alpha vaccine lead product plans initiating formulation studies progress her2neu vaccine towards phase ii clinical trial 2017 products technologypreclinical polystart converted previously filed us provisional patent application polystart full patent application february 2016 received notice allowance us patent trademark office “uspto” patent application entitled “a chimeric nucleic acid molecule nonaug initiation sequences” term patent extends march 17 2034 additional patent filings progress plan develop polystart standalone therapy ‘boost strategy’ used synergistically peptidebased vaccines breast ovarian cancer current state company clinicalstage immunotherapy company specializing development innovative peptide genebased immunotherapeutics vaccines treatment cancer plan conduct multiple phase ii clinical trials vaccines largest studies triplenegative breast cancer totally funded 133 million grant us department defense collaborators mayo clinic jacksonville florida companysponsored trial triplenegative breast cancer started second quarter 2016 recruitment multiple sites treatment first patients believe development pipeline strong provides us opportunity continue expand collaborations leading institutions corporations believe strength science development approaches becoming widely appreciated particularly clinical program generated positive interim data clinical programs breast ovarian cancer continue focused entry phase ii triplenegative breast cancer trials including application fast track orphan drug status well planning phase ii her2neu breast cancer trials expect continue prosecute polystart patent filings develop new constructs facilitate collaborative efforts current clinical indications others already indicated interest combination therapies believe fundamental programs corporate activities positioned tapimmune capitalize acceptance immunotherapy leading therapeutic strategy cancer infectious disease tapimmune’s pipeline clinical program pipeline potential immunotherapies development phase clinical programs her2neu breast ovarian cancer completed strong immune responses 90 patients treated provided rationale catalyst advance programs phase ii clinical trials addition exciting clinical developments peptide vaccine technology may coupled recently developed inhouse polystart nucleic acidbased technology designed make vaccines significantly effective producing four times required peptides immune systems recognize act nucleic acidbased systems also incorporate “tap” stands transporter associated antigen presentation key component success comprehensive patent strategy continually updates extends patent coverage key products highly unlikely early patents extend ultimate product marketing extending patent life important strategy ensuring product protection three active patent families supporting 1 filed patents polystart expression vector owned tapimmune filed 2014 ip covers use tap announced allowance patent february 2016 2 filed patents her2neu class ii class antigens exclusive license mayo foundation 3 filed patents folate receptor alpha antigens exclusive license mayo foundation pathway successful product development takes time believe put place significant success strength product pipeline access leading scientists institutions gives us unique opportunity make major contribution global health care respect broader market major driver positive influence activities emergence general acceptance potential new generation immunotherapies promise change standard care cancer immunotherapy sector greatly stimulated approval provenge® prostate cancer yervoy™ metastatic melanoma progression areas checkpoint inhibitors adoptive tcell therapy multiple approaches reaching phase ii phase iii status believe combination technologies well positioned leading player emerging market important note many latestage immunotherapies currently development represent competition programs instead offer synergistic opportunities partner antigen based immunotherapeutics polystart expression system thus use naturally processed tcell antigens discovered using samples derived cancer patients plus polystart expression technology improve antigen presentation tcells could produce effective cancer vaccine right also enhance efficacy immunotherapy approaches cart pd1 inhibitors example recent developments company highlights research programs her2neu license agreement june 7 2016 announced exercised option agreement mayo clinic signed worldwide license agreement proprietary her2neu vaccine technology license gives us right develop commercialize technology cancer indication her2neu antigen overexpressed phase ii trials started april 26 2016 announced plans participate phase ii trial cancer vaccine tpiv 200 multiepitope antifolate receptor vaccine frα combination astrazeneca’s durvalumab medi4736 antipdl1 antibody patients platinumresistant ovarian cancer study started enrollment treatment patients second quarter 2016 memorial sloan kettering cancer center new york led jason konner md principal investigator june 21 2016 announced treatment first patient companysponsored phase ii trial triplenegative breast cancer part multicenter study manufacturing april 7 2016 announced successfully completed formulation development scaleup gmp good manufacturing practice manufacturing release tpiv 200 multiepitope folate receptor peptide vaccine breast ovarian cancer manufactured product contains five peptide antigens freeze dried single vial ready injection reconstitution addition granulocytemacrophage colonystimulating factor gmcsf tpiv 200 doses available upcoming phase ii clinical trials triplenegative breast cancer ovarian cancer recent developments enrolling patients phase ii tpiv 200 trial triplenegative breast cancer opened ten clinical sites another two sites anticipated 2017 begun treating patients phase ii trial folate receptor alpha cancer vaccine tpiv 200 treatment triplenegative breast cancer one difficult cancers treat representing clear unmet medical need openlabel 80patient clinical trial designed evaluate dosing regimens adjuvants efficacy immune responses women triplenegative breast cancer key data trial expected included future new drug application submission fda marketing clearance trial sponsored conducted tapimmune details regarding trial found wwwclinicaltrialsgov identifier numbers nct02593227 frv002 enrolling patients phase ii trial memorial sloan kettering tpiv 200 ovarian cancer phase ii study tpiv 200 ovarian cancer patients responsive platinum commonly used chemotherapy ovarian cancer sponsored memorial sloan kettering cancer center collaboration astrazeneca tapimmune begun enrollment 40patient study openlabel study designed evaluate combination therapy includes tpiv 200 tcell vaccine astrazeneca’s checkpoint inhibitor durvalumab unresponsive platinum patients real remaining options combination therapy proves effective believe would address critical unmet need tpiv 200 received orphan drug designation use treatment ovarian cancer details regarding trial found wwwclinicaltrialsgov identifier numbers nct02764333 enrolling patients phase ii tpiv 200 trial platinumsensitive ovarian cancer opened one clinical site least another 10 sites anticipated 2017 phase ii trial tpiv 200 80 ovarian cancer patients responsive platinum received fda’s fast track designation develop tpiv 200 maintenance therapy combination platinum responsive ovarian cancer patients multicenter doubleblind efficacy study sponsored conducted tapimmune details regarding trial found wwwclinicaltrialsgov identifier numbers nct02978222 frv004 patient enrollment commence first quarter 2017 phase ii mayo clinicus dod trial tpiv 200 triplenegative breast cancer anticipate phase ii study tpiv 200 treatment triplenegative breast cancer conducted mayo clinic sponsored us department defense “dod” begin enroll patients first quarter 2017 anticipated 280patient study led dr keith knutson mayo clinic jacksonville florida dr knutson inventor technology scientific advisory board tapimmune supplying doses tpiv 200 trial reimbursed costs associated manufacturing remaining costs associated conducting study funded 133 million grant made dod mayo clinic open ind fda tpiv 110 early 2017 phase ii protocol preparation reformulated second cancer vaccine product tpiv 110 following strong safety immune responses phase mayo clinic study tpiv 110 targets her2neu makes applicable breast ovarian colorectal cancer reformulated product adds fifth antigen produce even robust immune response activating cd4 cd8 tcells participated preinvestigational new drug pre”ind” meeting fda discussions fda requirements filing amended ind containing fifth peptide although cannot know sure anticipate open ind early 2017 pending comments fda protocol phase ii trial tpiv 110 treatment her2neu positive breast cancer patients designed reviewed scientific advisory board collaborators tpiv products offtheshelf commercially viable excellent potential margins continuously working improving product formulation supply believe tpiv 200 tpiv 110 stable offtheshelf lyophilized products require reconstitution clinical site injection believe investments made formulation work performed result commercially viable product excellent potential profit margins robust product data independent vetting key highvalue collaborations believe phase data produced tpiv 200 tpiv 100 collaboration mayo clinic driving force behind highvalue collaborations able maintain establish organizations including mayo clinic astrazeneca sloan kettering us department defense move forward advancing phase ii studies represent collaboration prestigious thirdparty organizations believe represents independent validation potential technology company highlights reverse stock split september 16 2016 effected onefortwelve reverse split common shares common shares began trading splitadjusted basis september 16 2016 reverse stock split effected connection intention apply list common stock nasdaq capital market november 2 2016 received notification common stock approved listing nasdaq capital market began trading tuesday november 8 2016 ticker symbol “tpiv” historical financial results adjusted reflect reduction number shares outstanding common stock 70550763 shares 5882955 shares december 31 2015 addition effective upon reverse stock split number authorized shares common stock reduced 500 million shares 41666667 shares fractional shares resulting reverse stock split rounded nearest whole share data herein retroactively adjusted reverse stock split par value adjusted result one twelve reverse stock split august 2016 private placement transaction august 10 2016 august 26 2016 completed private placements units certain accredited investors units consisted one share common stock par value 0001 per share ii one fiveyear warrant purchase one share common stock 600 issued sold aggregate 653187 units purchase price per unit 480 aggregate approximately 3100000 incurred approximately 08 million agency fees legal costs addition issued fiveyear warrants placement agent offering providing purchase 65327 shares common stock 480 per share pursuant registration rights agreements entered connection private placements required file registration statement securities exchange commission registering resale common stock issued private placement offering b shares common stock issuable upon exercise fiveyear warrants c shares common stock issuable upon exercise warrants issued placement agent required file registration statement within 120 days august 26 2016 closing december 27 2016 also required ensure registration statement declared effective within 90 calendar days filing securities exchange commission filed registration statement december 22 2016 subsequently declared effective securities exchange commission january 18 2017 meeting contractual deadlines august 2016 warrant exercises august 11 2016 holders aggregate 583333 outstanding series c warrants 416667 series c1 warrants providing purchase one share common stock 600 per share exercised warrants aggregate exercise price 6000000 august 2016 warrant amendments simultaneous exercise series c series c1 warrants holders aggregate 3096665 outstanding series warrants series a1 warrants series c warrants series c1 warrants series warrants series d1 warrants series e warrants series e1 warrants “outstanding series warrants” entered warrant amendment agreements “amendment agreement” agreed amend terms outstanding series warrants remove provisions outstanding series warrants previously caused classified derivative liability opposed equity balance sheet consideration amendment exercise series c warrants series c1 warrants issued aggregate 750000 additional shares common stock warrant holders new fiveyear warrants purchase one million shares common stock exercise price 720 per share “series f warrants” following table reflects status outstanding warrants january 2015 march 2015 august 2016 private placement financings including placement agent warrants following amendment agreement private placement financial overview critical accounting policies condensed consolidated financial statements prepared conformity us gaap require use estimates judgments assumptions affect reported amounts assets liabilities disclosure contingent liabilities date financial statements reported amounts expenses periods presented believe accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods critical accounting estimates affect consolidated financial statements judgments assumptions used consistent described part ii item 7 annual report form 10k year ended december 31 2016 use estimates preparation financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stockbased transactions fair value components convertible notes payable foreign exchange gains losses accrued liabilities matters impacting ability continue going concern contingencies also involve use estimates assumptions fair value measurements fair value certain financial instruments including cash equivalents accrued compensation accrued liabilities approximate cost short maturities measure fair value certain financial assets liabilities recurring basis fair value hierarchy used rank quality reliability information used determine fair values financial assets liabilities carried fair value classified disclosed one following three categories • level 1quoted prices unadjusted active markets identical assets liabilities • level 2inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities • level 3unobservable inputs supported little market activity significant fair value assets liabilities stockbased compensation stockbased compensation measured grant date based fair value award fair value award ultimately expected vest recognized expense straightline basis requisite service period generally vesting period expense recognized portion award expected vest reduced estimated forfeiture rate forfeiture rate determined time grant revised necessary subsequent periods actual forfeitures differ estimates expected term expected term options represents period stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility compute stock price volatility expected terms based historical common stock trading prices riskfree interest rate base riskfree interest rate implied yield available u treasury zerocoupon issues equivalent remaining term expected dividend never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore use expected dividend yield zero valuation models recognize fair value stock options granted nonemployees stockbased compensation expense period related services received derivative liability evaluate convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instruments classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within twelve months balance sheet date management must determine whether instrument embedded feature indexed stock entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions application exercise affects accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain free standing warrants contain contingently puttable cash settlement results operations year ended december 31 2016 compared year ended december 31 2015 discussion results operations financial condition amounts pershare amounts rounded nearest thousand dollars recorded net loss 2455000 036 basic per share 072 diluted per share year ended december 31 2016 compared net loss 34066000 930 basic diluted per share year ended december 31 2015 operating expenses operating expenses incurred fiscal year ended december 31 2016 8492000 compared 6159000 prior year significant changes expenditures outlined follows ·research development costs fiscal year ended december 31 2016 3800000 compared 1711000 prior fiscal year due exercising option acquire mayo clinic technology part agreement entered march 2014 increased inhouse research activity current period ·general administrative expenses increased 4692000 year ended december 31 2016 4448000 prior period due generally increased expenses relating consulting general administrative investor relations professional fees operating activities increased substantially ·the changes fair value derivative liabilities year ended december 31 2016 5940000 compared 27873000 year ended december 31 2015 variance previous year due following factor revaluation series a1 series c c1 series d1 series e e1 warrants issued us january march 2015 december 31 2015 august 10 2016 august 10 2016 amended warrant agreements remove clause caused warrants classified derivative liabilities revalue derivative liabilities balance sheet date fair value record corresponding gain consolidated statement operations significant change revaluation difference stock price used august 10 2016 600 compared 720 december 31 2015 5940000 change fair value derivative liabilities fiscal 2016 5937000 due revaluation december 31 2015 august 10 2016 remaining change due revaluation remaining derivative warrants december 31 2016 ·during year ended december 31 2016 received 231000 grant awarded mayo foundation us department defense phase ii clinical trial tpiv 200 grant paid clinical supplies purchased us ·during year ended december 31 2016 incurred 136000 loss debt settlement agreements relating outstanding debt agreement previous years compares 25000 loss debt settlement agreements year ended december 31 2015 weighted average number shares outstanding approximately 6890000 basic 7421000 diluted year ended december 31 2016 compared approximately 3662000 basic diluted year ended december 31 2015 liquidity capital resources generated revenues since inception financed operations primarily public private offerings stock debt including warrants exercise thereof following table sets forth cash working capital december 31 2016 2015 cash flows following table summarizes cash flows years ended december 31 2016 2015 financings current available funding come financings conducted january march 2015 exercise warrants issued connection january march 2015 financings well recent august 2016 private placement 2015 financings january 2015 financing january 2015 entered securities purchase agreement certain investors sale 610000 units purchase price 240 per unit total purchase price approximately 1250000 net finders’ fee offering expenses approximately 214000 unit consisting one share common stock ii one series warrant purchase one share common stock iii one series b warrant purchase one share common stock iv one series c warrant purchase one share common stock v one series warrant purchase one share common stock vi one series e warrant purchase one share common stock series b c e warrants hereby collectively referred “january 2015 warrants” series warrants exercisable 1800 per share fiveyear term series b warrants exercisable 480 per share sixmonth term series c warrants exercisable 1200 per share fiveyear term series warrants exercisable 900 per share extent series b warrants exercised fiveyear term date series b warrants exercised series e warrants exercisable 1500 per share extent series c warrants exercised fiveyear term date series c warrants exercised pursuant placement agent agreement agreed issue warrants purchase 30500 common shares substantially terms january 2015 warrants march 2015 financing march 2015 entered securities purchase agreement certain accredited investors sale 416667 units purchase price 240 per unit total purchase price approximately 950000 net finders’ fee offering expenses approximately 50000 unit consisting one share common stock ii one series a1 warrant purchase one share common stock iii one series b1 warrant purchase one share common stock iv one series c1 warrant purchase one share common stock v one series d1 warrant purchase one share common stock vi one series e1 warrant purchase one share common stock series a1 b1 c1 d1 e1 warrants hereby collectively referred “march 2015 warrants” march 2015 warrants substantially terms january 2015 warrants pursuant placement agent agreement agreed issue warrants purchase 10417 common shares substantially terms march 2015 warrants restructuring january march 2015 financings may 2015 entered restructuring agreement investors january 2015 march 2015 financings ·the exercise price series a1 warrants changed 1800 per share 120 per share ·the exercise price series b series b1 warrants changed 480 per share 240 per share ·each warrant series b series b1 existing prior restructuring agreement replaced two warrants series ·the exercise price series c series c1 warrants changed 1200 per share 600 per share ·each warrant series c series c1 existing prior restructuring agreement replaced two warrants series result restructuring agreement issued additional 1026667 series b b1 warrants 1026667 series c c1 warrants 2016 financings august 2016 private placement transaction august 10 2016 august 26 2016 completed private placements units certain accredited investors units consisted one share common stock par value 0001 per share ii one fiveyear warrant purchase one share common stock 600 issued sold aggregate 653187 units purchase price per unit 480 aggregate approximately 3100000 incurred approximately 08 million agency fees legal costs addition issued fiveyear warrants placement agent offering providing purchase 65327 shares common stock 480 per share pursuant registration rights agreements entered connection private placements required file registration statement securities exchange commission registering resale common stock issued private placement offering b shares common stock issuable upon exercise fiveyear warrants c shares common stock issuable upon exercise warrants issued placement agent required file registration statement within 120 days august 26 2016 closing december 27 2016 also required ensure registration statement declared effective within 90 calendar days filing securities exchange commission met foregoing requirements warrant exercises june 16 2015 december 9 2015 3090000 shares issued upon exercise certain warrants issued connection 2015 financings providing 922 million proceeds august 2016 holders aggregate 583333 outstanding series c warrants 416667 series c1 warrants providing purchase one share common stock 600 per share exercised warrants aggregate exercise price 6000000 future capital requirements capital requirements 2017 depend numerous factors including success research development resources devote develop support technologies success pursuing strategic licensing funded product development relationships external partners subject ability raise additional capital including possible joint ventures andor partnerships expect incur substantial expenditures develop technologies including continued increases costs related research nonclinical testing clinical studies well costs associated capital raising efforts public company believe existing cash equivalents allow us fund operations next twelve months require substantial funds conduct research development nonclinical phase ii clinical testing licensed patented technologies develop sublicensing relationships phase ii iii clinical testing plans include seeking equity debt financing alliances partnership agreements entities interested technologies business transactions would generate sufficient resources ensure continuation operations research development programs expect continue seek additional funding operations required additional capital may available reasonable terms unable obtain additional financing may required reduce scope delay eliminate planned clinical testing research development activities could harm business sale additional equity debt securities may result additional dilution shareholders raise additional funds issuance debt securities preferred stock securities could rights senior common stock could contain covenants would restrict operations also require additional capital beyond currently forecasted amounts numerous risks uncertainties associated research development commercialization product candidates unable estimate exact amounts working capital requirements future funding requirements depend many factors including limited · number characteristics product candidates pursue · scope progress results costs researching developing product candidates conducting nonclinical clinical trials including research development expenditures expect make connection license agreements mayo foundation · timing costs involved obtaining regulatory approvals product candidates · ability maintain current research development licensing agreements establish new strategic partnerships licensing arrangements financial terms agreements · ability achieve milestones licensing arrangements payment obligations may · costs involved preparing filing prosecuting maintaining defending enforcing patent claims including litigation costs outcome litigation · timing receipt amount sales royalties future products based estimates assumptions may prove wrong may need obtain additional funds sooner greater amounts currently anticipate potential sources financing include strategic relationships public private sales shares debt sources may seek access public private equity markets conditions favorable due longterm capital requirements committed sources financing time uncertain whether additional funding available need terms acceptable us raise funds selling additional shares common stock securities convertible common stock ownership interest existing stockholders diluted able obtain financing needed may unable carry business plan result may significantly limit operations business financial condition results operations would materially harmed various conditions outside control may detract ability raise additional capital needed execute plan operations including overall market conditions international local economies recognize united states economy suffered period uncertainty capital markets impacted certainty levels stabilize reverse despite optics improving economy factors could material impact upon ability raise financing result upon shortterm longterm liquidity going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional capital factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors tax loss credit carryforwards december 31 2016 approximately 31000000 federal 11200000 state net operating loss “nol”s may available offset future taxable income federal net operating loss carryforwards utilized expire 2029 2036 state net operating loss carryforwards utilized expire 2036 greater 50 change ownership section 382 internal revenue code places significant annual limitations use net operating loss carryforwards december 31 2016 2015 recorded 100 valuation allowance deferred tax assets approximately 13792000 10826000 respectively management believes uncertain fully realized determine future able realize portion net operating loss carryforwards adjustment valuation allowance deferred tax assets would increase net income period make determination inflation affects cost raw materials goods services use recent years inflation modest however fluctuations energy costs commodity prices affect cost raw materials components competitive environment somewhat limits ability recover higher costs resulting inflation raising prices although cannot precisely determine effects inflation business management’s belief effects revenues operating results significant believe inflation material impact results operations periods presented except respect payrollrelated costs arising related government imposed regulations item 7a item 7management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2011 period inception july 27 1999 december 31 2011 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors including limited set forth “risk factors” elsewhere annual report plan operations vaccine component gene based tap technology potential significantly improve efficacy prophylactic immunotherapeutic vaccines addresses fundamental mechanism cell recognition response unlike vaccine technologies address initiation immune responses tap expression also unique ability enhance effector function mature killer cells enhancement effector function potentially complementary anyall vaccine approaches designed enhance cellular responses therefore envisage establishing multiple collaborative partnerships progress genebased tap development research clinic exploitation key mechanism highlighted two collaborations mayo clinic rochester mn progress 2011 management believes result recent personal additions moving state art facility exclusive licensing option agreements mayo clinic rochester minnesota near term phase 1 clinical trials adequate funding company well positioned significant growth 2012 august fda approved ind investigational new drug application company signed sponsored research agreement mayo clinic phase 1 her2neu breast cancer clinical trial scheduled start first quarter 2012 trial use patented technology developed mayo clinic tapimmune exclusive option license technology recent clinical trials her2neu vaccines shown considerable promise left significant room improvements technology evaluating phase clinical trial offers vaccine broader coverage making applicable much larger population women breast cancer anticipate technology used therapeutically together tap expression technology reaches clinical development combination improved her2neu targeted vaccine currently herceptin® trastuzumab intravenously delivered monoclonal antibody used treatment her2neu breast cancer sales product 2009 approximately us5 billion source roche ag’s pharmaceutical division vaccine approach potential treat broader her2neu positive clinical population market potential significant genebased tap vaccines also potential significantly improve efficacy prophylactic vaccines viral pandemics agents biodefense novel approach development smallpox vaccine collaboration mayo clinic research studies progressed well testing unique patentable smallpox antigens combination tap technology expect completed third quarter 2012 feasibility studies complete would move larger preclinical animal studies phase safety trials study also act platform extensive use genebased tap vectors biodefense seeking nondilutive avenues finance advance program way biodefense focused grants contracts exclusive option license patented mayo technology derived collaboration opening new laboratories offices 1551 eastlake avenue seattle january 23 2012 represents significant advance company several fronts first sublease service agreements puget sound blood center research institute enables scientific team access wide array functioning core labs shared equipment relevant aspects development genebased product candidates second arrangement allows us speed development tapbased products towards clinic third capabilities produce test range proprietary tapbased expression vectors cancer infectious disease expand external collaborations fourth development new tap constructs laboratories allows us significantly enhance intellectual property portfolio us patent 7994146 issued 2011 represents recent example strategy opening new facilities consistent strategy managing costs using small core internal team leverages external resources continue build technical team 2012 leadership mark reddish joined tapimmune management team vice president product development recruitment worldclass scientists progressing rapidly mark recognized leader vaccine technology development impressive track record taking leading immunotherapy products early research development areas cancer vaccines biodefense formerly vice president product development principal investigator biodefense id biomedical bothell wa prior acquisition company glaxo smithkline 16 billion biomira inc renamed oncothyreon responsible preclinical development cancer vaccines program led early research clinical development stimuvax currently late stage 3 clinical trials partnership merck kgaa respect broader market major driver positive influence activities emergence general acceptance potential new generation immunotherapies promise change standard care cancer immunotherapy sector greatly stimulated approval provenge® dendreon nasd dndn prostate cancer yervoy™ bms metastatic melanoma anticipation results phase iii trials stimuvax® merck kgaaoncothyreon nasd onty mage3 gsk treatment lung cancer progression approaches multiple cancer indications phase ii phase iii management believes tapimmune well positioned leading player emerging market important note late stage immunotherapies development necessarily represent competition programs rather offer us opportunities tap expression technology potentially synergistic many vaccine approaches addition tap expression vector patients already receiving therapeutic vaccine could enhance efficacy vaccines tap designed help killer tcells kill tumor cells concept enhancing effector stage immune response differentiates tap technology wide list immunotherapies currently development offers great opportunity collaborations partnerships accordingly believe use tap expression vectors represents next logical step development effective immunotherapies 2011 made significant progress resources recent progress buildup resources indicate make even greater progress 2012 technology product pipeline side management believes company fundamentally strong poised leading company highly attractive expanding market position reinforced recruitment topclass managers advisors investors share vision results operations following table sets consolidated losses periods indicated reflects restated december 31 2010 numbers referenced 10ka filed october 14 2011 restatement relating classification valuation derivative liabilities years ended december 31 2010 management restated consolidated financial statements year ended december 31 2010 relating company’s accounting share purchase warrants issued part private placement transactions consulting service agreements debt settlement transactions previously fair value share purchase warrants determined using blackscholes valuation model alternate methodology time issuance classified within shareholders’ equity following discussions auditors company reviewed terms conditions underlying outstanding share purchase warrants determined accounting warrants reviewed specifically company issued warrants purchase common stock may require company successor purchase unexercised warrants cash amount equal fair value following announcement specified events defined “fundamental transactions” eg merger sale substantially assets tender offer going private share exchange cash settlement provisions require use blackscholes model calculating cash payment value event fundamental transaction delisting consequence provisions management believes share purchase warrants classified liability balance sheets measured fair value changes fair value reported results operations reporting period coming conclusion management evaluated application asc 48010 distinguishing liabilities equity asc 81540 contracts entity’s equity asc 71810 compensation stock compensation issued outstanding warrants purchase common stock issued private placements consulting debt settlement transactions summary guidance requires share purchase warrant equity instrument classified liability equity whenever company could required settle equity instrument transferring cash assets fundamental transaction clause creates situation warrants may contingently puttable back company cash settlement result company restated accounting share purchase warrants recorded fair value warrants “derivative liability warrants” balance sheet changes fair value time reflected statements operations “changes fair value derivative liabilities” net loss year ended december 31 2010 decreased 1558028 due recognition derivative liabilities year ended december 31 2011 compared year ended december 31 2010 restated discussion company’s results operations financial condition amounts pershare amounts rounded nearest thousand dollars development stage company recorded net loss 2029000 year ended december 31 2011 compared 3533000 year ended december 31 2010 operating expenses operating expenses incurred fiscal year ended december 31 2011 3316000 compared 5472000 prior year significant changes expenditures outlined follows · consulting fees 179000 fiscal year ended december 31 2011 compared 88000 prior fiscal year increase due primarily higher business development services entered current period · stockbased consulting fees 872000 year ended december 31 2011 compared 1058000 prior year current prior year charges result fair valuation shares issued consultants options granted earned consultants periods · general administrative expenses 306000 year ended december 31 2011 compared 203000 prior year increase resulting primarily increased investor relations travel expenses · interest finance charges 679000 fiscal year ended december 31 2011 compared 1241000 prior fiscal year current prior period interest charges primarily accretion interest fair value warrants issued convertible notes · management fees 248000 year ended december 31 2011 compared 329000 prior year difference resulting primarily due one less person management current period offset somewhat higher management fee paid current management · management compensation stockbased 390000 year ended december 31 2011 compared 1088000 prior year current prior year charges result fair valuation options granted management earned period · professional fees 438000 year ended december 31 2011 compared 1174000 prior year decrease prior year results due lower legal fees incurred relating debt issuance current period · research development costs fiscal year ended december 31 2011 204000 compared 290000 prior fiscal year due higher technology licensing fee accrued payment due mayo clinic current period fiscal year ended december 31 2011 company recorded gain settlement debt amount 318000 relating early settlement 2010 convertible notes settlement trade payables shares company also recorded gain extinguishment derivative share purchase warrants amount 291000 determined fair value warrants date settlement less consideration attributed settlement warrants relating 2010 notes similar transactions prior period net loss year ended december 31 2011 2029000 004 per share compared net loss 3533000 009 per share prior period weighted average number shares outstanding 45994617 year ended december 31 2011 compared 39803173 prior year liquidity capital resources following table sets forth cash working capital december 31 2011 2010 subject availability additional financing intend spend approximately 5000000 next twelve months carrying plan operations december 31 2011 250000 cash hand working capital deficit 3493000 working capital december 31 2011 sufficient enable us pay general administrative expenses pursue plan operations next twelve months anticipate require additional funding approximately 5000000 management currently making significant efforts secure needed financing yet secured commitments respect financing able obtain financing amounts required terms acceptable us may forced scale back abandon plan operations various conditions outside control may detract ability raise capital needed execute plan operations including overall market conditions international local economies recognize united states economy suffered period uncertainty capital markets depressed levels established twelve months ago certainty levels stabilize reverse factors could material impact upon ability raise financing result upon shortterm longterm liquidity going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional equity financing factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business december 31 2011 accumulated losses 43722000 since inception financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern net cash used operating activities operating activities year ended december 31 2011 used cash 1310000 compared 925000 year ended december 31 2010 operating activities period inception july 27 1999 december 31 2011 used cash 14854000 operating activities primarily used cash result operating organizational activities consulting fees management fees professional fees research development net cash used investing activities year ended december 31 2011 investing activities used cash nil compared nil year ended december 31 2010 period inception july 27 1999 december 31 2011 investing activities provided cash 205000 net cash provided financing activities revenues since inception financed operations primarily private placements stock financing activities year ended december 31 2011 provided cash 1537000 compared 807000 year ended december 31 2010 period inception july 27 1999 december 31 2011 financing activities provided net cash 14900000 primarily sale equity securities critical accounting policies consolidated financial statements accompanying notes prepared accordance united states generally accepted accounting principles applied consistent basis preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods regularly evaluate accounting policies estimates use prepare consolidated financial statements general management’s estimates based historical experience information third party professionals various assumptions believed reasonable facts circumstances actual results could differ estimates made management see note 2 consolidated financial statements year ended december 31 2011 summary significant accounting policies offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2013 period inception july 27 1999 december 31 2013 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors plan operations management believes platform technologies combine make comprehensive vaccines development today comprehensive approach stimulating helper killer tcell response cancer antigens essential effective long lasting killing effect tumor infected cells jan 10 2014 shareholders board directors approved reverse stock split whereby every one hundred 100 shares common stock held tapimmune stockholder exchanged one share tapimmune common stock “reverse stock split” board directors set close business twentieth day following mailing information statement shareholders date file “certificate pursuant nrs 78209” nevada secretary state make reverse stock split effective every one hundred 100 shares common stock issued outstanding immediately prior effective date reclassified changed one share common stock principal effect reverse stock split decreased number outstanding shares common stock time approval reverse stock split shareholders january 10 2014 approximately 145000000 common shares outstanding number reduced approximately 1450000 shares result reverse stock split respective relative voting rights accompany common stock altered common stock continues par value 0001 per share reasons effect proposed reverse stock split management undertook reverse stock split three goals mind reduce company’s debt creating capital structure would attractive enough debtholders company entice convert shares company ii position company upon successful capital raise could uplist nasdaq market iii create capital structure increasing authorized number shares would allow company make acquisitions raise additional capital date written consent company essentially shares available issuance purpose remaining 5000000 reserved issuance debtors reverse stock split debt settlement conversions amendment articles incorporation common stock outstanding approximately 16000000 shares providing us 484000000 authorized unissued shares common stock proceed capital raise sale common stock result company’s recent restructure approximately 5000000 debt bridge debt converted common shares via preferred stock turn converted approximately 11500000 common shares upon effectiveness reverse stock split amendment articles incorporation guarantee success effort efforts allowed us reduce debt held books approximately 5000000 including recently added bridge funded convertible debt allow prior shareholders maintain approximately 95 outstanding common stock upon completion restructuring debt conversions stock issuances regard explanation pursuant articles incorporation authorized issue 5000000 shares preferred stock greatly reduced debt outstanding balance sheet converting debt shares preferred stock turn converted shares common stock upon occurrence reverse stock split pursuant applicable certificates designation january 7 2014 filed certificate designation create 1250000 shares series convertible preferred stock january 7 2014 february 18 2014 converted debt totaling approximately 3497570 874393 shares series convertible preferred stock upon occurrence reverse stock split february 18 2014 series convertible preferred shares converted approximately 4371964 shares common stock also february 18 2014 approximately 1376946 outstanding debt converted 1376946 shares series b convertible preferred stock turn converted approximately 8512900 shares common stock result issuances approximately 15647422 shares common stock currently issued outstanding transactions registered act reliance exemption registration section 42 act transaction involving public offering issued press release february 25 2014 discussing matters details available filed form 14c form 8ks describing corporate actions current state company market investment community supported applauded restructuring effort undertaken support creditors agreement convert debt new equity significantly stronger balance sheet present investor community expect attract financial backing respected names life science aid us executing product development plans provide fuel growth 2014 ambitious plans advance deepen pipeline expand operations explore strategic business development opportunities following partial summary progress made last six months well overview objectives 2014 2013 her2neu clinical program continued full recruitment breast cancer patients progression initial safety checkpoint demonstration immune responses also saw major advancement technology development laboratories “proof concept” new novel expression vector technology polystart™ could provide much greater signal tcells kill abnormal cells become platform technology build multiple applications revenue streams additional data information forthcoming attempt secure intellectual property around exciting technology advancement 2013 results infectious disease program opened several business development opportunities expect solidify end 2014 march 3 2014 company announced positive interim data phase clinical trial her2neu positive breast cancer tpiv vaccines address significant unmet market need applicable much larger broader patient population current ‘standard care’ therapies like herceptin roche useful 1520 her2neu breast cancer patient population herceptin designed kill tumor cells slows tumor growth large market evidenced herceptin’s 2013 sales exceeding 6 billion contrast vaccine applicable 50 her2neu patient population also limited breast cancer her2neu also target colorectal ovarian cancer therapeutic options her2neu vaccine combination unique designed stimulate killer tcells helper tcells needed sustain killer cells long lasting vaccine kills tumor cells published data also supports fivefold increase killing efficacy compared development vaccine neuvax galena tpiv100 completing phase 1 phase lblla scheduled start q4 2014 march 19 2014 announced licensing late stage phase l clinical program ovarian cancer folate alpha excited opportunity therapeutic presents folate receptor alpha expressed nearly 50 breast cancers addition 95 ovarian cancers treatment options surgery chemotherapy leaving important urgent clinical need new therapeutic time recurrence relatively short type cancer survival prognosis extremely poor recurrence us alone approximately 30000 ovarian cancer patients newly diagnosed every year importantly patient population treatment options result plan present phase ii advancement plan late 2014 application orphan drug status orphan drug status allowed fda cases disease affects fewer 200000 people usa makes allowances accelerated regulatory process sales drug 7 years without competition march 20 2014 company announced filing new intellectual property polystart™ unique vaccine platform antigen expression systems ‘boosts’ presentation desired peptide surface cell killer tcells recognize kill totally novel system creates fourfold increase antigen presentation current studies smallpox shown working well technology exclusively believe unlimited application oncology infectious diseases platforms applied many others via licensing ideal candidates include provenge yervoy many infectious disease national preparedness another significant market ideal therapeutic area tpiv vaccine conjugate along novel peptides polystart™ expression system tpiv vaccine platform address multiple infectious disease well pandemic biodefense threats current smallpox vaccine study mayo clinic already shown significant benefits current vaccine stockpile last dhhsbarda contract smallpox vaccine stockpile contract worth 3 billion httpwwwdddmagcomnews201102sigatrackbilliondollarsmallpoxcontract upcoming 2014 milestones include · additional interim data immune responses her2neu trial · initial interim data folate alpha trial breast ovarian cancer · final data preclinical small animal studies smallpox mayo clinic decision advancement nonhuman primates license deal partnering opportunities · uplisting nasdaq 2014 opening new laboratories offices 1551 eastlake avenue seattle january 23 2012 represented significant advance company several fronts first sublease service agreements puget sound blood center research institute enabled scientific team access wide array functioning core labs shared equipment relevant aspects development genebased product candidates second arrangement allowed tapimmune staff discover start development polystart™ nucleic acidbased expression vector technology start move towards clinic third capabilities produce test range proprietary polystart™ based expression vectors cancer infectious disease expand external collaborations fourth development polystart™ allows us significantly enhance intellectual property portfolio addition use facilities eastlake avenue continue leverage considerable resources external collaborations 2013 downsize inhouse technical due resource constraints plan enhance technical team 2014 leadership dr bob florkiewicz bob held academic biotech positions career spanning 25 years including scientific founder ciblex corporation bob also registered us patent agent previous inhouse experience managing intellectual property assets id biomedical corporation bothell wa bob inventor company’s polystart™ technology mark reddish member company’s board directors serves advisor area product development mark recognized leader vaccine technology development impressive track record taking leading immunotherapy products early research development areas cancer vaccines biodefense formerly vice president product development principal investigator biodefense id biomedical bothell wa prior acquisition company glaxo smithkline 16 billion biomira inc renamed oncothyreon responsible preclinical development cancer vaccines program collaborator dr keith knutson joined vaccine gene therapy research institute florida 2013 research program director oncology full member institute retains adjunct position mayo clinic maintains oversight analysis phase clinical trial her2neu breast cancer respect broader market major driver positive influence activities emergence general acceptance potential new generation immunotherapies promise change standard care cancer immunotherapy sector greatly stimulated approval provenge® prostate cancer yervoy™ metastatic melanoma progression areas checkpoint inhibitors adoptive tcell therapy multiple approaches reaching phase ii phase iii status believe combination technologies well positioned leading player emerging market important note many late stage immunotherapies currently development represent competition programs instead offer synergistic opportunities partner polystart™ andor tap expression systems thus use naturally processed tcell antigens discovered using samples derived cancer patients plus polystart™ expression technology improve antigen presentation tcells could produce effective cancer vaccines right also enhance efficacy immunotherapy approaches technology product pipeline side management believes company fundamentally strong poised leading company highly attractive multibillion dollar expanding market position reinforced recruitment topclass managers advisors investors share vision results operations year ended december 31 2013 compared year ended december 31 2012 discussion company’s results operations financial condition amounts pershare amounts rounded nearest thousand dollars development stage company recorded net loss 5533000 year ended december 31 2013 compared 6172000 year ended december 31 2012 operating expenses operating expenses incurred fiscal year ended december 31 2013 3310000 compared 6229000 prior year significant changes expenditures outlined follows · consulting fees 185000 fiscal year ended december 31 2013 compared 183000 prior fiscal year decrease due primarily lower business development services entered current year · stockbased consulting fees 85000 year ended december 31 2013 compared 2316000 prior year current prior year charges result fair valuation shares issued consultants options granted earned consultants periods · general administrative expenses 576000 year ended december 31 2013 compared 1012000 prior year decrease resulting primarily lower payroll investor relations travel expenses · interest finance charges 646000 fiscal year ended december 31 2013 compared 745000 prior fiscal year current prior period interest charges primarily accretion interest fair value warrants issued convertible notes · management fees 264000 year ended december 31 2013 compared 302000 prior year difference resulting primarily due fewer management staff current year · management compensation stockbased 47000 year ended december 31 2013 compared 124000 prior year current prior year charges result fair valuation options granted management earned year · professional fees 845000 year ended december 31 2013 compared 490000 prior year increase prior year results due higher legal fees incurred relating debt issuance settlements current year · research development costs fiscal year ended december 31 2013 661000 compared 1057000 prior fiscal year due lower technology licensing fee accrued payment due mayo clinic decreased research activity current year net loss year ended december 31 2013 5533000 487 per share compared net loss 6172000 942 per share prior year weighted average number shares outstanding 1136115 year ended december 31 2013 compared 655269 prior year liquidity capital resources following table sets forth cash working capital december 31 2013 2012 subject availability additional financing intend spend approximately 7500000 next twelve months carrying plan operations december 31 2013 49000 cash hand working capital deficit 8768000 working capital december 31 2013 sufficient enable us pay general administrative expenses pursue plan operations next twelve months effort address deficiency management undertook reverse stock split three goals mind reduce company’s debt creating capital structure would attractive enough debtholders company entice convert shares company ii position company upon successful capital raise could uplist nasdaq market iii create capital structure increasing authorized number shares would allow company make acquisitions raise additional capital reverse stock split debt settlement conversions q1 2014 approximately 16000000 shares providing us 484000000 authorized unissued shares common stock proceed capital raise sale common stock approximately 5300000 debt bridge debt converted common shares market investment community supported applauded restructuring effort undertaken support creditors agreement convert debt new equity significantly stronger balance sheet present investor community expect attract financial backing respected names life science aid us executing product development plans provide fuel growth 2014 ambitious plans advance deepen pipeline expand operations explore strategic business development opportunities uplist nasdaq market meet necessary criteria able obtain financing amounts required terms acceptable us may forced scale back abandon certain elements plan operations various conditions outside control may detract ability raise capital needed execute plan operations including overall market conditions international local economies recognize united states economy suffered period uncertainty capital markets depressed certainty levels stabilize reverse despite optics improving economy factors could material impact upon ability raise financing result upon shortterm longterm liquidity going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional equity financing factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business december 31 2013 accumulated losses 55427000 since inception financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern net cash used operating activities operating activities year ended december 31 2013 used cash 928000 compared 1589000 year ended december 31 2012 operating activities period inception july 27 1999 december 31 2013 used cash 17371000 operating activities primarily used cash result operating organizational activities consulting fees management fees professional fees research development net cash used investing activities year ended december 31 2013 investing activities used cash nil compared nil year ended december 31 2012 period inception july 27 1999 december 31 2012 investing activities provided cash 205000 net cash provided financing activities revenues since inception financed operations primarily private placements stock debt financing activities year ended december 31 2013 provided cash 943000 compared 1372000 year ended december 31 2012 period inception july 27 1999 december 31 2013 financing activities provided net cash 17215000 primarily sale equity securities critical accounting policies consolidated financial statements accompanying notes prepared accordance united states generally accepted accounting principles applied consistent basis preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods regularly evaluate accounting policies estimates use prepare consolidated financial statements general management’s estimates based historical experience information third party professionals various assumptions believed reasonable facts circumstances actual results could differ estimates made management see note 2 consolidated financial statements year ended december 31 2013 summary significant accounting policies offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2020 december 31 2019 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors company overview clinicalstage immunooncology company specializing development commercialization novel cellbased immunotherapies innovative peptidebased vaccines treatment hematological malignancies solid tumor indications developed lead product candidates multitaaspecific cell technology based selective expansion nonengineered tumorspecific cells recognize tumor associated antigens taas tumor targets kill tumor cells expressing targets cells designed recognize multiple tumor targets produce broad spectrum antitumor activity advancing two pipelines product candidates part multitaaspecific cell program autologous cells treatment lymphoma multiple myeloma mm selected solid tumors allogeneic cells treatment acute myeloid leukemia aml acute lymphoblastic leukemia genetically engineer multitaaspecific cell therapies believe product candidates easier less expensive manufacture lower toxicities current engineered chimeric antigen receptor cart cell receptorbased therapies may provide patients meaningful clinical benefit also developing innovative peptidebased immunotherapeutic vaccines treatment metastatic solid tumors pursuing posttransplant aml lead indication first companysponsored multitaaspecific cell program april 2020 fda granted orphan drug designation mt401 treatment aml receiving allogeneic stem cell transplant multitaaspecific cell therapy well tolerated ongoing phase 1 clinical trial aml myelodysplastic syndrome mds conducted strategic partner baylor college medicine bcm reported recent publication lulla et al 11 17 patients adjuvant disease setting dosed multitaaspecific cell therapy receiving allogeneic hematopoietic stem cell transplant hsct never relapsed median leukemiafree survival lfs reached median followup 19 years 11 15 patients remaining alive estimated twoyear overall survival 77 median followup 19 years postinfusion compares favorably hsct outcomes riskmatched amlmds patients posthsct median lfs nine 15 months twoyear survival probability 42 additionally eight patients treated active disease resistant salvage therapy posthsct median five prior lines therapy range four 10 one eight patients crossed adjuvant group two patients enrolled twice three patients active aml failed another line salvage therapy first multitaaspecific cell infusion two eight patients achieved objective responses one complete response one partial response six patients continuing stable disease submitted investigational new drug ind application united states food drug administration fda initiate phase 2 clinical trial multitaaspecific cell therapy refer mt401 zedenoleucel postallogeneic hsct patients aml adjuvant active disease setting dose administered multicenter trial approximate flat dose equivalent current maximum tolerated dose ongoing phase 1 trial adjuvant setting patients randomized either multitaaspecific cell therapy approximately 90 days posttransplant versus standard care observation active disease patients receive mt401 following relapse posttransplant part singlearm group expect complete safety leadin portion trial first half 2021 anticipate initiate remainder phase 2 trial third quarter 2021 complete enrollment 20 patients phase trial fourth quarter 2021 order report results active disease arm trial first quarter 2022 expect begin manufacturing mt401 phase 2 trial cgmp manufacturing facility third quarter 2021 reported interim data ongoing phase 12 clinical trial multitaaspecific cell therapy treatment pancreatic adenocarcinoma conducted bcm trial observed clinical benefit correlated postinfusion detection tumorreactive cells patient peripheral blood within tumor biopsy samples patients tumorresection arm trial cells exhibited activity targeted antigens nontargeted taas indicating induction antigen spreading date observed cytokine release syndrome neurotoxicity trial also evaluating multitaaspecific cell therapies phase 2 clinical trial treatment breast cancer phase 1 clinical trials treatment lymphoma mm sarcoma conducted bcm december 2020 multitaaspecific cell therapies generally well tolerated patients enrolled clinical trials hematological solid tumor indications incidents cytokine release syndrome neurotoxicity frequently associated cart therapies ongoing clinical trials may also affected covid19 pandemic based observations clinical trials aml pancreatic cancer lymphoma mm believe multitaaspecific cell therapies potential mediate meaningful antitumor effect well significant vivo expansion cells may initiate additional phase 2 clinical trials investigating indications addition planned phase 2 trial posttransplant aml patients financial overview critical accounting policies consolidated financial statements prepared conformity us gaap require use estimates judgments assumptions affect reported amounts assets liabilities disclosure contingent liabilities date financial statements reported amounts expenses periods presented believe accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods critical accounting estimates affect consolidated financial statements judgments assumptions used consistent described note 3 notes consolidated financial statements form 10k research development expenses date research development expenses related primarily development clinical platform identification development product candidates clinical research development expenses consist expenses incurred performing research development activities cost clinical trials including compensation sharebased compensation expense benefits research development employees consultants facilities expenses overhead expenses cost supplies manufacturing expenses fees paid third parties outside expenses clinical costs expensed incurred costs timing clinical trials development product candidates depend variety factors include limited following ●per patient clinical trial costs ●the number patients participate clinical trials ●the number sites included clinical trials ●the length time required enroll eligible patients ●the number doses patients receive ●the dropout discontinuation rates patients ●potential additional safety monitoring studies requested regulatory agencies ●the duration patient followup ●the efficacy safety profile product candidates ●the ability successfully manufacture patient doses addition potential success product candidate depend numerous factors including clinical trial outcomes acceptance regulatory authorities competition manufacturing capability commercial viability determine programs pursue much fund program response ongoing scientific assessments competitive developments clinical trial results well assessment product candidates commercial potential anticipate research development costs continue increase next several years due increased spending clinical development manufacturing product candidates general administrative expenses general administrative expenses consist primarily salaries related costs including sharebased compensation personnel executive finance accounting business development legal human resources functions significant costs include facility costs otherwise included research development expenses legal fees relating patent corporate matters insurance costs professional fees consultancy accounting audit investor relations anticipate general administrative expenses increase future support continued research development activities potential commercialization product candidates income taxes recognize income tax expense years ended december 31 2020 2019 income expense income expense net consists interest income change fair value warrant liabilities results operations years ended december 31 2020 2019 following table summarizes results operations rounded thousand except per share amounts years ended december 31 2020 2019 together changes items revenue generate revenue years ended december 31 2020 2019 respectively sales licensing product candidates year ended december 31 2020 recognized 05 million revenue associated grant awarded mayo foundation us department defense phase 2 clinical trial tpiv200 mayo paid us clinical supplies manufactured us provided clinical trial funded grant refer grant mayo grant year ended december 31 2019 recognized 02 million grant income mayo grant operating expenses operating expenses incurred fiscal year ended december 31 2020 294 million compared 227 million prior year significant changes expenditures operating expenses outlined follows research development expense research development expenses increased 48 189 million year ended december 31 2020 compared 128 million year ended december 31 2019 increase 61 million 2020 primarily attributable following oincrease 29 million headcountrelated expenses increased number research development personnel oincrease 23 million process development expenses oincrease 17 million sponsored research consulting expenses bcm agreements oincrease 06 million rent expenses odecrease 13 million peptide vaccine clinical trial expenses due stages ongoing clinical trials decreased number active patients trials odecrease 01 million expenses included research development expenses related agreements bcm november 2018 february 2020 entered sponsored research agreements bcm provided conduct research us credentialed personnel bcm’s center cell gene therapy years ended december 31 2020 2019 incurred 03 million 01 million expenses related agreements respectively september 2019 entered clinical supply agreement bcm provided bcm provide us multi tumor antigen specific products year ended december 31 2020 incurred 06 million related agreement october 2019 entered workforce grant agreement bcm provided bcm provide us manpower costs projects manufacturing quality control testing validation run activities year ended december 31 2020 incurred 06 million related agreement august 2020 entered clinical trial agreement bcm provided bcm provide us investigatorinitiated research studies year ended december 31 2020 incurred 03 million related agreement general administrative expenses general administrative expenses increased 5 105 million year ended december 31 2020 100 million prior period increase general administrative expenses 05 million mainly comprised following oincrease 10 million headcountrelated expenses increased number administrative personnel oincrease 02 million rent expenses oincrease 04 million insurance expenses odecrease 03 million general administrative expenses odecrease 08 million legal professional fees income expense change fair value warrant liabilities change fair value warrant liabilities year ended december 31 2020 31000 compared 18000 fiscal year ended december 31 2019 interest income interest income 01 million 11 million years ended december 31 2020 2019 respectively attributable interest income relating funds held us treasury notes us government agencybacked securities part reaction covid19 pandemic federal reserve cut rates midmarch 2020 range 00025 recorded lower interest income year ended december 31 2020 net loss increase net loss year ended december 31 2020 compared year ended december 31 2019 due continued expansion research development activities increased expenses relating future clinical trials overall growth corporate infrastructure anticipate continue incur net losses future continue invest research development activities including clinical development multitaa cell product candidates liquidity capital resources generated revenues sales licensing product candidates since inception limited revenue associated grants financed operations primarily public private offerings stock debt including warrants exercise thereof following table sets forth cash equivalents working capital december 31 2020 2019 cash flows following table summarizes cash flows years ended december 31 2020 2019 operating activities net cash used operating activities year ended december 31 2020 189 million use cash primarily related net loss 287 million addition effect changes asset liability accounts including increase prepaid expenses deposits 05 million increase accounts payable accrued liabilities 43 million increase lease liabilities 02 million net cash used operating activities year ended december 31 2019 183 million use cash primarily related net loss 214 million addition effect changes asset liability accounts including increase prepaid expenses deposits 14 million decrease accounts payable accrued liabilities 10 million decrease interest receivable 52000 net increase lease liabilities 02 million investing activities net cash used investing activities 104 million 04 million purchase property equipment years ended december 31 2020 2019 respectively increase relates 68 million construction progress towards new modular cleanrooms buildout manufacturing facility additional 22 million laboratory equipment 06 million computers equipment 05 million furniture fixtures 03 million leasehold improvements new research facility financing activities net cash provided financing activities 67 million year ended december 31 2020 mainly due sale 4113440 shares stock purchase agreement aspire capital provided proceeds company approximately 62 million along 06 million proceeds exercise stock warrants net cash provided financing activities 08 million year ended december 31 2019 due exercise stock warrants stock options future capital requirements date generated revenues commercial sale approved drug products expect generate substantial revenue least next several years fail complete development product candidates timely manner fail obtain regulatory approval ability generate future revenue compromised know generate revenue product candidates expect generate significant revenue unless obtain regulatory approval commercialize product candidates expect expenses increase connection ongoing activities particularly continue research development continue initiate clinical trials seek marketing approval product candidates addition obtain approval product candidates expect incur significant commercialization expenses related sales marketing manufacturing distribution anticipate need substantial additional funding connection continuing operations unable raise capital needed attractive terms could forced delay reduce eliminate research development programs future commercialization efforts december 31 2020 working capital 180 million compared working capital 435 million december 31 2019 based revised clinical research development plans revised timing expectations related progress programs expect cash equivalents december 31 2020 enable us fund operating expenses capital expenditure requirements third quarter 2021 based estimate assumptions may prove wrong could utilize available capital resources sooner currently expect furthermore operating plan may change may need additional funds sooner planned order meet operational needs capital requirements product development commercialization numerous risks uncertainties associated development commercialization product candidates extent may enter additional collaborations third parties participate development commercialization unable estimate amounts increased capital outlays operating expenditures associated current anticipated clinical trials future funding requirements depend many factors ●initiate continue clinical trials product candidates ●continue research development product candidates seek discover additional product candidates seek regulatory approvals product candidates successfully complete clinical trials ●establish sales marketing distribution infrastructure scaleup manufacturing capabilities commercialize product candidates may receive regulatory approval ●evaluate strategic transactions may undertake ●enhance operational financial information management systems hire additional personnel including personnel support development product candidates product candidate approved commercialization efforts product candidates early stages clinical preclinical development outcome efforts uncertain cannot estimate actual amounts necessary successfully complete development commercialization product candidates whether may achieve profitability time ever generate substantial product revenue expect finance cash needs combination equity debt financings collaboration arrangements fiscal 2020 entered agreements buildout manufacturing facility lease research lab expand corporate headquarters houston texas plan continue fund operations capital funding needs equity andor debt financing may also consider new collaborations selectively partner technology extent raise additional capital sale equity convertible debt securities ownership interests stockholders diluted terms may include liquidation preferences adversely affect rights existing stockholders’ common stock incurrence indebtedness would result increased fixed payment obligations could involve certain restrictive covenants limitations ability incur additional debt limitations ability acquire license intellectual property rights operating restrictions could adversely impact ability conduct business raise additional funds strategic partnerships alliances licensing arrangements third parties may relinquish valuable rights technologies product candidates grant licenses terms unfavorable us may also required pay damages liabilities associated litigation legal proceedings involving company addition foregoing based current assessment expect material impact longterm liquidity due covid19 pandemic however continue assess effect pandemic operations extent covid19 pandemic impact business operations depend future developments highly uncertain cannot predicted confidence ultimate geographic spread disease duration outbreak duration effect business disruptions shortterm effects ultimate effectiveness travel restrictions quarantines social distancing requirements business closures united states countries contain treat disease potential economic impact brought duration covid19 may difficult assess predict widespread pandemic could result significant disruption global financial markets reducing ability access capital could future negatively affect liquidity addition recession market correction resulting spread covid19 could materially affect business value common stock aspire common stock purchase agreement february 2020 entered common stock purchase agreement purchase agreement aspire capital fund llc aspire capital provides upon terms subject conditions limitations set forth therein aspire capital committed purchase aggregate 300 million shares common stock 30month term purchase agreement december 31 2020 aspire capital purchased 4113440 shares purchase agreement providing aggregate proceeds company approximately 62 million consideration entering purchase agreement concurrently execution purchase agreement company issued aspire capital 345357 shares company’s common stock purchase agreement provides aspire capital shall effect sales purchase agreement purchase date closing sale price common stock less 025 trading volume requirements restrictions purchase agreement control timing amount sales common stock aspire capital aspire capital right require sales us obligated make purchases us directed us future funding rights first refusal participation rights penalties liquidated damages purchase agreement purchase agreement may terminated us time discretion without cost us aspire capital agreed neither agents representatives affiliates shall engage direct indirect shortselling hedging common stock time prior termination purchase agreement expect use proceeds purchase agreement working capital general corporate purposes purchase agreement provides number shares may sold pursuant purchase agreement limited 9232814 shares including commitment shares exchange cap represents 1999 outstanding shares common stock date purchase agreement unless stockholder approval obtained issue 1999 limitation apply time exchange cap reached times thereafter average price paid shares issued purchase agreement equal greater 241 closing price shares nasdaq global market immediately preceding execution purchase agreement required permitted issue shares common stock purchase agreement issuance would breach obligations rules regulations nasdaq global market going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional capital factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors tax loss credit carryforwards december 31 2020 approximately 972 million federal 390 million state net operating loss carryforwards may available offset future taxable income federal net operating loss carryforwards 416 million utilized expire 2029 2037 federal net operating loss carryforwards 556 million generated 2018 thereafter subject 80 limitation taxable income expire carry forward indefinitely state net operating loss carryforwards 219 million utilized begin expire 2035 state net operating loss carryforwards 171 million generated 2018 thereafter subject 80 limitation taxable income expire carry forward indefinitely change ownership greater 50 section 382 internal revenue code places significant annual limitations use net operating loss carryforwards december 31 2020 2019 recorded 100 valuation allowance deferred tax assets approximately 297 million 246 million respectively management believes uncertain fully realized determine future able realize portion net operating loss carryforwards adjustment valuation allowance deferred tax assets would increase net income period make determination inflation affects cost raw materials goods services use recent years inflation modest however fluctuations energy costs commodity prices affect cost raw materials components competitive environment somewhat limits ability recover higher costs resulting inflation raising prices although cannot precisely determine effects inflation business management’s belief effects future revenues operating results significant believe inflation material impact results operations periods presented except respect payrollrelated costs arising related governmentimposed regulations item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2014 period inception july 27 1999 december 31 2013 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors plan operations management believes platform technologies combine make comprehensive vaccines development today comprehensive approach stimulating helper killer cell response cancer antigens essential effective long lasting killing effect tumor infected cells january 10 2014 shareholders board directors approved reverse stock split whereby every one hundred 100 shares common stock held tapimmune stockholder exchanged one share tapimmune common stock “reverse stock split” board directors set close business twentieth day following mailing information statement shareholders date file “certificate pursuant nrs 78209” nevada secretary state make reverse stock split effective every one hundred 100 shares common stock issued outstanding immediately prior effective date reclassified changed one share common stock principal effect reverse stock split decreased number outstanding shares common stock time approval reverse stock split shareholders january 10 2014 approximately 145000000 common shares outstanding number reduced approximately 1450000 shares result reverse stock split respective relative voting rights accompany common stock altered common stock continues par value 0001 per share reasons effect reverse stock split management undertook reverse stock split three goals mind reduce company’s debt creating capital structure would attractive enough debtholders company entice convert shares company ii position company upon successful capital raise could uplist nasdaq market iii create capital structure increasing authorized number shares would allow company make acquisitions raise additional capital date written consent company essentially shares available issuance purpose remaining 5000000 reserved issuance debtors reverse stock split debt settlement conversions amendment articles incorporation common stock outstanding approximately 15000000 shares providing us 485000000 authorized unissued shares common stock proceed capital raise sale common stock debt conversions stock issuances regard explanation pursuant articles incorporation authorized issue 5000000 shares preferred stock reduced outstanding debt balance sheet significantly converting shares preferred stock turn converted shares common stock upon occurrence reverse stock split january 7 2014 filed certificate designation create 1250000 shares series convertible preferred stock also first quarter fiscal 2014 filed certificate designation create 1500000 shares series b convertible preferred stock year issued 418000 convertible notes carried interest rate converted shortly thereafter preferred stock immediately common stock year approximately 48 million debt 05 million accrued interest converted preferred stock immediately converted 140 million shares common stock debt settlement capital raising efforts 2014 early 2015 resulted approximately 32639000 shares common stock currently issued outstanding debt settlement transactions registered act reliance exemption registration section 42 act transaction involving public offering issued press release february 25 2014 discussing matters details available filed information statement form 14c form 8ks describing corporate actions completed new institutional financing january 2015 march 2015 via effective s3 registration statement july 23 2014 current state company tapimmune clinicalstage immunotherapy company specializing development innovative peptide genebased immunotherapeutics vaccines treatment cancer company multiple clinical trials underway mayo clinic rochester mn addition sponsored clinical trials announced new grantfunded breast ovarian cancer trial started mayo using folate alpha receptor peptides exclusive commercial rights development pipeline extremely strong provides us opportunity continue expand collaborations leading institutions corporations past year significantly strengthened balance sheet raising additional working capital reducing stockholders’ deficit 87 million december 2013 246 million second quarter 656000 third quarter august 14 2014 closed 2 million registered direct offering fundamental institutional investor 25 million first quarter 2015 giving us confidence ability continue developing products path commercialization strength science development approaches becoming widely appreciated particularly clinical program generated positive interim data clinical programs breast ovarian cancer also pleased report preclinical programs seeing positive outcomes new funding company focusing following key initiatives entry phase ii her2neu breast cancer trials entry phase ii triple negative cancer trials fast track orphan drug status produce new polystart™ constructs inhouse facilitate collaborative efforts current clinical indications others already indicated interest combination therapies addition continue work deficit reduction capital improvement order make required benchmarks uplisting nasdaq together fundamental programs corporate activities positioned tapimmune extremely well capitalize acceptance immunotherapy leading therapeutic strategy cancer infectious disease resulting exploding valuations market tapimmune’s pipeline company deep pipeline potential blockbuster immunotherapies development two clinical programs completing phase studies expected advance phase ii 2015 major inflection valuation events believe light assets company significantly undervalued past year number highly visible transactions billion dollar acquisitions taken place validate work believe treatment successfully reaches commercialization treatment applicable 50 her2neu breast cancer market 21 billion annual market believe ovarian cancer treatment reaches commercialization applicable 95 market decision resources one world’s leading research firms pharmaceuticals healthcare believes triple next 10 years least 15 billion addition exciting clinical developments peptide vaccine technology may coupled recently developed inhouse polystart™ nucleic acidbased technology designed make vaccines significantly effective producing four times required peptides immune systems recognize act nucleic acidbased systems also incorporate “tap” stands transporter associated antigen presentation technologies also widely applicable treatment emerging viral threats pandemics particular highly versatile polystart™ technology application areas established focus oncology continue seek new collaborations nondilutive funding infectious disease area respect validation technologies important note majority technologies published leading peerreviewed journals timing publications consistent filing patents list publications tap technology found website wwwtapimmunecom publication data polystart occur current patent filings completed key component success comprehensive patent strategy continually updates extends patent coverage key products highly unlikely early patents extend ultimate product marketing extending patent life important strategy ensuring product protection tapimmune working seed ip seattle effect strategy addition fortunate dr robert florkiewicz tapimmune registered patent agent extensive background field tapimmune four patent estates details found website 1 issued filed patents tap treatment cancer infectious disease owned tapimmune 2 filed patents polystart™ expression vector owned tapimmune filed 2014 3 filed patents her2neu class ii class antigens exclusive license mayo clinic 4 filed patents folate receptor alpha antigens exclusive license option mayo clinic pathway successful product development takes time believe put place significant resources technical corporate fundamentals success strength product pipeline access leading scientists institutions gives us unique opportunity make major contribution global health care number early stage billion dollar pharma acquisitions recent ipos highlighted growing interest investment immunotherapy space looking current valuation peers considering pipeline clinical programs nearterm advancements value inflections represent believe excellent opportunity presents exceptional entry point yet become shareholder respect broader market major driver positive influence activities emergence general acceptance potential new generation immunotherapies promise change standard care cancer immunotherapy sector greatly stimulated approval provenge® prostate cancer yervoy™ metastatic melanoma progression areas checkpoint inhibitors adoptive tcell therapy multiple approaches reaching phase ii phase iii status believe combination technologies well positioned leading player emerging market important note many late stage immunotherapies currently development represent competition programs instead offer synergistic opportunities partner antigen based immunotherapeutics polystart™ andor tap expression systems thus use naturally processed tcell antigens discovered using samples derived cancer patients plus polystart™ expression technology improve antigen presentation tcells could produce effective cancer vaccines right also enhance efficacy immunotherapy approaches cart pd1 inhibitors example technology product pipeline side management believes company fundamentally strong poised leading company highly attractive multibillion dollar expanding market position reinforced recruitment topclass managers advisors investors share vision results operations year ended december 31 2014 compared year ended december 31 2013 discussion company’s results operations financial condition amounts pershare amounts rounded nearest thousand dollars recorded net loss 30883000 year ended december 31 2014 compared 5533000 year ended december 31 2013 operating expenses operating expenses incurred fiscal year ended december 31 2014 3425000 compared 2664000 prior year significant changes expenditures outlined follows · general administrative expenses increased 3182000 year ended december 31 2014 1967000 prior period increase primarily due higher noncash consulting fees paid stockbased compensation 1391000 year ended december 31 2014 85000 prior period offset professional fees 474000 year ended december 31 2014 compared 845000 prior year decrease professional fee prior year due lower legal fees incurred relating debt issuance settlements current year · research development costs fiscal year ended december 31 2014 189000 compared 698000 prior fiscal year due lower technology licensing fee accrued payment due mayo clinic decreased house research activity current year net loss year ended december 31 2014 30883000 200 per share compared net loss 5533000 487 per share prior year weighted average number shares outstanding 15465213 year ended december 31 2014 compared 1136115 prior year liquidity capital resources following table sets forth cash working capital december 31 2014 2013 subject availability additional financing intend spend approximately 7500000 next twelve months carrying plan operations december 31 2014 142000 cash hand working capital deficit 1024000 working capital december 31 2014 sufficient enable us pay general administrative expenses pursue plan operations next twelve months effort address deficiency management undertook reverse stock split three goals mind reduce company’s debt creating capital structure would attractive enough debtholders company entice convert shares company ii position company upon successful capital raise could uplist nasdaq market iii create capital structure increasing authorized number shares would allow company make acquisitions raise additional capital 2014 reverse stock split debt settlement conversions approximately 20319000 shares outstanding providing us 479681000 authorized unissued shares common stock proceed capital raise sale common stock market investment community supported applauded restructuring effort undertaken support creditors agreement convert debt new equity significantly stronger balance sheet present investor community expect attract financial backing respected names life science aid us executing product development plans provide fuel growth 2014 ambitious plans advance deepen pipeline expand operations explore strategic business development opportunities uplist nasdaq market meet necessary criteria able obtain financing amounts required terms acceptable us may forced scale back abandon certain elements plan operations various conditions outside control may detract ability raise capital needed execute plan operations including overall market conditions international local economies recognize united states economy suffered period uncertainty capital markets depressed certainty levels stabilize reverse despite optics improving economy factors could material impact upon ability raise financing result upon shortterm longterm liquidity going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional equity financing factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business december 31 2014 accumulated losses 86310000 since inception financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern net cash used operating activities operating activities year ended december 31 2014 used cash 2187000 compared 695000 year ended december 31 2013 operating activities primarily used cash result operating organizational activities consulting fees management fees professional fees research development net cash provided financing activities revenues since inception financed operations primarily private placements stock debt financing activities year ended december 31 2014 provided cash 2281000 compared 709000 year ended december 31 2013 critical accounting policies consolidated financial statements accompanying notes prepared accordance united states generally accepted accounting principles applied consistent basis preparation financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses reporting periods regularly evaluate accounting policies estimates use prepare consolidated financial statements general management’s estimates based historical experience information third party professionals various assumptions believed reasonable facts circumstances actual results could differ estimates made management use estimates preparation company’s financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stock based transactions fair value components convertible notes payable foreign exchange gains losses accrued liabilities matters impacting company’s ability continue going concern contingencies also involve use estimates assumptions fair value measurements fair value certain company’s financial instruments including cash equivalents accrued compensation accrued liabilities approximate cost short maturities company measures fair value certain financial assets liabilities recurring basis fair value hierarchy used rank quality reliability information used determine fair values financial assets liabilities carried fair value classified disclosed one following three categories • level 1quoted prices unadjusted active markets identical assets liabilities • level 2inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities • level 3unobservable inputs supported little market activity significant fair value assets liabilities stockbased compensation stockbased compensation measured grant date based fair value award fair value award ultimately expected vest recognized expense straightline basis requisite service period generally vesting period expense recognized portion award expected vest reduced estimated forfeiture rate forfeiture rate determined time grant revised necessary subsequent periods actual forfeitures differ estimates expected term expected term options represents period company’s stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility company computes stock price volatility expected terms based historical common stock trading prices riskfree interest rate company bases riskfree interest rate implied yield available us treasury zerocoupon issues equivalent remaining term expected dividend company never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore uses expected dividend yield zero valuation models company recognizes fair value stock options granted nonemployees stockbased compensation expense period related services received derivative liability company evaluates convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accordance asc 81010054 81540 accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instruments classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date evaluating application asc 81540 management must determine whether instrument embedded feature indexed company’s stock asc 8154015 provides entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions application asc 8154015 affected accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain free standing warrants contain contingently puttable cash settlement company evaluated application asc 48010 distinguishing liabilities equity asc 81540 contracts entity’s equity asc 71810 compensation stock compensation issued outstanding warrants purchase common stock issued convertible notes private placements consulting agreements various debt settlements 2009 2012 based guidance management concluded instruments required accounted derivatives either due ratchet protection feature available exercise price note 5 holder’s right put warrants back company cash certain conditions conversion option feature conversion variable number shares asc 8154025 company records fair value warrants conversion options derivatives balance sheet fair value changes values reflected statements operations “changes fair value derivative liabilities” fair value share purchase warrants recorded balance sheet ‘derivative liability warrants’ fair value conversion options recorded balance sheet ‘derivative liability conversion option’ offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors item 7a item 7 management’s discussion analysis financial condition results operations following discussion financial condition changes financial condition plan operations results operations read conjunction audited consolidated financial statements december 31 2017 december 31 2016 ii section entitled “business” included annual report discussion contains forwardlooking statements involve risks uncertainties assumptions actual results may differ materially anticipated forwardlooking statements result many factors cancer vaccines clinicalstage immunooncology company specializing development innovative peptide genebased immunotherapeutics vaccines treatment cancer metastatic disease also developing proprietary technology improve ability cellular immune system recognize destroy diseased cells dna expression technology named polystart™ preclinical development enhance shareholder value taking account development timelines plan focus advancing clinical programs including folate receptor alpha program breast ovarian cancer her2neu peptide antigen program phase ii clinical trials parallel plan complete preclinical development polystart™ technology integral component primeandboost vaccine methodology immunotherapy industry cancer immunooncology become rapidly growing sector pharmaceutical biotech industry approval success checkpoint inhibitors yervoy opdivo bristol myers squibb keytruda merck co together development car tcell therapies juno therapeutics formerly kite pharma provided much momentum sector addition new evidence points increasing use combination immunotherapies treatment cancer provided greater opportunities successful development tcell vaccines combination approaches products technology developmentclinical folate receptor alpha expressed 80 triplenegative breast cancers addition 90 ovarian cancers treatment options surgery radiation therapy chemotherapy leaving important urgent clinical need new therapeutic time recurrence relatively short types cancer survival prognosis extremely poor recurrence united states alone approximately 30000 ovarian cancer patients 40000 triplenegative breast cancer patients newly diagnosed every year tpiv200 phase human clinical trials folate alpha breast ovarian cancer mayo clinic 21patient phase clinical trial using tpiv200 completed 2015 vaccine well tolerated safe 20 21 evaluable patients showed positive immune responses provided strong rationale progressing phase ii trials good manufacturing practice “gmp” phase ii trials resulted commercially viable formulation july 27 2015 exercised option agreement mayo clinic signing worldwide exclusive license agreement commercialize proprietary folate receptor alpha vaccine technology cancer indications part agreement investigational new drug application “ind” folate receptor alpha “tpiv200” transferred mayo clinic us amendment support phase ii clinical trials lead product march 15 2018 announced publication clinical data phase trial tpiv200 multiepitope tcell vaccine targeting folate receptor alpha “fra” patients ovarian breast cancer results show tpiv200 vaccination well tolerated patients 90 developed robust durable antigenspecific immune responses fra without regard hla type aligns intended mechanism action vaccine september 15 2015 announced collaborators mayo foundation awarded grant 133 million us department defense grant commencing september 15 2015 cover costs 280patient phase ii clinical trial folate receptor alpha vaccine patients triplenegative breast cancer work closely mayo foundation clinical trial providing clinical manufacturing expertise well providing gmp vaccine formulations vaccine formulations developed multiple phase ii clinical programs triplenegative breast ovarian cancer combination immunotherapeutics phase ii study tpiv200 treatment triplenegative breast cancer began enrolling patients late 2017 december 9 2015 announced received orphan drug designation us food drug administration’s office orphan products development “oopd” cancer vaccine tpiv200 treatment ovarian cancer tpiv200 ovarian cancer clinical program receive benefits including tax credits clinical research sevenyear market exclusivity upon receiving marketing approval tpiv200 multiepitope peptide vaccine targets folate receptor alpha overexpressed multiple cancers including 90 ovarian cancer cells february 3 2016 announced us fda designated investigation multipleepitope folate receptor alpha peptide vaccine tpiv200 gmcsf adjuvant maintenance therapy subjects platinumsensitive advanced ovarian cancer achieved stable disease partial response following completion standardofcare chemotherapy fast track development program began enrolling phase ii study indication 2017 opened multiple clinical sites completed enrollment patients phase ii trial folate receptor alpha cancer vaccine tpiv200 treatment triplenegative breast cancer one difficulttotreat cancers representing clear unmet medical need openlabel 80patient clinical trial designed evaluate dosing regimens efficacy immune responses women triplenegative breast cancer key data trial expected included future new drug application submission fda marketing clearance trial sponsored conducted tapimmune april 21 2016 announced participation ovarian cancer study sponsored memorial sloan kettering cancer center new york city collaboration astrazeneca pharmaceuticals ovarian cancer patients responsive platinum commonly used chemotherapy ovarian cancer study phase ii study tpiv200 currently enrolling ovarian cancer patients designed look effects combination therapy astrazeneca’s checkpoint inhibitor durvalumab study enroll 40 patients openlabel unresponsive platinum patients real options left combination therapy proves effective believe would address critical unmet need tpiv200 received orphan drug designation use treatment ovarian cancer although business relationship astrazeneca paying onehalf costs clinical study addition providing tpiv200 study companysponsored phase ii study platinumsensitive ovarian cancer patients initiated 2017 study designed evaluate tpiv200 gmcsf randomized placebocontrolled fashion first maintenance period primary surgery chemotherapy patients stage treatment highest potential immunotherapeutic effect approved treatment options study enroll 120 patients next year half interim analysis planned first quarter 2019 tpiv100110 phase human clinical trials her2neu breast cancer mayo clinic phase study using tpiv100 fourpeptide product completed 2015 final safety analysis patients treated complete product shown safe addition 19 20 evaluable patients showed robust tcell immune responses antigens vaccine composition providing solid case advancement phase ii 2017 additional secondary endpoint incorporated phase trial twoyear follow recording time disease recurrence participating breast cancer patients second trial started 2018 uses novel vaccine strategy patients dcis eliminate disease protect recurrence phase ibii studies plan add class peptide licensed mayo clinic april 16 2012 four class ii peptides producing tpiv110 fivepeptide product management believes combination class ii her2neu antigens gives us leading her2neu vaccine platform plan amend ind incorporate fifth peptide phase ibii study discussions fda resulted preclinical development project allow us file amended ind first half 2018 products technologypreclinical polystart™ converted previously filed us provisional patent application polystart™ full patent application february 2016 received notice allowance us patent trademark office “uspto” patent application entitled “a chimeric nucleic acid molecule nonaug initiation sequences” term patent extends march 17 2034 additional patent filings progress plan develop polystart™ standalone therapy ‘boost strategy’ used synergistically peptidebased vaccines breast ovarian cancer current state company clinicalstage immunotherapy company specializing development innovative peptide genebased immunotherapeutics vaccines treatment cancer plan conduct multiple phase ii clinical trials vaccines largest studies triplenegative breast cancer totally funded 133 million grant us department defense collaborators mayo clinic jacksonville florida companysponsored trial triplenegative breast cancer started second quarter 2016 companysponsored trial ovarian cancer started fourth quarter 2017 believe development pipeline strong provides us opportunity continue expand collaborations leading institutions corporations believe strength science development approaches becoming widely appreciated particularly clinical program generated positive interim data clinical programs breast ovarian cancer continue focused entry phase ii triplenegative breast cancer trials including application fast track orphan drug status well planning phase ii her2neu breast cancer trials expect continue prosecute polystart™ patent filings develop new constructs facilitate collaborative efforts current clinical indications others already indicated interest combination therapies believe fundamental programs corporate activities positioned tapimmune capitalize acceptance immunotherapy leading therapeutic strategy cancer infectious disease tapimmune’s pipeline clinical program pipeline potential immunotherapies development phase clinical programs her2neu breast ovarian cancer completed strong immune responses 90 patients treated provided rationale catalyst advance programs phase ii clinical trials addition exciting clinical developments peptide vaccine technology may coupled developed inhouse polystart™ nucleic acidbased technology designed make vaccines significantly effective producing four times required peptides immune systems recognize act nucleic acidbased systems also incorporate “tap” stands transporter associated antigen presentation key component success comprehensive patent strategy continually updates extends patent coverage key products highly unlikely early patents extend ultimate product marketing extending patent life important strategy ensuring product protection three active patent families supporting 1 filed patents polystart™ expression vector owned tapimmune filed 2014 ip covers use tap announced allowance patent february 2016 2 filed patents her2neu class ii class antigens exclusive license mayo foundation 3 filed patents folate receptor alpha antigens exclusive license mayo foundation pathway successful product development takes time believe put place significant success strength product pipeline access leading scientists institutions gives us unique opportunity make major contribution global health care respect broader market major driver positive influence activities emergence general acceptance potential new generation immunotherapies promise change standard care cancer immunotherapy sector greatly stimulated approval provenge® prostate cancer yervoy™ metastatic melanoma progression areas checkpoint inhibitors adoptive tcell therapy multiple approaches reaching phase ii phase iii status believe combination technologies well positioned leading player emerging market important note many latestage immunotherapies currently development represent competition programs instead offer synergistic opportunities partner antigen based immunotherapeutics polystart™ expression system thus use naturally processed tcell antigens discovered using samples derived cancer patients plus polystart™ expression technology improve antigen presentation tcells could produce effective cancer vaccine right also enhance efficacy immunotherapy approaches cart pd1 inhibitors example recent developments company highlights recent developments completed gmp manufacturing scale second clinical lot tpiv200 supply additional phase ii clinical trials successfully completed multigram production scaleup well gmp manufacturing second clinical lot tpiv200 vaccine supply used company’s ongoing phase ii study platinumsensitive ovarian cancer well planned 280patient phase ii study sponsored mayo clinic funded us department defense treating triplenegative breast cancer also made various improvements vaccine manufacturing process resulting believe superior formulation vaccine amenable largescale manufacturing commercialization clinical program pipeline status updates announcement publication clinical trial results tpiv200 cancer vaccine clinical cancer research march 15 2018 announced publication clinical data phase trial tpiv200 multiepitope tcell vaccine targeting folate receptor alpha “fra” patients ovarian breast cancer results show tpiv200 vaccination well tolerated patients 90 developed robust durable antigenspecific immune responses fra without regard hla type aligns intended mechanism action vaccine enrollment completed phase ii tpiv200 trial triplenegative breast cancer completed enrollment treating following patients phase ii trial folate receptor alpha cancer vaccine tpiv200 treatment triplenegative breast cancer one difficult cancers treat representing clear unmet medical need openlabel 80patient clinical trial designed evaluate dosing regimens adjuvants efficacy immune responses women triplenegative breast cancer key data trial expected included future biologics license application submission fda marketing clearance trial sponsored conducted tapimmune independent data safety monitoring board dsmb reviews safety every quarter ongoing phase ii study enrolling women stage iiii triplenegative breast cancer completed initial surgery chemoradiation therapy randomized fourarm study evaluating two doses tpiv200 high dose low dose tested without immune priming cyclophosphamide prior vaccination safety reviews conducted quarterly shown safety issues study completed enrollment end 2017 interim data expected mid2018 details regarding trial found wwwclinicaltrialsgov identifier numbers nct02593227 frv002 enrolling patients phase ii tpiv200 trial platinumsensitive ovarian cancer opened multiple clinical sites enrolled first 12 patients phase ii trial tpiv200 120patient study ovarian cancer patients responsive platinum received fda’s fast track designation develop tpiv200 maintenance therapy combination platinum platinumresponsive ovarian cancer patients including women stage iii iv ovarian cancer remission following first round successful platinumbased chemotherapy multicenter doubleblind efficacy study sponsored conducted tapimmune expect complete enrollment mid2019 interim analysis planned based upon 50 patient enrollment anticipate completing first half 2019 details regarding trial found wwwclinicaltrialsgov identifier numbers nct02978222 frv004 enrolling patients phase ii mayo clinicus dod trial tpiv200 triplenegative breast cancer patients enrolled phase ii study tpiv200 treatment triplenegative breast cancer conducted mayo clinic sponsored us dod 280patient study led dr keith knutson mayo clinic jacksonville florida dr knutson inventor technology member scientific advisory board tapimmune supplying doses tpiv200 trial reimbursed costs associated manufacturing remaining costs associated conducting study funded 133 million grant made dod mayo clinic enrolling patients phase ii trial memorial sloan kettering tpiv200 platinumresistant ovarian cancer phase ii study tpiv200 ovarian cancer patients responsive platinum commonly used chemotherapy ovarian cancer sponsored memorial sloan kettering cancer center “mskcc” collaboration astrazeneca tapimmune begun enrollment 40patient study openlabel study designed evaluate combination therapy includes tpiv200 tcell vaccine astrazeneca’s checkpoint inhibitor durvalumab unresponsive platinum patients real remaining options combination therapy proves effective believe would address critical unmet need tpiv200 received orphan drug designation use treatment ovarian cancer successfully completed enrollment first safety cohort may enable mskcc increase number patients enrolled subsequently increase study’s enrollment rate currently 50 patients enrolled interim analysis planned first half 2018 details regarding trial found wwwclinicaltrialsgov identifier numbers nct02764333 16011 open ind fda tpiv110 2018 phase ii protocol preparation enhanced formulation second cancer vaccine product tpiv110 fivepeptide product following strong safety immune responses phase mayo clinic study using tpiv100 fourpeptide product tpiv110 targets her2neu makes applicable breast ovarian colorectal cancers enhanced tpiv product adds fifth antigen produce even robust immune response activating cd4 helper cd8 killer tcells participated preinvestigational new drug “preind” meeting fda file amended ind containing fifth peptide early 2018 protocol phase ii trial tpiv110 treatment her2neu positive breast cancer patients currently review clinical advisory board collaborators mayo clinic vaccinate women ductal carcinoma situ dcis using tapimmune tpiv100 her2targeted tcell vaccine march 14 2017 announced partners mayo clinic received grant us department defense conduct phase ib study her2targeted vaccine candidate early form breast cancer called dcis second tapimmune vaccine tested fully funded study sponsored mayo clinic collaborators mayo clinic announced 38 million grant believe would fully fund trial study successful vaccine may eventually augment even replace standard surgery chemotherapy potentially could become part routine immunization schedule preventing breast cancer healthy women study expected enroll 4045 women dcis begin commence enrollment early 2018 company highlights reverse stock split september 16 2016 effected onefortwelve reverse split common shares common shares began trading splitadjusted basis september 16 2016 reverse stock split effected connection intention apply list common stock nasdaq capital market november 2 2016 received notification common stock approved listing nasdaq capital market began trading tuesday november 8 2016 ticker symbol “tpiv” june 2017 private placement transaction june 26 2017 completed private placements units certain accredited investors private placement transaction sold 1503567 shares common stock 397 per share fiveyear warrants purchase equal number shares common stock exercise price 397 per share 0125 per warrant one common share one warrant sold together unit total 4095 per unit issued sold aggregate 1503567 units aggregate gross proceeds 62 million incurred 08 million agency fees legal costs connection offering reduced exercise price warrants purchase aggregate 653187 shares common stock issued investors private placement closed august 2016 600 per share 397 per share addition issued fiveyear warrants placement agent offering providing purchase 150357 shares common stock 397 per share june 2017 exercise repricing warrants held existing institutional investors june 23 2017 certain existing institutional shareholders company hold various outstanding warrants ie c e f purchase company common stock entered warrant repricing exercise agreements series e repriced exercised warrants approximately 168000 series e warrants repriced 1500 per share 397 per share exercised immediately gross proceeds approximately 07 million series e warrants purchase approximately 187000 shares company common stock reduced 1500 per share 450 per share series c f repriced warrants additionally exercise prices certain investors series c series f warrants reduced follows fair value relating modification exercise prices repriced warrants treated deemed dividend statement stockholders’ equity 06 million june 2017 agent warrants pursuant agency agreement dated may 12 2017 katalyst securities llc us katalyst agreed act placement agent connection june 26 2017 private placement offering pursuant agreement agreed pay katalyst aggregate cash fee placement agent financial advisory services equal 10 gross proceeds offering ii nonaccountable expense allowance amount seventy thousand dollars 70000 iii fiveyear warrants purchase number shares common stock equal 10 number shares sold offering katalyst warrants terms private placement warrants issued offering based 1503567 shares common stock sold private placement issued fiveyear warrants katalyst providing purchase 150357 shares company common stock 397 per share previous funding previous funding come financings conducted january march 2015 exercises stock warrants august 2016 private placement completed private placements units certain accredited investors units consisted one share common stock par value 0001 per share ii one fiveyear warrant purchase one share common stock 600 issued sold aggregate 653187 units purchase price per unit 480 aggregate 31 million incurred 08 million agency fees legal costs addition issued fiveyear warrants placement agent offering providing purchase 65327 shares common stock 480 per share connection august 2016 private placement holders aggregate 583333 outstanding series c warrants 416667 series c1 warrants providing purchase one share common stock 600 per share exercised warrants aggregate exercise price 60 million financial overview critical accounting policies condensed consolidated financial statements prepared conformity us gaap require use estimates judgments assumptions affect reported amounts assets liabilities disclosure contingent liabilities date financial statements reported amounts expenses periods presented believe accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods critical accounting estimates affect consolidated financial statements judgments assumptions used consistent described part ii item 7 annual report form 10k year ended december 31 2017 use estimates preparation financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stockbased transactions fair value components convertible notes payable foreign exchange gains losses accrued liabilities matters impacting ability continue going concern contingencies also involve use estimates assumptions fair value measurements fair value certain financial instruments including cash equivalents accrued compensation accrued liabilities approximate cost short maturities measure fair value certain financial assets liabilities recurring basis fair value hierarchy used rank quality reliability information used determine fair values financial assets liabilities carried fair value classified disclosed one following three categories • level 1quoted prices unadjusted active markets identical assets liabilities • level 2inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities • level 3unobservable inputs supported little market activity significant fair value assets liabilities stockbased compensation stockbased compensation measured grant date based fair value award fair value award ultimately expected vest recognized expense straightline basis requisite service period generally vesting period expense recognized portion award expected vest reduced estimated forfeiture rate forfeiture rate determined time grant revised necessary subsequent periods actual forfeitures differ estimates expected term expected term options represents period stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility compute stock price volatility expected terms based historical common stock trading prices riskfree interest rate base riskfree interest rate implied yield available u treasury zerocoupon issues equivalent remaining term expected dividend never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore use expected dividend yield zero valuation models recognize fair value stock options granted nonemployees stockbased compensation expense period related services received derivative liability evaluate convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instruments classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within twelve months balance sheet date management must determine whether instrument embedded feature indexed stock entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions application exercise affects accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain freestanding warrants contain contingently puttable cash settlement results operations year ended december 31 2017 compared year ended december 31 2016 recorded net loss 110 million 116 basic diluted per share year ended december 31 2017 compared net loss 25 million 036 basic per share 072 diluted per share year ended december 31 2016 operating expenses operating expenses incurred fiscal year ended december 31 2017 117 million compared 85 million prior year significant changes expenditures outlined follows ·research development costs fiscal year ended december 31 2017 53 million compared 38 million prior fiscal year due increases prior period planned expenses relating clinical trials ·general administrative expenses increased 64 million year ended december 31 2017 47 million prior period increased expenses period attributable following ostockbased compensation relating stock grants pursuant peter hoang’s glynn wilson’s employment agreements ostockbased compensation employees outside consultants olegal audit professional fees oinvestor relations expenses oexpenses relating shareholder meeting income expense change fair value warrant liabilities change fair value warrant liabilities year ended december 31 2017 5500 compared 59 million year ended december 31 2016 august 10 2016 amended series a1 series c c1 series d1 series e e1 warrants agreements issued us january march 2015 remove clause caused warrants classified warrant liabilities variance period due reason fair value warrant liabilities decreased 5500 year ended december 31 2017 reflected corresponding loss condensed consolidated statement operations compares decrease fair value derivative liabilities year ended december 31 2016 59 million revalue derivative liabilities balance sheet date fair value fair value determined using blackscholes valuation model using various assumptions two significant changes assumptions difference strike price number warrants derivative liabilities debt extinguishment gain 2003 entered license agreement foreign based thirdparty certain adenovirus technology license agreement amended several times inception 2008 time amended restated fixed threeyear term expiring 2011 time pursue technology undertaken work area covered technology license neither thirdparty took actions pursuant license agreement carried historical accrual approximately 05 million amended license agreement related certain obligations provided license agreement license agreement governed laws foreign jurisdiction sought obtained legal advice related accrued obligations expired license agreement relied upon judicial conclusion opined upon outside legal counsel applicable foreign jurisdiction court foreign jurisdiction would grant relief releasing us liability license agreement accordance accounting standards codification 405 “extinguishment liabilities” recorded debt extinguishment gain 05 million reduced liability amount owed 0 year ended december 31 2017 grant income years ended december 31 2017 2016 received 02 million grant awarded mayo foundation us department defense phase ii clinical trial tpiv200 grant compensated us outofpocket costs associated clinical supplies manufactured provided us clinical study shares issued debt settlement agreements year ended december 31 2016 incurred 01 million loss connection shares issued satisfy outstanding debt agreements previous years weighted average number shares outstanding 95 million basic diluted year ended december 31 2017 compared 69 million basic 74 million diluted year ended december 31 2016 liquidity capital resources generated revenues since inception financed operations primarily public private offerings stock debt including warrants exercise thereof following table sets forth cash working capital december 31 2017 2016 cash flows following table summarizes cash flows years ended december 31 2017 2016 financings june 2017 private placement transaction june 26 2017 completed private placements units certain accredited investors private placement transaction sold 1503567 shares common stock 397 per share fiveyear warrants purchase equal number shares common stock exercise price 397 per share 0125 per warrant one common share one warrant sold together unit total 4095 per unit issued sold aggregate 1503567 million units aggregate gross proceeds 62 million incurred 08 million agency fees legal costs connection offering reduced exercise price warrants purchase aggregate 653187 shares common stock issued investors private placement closed august 2016 600 per share 397 per share previous funding previous funding come financings conducted january march 2015 exercises stock warrants august 2016 private placement completed private placements units certain accredited investors units consisted one share common stock par value 0001 per share ii one fiveyear warrant purchase one share common stock 600 issued sold aggregate 653187 units purchase price per unit 480 aggregate 31 million incurred 08 million agency fees legal costs addition issued fiveyear warrants placement agent offering providing purchase 65327 shares common stock 480 per share connection august 2016 private placement holders aggregate 583333 outstanding series c warrants 416667 series c1 warrants providing purchase one share common stock 600 per share exercised warrants aggregate exercise price 60 million future capital requirements december 31 2017 working capital 38 million compared working capital 62 million december 31 2016 expect expenses continue similar pace 2018 primarily continue funding inprocess phase ii clinical trials two clinical studies expected funded total 171 million grants made dod mayo clinic collaborators mayo clinic announced 38 million grant expect would fully fund phase ii clinical trial dcis planned her2neu vaccine capital requirements 2018 beyond depend numerous factors including success research development resources devote develop support technologies success pursuing strategic licensing funded product development collaborations external partners well strategic initiatives may determine pursue subject ability raise additional capital expect incur substantial expenditures develop technologies including continued increases costs related research nonclinical testing clinical studies trials well costs associated capital raising efforts public company believe existing cash fund operations third quarter fiscal 2018 require substantial additional capital conduct research development fund nonclinical testing phase ii clinical trials licensed patented technologies begin cultivating collaborative relationships phase ii future phase iii clinical testing plans could include seeking equity debt financing alliances partnership agreements entities interested technologies business transactions could generate sufficient resources ensure continuation operations research development programs expect continue seek additional funding operations required additional capital may available reasonable terms unable obtain additional financing may required reduce scope delay eliminate planned clinical testing research development activities could harm business sale additional equity debt securities may result additional dilution shareholders raise additional funds issuance debt securities preferred stock securities could rights senior holders common stock could contain covenants could restrict operations also require additional capital beyond currently forecasted amounts numerous risks uncertainties associated research development commercialization product candidates unable estimate exact amounts future working capital requirements future funding requirements depend many factors including limited · number characteristics product candidates pursue · scope progress results costs researching developing product candidates conducting preclinical clinical trials including research development expenditures expect make connection license agreements mayo foundation · strategic transactions may undertake · timing costs involved obtaining regulatory approvals product candidates · ability maintain current research development licensing agreements establish new strategic partnerships collaborations licensing arrangements financial terms agreements · ability achieve milestones licensing arrangements payment obligations may agreements · costs involved preparing filing prosecuting maintaining defending enforcing patent claims including litigation costs outcome litigation · timing receipt amount sales royalties future products based estimates assumptions may prove wrong may need obtain additional funds sooner greater amounts currently anticipate various conditions outside control may detract ability raise additional capital needed execute plan operations including overall market conditions international local economies recognize united states economy suffered period uncertainty capital markets impacted certainty levels stabilize reverse despite optics improving economy factors could material impact upon ability raise financing result upon shortterm longterm liquidity going concern sources revenue provide incoming cash flows sustain future operations outlined ability pursue planned business activities dependent upon successful efforts raise additional capital however company cannot guarantee successful raising funds future factors raise substantial doubt regarding ability continue going concern consolidated financial statements prepared going concern basis implies continue realize assets discharge liabilities normal course business financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary unable continue going concern offbalance sheet arrangements entered offbalance sheet arrangements reasonably likely current future effect financial condition changes financial condition revenues expenses results operations liquidity capital expenditures capital resources material investors tax loss credit carryforwards december 31 2017 approximately 417 million federal 219 million state net operating loss “nol”s may available offset future taxable income federal net operating loss carryforwards utilized expire 2029 2037 state net operating loss carryforwards utilized expire 2037 greater 50 change ownership section 382 internal revenue code places significant annual limitations use net operating loss carryforwards december 31 2017 2016 recorded 100 valuation allowance deferred tax assets approximately 167 million 138 million respectively management believes uncertain fully realized determine future able realize portion net operating loss carryforwards adjustment valuation allowance deferred tax assets would increase net income period make determination inflation affects cost raw materials goods services use recent years inflation modest however fluctuations energy costs commodity prices affect cost raw materials components competitive environment somewhat limits ability recover higher costs resulting inflation raising prices although cannot precisely determine effects inflation business management’s belief effects revenues operating results significant believe inflation material impact results operations periods presented except respect payrollrelated costs arising related government imposed regulations item 7a item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7aquantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7aquantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 8financial statements financial statements incorporated herein reference pages end report supplementary data applicable item 9 item 8 financial statements tapimmune inc development stage company consolidated financial statements december 31 2008 2007 report independent registered public accounting firm consolidated balance sheets consolidated statements operations consolidated statement stockholders’ deficit consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm stockholders board directors tapimmune inc audited accompanying consolidated balance sheets tapimmune inc development stage company december 31 2008 2007 related consolidated statements operations stockholders’ deficit cash flows years ended december 31 2008 2007 period july 27 1999 inception december 31 2008 financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position tapimmune inc december 31 2008 2007 results operations cash flows years ended december 31 2008 2007 period july 27 1999 inception december 31 2008 conformity accounting principles generally accepted united states america accompanying financial statements prepared assuming company continue going concern discussed note 1 financial statements company generated revenues since inception incurred losses developing business losses anticipated company requires additional funds meet obligations costs operations factors raise substantial doubt company’s ability continue going concern management’s plans regard described note 1 financial statements include adjustments might result outcome uncertainty dale matheson carrhilton labunte llp dale matheson carrhilton labonte llp chartered accountants vancouver canada march 31 tapimmune inc development stage company consolidated balance sheets commitments contingencies notes 1 4 5 7 10 11 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements operations accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2008 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2008 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2008 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2008 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2008 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements cash flows supplemental cash flow information noncash investing financing activities note 9 accompanying notes integral part consolidated financial statements tapimmune inc development stage company notes consolidated financial statements december 31 2008 note 1 nature operations may 9 2002 tapimmune inc “tpim” “company” nevada corporation entered letter intent acquire 100 issued outstanding common shares genemax pharmaceuticals inc development stage company “gpi” gpi private delaware company incorporated july 27 1999 whollyowned subsidiary genemax pharmaceuticals canada inc “gpc” private british columbia company incorporated may 12 2000 gpi development stage company formed purpose building biotechnology business specializing discovery development immunotherapeutics aimed treatment cancer therapies infectious diseases autoimmune disorders transplant tissue rejection june 28 2007 company approved name change tapimmune inc completed reverse stock split issuance one 1 new share two onehalf 25 outstanding shares company’s common stock unless specifically noted amounts retroactively restated recognize reverse stock split note 7 2000 gpi university british columbia “ubc” entered worldwide license agreement providing gpi exclusive license rights certain patented unpatented technologies originally invented developed ubc also 2000 gpi ubc entered collaborative research agreement “cra” appointing ubc carry development licensed technology providing gpi option acquire rights commercialize additional technologies developed within cra consideration certain funding commitments lead product resulting licenses immunotherapy vaccine company completing preclinical work anticipation clinical trials specifically company moved technology issuance us patent tested various viral vectors needed deliver gene forms basis vaccine licensed preferred viral vector planned contract production clinical grade vaccine company plans continue development lead product vaccine clinical trials technologies licensed include assays company plans use generation pipeline immunemodulation products assay technology acquired received patent protection consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2008 company working capital deficiency 3032512 capital deficiency 3023373 incurred significant losses since inception losses anticipated development stage raising substantial doubt company’s ability continue going concern ability company continue going concern dependent raising additional capital fund ongoing research development maintenance protection patents accommodation certain debt obligations ultimately generating future profitable operations planned expenditures relating future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities indicated notes 5 11 financial statements number debt obligations default audit report date management addressing going concern remediation seeking new sources capital restructuring retiring debt conversion equity debt settlement arrangements creditors cost reduction programs seeking possible joint venture participation management’s plans intended return company financial stability improve continuing operations company continuing raise capital private placements related party loans sources meet immediate working capital requirements note 10 management believes company able complete restructuring plans mid late 2009 substantial additional funding equity debt settlement required retire notes payable debt obligations company successful raising sufficient funding management plans expand programs including preclinical work establishment manufacturing contracts necessary enter clinical trials lead tap transporters antigen processing vaccine infectious disease adjuvant technology measures successful contribute reducing risk going concern uncertainties company next twelve months certainty company able raise sufficient funding satisfy current debt obligations continue development products marketability note 2 summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america principles consolidation financial statements include accounts company whollyowned subsidiaries gpi gpc described note 1 significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stock based transactions fair value components convertible notes payable foreign exchange gains losses useful lives furniture equipment allocation costs research development accrued liabilities matters impacting company’s ability continue going concern contingencies also involve use estimates assumptions foreign currency translation companys primary management operations currently located canada foreign exchange translation gains losses except gains losses arising self sustaining foreign subsidiary translation balance sheet date recorded earnings company financial statements presented united states dollars accordance sfas 52 “foreign currency translation” foreign denominated monetary assets liabilities translated united states dollar equivalents using foreign exchange rates prevailed balance sheet date nonmonetary assets liabilities translated transaction date revenue expenses translated average rates exchange year related translation adjustments gains losses resulting foreign currency transactions included results operations financial instruments concentration credit risk accordance requirements statement financial accounting standards “sfas” 107 “disclosures fair value financial instruments” company determined estimated fair value financial instruments using available market information appropriate valuation methodologies include assumptions equity capital market conditions liquidity interest rates cost capital market risk fair value estimates based primarily management inputs direct arms length market indicators readily determinable available management based estimates inputs generally subject higher variability observable market indicators fair value financial instruments classified current assets liabilities including cash prepaid expenses receivables research agreement obligations accounts payable accrued liabilities certain amounts due related parties approximate carrying values due shortterm maturity instruments unless otherwise noted managements opinion company exposed significant interest credit risks arising assets classified financial instruments company operates us incurs expenditures outside united states exposed foreign currency risk canadian dollar us dollar euros furniture equipment furniture equipment recorded cost amortized using straightline method estimated useful life following rates computer equipment years furniture fixtures years laboratory equipment years longlived assets company monitors recoverability longlived assets including furniture equipment based estimates using factors current market value future asset utilization future cash flows expected result investment use related assets company’s policy record impairment loss period determined carrying amount asset may recoverable impairment loss calculated excess carrying value estimated realizable value stockbased compensation company recorded 234168 2007 904822 stockbased compensation valued using blackscholes option pricing model additional expense 90000 2007 59400 fair value stock issued pursuant consulting services agreement year ended december 31 2008 notes 6 7 deferred financing fees company defers direct costs incurred connection sale common shares offset proceeds financing upon completion costs incurred connection convertible loans payable deferred amortized financing cost term convertible loans upon conversion loan unamortized amount deferred financing costs charged stockholders’ equity cost financing research development costs company acquired development marketing rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs also ongoing costs incurred connection cra considered costs incurred development unproven technology may alternate future accordingly costs expensed incurred research development costs income taxes company follows liability method accounting income taxes method deferred income tax assets liabilities recognized estimated tax consequences attributable differences financial statement carrying values respective income tax basis temporary differences effect deferred income tax assets liabilities change tax rates recognized income period includes enactment date company adopted provisions fibs interpretation 48 accounting uncertainty income taxes “fin 48” january 1 2007 previously company accounted tax contingencies accordance sfas 5 accounting contingencies required interpretation 48 clarifies sfas 109 accounting income taxes company recognizes financial statement benefit tax position determining relevant tax authority would likely sustain position following audit tax positions meeting standard amount recognized financial statements largest benefit greater 50 percent likelihood realized upon ultimate settlement relevant tax authority adoption date company applied interpretation 48 tax positions statute limitations remained open adoption fin 48 material impact consolidated financial statements year ended december 31 2008 except disclosures matters described note 11 contingencies loss per common share company computes loss per share accordance sfas 128 “earnings per share”” requires presentation basic diluted earnings per share face statement operations basic loss per share computed dividing net loss available common shareholders weighted average number outstanding common shares period diluted loss per share gives effect dilutive potential common shares outstanding period including stock options warrants using treasury method dilutive loss per share excludes potential common shares effect antidilutive recent accounting pronouncements march 2008 fasb issued sfas 161 disclosures derivative instruments hedging activities sfas 161 sfas 161 intended improve financial reporting derivative instruments hedging activities requiring enhanced disclosures enable investors better understand effects entitys financial position financial performance cash flows sfas 161 achieves improvements requiring disclosure fair values derivative instruments gains losses tabular format also provides information entitys liquidity requiring disclosure derivative features credit riskrelated finally requires crossreferencing within footnotes enable financial statement users locate important information derivative instruments sfas 161 effective financial statements issued fiscal years interim periods beginning november 15 2008 adopted company beginning first quarter 2009 management expect significant impact adopting sfas 161 financial position cash flows results operations may 2008 fasb issued sfas 162 hierarchy generally accepted accounting principles “sfas no162” sfas 162 intended improve financial reporting identifying consistent framework hierarchy selecting accounting principles used preparing financial statements presented conformity us generally accepted accounting principles gaap nongovernmental entities sfas 162 effective 60 days following secs approval public company accounting oversight board auditing amendments au section 411 meaning present fairly conformity generally accepted accounting principles new pronouncement expected impact company’s results operations disclosures may 2008 financial accounting standards board “fasb” issued sfas 163 “accounting financial guarantee insurance contracts interpretation fasb statement 60” sfas 163 requires insurance enterprise recognize claim liability prior event default evidence credit deterioration occurred insured financial obligation also clarifies statement 60 applies financial guarantee insurance contracts including recognition measurement used account premium revenue claim liabilities requires expanded disclosures financial guarantee insurance contracts effective financial statements issued fiscal years beginning december 15 2008 except disclosures insurance enterprise’s riskmanagement activities sfas 163 requires disclosures riskmanagement activities insurance enterprise effective first period beginning issuance except disclosures earlier application permitted new pronouncement expected material effect company’s financial statements note 3 furniture equipment furniture equipment consisted following note 4 research agreements crucell holland bv “crucell” research license option agreement effective august 7 2003 crucell gpi entered fiveyear research license option agreement whereby crucell granted gpi nonexclusive worldwide license research use adenovirus technology company required make certain payments fiveyear term totaling euro €450000 approximately 510100 effective june 6 2005 crucell gave company notice default whereby company six months remedy unpaid option maintenance payments 236880 €200000 owing december 31 2005 november 16 2005 crucell provided notice termination default due company’s failure remedy default within required six month period may 2006 company negotiated reinstatement original research license option agreement crucell paid crucell april 20 2006 €123590 151521 connection reinstatement revised terms agreement company would pay crucell twelve monthly payments €10300 starting may 2006 paid october 31 2006 december 31 2008 €75000 annual license fee outstanding december 31 2008 maintain reinstated agreement good standing january 2008 company paid €27316 40000 towards outstanding balance december 31 2008 €172801 243598 included research agreement obligations crucell agreement outstanding terms agreement currently default management attempting negotiate revised payment schedule remaining balance continued working relationship management proposed crucell would hold license dormant state company initiate manufacturing scheduled payments license management confident based discussions crucell proposed future relationship cannot certain conditions met continue licensing arrangement able reinstate crucell license company would forced use alternate cell lines manufacturing alternatives already considered investigated audit report date remains uncertainty satisfactory completion arrangements crucell impact company suitable licensing arrangements reached operating lease march 2007 company entered laboratory lease expires february 2012 terms operating lease agreement require company make minimum monthly payments approximately 2058 2520 combined research operating obligations company obligations operating lease agreement expire february 2012 aggregate minimum annual payments years ending december 31 follows note 5 convertible debt promissory notes payable past several years company obtained financing related unrelated parties challenging conditions company successful date sustaining operations raising additional capital renegotiating replacing debt instruments extending terms conditions default occurred forms financing restrictive costly market risk perspective restrictive legal operational perspective consequence debt restructuring substantial dilution potential dilution shareholders stock based payments commitments required continue renew debt arrangements company continues high risk interest rate exposure liquidity solvency debt renewal march 30 2009 virtually company’s promissory note debt instruments default note 11 following summary debt instrument transactions relevant current prior year 2004 convertible notes debenture financing 2004 company issued two unsecured convertible promissory notes principal amount 500000 included interest 8 per annum due twelve months date issue 2006 company repaid 300000 towards convertible notes addition interest accrued date final payment october 31 2006 2007 company repaid 133367 towards convertible note principal july 3 2007 company entered letter agreement extending term warrants originally issued outstanding convertible note period two years 18 months effective registration warrants completed date reduced conversion price 125 025 incremental increase fair value warrants resulting repricing determined management 40000 recorded interest finance charges fair value estimated using blackscholes option pricing model expected life 2 years risk free interest rate 528 dividend yield 0 expected volatility 86 2008 company repaid 10000 towards convertible note principal december 31 2008 principal amount 56633 2007 66633 outstanding convertible notes accrued interest 15025 2007 10366 accrued recorded accounts payable accrued liabilities ii 2007 promissory note 1 august 31 2007 company issued unsecured promissory note company related family member director company note 6 principal amount 125000 promissory note matured september 28 2007 bears interest 12 per annum partial consideration promissory note october 31 2007 company issued lender fully paid nonassessable 125000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 030 per warrant share exercise period one year issuance date fair value warrants determined management 18104 recorded interest finance charges fair value estimated using blackscholes option pricing model expected life 1 year risk free interest rate 527 dividend yield 0 expected volatility 125 december 18 2007 company signed agreement extend terms 2007 promissory note february 28 2008 consideration extension company agreed issue lender fully paid nonassessable 400000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 025 per warrant share exercise period three years issuance date fair value warrants determined management 44000 recorded warrant issuance obligation expensed interest finance charges fair value estimated using blackscholes option pricing model expected life 3 years risk free interest rate 421 dividend yield 0 expected volatility 106 december 31 2008 warrants issued december 31 2008 repayment made principal amount accrued interest 23556 2007 6625 accrued promissory note included accounts payable accrued liabilities iii 2007 promissory note 2 august 31 2007 company issued holder 2007 promissory note 1 second promissory note 6 principal amount 200000 note bears interest 12 per annum due demand december 31 2008 repayment made principal amount interest 35112 2007 8022 accrued convertible promissory note included accounts payable accrued liabilities effective october 15 2008 two 2007 promissory notes 5ii iii renewed march 30 2009 consideration renewal company agreed issue 1525000 transferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 001 per warrant share exercise period two years issuance date share purchase warrants issued march 11 2009 management estimated fair value 1525000 warrants 76250 using blackscholes option pricing model expected life 2 years risk free interest rate 164 dividend yield 0 expected volatility 199 fair value warrants recorded discount note amortized new maturity term iv 2007 loan security agreement november 30 2007 company entered loan security agreement unrelated company whereby company issued 12 promissory notes principal amount 445000 secured company’s assets interest paid advance resulting net proceeds 391600 discount amortized interest finance charges term notes promissory notes matured may 31 2008 additionally company issued lenders fully paid nonassessable 1780000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 025 per warrant share exercise period five years issuance date company allocated proceeds issuance secured promissory notes warrants based relative fair values determined management accordingly company recognized relative fair value warrants 356000 component stockholders’ deficit interest paid advance amortized 44354 2007 9046 interest expense year ended december 31 2008 increasing net carrying value secured promissory notes additionally fair value warrants accreted interest expense 295694 2007 60306 year ended december 31 2008 increasing carrying value secured promissory notes 445000 fair value warrants estimated using blackscholes option pricing model expected life five years risk free interest rate 455 dividend yield 0 expected volatility 106 may 31 2008 notes repaid full pursuant loan security agreement company paid 54195 including reimbursement legal fees finders’ fees expensed interest finance charges additionally company issued finders’ fees 178000 warrants terms lender’s warrants fair value warrants estimated 35600 using blackscholes option pricing model expected life five years risk free interest rate 455 dividend yield 0 expected volatility 106 recorded interest finance charges warrants issued finders’ fees described exercised current fiscal year v 2008 promissory note 1 april 10 2008 company issued unsecured promissory note principal amount 65000 unrelated party bears interest 18 per annum due ninety 90 days date issuance additionally company issued lender fully paid nonassessable 130000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 025 per warrant share exercise period five years issuance date company allocated proceeds issuance promissory note warrants based relative fair values determined management accordingly company recognized relative fair value warrants 22100 component stockholders’ deficit fair value warrants accreted interest expense 22100 year ended december 31 2008 adjusting carrying value promissory note 65000 fair value warrants estimated using blackscholes option pricing model expected life five years risk free interest rate 234 dividend yield 0 expected volatility 110 effective october 15 2008 promissory note renewed march 30 2009 consideration renewal company agreed issue 390000 transferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 001 per warrant share exercise period two years issuance date share purchase warrants issued march 11 2009 management estimated fair value 390000 warrants 19500 using blackscholes option pricing model expected life 2 years risk free interest rate 164 dividend yield 0 expected volatility 199 fair value warrants recorded discount note amortized new maturity term december 31 2008 repayment made principal amount interest 8495 2007 nil accrued promissory note included accounts payable accrued liabilities vi 2008 promissory note 2 may 5 2008 company issued unsecured promissory note company controlled director company note 6 principal amount 27000 bears interest 18 per annum due ninety 90 days date issuance additionally company issued lender fully paid nonassessable 54000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 025 per warrant share exercise period five years issuance date company allocated proceeds issuance promissory note warrants based relative fair values determined management accordingly company recognized relative fair value warrants 9720 component stockholders’ deficit fair value warrants accreted interest expense 9720 year ended december 31 2008 adjusting carrying value promissory note 27000 fair value warrants estimated using blackscholes option pricing model expected life five years risk free interest rate 194 dividend yield 0 expected volatility 117 effective october 15 2008 promissory note 2 renewed march 30 2009 consideration renewal company agreed issue 162000 transferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 001 per warrant share exercise period two years issuance date share purchase warrants issued march 11 2009 management estimated fair value 162000 warrants 8100 using blackscholes option pricing model expected life 2 years risk free interest rate 164 dividend yield 0 expected volatility 199 fair value warrants recorded discount note amortized new maturity term december 31 2008 repayment made principal amount interest 3196 2007 nil accrued promissory note included accounts payable accrued liabilities vii 2008 promissory note 3 may 14 2008 company issued unsecured promissory note company related family member officer company note 6 principal amount 200000 bears interest 18 per annum due ninety 90 days date issuance additionally company issued lender fully paid nonassessable 400000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 025 per warrant share exercise period five years issuance date company allocated proceeds issuance promissory note warrants based relative fair values determined management accordingly company recognized relative fair value warrants 76000 component stockholders’ deficit fair value warrants accreted interest expense 76000 year ended december 31 2008 adjusting carrying value promissory note 200000 fair value warrants estimated using blackscholes option pricing model expected life five years risk free interest rate 196 dividend yield 0 expected volatility 117 december 31 2008 repayment made principal amount interest 22784 2007 nil accrued promissory note included accounts payable accrued liabilities viii 2008 promissory note 4 may 22 2008 company issued holder 2008 promissory note 3 second unsecured promissory note 6 principal amount 250000 bears interest 18 per annum due ninety 90 days date issuance additionally company issued lender fully paid nonassessable 500000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 025 per warrant share exercise period five years issuance date company allocated proceeds issuance promissory note warrants based relative fair values determined management accordingly company recognized relative fair value warrants 90000 component stockholders’ deficit fair value warrants accreted interest expense 90000 year ended december 31 2008 adjusting carrying value promissory note 250000 fair value warrants estimated using blackscholes option pricing model expected life five years risk free interest rate 207 dividend yield 0 expected volatility 117 december 31 2008 repayment made principal amount interest 27493 2007 nil accrued promissory note included accounts payable accrued liabilities effective october 15 2008 promissory notes 3 4 note 5vii viii renewed march 30 2009 consideration renewal company agreed issue 2700000 transferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 001 per warrant share exercise period two years issuance date share purchase warrants issued march 11 2009 management estimated fair value 2700000 warrants 135000 using blackscholes option pricing model expected life 2 years risk free interest rate 164 dividend yield 0 expected volatility 199 fair value warrants recorded discount note amortized new maturity term ix 2008 promissory note 5 may 15 2008 company issued unsecured promissory note officer company note 6 principal amount 25000 bears interest 18 per annum due ninety 90 days date issuance additionally company issued lender fully paid nonassessable 50000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 025 per warrant share exercise period five years issuance date company allocated proceeds issuance promissory note warrants based relative fair values determined management accordingly company recognized relative fair value warrants 9000 component stockholders’ deficit fair value warrants accreted interest expense 9000 year ended december 31 2008 adjusting carrying value promissory note 25000 fair value warrants estimated using blackscholes option pricing model expected life five years risk free interest rate 196 dividend yield 0 expected volatility 117 effective october 15 2008 promissory note renewed march 30 2009 consideration renewal company agreed issue 150000 transferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 001 per warrant share exercise period two years issuance date share purchase warrants issued march 11 2009 management estimated fair value 150000 warrants 7500 using blackscholes option pricing model expected life 2 years risk free interest rate 164 dividend yield 0 expected volatility 199 fair value warrants recorded discount note amortized new maturity term december 31 2008 repayment made principal amount interest 2836 2007 nil accrued promissory note included accounts payable accrued liabilities x 2008 promissory note 6 november 15 2008 company issued holder promissory note 5 second promissory note 6 principal amount 10000 bears interest 18 per annum due march 30 2009 additionally company agreed issue lender fully paid nonassessable 200000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 001 per warrant share exercise period two years issuance date share purchase warrants issued march 11 2009 management estimated fair value 200000 warrants 10000 blackscholes option pricing model resulted value 18000 higher principal amount expected life 2 years risk free interest rate 122 dividend yield 0 expected volatility 190 fair value warrants recorded discount note amortized new maturity term december 31 2008 repayment made principal amount interest 150 2007 nil accrued promissory note included accounts payable accrued liabilities see note 6 related party transactions company transactions certain officers directors company fiscal year ended december 31 2008 follows incurred 308162 2007 286632 management fees recorded additional 172668 2007 654722 stock based compensation expense fair value options granted management vested period b incurred 74579 2007 167233 research development fees related parties 28114 2007 112313 former chief science officer 46466 2007 54920 paid direct family member current officer c incurred 16932 2007 6625 interest finance charges 125000 promissory note due company related direct family member current director refer note 5ii incurred 27090 2007 8022 interest finance charges 200000 promissory note due company incurred 35369 2007 nil interest finance charges related agreement issue warrants connection extending terms 125000 200000 notes march 30 2009 refer note 5iii issued 27000 promissory note bearing interest 18 per annum including 54000 nontransferable registerable share purchase warrants exercise price 025 per share exercise period five years issuance date company controlled director company incurred 3196 2007 nil interest finance charges 27000 promissory note incurred 3757 2007 nil interest finance charges related agreement issue warrants connection extending term march 31 2009 refer note 5vi e issued 200000 promissory note bearing interest 18 per annum including 400000 nontransferable registerable share purchase warrants exercise price 025 per share exercise period five years issuance date company related family member officer company incurred 22784 2007 nil interest finance charges 200000 promissory note refer note 5vii incurred 62620 2007 nil interest finance charges related agreement issue warrants connection extending terms 200000 250000 notes march 30 2009 refer note 5viii f issued 25000 promissory note bearing interest 18 per annum including 50000 nontransferable registerable share purchase warrants exercise price 025 per share exercise period five years issuance date officer company incurred 2836 2007 nil interest finance charges 25000 promissory note incurred 3479 2007 nil interest finance charges related agreement issue warrants connection extending term march 30 2009 refer note 5ix issued 10000 promissory note bearing interest 18 per annum including agreement issue 200000 transferable registerable share purchase warrants exercise price 001 per share exercise period two years issuance date officer company incurred 150 2007 nil interest finance charges 10000 promissory note incurred 3407 2007 nil interest finance charges related agreement issue warrants refer note 5ix g january 2009 bonuses amounts 20000 25000 granted director officer company respectively compensation work 2008 recorded due related parties december 31 2008 related party transactions stock based consideration involving provision services recorded exchange amount established agreed related parties representing fair value december 31 2008 company amounts owing directors officers 438591 december 31 2007 111593 direct relative officer 29530 december 31 2007 3000 former cso 52017 december 31 2007 39672 amounts normal course operations amounts due related parties unsecured noninterest bearing specific terms repayment except described note 7 capital stock share capital authorized capital company consists 500000000 common shares 0001 par value 5000000 nonvoting preferred shares 0001 par value march 27 2007 company’s articles incorporation amended increase authorized capital 20000000 shares common stock 80000000 shares common stock january 22 2009 authorized capital increased 80000000 shares common stock 500000000 shares common stock special meeting shareholders prior period share transactions included company’s stock transactions balances retroactively restated give effect 25 1 reverse stock split occurred june 28 2007 share transactions december 19 2007 company agreed issue 120000 shares restricted common stock estimated fair value 0195 per share pursuant consulting services agreement december 31 2008 23400 fair value shares issued recorded obligation issue shares warrants share transactions april 8 2008 company issued 300000 shares restricted common stock estimated fair value based market trading value 030 per share pursuant consulting services agreement 90000 fair value issued shares recorded stockbased consulting fees additionally pursuant consulting services agreement company committed issue options acquire 200000 shares company’s common stock exercise price 025 per share vesting expiry terms determined time grant december 31 2008 march 31 2009 options issued stock based compensation recorded commitment fair value could reasonably determined commitment date july 31 2008 effective date june 30 2008 company completed private placement amount 140000 units subscription price 025 gross proceeds company 35000 unit comprised one common share onehalf one nontransferable share purchase warrant company whole warrant entitles holder purchase additional common share company exercise price 030 per share period earlier two years date issuance ii 18 months effective date registration company estimated total fair market value warrants 21000 date grant using blackscholes pricing model using expected life 18 months riskfree interest rate 260 expected volatility 202 fair value warrants included capital stock company separately disclosed fair market value warrants attached private placements units current prior fiscal years share purchase warrants december 18 2007 company signed agreement extend terms 2007 promissory note february 28 2008 refer note 5ii consideration extension company agreed issue lender fully paid nonassessable 400000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 025 per warrant share exercise period three years issuance date fair value warrants determined management 44000 recorded warrant issuance obligation year ended december 31 2008 company issued fully paid nonassessable 1134000 nontransferable registerable share purchase warrants entitling holder acquire equivalent number common shares company exercise price 025 per share period five years date issuance warrants issued part promissory note agreements refer note 5 v ix year ended december 31 2008 company issued 207146 shares restricted common stock pursuant exercise 358000 warrants total proceeds 25000 358000 warrants exercised 258000 exercised nil proceeds accordance cashless exercise option resulting issuance 107146 shares restricted common stock effective october 15 2008 2007 2008 promissory notes 5ii ix renewed march 30 2009 consideration renewal company agreed issue 4927000 transferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 001 per warrant share exercise period two years issuance date share purchase warrants issued march 11 2009 fair value warrants determined 246350 using blackscholes model assumptions note 5 recorded equity obligation issue warrants december 31 2008 114271 total value 246350 expensed financing cost effective november 25 2008 company agreed issue fully paid nonassessable 200000 nontransferable registerable share purchase warrants “warrant” acquire equivalent number common shares company “warrant share” exercise price 001 per warrant share exercise period two years issuance date warrant obligation agreed part promissory note agreement refer note 5 x issued march 31 2009 fair value warrants determined 10000 using blackscholes model assumptions note 5 recorded equity obligation issue warrants december 31 2008 3358 total value 10000 expensed financing cost summary company’s issued stock purchase warrants december 31 2008 changes year presented december 31 2008 company committed issuing additional share purchase warrants follows stock compensation plan june 8 2007 board directors company approved adoption stock option plan “2007 plan” allowing granting 6400000 options directors officers employees consultants company subsidiaries options granted plan shall prices terms determined board directors options granted plan may vesting requirements determined board directors june 8 2007 total 6320000 stock options granted 1640000 consultants 4680000 officers directors exercise price 025 per share term options ten years 6320000 options granted 3100000 vested upon grant 2420000 vest one year 400000 vest two years 400000 vest three years aggregate fair value options estimated 1179600 019 per option using blackscholes option pricing model risk free interest rate 526 dividend yield 0 expected volatility 83 expected life 5 years options vesting immediately 4 years options vesting one year 3 years options vesting two years 2 years options vesting three years earned portion value options year ended december 31 2008 234168 2007 904822 61500 2007 250010 recorded stock based consulting 172667 2007 654722 recorded stock based management fees summary company’s stock options december 31 2008 changes year presented summary status company’s unvested options december 31 2008 changes year ended december 31 2008 presented note 8 income taxes significant temporary differences company’s tax financial bases result deferred tax assets except company’s net operating loss carryforwards amounting approximately 10228000 december 31 2008 2007 12397000 may available reduce future year’s taxable income carry forwards begin expire utilized commencing 2009 future tax benefits may arise result losses recognized financial statements realization determined likely occur accordingly company recorded valuation allowance deferred tax asset relating tax loss carry forwards company reviews valuation allowance requirements annual basis based projected future operations circumstances change causes change management’s judgment recoverability future tax assets impact change valuation allowance reflected current operations disclosures company’s policy accrue interest penalties related unrecognized tax charges likely penalties interest provision income taxes additionally fin 48 requires company recognize financial statements impact tax position likely sustained upon examination based technical merits position company incurred taxable losses tax years since inception accordingly provision taxes recorded current prior fiscal year actual income tax provisions differ expected amounts calculated applying combined federal state corporate income tax rates company’s loss income taxes temporary adjusted appropriate temporary permanent tax basis differences components differences follows company’s deferred tax assets follows criteria recognizing future income tax assets met due uncertainty realization valuation allowance 100 recorded current prior year company filed income tax returns several years us entities within consolidated group companies canadian corporate tax returns end 2007 filed march 302009 assessed taxing authorities prescribe penalties failing file certain tax returns supplemental disclosures upon filing andor review could penalties interest assessed penalties vary jurisdiction assessing practices authorities company incurred losses since inception anticipated risk exposure penalties income tax liability determined low however certain jurisdictions may assess penalties failing file returns disclosures failing file supplementary information associated foreign ownership debt equity positions inherent uncertainties arise tax positions taken expected taken respect transfer pricing intercompany charges allocations financing charges fees related party transactions tax credits tax based incentives stock based transactions management considered likelihood significance possible penalties associated current intended filing positions determined based assessment penalties would expected material note 10 disclosure concerning certain carryforward tax pools temporary permanent timing differences tax basis versus reported amounts may impacted assessing practices tax code regulations income tax returns filed date 100 valuation allowance provided deferred tax assets reported company’s annual consolidated financial statements would significant net impact expected current deferred income tax disclosures reconciliations reported management currently able assess likelihood imposition penalties interest arising delinquent filings reasonable reliable estimate liability made time management intends bring company’s tax filings compliance requirements date company resources permit note 9 supplemental cash flow information noncash investing financing activities april 8 2008 company issued 300000 shares restricted common stock estimated fair value 030 per share pursuant consulting services agreement 90000 fair value issued shares recorded stockbased consulting fees refer note 7 note 10 contingencies commitments contingency described note 8 company filed income tax returns several years certain operating jurisdictions company may subject possible compliance penalties interest management currently able make reliably measurable provision possible liability penalties interest time company may liable amounts upon assessment penalties interest assessed future recorded period amounts determinable commitment company signed agreement effective october 1st 2008 arms length consulting firm united states assist strategic planning debt consolidation negotiation strategic partnering mergers acquisition near long term financing pursuant agreement consulting firm compensated 10000 month term agreement 36 months mutual cancellation clauses upon notice continuation agreement subject deliverables outlined therein including strategic planning successful debt consolidation restructuring funding least 750000 certain restructuring efforts taken place consulting firm would provided mobilization fee 75000 issued 2 million common shares three tranches warrants first priced market issued subsequent warrants 50 100 premiums respectively first set warrants march 30 2009 deliverables met monthly consulting fee incurred upon achievement deliverables stock based commitments valued measurement date period commitment march 31 2009 parties addressing plans complete steps necessary achieve deliverables however achieved note 11 subsequent events around february 4 2009 company entered series secured loan agreements pursuant issued secured convertible debentures “debentures” term 180 days debentures total principal amount 120000 carries per annum interest rate 30 connection issuance debenture company entered security agreement debenture holders secured company’s assets including company’s tangible assets patents patent applications full compliance terms debentures connection debentures company issued warrants purchase 20000 shares common stock every 1000 face amount debentures total 2400000 warrants term two years date issuance holder warrants may exercise warrants 002 subject adjustments upon occurrence certain events like stock splits company agreed shares debenture converted warrants may exercised shall included registration statement company may elect file registration common stock secured loan agreements security agreement authorize company issue another 55000 debentures 1100000 warrants additional investors terms funding contain onerous security provisions interest rates performance requirements due difficulties raising funds capital markets early 2009 management arranged financing private lenders specified terms certain critical expenditures met sustain company although certainty management believes company secure adequate funding prior maturity date repay loan release secured collateral relation financing subsequent year end finders’ fee 10000 paid note 12 comparative figures certain comparative figures reclassified conform current period’s presentation item 9 item 8 financial statements tapimmune inc development stage company consolidated financial statements december 31 2009 2008 report independent registered public accounting firm consolidated balance sheets consolidated statements operations consolidated statement stockholders’ deficit consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm stockholders board directors tapimmune inc audited accompanying consolidated balance sheets tapimmune inc development stage company december 31 2009 2008 related consolidated statements operations stockholders’ deficit cash flows years ended december 31 2009 2008 period july 27 1999 inception december 31 2009 financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position tapimmune inc december 31 2009 2008 results operations cash flows years ended december 31 2009 2008 period july 27 1999 inception december 31 2009 conformity accounting principles generally accepted united states america accompanying financial statements prepared assuming company continue going concern discussed note 1 financial statements company generated revenues since inception incurred losses developing business losses anticipated company requires additional funds meet obligations costs operations factors raise substantial doubt company’s ability continue going concern management’s plans regard described note 1 financial statements include adjustments might result outcome uncertainty dmcl dale matheson carrhilton labonte llp chartered accountants vancouver canada april 9 tapimmune inc development stage company consolidated balance sheets commitments contingencies notes 1 4 5 10 11 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements operations accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2009 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2009 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2009 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2009 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2009 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements cash flows supplemental cash flow information noncash investing financing activities note 9 accompanying notes integral part consolidated financial statements tapimmune inc development stage company notes consolidated financial statements december 31 2009 note 1 nature operations tapimmune inc “company” nevada corporation incorporated 1992 development stage company formed purpose building biotechnology business specializing discovery development immunotherapeutics aimed treatment cancer therapies infectious diseases autoimmune disorders transplant tissue rejection effective july 10 2009 company executed 1 10 reverse stock split reducing authorized capital 50000000 common shares 0001 par value 5000000 nonvoting preferred shares 0001 par value unless specifically noted amounts retroactively restated recognize reverse stock splits refer note 7 effective february 21 2010 company increased shares common stock 50000000 common shares 150000000 common shares company maintained authorized shares preferred stock 5000000 since inception tapimmune university british columbia “ubc” parties various collaborative research agreements “cra” appointing ubc carry development licensed technology providing tapimmune option acquire rights commercialize additional technologies developed within cra lead product wholly owned ongoing license royalty resulting license agreements immunotherapy vaccine company completing preclinical work anticipation clinical trials specifically company obtained expanded three us international patents tested various viral vectors licensed viral vector working towards production clinical grade vaccine company plans continue development lead product vaccine clinical trials oncology infectious diseases alone partnership vaccine developers consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2009 company working capital stockholders’ deficit 629388 incurred significant losses since inception losses anticipated development stage raising substantial doubt company’s ability continue going concern ability company continue going concern dependent raising additional capital fund ongoing research development maintenance protection patents accommodation certain debt obligations ultimately generating future profitable operations planned expenditures relating future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities management addressing going concern remediation seeking new sources capital restructuring retiring debt conversion equity debt settlement arrangements creditors cost reduction programs seeking possible joint venture participation management’s plans intended return company financial stability improve continuing operations company continuing initiatives raise capital private placements related party loans institutional sources meet immediate working capital requirements refer note 10 company able substantially complete ongoing restructuring plans second half 2009 additional funding equity debt settlements retired notes payable debt obligations satisfied additional capital required expand programs including preclinical work establish future manufacturing contracts necessary clinical trials lead tap transporters antigen processing vaccine infectious disease adjuvant technology strategic partnerships needed continue product development portfolio fund development costs measures successful may contribute reduce risk going concern uncertainties company next twelve months certainty company able raise sufficient funding satisfy current debt obligations continue development products marketability note 2 summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america tapimmune inc development stage company notes consolidated financial statements december 31 2009 principles consolidation financial statements include accounts company whollyowned subsidiaries genemax pharmaceuticals inc “gpi” genemax pharmaceuticals canada inc “gpc” significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stock based transactions fair value components convertible notes payable foreign exchange gains losses useful lives furniture equipment allocation costs research development accrued liabilities matters impacting company’s ability continue going concern contingencies also involve use estimates assumptions fair value measurements objective accounting standards codification “asc” 820 fair value measurements disclosures increase consistency comparability fair value measurements expand disclosures fair value measurements asc 820 defines fair value establishes framework measuring fair value generally accepted accounting principles expands disclosures fair value measurements asc 820 applies accounting pronouncements require permit fair value measurements require new fair value measurements foreign currency translation functional currency company including subsidiary united states dollars gpc maintains accounting records local currency canadian dollar accordance asc 830 foreign currency matters financial statements companys subsidiary translated united states dollars using period end exchange rates monetary assets liabilities average exchange rates revenues expenses nonmonetary assets translated historical exchange rates net gains losses resulting foreign exchange translations foreign currency exchange gains losses transactions occurring currency companys functional currency included determination net income period financial instruments concentration credit risk fair values cash accounts payable current monetary liabilities approximate carrying values due immediate shortterm maturity financial instruments companys operations financing activities conducted primarily united states dollars result company subject significant exposure market risks changes foreign currency rates unless otherwise noted managements opinion company exposed significant interest credit risks arising assets classified financial instruments furniture equipment furniture equipment recorded cost amortized using straightline method estimated useful life following rates computer equipment years furniture fixtures years laboratory equipment years impairment longlived assets longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable circumstances could trigger review include limited significant decreases market price asset significant adverse changes business climate legal factors accumulation costs significantly excess amount originally expected acquisition construction asset current period cash flow operating losses combined history losses forecast continuing losses associated use asset current expectation asset likely sold disposed significantly end estimated useful life recoverability assets measured comparison carrying amount future undiscounted cash flows assets expected generate impairment loss recognized carrying amount recoverable exceeds fair value tapimmune inc development stage company notes consolidated financial statements december 31 2009 stockbased compensation company uses blackscholes optionpricing model determine grant date fairvalue stockbased awards asc 718 compensation stock compensation fair value recorded income depending terms conditions award nature relationship recipient award company records grant date fair value income line period earned employees management typically considered vesting period award consultants fair value award recorded income term service period unvested amounts revalued reporting period service period deferred financing fees company defers direct costs incurred connection sale common shares offset proceeds financing upon completion costs incurred connection convertible loans payable deferred amortized financing cost term convertible loans upon conversion loan unamortized amount deferred financing costs charged stockholders’ equity cost financing research development costs company acquired development marketing rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs income taxes company follows liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect deferred tax assets liabilities change tax rates recognized income period includes date enactment company recognizes deferred taxes unrealized gains directly within comprehensive income concurrently releases part valuation allowance resulting nil impact within oci balance sheet december 31 2009 company net operating loss carry forwards however due uncertainty realization company provided full valuation allowance potential deferred tax assets resulting loss carry forwards loss per common share basic loss per share includes dilution computed dividing loss attributable common stockholders weighted average number common shares outstanding period diluted earnings per share reflect potential dilution securities could share earnings loss company common shares potentially issuable conversion outstanding convertible debentures exercise stock options included calculation weighted average number shares outstanding effect would antidilutive recent accounting pronouncements effective july 1 2009 company adopted asc 855 subsequent events asc 855 establishes general standards accounting disclosures events occur balance sheet date financial statements issued available issued asc 855 requires disclosure date entity evaluated subsequent events basis date asc 855 effective interim financial periods ending june 15 2009 adoption asc 855 affect companys consolidated financial statements recent accounting guidance yet adopted company reviewed recently issued accounting pronouncements plans adopt apply company expect adoption pronouncements material impact financial position results operations cash flows tapimmune inc development stage company notes consolidated financial statements december 31 2009 note 3 furniture equipment furniture equipment consisted following december 31 2009 december 31 2008 computer equipment 4533 furniture fixtures 3161 laboratory equipment 16704 4533 24398 less accumulated depreciation 4533 15259 9139 note 4 research agreement crucell holland bv “crucell” research license option agreement effective august 7 2003 crucell gpi entered fiveyear research license option agreement whereby crucell granted gpi nonexclusive worldwide license research use adenovirus technology company required make certain payments fiveyear term totaling euro €450000 approximately 510100 december 31 2008 243598 €172801 owing crucell agreement year ended december 31 2009 management negotiated settlement outstanding balance requiring €17000 cash payment issuance 265000 shares company’s common stock december 31 2009 25467 €17000 cash payment made 243800 fair value noncash settlement determined market price settlement date recorded stock issuance obligation january 26 2010 company issued 265000 shares restricted common stock pursuant settlement addition retroactively effective august 7 2008 company negotiated amended license agreement use crucell’s adenovirus technology company required make annual license payments anniversary effective date three year term equal €75000 per annum december 31 2009 company accrued 45676 €31250 amended agreement tapimmune inc development stage company notes consolidated financial statements december 31 2009 note 5 short term debt following summary debt instrument transactions relevant current prior year ii iii issued august 31 2007 company related family member director v issued may 5 2008 company controlled director vi vii issued may 14 2008 company related family member officer viii issued may 15 2008 officer company ix issued november 15 2008 officer company year ended december 31 2009 company issued 31812065 shares fair value 1678391 settlement 3181207 resulting gain debt settlement 1502815 refer note 7 connection issuance debentures company entered security agreement debenture holders secured company’s assets including company’s tangible assets patents patent applications full compliance terms debentures connection debentures company issued total 270000 warrants term two years date issuance management estimated fair value warrants 60000 using blackscholes pricing model refer note 7 tapimmune inc development stage company notes consolidated financial statements december 31 2009 december 31 2009 repayment made principal amount interest 35396 2008 nil accrued included accounts payable accrued liabilities xi august 31 2009 company completed convertible debenture financing 350000 issuing convertible promissory note bearing interest 10 per annum converted note would due february 28 2010 unpaid amount principal accrued interest converted time holders option shares companys common stock price 080 per share terms debenture agreement note automatically convert equity term note company receives funding equal exceeding 2000000 sale shares common stock additional debt instruments converted common stock term debenture company receive 2000000 additional funding end term holders may convert debentures 3500000 common shares company get repaid full company recognized embedded beneficial conversion feature 139571 additional paidin capital convertible notes issued intrinsic value conversion feature additionally company issued 437500 nontransferable registerable share purchase warrants management estimated fair value warrants 210429 relative fair value warrants beneficial conversion feature together limited face value loan refer note 7 note 6 related party transactions company transactions certain officers directors company fiscal year ended december 31 2009 follows incurred 260242 2008 308162 management fees 42000 2008 74579 research development recorded additional 2019660 2008 172668 management fees stock based compensation expense estimated fair value options management vested year b effective june 4 2009 outstanding balance 595987 due directors officers settled issuance 5959870 shares conjunction debt settlement agreement c incurred 9247 2008 16932 interest finance charges 125000 promissory note due company related direct family member current director refer note 5 incurred 14795 2008 27090 interest finance charges 200000 convertible promissory note due company refer note 5 incurred 40881 2008 35369 interest finance charges related agreement issue warrants connection extending terms 125000 200000 notes march 30 2009 refer note 5 effective june 4 2009 outstanding principal interest settled conjunction equity issuance incurred 1997 2008 3196 interest finance charges 27000 promissory note issued company controlled director company incurred 4343 2008 3757 interest finance charges related agreement issue warrants connection extending term march 30 2009 refer note 5 effective june 4 2009 outstanding principal interest settled conjunction equity issuance e incurred 14795 2008 22784 interest finance charges 200000 promissory note issued company related family member officer company refer note 5 incurred 18493 2008 27493 interest finance charges 250000 promissory note issued company refer note 5 incurred 72380 2008 62620 interest finance charges related agreement issue warrants connection extending terms 200000 250000 notes march 30 2009 refer note 5 effective june 4 2009 outstanding principal interest settled conjunction equity issuance tapimmune inc development stage company notes consolidated financial statements december 31 2009 f incurred 1849 2008 2836 interest finance charges 25000 promissory note issued officer company incurred 4021 2008 3479 interest finance charges related agreement issue warrants connection extending term march 30 2009 refer note 5 effective june 4 2009 outstanding principal interest settled conjunction equity issuance g incurred 740 2008 150 interest finance charges 10000 promissory note issued officer company incurred 4343 2008 3407 interest finance charges related agreement issue warrants connection note issuance refer note 5 effective june 4 2009 outstanding principal interest settled conjunction equity issuance h issued 15000 secured promissory note bearing interest 30 per annum issued 30000 transferable registerable share purchase warrants exercise price 020 per share exercise period two years issuance date direct family member officer company incurred 4068 2008 nil interest finance charges 15000 promissory note incurred 4167 2008 nil interest finance charges related issued warrants refer note 5 related party transactions stock based consideration involving provision services recorded exchange amount established agreed related parties company accounted debt settlement transactions related parties management’s estimate fair value determined reference similar settlements armslength parties debt settlement transactions related parties resulted gain 284368 included statement operations december 31 2009 company amounts owing directors officers 16100 2008 468121 amounts normal course operations amounts due related parties unsecured noninterest bearing specific terms repayment except described note 7 capital stock share capital prior march 27 2007 authorized capital company consisted 500000000 common shares 0001 par value 5000000 nonvoting preferred shares 0001 par value march 27 2007 company’s articles incorporation amended increase authorized shares common stock 20000000 shares common stock 80000000 shares common stock january 22 2009 authorized shares common stock increased 80000000 shares common stock 500000000 shares common stock effective july 10 2009 company executed 1 10 reverse stock split simultaneously reducing authorized shares common stock 50000000 common shares 0001 par value maintaining 5000000 nonvoting preferred shares 0001 par value effective february 21 2010 company increased shares common stock 50000000 common shares 150000000 common shares company maintained authorized shares preferred stock 5000000 prior period share transactions included company’s stock transactions balances retroactively restated give effect 1 10 reverse stock split noted share transactions april 8 2008 company issued 30000 shares restricted common stock estimated fair value based market trading 300 per share pursuant consulting services agreement 90000 estimated fair value issued shares recorded stockbased consulting fees additionally pursuant consulting services agreement company agreed issue stock options acquire 20000 shares company’s common stock exercise price 250 per share vesting expiry terms determined time grant december 31 2009 options issued vesting expiry terms established stock based compensation recorded commitment fair value reasonably determined commitment date july 31 2008 effective date june 30 2008 company completed private placement amount 14000 units subscription price 250 per unit gross proceeds company 35000 unit comprised one common share onehalf one nontransferable share purchase warrant company whole warrant entitles holder purchase additional common share company exercise price 300 per share period earlier two years date issuance ii 18 months effective date registration company estimated total fair market value warrants 21000 date grant using blackscholes option pricing model using expected life 18 months riskfree interest rate 260 expected volatility 202 fair value warrants included capital stock tapimmune inc development stage company notes consolidated financial statements december 31 2009 year ended december 31 2008 company issued 20715 shares restricted common stock pursuant exercise 35800 warrants total proceeds 25000 35800 warrants exercised 25800 exercised nil proceeds accordance cashless exercise option resulting issuance 10715 shares restricted common stock share transactions effective june 4 2009 company completed debt conversion assignment transaction resulting obligation issue 31812065 common shares conjunction retirement 3181207 accounts payable accrued liabilities notes payable related party debt shares issued july 1 2009 management estimated fair value resultant obligation issue shares 1678392 based third party debt settlements included statement operations gain debt settlement 972369 net transaction costs 33812065 share issuance 2000000 shares issued pursuant consulting services agreement related debt conversion assignment transaction 2000000 share issuance estimated fair value 400000 recorded gain debt settlement company also settled accounts payable incurred loss debt settlement 11314 august 10 2009 company issued 162500 shares common stock pursuant exercise 130000 warrants cashless basis nil proceeds settlement warrant holders included waiver rights additional ratchet provisions warrants originally issued conjunction 2007 loan security agreement time issuance market price shares 110 per share estimated fair value 178750 recorded interest financing charges august 10 2009 company issued 25000 shares restricted common stock pursuant consulting services agreement relation settlement financing transaction time issuance market price shares 110 per share estimated fair value 27500 recorded stockbased consulting fees august 26 2009 company issued 50000 shares common stock pursuant exercise 40000 warrants cashless basis nil proceeds settlement warrant holders included waiver rights additional ratchet provisions warrants originally issued conjunction 2007 loan security agreement time issuance market price shares 128 per share estimated fair value 64000 recorded interest financing charges october 20 2009 company issued 314466 shares common stock pursuant exercise 385532 warrants cashless basis nil proceeds warrants originally issued conjunction 2009 secured loan agreement refer note 5 fair value shares determined management 62893 november 6 2009 company completed private placement 625000 units subscription price 080 per unit gross proceeds 500000 unit comprised one common share one nontransferable share purchase warrant company warrant entitles holder purchase additional common share company exercise price 120 per warrant share period five years date issuance november 6 2009 company completed private placement 125000 units subscription price 080 per unit gross proceeds 100000 unit comprised one common share one nontransferable share purchase warrant company warrant entitles holder purchase additional common share company exercise price 120 per warrant share period five years date issuance november 30 2009 company completed private placement 125000 units subscription price 080 per unit gross proceeds 100000 unit comprised one common share one nontransferable share purchase warrant company warrant entitles holder purchase additional common share company exercise price 120 per warrant share period five years date issuance november 30 2009 company issued 707542 shares common stock pursuant exercise 915642 warrants cashless basis nil proceeds warrants originally issued conjunction 2009 secured loan agreement refer note 5 fair value shares determined management 141508 company separately disclosed fair market value warrants attached private placements units current prior fiscal years tapimmune inc development stage company notes consolidated financial statements december 31 2009 share purchase warrants following table summary warrant issuances current year ended december 31 2009 company extended terms 2007 2008 promissory notes refer note 5 exchange issuance 532700 warrants fair value warrants determined 290350 using blackscholes option pricing model expected life 2 3 years risk free interest rate 164 421 dividend yield 0 expected volatility 100 199 fiscal year ended december 31 2009 remaining 132079 total value expensed financing charges ii year ended december 31 2009 connection debenture issuances following transactions occurred company issued 20000 share purchase warrants march 11 2009 company issued 270000 warrants february 4 2009 company issued secured promissory note lenders refer note 5 1031174 share purchase warrants july 1 2009 october 28 2009 company issued 437500 share purchase warrants august 31 2009 aggregate fair value warrants determined 398801 using blackscholes option pricing model expected life 2 5 years risk free interest rate 023 164 dividend yield 0 expected volatility 195 245 fair values warrants issued february 4 2009 august 31 2009 recorded discounts notes amortized term notes iii july 14 2009 company issued 30000 share purchase warrants part debt assignment transaction fair value warrants determined 12000 using blackscholes option pricing model expected life 4 years risk free interest rate 096 dividend yield 0 expected volatility 192 iv year ended december 31 2009 pursuant consulting services agreements following transactions occurred company issued 200000 share purchase warrants december 17 2009 company issued 125000 share purchase warrants december 18 2009 company issued 400000 share purchase warrants december 18 2009 company issued 500000 share purchase warrants december 18 2009 aggregate fair value warrants determined 622750 using blackscholes option pricing model expected life 5 years risk free interest rate 224 23 dividend yield 0 expected volatility 236 expensed portion value warrants year ended december 31 2009 374270 remaining portion 248480 recorded fiscal 2010 stock based consulting fees tapimmune inc development stage company notes consolidated financial statements december 31 2009 summary company’s issued stock purchase warrants december 31 2009 changes year presented stock compensation plan june 8 2007 board directors company approved adoption stock option plan “2007 plan” allowing granting 640000 options directors officers employees consultants company subsidiaries october 14 2009 company adopted 2009 stock incentive plan “2009 plan” supersedes replaces 2007 stock plan 2009 plan allows issuance 10000000 common shares options granted plan shall prices terms determined board directors options granted plan may vesting requirements determined board directors june 8 2007 total 632000 stock options granted 164000 consultants 468000 officers directors exercise price 250 per share term options ten years 632000 options granted 310000 vested upon grant 242000 vested one year 40000 vested two years 40000 vested three years aggregate fair value options estimated 1179600 190 per option using blackscholes option pricing model risk free interest rate 526 dividend yield 0 expected volatility 83 expected life 5 years options vesting immediately 4 years options vesting one year 3 years options vesting two years 2 years options vesting three years expensed portion value options year ended december 31 2009 23500 2008 234168 recorded stock based management fees october 14 2009 company granted total 3326000 stock options exercise price 097 per share consultants management 1913000 vested immediately remaining 1413000 vest one year term options ten years additionally october 14 2009 company approved repricing certain stock options issued consultants management options exercise price 250 repriced 097 per share aggregate fair value repriced options 5840 aggregate fair value new grants estimated 3192960 096 per option using blackscholes option pricing model risk free interest rate 236 dividend yield 0 expected volatility 236 expected life 5 years expensed portion value options year ended december 31 2009 2068400 recorded 72240 stock based consulting 1996160 stock based management fees remaining portion 1130400 recorded fiscal 2010 stock based consulting management fees 2009 stock plan grant stock options thereunder repricing existing options subject shareholder approval summary company’s stock options december 31 2009 changes year presented tapimmune inc development stage company notes consolidated financial statements december 31 2009 summary status company’s unvested options december 31 2009 changes year presented note 8 income taxes company identified quantified significant temporary differences company’s tax financial bases assets liabilities result deferred tax assets except company’s net operating loss carryforwards amounting approximately 11770000 december 31 2009 2008 10575000 may available reduce future year’s taxable income carry forwards begin expire utilized commencing 2010 future tax benefits may arise result losses recognized financial statements realization meet likely test accordingly company recorded valuation allowance potential deferred tax asset relating tax loss carry forwards company reviews valuation allowance requirements annual basis based management’s expectations future operations circumstances change resulting change management’s judgment recoverability future tax assets impact change valuation allowance would reflected current operations disclosures company’s policy accrue amounts known likely interest penalties related unrecognized tax charges likely penalties interest provision income taxes additionally asc 74010 requires company recognize financial statements impact tax position likely sustained upon examination based technical merits position company incurred taxable losses tax years since inception accordingly provision taxes recorded current prior fiscal year actual income tax provisions differ expected amounts calculated applying combined federal state corporate income tax rates company’s loss income taxes temporary adjusted appropriate temporary permanent tax basis differences components differences follows tapimmune inc development stage company notes consolidated financial statements december 31 2009 company’s deferred tax assets follows criteria recognizing future income tax assets met due uncertainty realization valuation allowance 100 recorded current prior year company filed income tax returns several years us entities within consolidated group companies canadian corporate tax returns end 2007 filed taxing authorities prescribe penalties failing file certain tax returns supplemental disclosures upon filing andor review could penalties interest assessed penalties vary jurisdiction assessing practices authorities company incurred losses since inception anticipated risk exposure penalties income tax liability determined low however certain jurisdictions may assess penalties failing file returns disclosures failing file supplementary information associated foreign ownership debt equity positions inherent uncertainties arise tax positions taken expected taken respect transfer pricing intercompany charges allocations financing charges fees related party transactions tax credits tax based incentives stock based transactions management considered likelihood significance possible penalties associated current intended filing positions determined based assessment penalties would expected material refer note 10 note 9 supplemental cash flow information noncash investing financing activities disclosed notes 5 6 7 effective june 4 2009 company completed debt conversion assignment transaction resulting issuance 33812065 common shares conjunction retirement 3181207 2008 nil accounts payable accrued liabilities notes payable related party debt accordingly company recorded cumulative net gain settlement debt 972370 2008 nil related transaction disclosed note 4 effective september 30 2009 company completed settlement research obligations 248938 2008 nil cash stock issuance obligation cumulative fair value 269267 2008 nil resulting loss 20329 also effective september 30 2009 company recorded gain settlement outstanding legal fees 9014 aggregate impact two settlements loss 11314 prepaid portion shares issued exchange public relations consulting services amounted 214501 2008 nil note 10 contingencies commitments contingency company filed income tax returns several years certain operating jurisdictions may subject possible compliance penalties interest refer note 8 tapimmune inc development stage company notes consolidated financial statements december 31 2009 commitments company signed agreement effective october 1 2008 arm’s length consulting firm united states dusford overseas management “dusford” assist strategic planning debt consolidation negotiation strategic partnering mergers acquisition near long term financing pursuant agreement consulting firm compensated 10000 month term agreement 36 months mutual cancellation clauses upon notice continuation agreement subject deliverables outlined therein including strategic planning successful debt consolidation restructuring funding least 750000 certain restructuring efforts taken place consulting firm would provided mobilization fee 75000 settled issued 2000000 common shares three tranches warrants first priced market issued subsequent warrants 50 100 premiums respectively first set warrants december 31 2009 monthly mobilization fees june 30 2009 converted part debt settlement transaction monthly fees july 1 2009 september 30 2009 paid monthly fees october 1 2009 december 31 2009 accrued 2000000 shares issued result june 4 2009 debt conversion assignment transaction refer note 7 warrants issued effective december 10 2009 company entered twelve month public relations retainer agreement pursuant terms agreement company agreed pay monthly fee 6500 november 30 2010 ii issue 200000 share purchase warrants acquire equivalent number common shares company exercise price 050 per share exercise period five years issuance date issued iii issue 200000 share purchase warrants acquire equivalent number common shares company exercise price 060 per share exercise period five years issuance date issued fair value warrants determined 204000 using blackscholes option pricing model refer note 7 effective december 17 2009 company entered six month consulting services agreement pursuant terms agreement company agreed issue 250000 shares common stock ii issue 250000 share purchase warrants acquire equivalent number common shares company exercise price 050 per share exercise period five years issuance date iii issue 250000 share purchase warrants acquire equivalent number common shares company exercise price 060 per share exercise period five years issuance date fair value warrants determined 255000 using blackscholes option pricing model refer note 7 effective december 17 2009 company entered second six month consulting services agreement pursuant terms agreement company agreed issue 100000 shares restricted common stock time entry agreement market price shares 052 per share estimated fair value 52000 recorded issuance obligation effective december 17 2009 company entered third six month consulting services agreement pursuant terms agreement company agreed issue 100000 shares restricted common stock time entry agreement market price shares 052 per share estimated fair value 52000 recorded issuance obligation operating lease june 22 2009 company entered one year office lease bellevue washington commencing july 1 2009 terms lease require company make minimum monthly payments 2654 per month combined research operating obligations company obligations various agreements june 30 2010 aggregate minimum annual payments year ending december 31 follows 2010 87424 tapimmune inc development stage company notes consolidated financial statements december 31 2009 note 11 subsequent events effective january 19 2010 company entered one year consulting services agreement pursuant terms agreement company issued 600000 share purchase warrants acquire equivalent number common shares company exercise price 050 per share exercise period three years issuance date ii 600000 share purchase warrants acquire equivalent number common shares company exercise price 060 per share exercise period three years issuance date january 22 2010 company dusford agreed terminate consulting agreement note 10 dusford released company obligations contract including 2250000 unissued warrants cancelled unpaid accrued fees effective february 8 2010 company entered debt settlement agreement outstanding amount 100000 settled issuance 750000 share purchase warrants acquire equivalent number common shares company exercise price 050 per share exercise period five years issuance date item 9 item 8 financial statements financial statements incorporated herein reference pages end report supplementary data applicable item 9 item 8 financial statements financial statements incorporated herein reference pages end report supplementary data applicable item 9 item 8financial statements tapimmune inc development stage company consolidated financial statements december 31 2010 2009 report independent registered public accounting firm stockholders board directors tapimmune inc audited accompanying consolidated balance sheets tapimmune inca development stage company december 31 2010 2009 related consolidated statements operations stockholders’ deficit cash flows years ended december 2010 2009 period july 27 1999 inception december 31 2010 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position tapimmue inc december 31 2010 2009 results operations cash flows years ended december 31 2010 2009 period july 271999 inception december 31 2010 conformity accounting principles generally accepted united states america accompanying consolidated financial statements prepared assuming company continue going concern discussed note 1 financial statements company generated revenues since inception incurred losses developing business losses anticipated company requires additional funds meet obligations costs operations factors raise substantial doubt company’s ability continue going concern management’s plans regard described note 1 financial statements include adjustments might result outcome uncertainty dale matheson carrhilton labonte llp dale matheson carrhilton labonte llp chartered accountants vancouver canada april 15 2011 vancouver suite 1500 1140 west pender street vancouver bc canada v6e 4g1 tel 604 687 4747 • fax 604 689 2778 main reception south surrey suite 301 1656 martin drive white rock bc canada v4a 6e7 tel 604 531 1154 • fax 604 538 2613 port coquitlam suite 700 2755 lougheed highway port coquitlam bc canada v3b 5y9 tel 604 941 8266 • fax 604 941 0971 tapimmune inc development stage company consolidated balance sheets commitments contingencies notes 1 3 5 6 11 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements operations accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2010 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2010 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2010 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2010 tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2010 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2010 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements cash flows supplemental cash flow information noncash investing financing activities note 10 accompanying notes integral part consolidated financial statements tapimmune inc development stage company notes consolidated financial statements december 31 2010 note 1a restatement consolidated financial statements company restated consolidated financial statements fiscal year ended december 31 2009 related company’s accounting debt settlement related parties components certain debt settlements occurred 2009 related parties accounted gain settlement debt determined accounting related party debt settlements accordance financial accounting standards board “fasb” accounting standards codification “asc” 47050402 states ‘extinguished transactions related entities may essence capital transactions’ based guidance concluded gain settlement related parties amount 766769 would appropriately recognized additional paidin capital impact restatement consolidated financial statements year ended december 31 2009 shown following tables note 1 nature operations tapimmune inc “company” tapimmune nevada corporation incorporated 1992 development stage company formed purpose building biotechnology business specializing discovery development immunotherapeutics aimed treatment cancer therapies infectious diseases autoimmune disorders transplant tissue rejection since inception company universities parties various collaborative research agreements “cra” appointing universities carry development licensed technology providing tapimmune option acquire rights commercialize additional technologies developed within cra lead product candidate wholly owned ongoing license royalty resulting license agreements immunotherapy vaccine company completing preclinical work anticipation clinical trials specifically company obtained expanded three us international patents tested various viral vectors licensed viral vector working towards production clinical grade vaccine company plans continue development lead product vaccine clinical trials oncology infectious diseases alone partnership vaccine developers consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2010 company working capital deficit 3272489 1400514 comprises derivative liabilities recorded current incurred significant losses since inception losses anticipated development stage raising substantial doubt company’s ability continue going concern ability company continue going concern dependent raising additional capital fund ongoing research development maintenance protection patents accommodation certain debt obligations ultimately generating future profitable operations planned expenditures relating future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities management addressing going concern remediation seeking new sources capital restructuring retiring debt conversion equity debt settlement arrangements creditors cost reduction programs seeking possible joint venture participation management’s plans intended return company financial stability improve continuing operations company continuing initiatives raise capital private placements related party loans institutional sources meet immediate working capital requirements company able substantially complete ongoing restructuring plans second half 2009 additional funding equity debt settlements retired notes payable certain debt obligations satisfied 2010 additional funding raised equity debt placements continuing restructuring debt equity instruments additional capital required expand programs including preclinical work establish future manufacturing contracts necessary clinical trials lead tap transporters antigen processing vaccine infectious disease adjuvant technology strategic partnerships needed continue product development portfolio fund development costs measures successful may contribute reduce risk going concern uncertainties company next twelve months certainty company able arrange sufficient funding satisfy current debt obligations continue development products marketability note 2 summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america principles consolidation financial statements include accounts company whollyowned subsidiaries genemax pharmaceuticals inc “gpi” genemax pharmaceuticals canada inc “gpc” significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stock based transactions fair value components convertible notes payable allocation costs research development accrued liabilities matters impacting company’s ability continue going concern contingencies also involve use estimates assumptions fair value measurements objective asc 820 fair value measurements disclosures increase consistency comparability fair value measurements expand disclosures fair value measurements asc 820 defines fair value establishes framework measuring fair value generally accepted accounting principles expands disclosures fair value measurements asc 820 applies accounting pronouncements require permit fair value measurements require new fair value measurements foreign currency translation functional currency company including subsidiary united states dollars gpc maintains accounting records local currency canadian dollar accordance asc 830 foreign currency matters financial statements companys subsidiary translated united states dollars using period end exchange rates monetary assets liabilities average exchange rates period revenues expenses nonmonetary assets translated historical exchange rates net gains losses resulting foreign exchange translations foreign currency exchange gains losses transactions occurring currency companys functional currency included determination net income period financial instruments concentration credit risk fair values cash accounts payable research obligations derivative liabilities loans payable due related parties approximate carrying values due immediate shortterm maturity financial instruments companys operations financing activities conducted primarily united states dollars result company subject significant exposure market risks changes foreign currency rates unless otherwise noted managements opinion company exposed significant interest credit risks arising assets classified financial instruments furniture equipment furniture equipment recorded cost amortized using straightline method estimated useful life following rates computer equipment2 years b furniture fixtures5 years c laboratory equipment3 years impairment longlived assets longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable circumstances could trigger review include limited significant decreases market price asset significant adverse changes business climate legal factors accumulation costs significantly excess amount originally expected acquisition construction asset current period cash flow operating losses combined history losses forecast continuing losses associated use asset current expectation asset likely sold disposed significantly end estimated useful life recoverability assets measured comparison carrying amounts future undiscounted cash flows assets expected generate impairment loss recognized carrying amount exceeds fair value stockbased compensation company uses blackscholes optionpricing model determine grant date fairvalue stockbased awards asc 718 compensation stock compensation fair value recorded income depending terms conditions award nature relationship recipient award company records grant date fair value income line period earned employees management typically considered vesting period award consultants fair value award recorded income term service period unvested amounts revalued reporting period service period deferred financing costs company defers direct costs incurred connection sale common shares offset proceeds financing upon completion costs incurred connection convertible loans payable deferred amortized financing cost term convertible loans upon conversion loan unamortized amount deferred financing costs charged stockholders’ equity cost financing research development costs company acquired development marketing rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs income taxes company follows liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized income period includes date enactment company recognizes deferred taxes unrealized gains directly within comprehensive income concurrently releases part related valuation allowance resulting nil impact within oci balance sheet december 31 2010 company net operating loss carry forwards however due uncertainty realization company provided full valuation allowance potential deferred tax assets resulting loss carry forwards derivative warrant liability company evaluates convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accordance asc 81010054 81540 accounting treatment requires carrying amount embedded derivatives markedtomarket inception balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise cancellation derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instruments classification derivative instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date evaluating application asc 81540 management must determine whether instrument embedded feature indexed company’s stock asc 8154015 provides entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions application asc 8154015 affected accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing ratchet antidilution protections year ended december 31 2010 referenced guidance resulted recognition derivative liabilities fair value financial instruments company follows asc paragraph 825105010 disclosures fair value financial instruments asc paragraph 820103537 measure fair value financial instruments 820103537 establishes framework measuring fair value pursuant gaap expands disclosures fair value measurements increase consistency comparability fair value measurements related disclosures paragraph 820103537 establishes fair value hierarchy prioritizes inputs valuation techniques used measure fair value three 3 broad levels fair value hierarchy gives highest priority quoted prices unadjusted active markets identical assets liabilities lowest priority unobservable inputs three 3 levels fair value hierarchy described level 1 quoted market prices available active markets identical assets liabilities reporting date level 2 pricing inputs quoted prices active markets included level 1 either directly indirectly observable reporting date level 3 pricing inputs generally observable inputs corroborated market data carrying amounts company’s financial assets liabilities cash receivables prepaid expenses deposits accounts payable research agreement obligations notes payable secured loans payable due related parties approximate fair values short term maturity company’s convertible notes payable approximate fair value based upon management’s estimate comparable interest rates would available company similar financial arrangements company revalues derivative warrant derivative conversion option liabilities reporting period recognizes gains losses consolidated statements operations comprehensive income loss attributable change fair value loss per common share basic loss per share computed dividing loss attributable common stockholders weighted average number common shares outstanding period applicable diluted earnings per share reflect potential dilution securities could share earnings loss company common shares potentially issuable conversion outstanding convertible debentures warrants stock options antidilutive included calculation recently issued accounting pronouncements company reviewed recently issued accounting pronouncements plans adopt applicable expect adoption pronouncements material impact financial position results operations cash flows note 3 research agreements crucell holland bv “crucell” research license option agreement effective august 7 2003 crucell gpi entered fiveyear research license option agreement whereby crucell granted gpi nonexclusive worldwide license research use adenovirus technology company required make certain payments fiveyear term totaling euro €450000 approximately 510100 december 31 2008 243598 €172801 owing crucell agreement year ended december 31 2009 management negotiated settlement outstanding balance requiring €17000 cash payment paid issuance 265000 shares company’s common stock refer note 8 addition retroactively effective august 7 2008 company negotiated amended license agreement use crucell’s adenovirus technology company required make annual license payments anniversary effective date three year term equal €75000 per annum december 31 2010 company accrued 141761 €106250 2009 45676 €31250 amended agreement company currently delinquent making first annual license payment amended license agreement crucell right cancel agreement however date company received notice terminating license agreement managment plans negotiate amended payment structure crucell successful would allow company maintain license agreement good standing however certainty license agreement maintained management successfully negotiate new terms note 4 derivative warrant liability fair value company evaluated application asc 815 derivatives hedging formerly sfas 133 asc 81540 contracts entity’s equity issued outstanding warrants purchase common stock issued convertible notes year ended december 31 2010 issued finders’ fees based guidance asc 815 asc 8154025 company concluded instruments required accounted derivatives due ratchet protection feature available exercise price note 5 asc 8154025 company records fair value derivatives balance sheet fair value changes values reflected statements operations “changes fair value derivative liabilities” derivative instruments disclosed balance sheet ‘derivative liabilities warrants’ asc 82010 defines fair value exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date asc 82010 also establishes fair value hierarchy requires entity maximize use observable inputs minimize use unobservable inputs measuring fair value asc 82010 describes three levels inputs may used measure fair value level 1 quoted prices active markets identical assets liabilities level 2 observable inputs level 1 prices quoted prices similar assets liabilities inputs observable corroborated observable market data substantially full term assets liabilities level 3 unobservable inputs supported little market activity financial instruments whose values determined using pricing models discounted cash flow methodologies similar techniques well instruments determination fair value requires significant judgment estimation company’s level 3 liabilities consist derivative liabilities associated warrants issued convertible notes year ended december 31 2010 december 31 2010 company’s derivative liabilities categorized level 3 fair value liabilities inputs used measure financial assets liabilities fall within one level described categorization based lowest level input significant fair value measurement instrument financial liabilities considered level 3 fair values determined using pricing models discounted cash flow methodologies similar techniques least one significant model assumption input unobservable level 3 financial liabilities consist notes warrants current market securities determination fair value requires significant judgment estimation determining fair value warrants conversion options given company’s stage development financial position highly subjective identifying appropriate measurement criteria models subject uncertainty several generally accepted pricing models warrants options derivative provisions company chosen value conversion option notes contain ratchet provisions using blackscholes model following assumptions series c warrants contingently exercisable following exercise series b warrants fair value series c warrants determined nominal foregoing assumptions reviewed quarterly subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations derivative liabilities measured fair value recurring basis financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet derivative liability warrants derivative liability conversion option table provides summary changes fair value including net transfers andor financial assets liabilities measured fair value recurring basis using significant unobservable inputs level 3 year ended december 31 2010 note 5 convertible note payable following summary debt instrument transactions relevant current prior period may 24 2010 company entered securities purchase agreement accredited investors place senior secured convertible notes “notes” maturity date one year issuance thereof aggregate principal amount 1530000 gross consideration 1275000 consisted 712254 cash proceeds company 212746 current services 350000 subscribed holder outstanding due 2009 convertible debenture connection issuance notes company entered 2010 security agreement note holders securing notes company’s assets note holders option convert outstanding balance notes including accrued interest shares company’s common stock maximum conversion rate 030 per share time notes placed 20 discount face value bear interest except case event default case bear interest rate 18 per annum principal interest due notes due 9 equal monthly installments starting september 2010 subject satisfaction certain customary conditions including effectiveness registration statement certain minimums amount value common stock traded overthecounter bulletin board company may elect pay amounts due installment date either cash shares common stock shares common stock company issues payment installment date issued price equal lesser 030 per share 85 average volumeweighted average prices company’s common stock overthecounter bulletin board twenty trading days immediately preceding applicable installment date company paid finders fee 64000 issued 1400000 broker’s warrants described fair value 167000 finder’s fee fair value broker’s warrants accounted deferred financing costs amortized term notes december 31 2010 91134 remains unamortized presented current assets company’s balance sheet notes warrants include price adjustment provisions whereby exercise price adjusted downwards based future sales issuances conversions equity debt results share issuance per share amount less 030 per share calculated lower per share amount future transaction adjusted conversion rate available note warrant holders economic characteristics risks embedded conversion option notes “conversion option” considered clearly closely related economic characteristics risks host debt contract price adjustment features included embedded conversion option warrants considered indexed company’s stock pursuant guidance asc 81510 embedded conversion option notes meet characteristics derivative instrument must valued separately host debt contract accordance asc 8154025 company evaluated notes’ conversion option recorded 790500 initial fair value conversion option derivative liability fair value determined using blackscholes option pricing model management regarded appropriate due expectation upward trending stock price current assumptions outlined following paragraphs result certain price adjustment clauses related warrants included company’s equity company recorded fair value warrants brokers’ warrants “derivative liability warrants” initially amount 2296250 note 4 proceeds received notes initially allocated embedded conversion option warrants based estimated fair value difference 1644750 gross consideration notes 1275000 fair value calculated derivative liabilities amounting 2919750 accounted ‘loss debt financing’ consolidated statements operations resulting liability 353050 december 31 2010 accretion debt discount relative 2010 secured convertible notes equal 926383 company repaid 573333 principal year ended december 31 2010 subsequent year end company settled negotiated terms contingent settlement full 1530000 outstanding 2010 secured convertible notes settlements company received cancellation 4625000 series warrants 3700000 series b warrants 4625000 series c warrants august 31 2009 company completed convertible debenture financing 350000 issuing convertible promissory note bearing interest 10 per annum note due february 28 2010 unpaid amount principal accrued interest could converted time holders option shares companys common stock price 080 per share terms debenture agreement note would automatically converted equity term note company received funding equal exceeding 2000000 sale shares common stock additional debt instruments convertible common stock term debenture holders debentures option convert 3500000 common shares company receive payment full company recognized embedded beneficial conversion feature assigning initial fair value 139571 additional paidin capital convertible notes issued intrinsic value conversion feature addition company issued 437500 nontransferable registerable share purchase warrants debt holders management estimated fair value warrants 210429 relative fair value warrants beneficial conversion feature together greater face value debentures limited face value loan year ended december 31 2010 holder converted principal amount debenture 2010 secured convertible notes described waived accrued interest amount 23589 connection debentures company issued total 270000 warrants exercise term two years date issuance management estimated fair value warrants 60000 using blackscholes pricing model expected life 2 years risk free interest rate 095 dividend yield 0 expected volatility 23602 year ended december 31 2010 company issued 687305 common shares pursuant conversion 2009 secured debentures face value 135000 plus accrued interest 49155 note 6 loans payable december 31 2010 advances third parties amount 425000 2009 nil due demand advances made company expectation converted convertible debentures note 12 company accruing interest 10 per annum loans rolled new convertible notes issued subsequent year end note 7 related party transactions year ended december 31 2010 company entered transactions certain officers directors company follows incurred 329177 2009 260242 management directors’ fees 72000 2009 42000 research development services paid officers directors period b recorded 1087915 2009 2019660 stock based compensation fair value options granted management granted vested period c incurred nil 2009 65984 interest finance charges promissory notes due related parties period settled connection equity issuance effective june 4 2009 incurred nil 2009 130065 interest finance charges related agreement issue warrants connection extending terms promissory notes due related parties period e issued nil 2009 15000 secured promissory note bearing interest 30 per annum issued 30000 transferable registrable share purchase warrants exercise price 020 per share exercise period two years issuance date direct family member officer company related party transactions stock based consideration involving provision services recorded exchange amount established agreed related parties representing fair value company accounted debt settlement transactions related parties exchange value determined reference arms length settlements time december 31 2010 company amounts owing directors officers 259305 2009 16100 amounts normal course operations amounts due related parties unsecured noninterest bearing specific terms repayment note 8 capital stock share capital prior march 27 2007 authorized capital company consisted 500000000 common shares 0001 par value 5000000 nonvoting preferred shares 0001 par value march 27 2007 company’s articles incorporation amended increase authorized shares common stock 20000000 shares common stock 80000000 shares january 22 2009 authorized shares common stock increased 80000000 shares 500000000 shares effective july 10 2009 company executed 1 10 reverse stock split simultaneously reducing authorized shares common stock 50000000 common shares 0001 par value effective february 21 2010 company increased authorized shares common stock 50000000 shares 150000000 common shares company maintained authorized shares preferred stock 5000000 prior period share transactions included company’s stock transactions balances retroactively converted financial statements give effect 1 10 reverse stock split noted 2010 share transactions january 28 2010 company issued 450000 shares common stock pursuant consulting services agreement time issuance shares quoted market value 052 per share 234000 recorded stockbased consulting fees january 28 2010 company issued 265000 shares common stock pursuant debt settlement agreement refer note 3 shares valued time debt settlement agreement 092 per share quoted market price shares 092 per share time debt settlement agreement april 14 2010 company issued 10400 shares common stock correct error share registry occurred data exchange identified change transfer agent april 26 2010 company issued 80000 shares common stock pursuant consulting services agreement time issuance shares quoted market value 036 per share 28800 recorded stockbased consulting fees may 1 2010 company issued 40000 shares common stock pursuant consulting services agreement time issuance shares quoted market value 032 per share 12800 recorded stockbased consulting fees may 4 2010 90412 trade debt settled exchange 361647 common shares company may 4 2010 company issued 687305 common shares pursuant conversion 2009 secured debenture face value 135000 plus accrued interest approximately 49155 refer note 5 2009 share transactions effective june 4 2009 company completed debt conversion assignment transaction resulting obligation issue 31812065 common shares conjunction retirement 3181207 accounts payable accrued liabilities notes payable related party debt shares issued july 1 2009 management estimated fair value resultant obligation issue shares 1678392 based similar settlement exchanges agreed third party debt settlements included statement operations gain debt settlement 205601 net transaction costs 33812065 share issuance 2000000 shares issued pursuant consulting services agreement related debt conversion assignment transaction 2000000 share issuance estimated fair value 400000 recorded gain debt settlement company also settled accounts payable incurred loss debt settlement 11314 august 10 2009 company issued 162500 shares common stock pursuant exercise 130000 cashless warrants settlement warrant holders included waiver rights additional ratchet provisions warrants originally issued conjunction 2007 loan security agreement time issuance market price shares 110 per share estimated fair value 178750 recorded interest financing charges august 10 2009 company issued 25000 shares restricted common stock pursuant consulting services agreement relation settlement financing transaction time issuance market price shares 110 per share estimated fair value 27500 recorded stockbased consulting fees august 26 2009 company issued 50000 shares common stock pursuant exercise 40000 cashless warrants settlement warrant holders included waiver rights additional ratchet provisions warrants originally issued conjunction 2007 loan security agreement time issuance market price shares 128 per share estimated fair value 64000 recorded interest financing charges october 20 2009 company issued 314466 shares common stock pursuant exercise 385532 warrants cashless basis nil proceeds warrants originally issued conjunction 2009 secured loan agreement refer note 5 fair value shares determined management 62893 november 6 2009 company completed private placement 625000 units subscription price 080 per unit gross proceeds 500000 unit comprised one common share one nontransferable share purchase warrant company warrant entitles holder purchase additional common share company exercise price 120 per warrant share period five years date issuance management determined fair market value warrants 250000 one year issuance warrant effective registration statement registering current prospectus available resale warrant share holder right exercise warrant means cashless exercise november 6 2009 company completed private placement 125000 units subscription price 080 per unit gross proceeds 100000 unit comprised one common share one nontransferable share purchase warrant company warrant entitles holder purchase additional common share company exercise price 120 per warrant share period five years date issuance management determined fair market value warrants 50000 one year issuance warrant effective registration statement registering current prospectus available resale warrant share holder right exercise warrant means cashless exercise november 30 2009 company completed private placement 125000 units subscription price 080 per unit gross proceeds 100000 unit comprised one common share one nontransferable share purchase warrant company warrant entitles holder purchase additional common share company exercise price 120 per warrant share period five years date issuance management determined fair market value warrants 61875 one year issuance warrant effective registration statement registering current prospectus available resale warrant share holder right exercise warrant means cashless exercise november 30 2009 company issued 707542 shares common stock pursuant exercise 915642 cashless warrants originally issued conjunction 2009 secured loan agreement refer note 5 fair value shares determined management 141508 company separately allocated fair market value warrants attached private placement units prior fiscal year stock compensation plan october 14 2009 company adopted 2009 stock incentive plan “2009 plan” supersedes replaces 2007 stock plan 2009 plan allows issuance 10000000 common shares options granted plan shall prices terms determined board directors june 8 2007 total 632000 stock options granted 2007 stock option plan exercise price 250 per share term options ten years 632000 options granted 310000 vested upon grant 242000 vested one year 40000 vested two years 40000 vested three years aggregate fair value options estimated 1179600 190 per option using blackscholes option pricing model risk free interest rate 526 dividend yield 0 expected volatility 83 expected lives 2 5 years expensed portion value options year ended december 31 2010 nil 2009 13167 recorded stock based management fees october 14 2009 company granted total 3326000 stock options exercise price 097 per share consultants management 1913000 vested immediately remaining 1413000 vest one year term options ten years additionally october 14 2009 company approved repricing certain stock options issued consultants management options exercise price 250 repriced 097 per share aggregate fair value repriced options 5840 aggregate fair value new grants estimated 3192960 096 per option using blackscholes option pricing model risk free interest rate 236 dividend yield 0 expected volatility 236 expected life 5 years recognized portion value options year ended december 31 2010 1126560 2009 nil recorded stock based consulting management compensation september 7 2010 company granted 250000 stock options exercise price 035 per share vesting monthly twenty four month period director company term options ten years fair value new grant estimated 47500 019 per option using blackscholes option pricing model risk free interest rate 261 dividend yield 0 expected volatility 2496 expected life 10 years expensed portion value options year ended december 31 2010 7917 recorded stock based management compensation share purchase options summary company’s stock options december 31 2010 changes period presented summary status company’s unvested options december 31 2010 presented share purchase warrants year ended december 31 2009 company extended terms 2007 2008 promissory notes refer note 5 exchange issuance 532700 warrants fair value warrants determined 290350 using blackscholes option pricing model expected life 2 3 years risk free interest rate 164 421 dividend yield 0 expected volatility 100 199 fiscal year ended december 31 2009 remaining 132079 total value expensed financing charges year ended december 31 2009 connection debenture issuances following transactions occurred company issued 20000 share purchase warrants march 11 2009 company issued 270000 warrants february 4 2009 company issued secured promissory note lenders refer note 5 1031174 share purchase warrants july 1 2009 october 28 2009 company issued 437500 share purchase warrants august 31 2009 aggregate fair value warrants determined 398801 using blackscholes option pricing model expected life 2 5 years risk free interest rate 023 164 dividend yield 0 expected volatility 195 245 fair values warrants issued february 4 2009 august 31 2009 recorded discounts notes amortized term notes july 14 2009 company issued 30000 share purchase warrants part debt assignment transaction fair value warrants determined 12000 using blackscholes option pricing model expected life 4 years risk free interest rate 096 dividend yield 0 expected volatility 192 year ended december 31 2009 pursuant consulting services agreements following transactions occurred company issued 200000 share purchase warrants december 17 2009 company issued 125000 share purchase warrants december 18 2009 company issued 400000 share purchase warrants december 18 2009 company issued 500000 share purchase warrants december 18 2009 aggregate fair value warrants determined 622750 using blackscholes option pricing model expected life 5 years risk free interest rate 224 23 dividend yield 0 expected volatility 236 expensed portion value warrants year ended december 31 2009 374270 remaining portion 248480 recorded fiscal 2010 stock based consulting fees january 19 2010 company issued 600000 share purchase warrants acquire equivalent number common shares company exercise price 050 per share exercise period three years issuance date 600000 share purchase warrants acquire equivalent number common shares company exercise price 060 per share exercise period three years issuance date warrants issued pursuant consulting services agreement fair value warrants determined 648000 using blackscholes option pricing model expected life 3 years risk free interest rate 138 dividend yield 0 expected volatility 235 february 8 2010 company issued 750000 share purchase warrants acquire equivalent number common shares company exercise price 050 per share exercise period five years issuance date warrants issued pursuant debt settlement agreement fair value warrants determined 100000 equal amount debt settled may 24 2010 company issued series warrants purchase shares common stock 5 year term series b warrants purchase shares common stock term shorter 18 months ii one year effective registration statement series c warrants purchase shares common stock 5 year term exercised extent series b warrants exercised initial exercise price series warrants 030 per share warrants exercisable 6375000 shares common stock aggregate initial exercise price series b warrants 030 per share warrants exercisable 5100000 shares common stock aggregate initial exercise price series c warrants 30 per share warrants exercisable 6375000 shares common stock addition company issued 1400000 brokers warrant’s exercisable terms conditions note holders warrants described 500000 series warrants400000 series b warrants 500000 series c warrants summary company’s share purchase warrants december 31 2010 changes period presented note 9 income taxes company identified quantified significant temporary differences company’s tax financial bases assets liabilities result deferred tax assets except company’s net operating loss carryforwards amounting approximately 15033000 december 31 2010 2009 12800000 may available reduce future year’s taxable income carry forwards begin expire utilized commencing 2011 future tax benefits may arise result losses recognized financial statements realization meet likely test accordingly company recorded 100 valuation allowance potential deferred tax asset relating tax loss carry forwards company reviews valuation allowance requirements annual basis based management’s expectations future operations circumstances change resulting change management’s judgment recoverability future tax assets impact change valuation allowance would reflected current operations disclosures company’s policy accrue amounts known likely interest penalties related unrecognized tax charges likely penalties interest provision income taxes additionally asc 74010 requires company recognize financial statements impact tax position likely sustained upon examination based technical merits position company incurred taxable losses tax years since inception accordingly provision taxes recorded current prior fiscal year actual income tax provisions differ expected amounts calculated applying combined federal state corporate income tax rates company’s loss income taxes temporary adjusted appropriate temporary permanent tax basis differences components differences follows company’s potential estimated deferred tax assets follows criteria recognizing future income tax assets met due uncertainty realization valuation allowance 100 recorded current prior year company filed income tax returns several years us entities within consolidated group companies canadian corporate tax returns end 2007 filed taxing authorities prescribe penalties failing file certain tax returns supplemental disclosures upon filing andor review could penalties interest assessed penalties vary jurisdiction assessing practices authorities company incurred losses since inception anticipated risk exposure penalties income tax liability determined low however certain jurisdictions may assess penalties failing file returns disclosures failing file supplementary information associated foreign ownership debt equity positions inherent uncertainties arise tax positions taken expected taken respect transfer pricing intercompany charges allocations financing charges fees related party transactions tax credits tax based incentives stock based transactions management considered likelihood significance possible penalties associated current intended filing positions determined based assessment penalties would expected material note 11 note 10 supplemental cash flow information noncash investing financing activities december 31 2010 prepaid portion fair value shares issued pursuant consulting services agreements nil december 31 2009 214501 year ended december 31 2010 100000 accounts payable settled issuance 750000 share purchase warrants exercisable 050 per share 5 year period note 8 year ended december 31 2010 90412 accounts payable settled issuance 361648 restricted common shares deemed price 025 per share note 8 pursuant consulting services arrangement entered january 19 2010 company issued 600000 share purchase warrants exercise price 050 per share 600000 share purchase warrants exercise price 060 per share exercisable three year period note 8 see notes 5 8 additional disclosure noncash transactions note 11 contingencies commitments contingencies tax filings company filed income tax returns several years certain operating jurisdictions note 9 may subject possible compliance penalties interest management currently able make reliably measurable provision possible liability penalties interest time company may liable amounts upon assessment penalties interest assessed future recorded period amounts determinable dormant payables december 31 2010 company approximately 150000 dormant payables included current liabilities management aware interest penalties associated payables company carrying payables fair value interest accrued ultimate settlement payables uncertain commitments combined research operating obligations effective may 25 2010 company entered research license option agreement mayo clinic development possible commercial use cancer vaccine subject approval guidance united states food drug administration “fda” mayo clinic plans conduct phase human clinical trial “phase trial” test develop company’s technology company agreed period option upon approval fda conduct phase trials pay costs incurred mayo exceed total 841000 parties agree within 30 days mayo clinic informs company writing receipt fda approval parties shall enter formal research agreement management services agreement subsequent year end company approved employment agreement chairman chief executive officer company initial term 2 years may automatically extended successive oneyear terms employment agreement provides annual compensation 180000 grant option acquire 2000000 shares company’s common stock 50 vested march 16 2011 remainder vest monthly period two years 41667 per month option price market price march 16 2011 shall exercisable least five years company obligations various agreements december 31 2013 aggregate minimum annual payments years ending december 31 follows 2011 696591 2012 625500 2013 25000 1347091 note 12 subsequent events february 2011 notes february 24 2011 company entered securities purchase agreement investors place 1159413 secured convertible notes “february 2011 notes” mature february 24 2014 25000 february 2011 notes issued family member officer director company february 2011 notes bear interest rate 10 per annum case default increases 20 per annum interest due payable end three month period starting three months issuance one year issuance february 2011 notes company may elect prepay portion principle company makes election holders may elect receive prepayment cash shares company’s common stock combination thereof one year issuance february 2011 notes note holder may elect convert portion 2011 note 015 per share consideration received february 2011 notes consisted 919413 cash rolling 240000 consideration 2010 notes see connection issuance february 2011 notes company issued 2318826 warrants exercisable common stock 025 five year terms company may force exercise warrants time average volume weighted average price company’s common stock prior ten trading days greater 050 average daily dollar volume company’s common stock sold ten trading days greater 25000 effective registration statement covering resale shares underlying warrants company also entered security agreement secure payment performance obligations 2011 notes pursuant company granted investors security interest assets otherwise encumbered settlement arrangements 2010 notes february 2011 company negotiated early settlement 640000 outstanding 2010 secured convertible notes “the 2010 notes” pursuant settlement agreement company paid 480000 cash issued 240000 february 2011 notes retired 4000000 series warrants 3200000 series b warrants 4000000 series c warrants agreement holders released company remaining obligations securities purchase agreement entered fiscal year 2010 security agreement conditions related issuance 2010 notes addition company entered exchange agreement settle 83333 2010 notes retire 625000 series warrants 500000 series b warrants 625000 series c warrants company issuing 2010 note holder 641023 shares common stock accordance terms thereof warrant purchase 250000 shares common stock company also entered agreement early settle remaining 233333 2010 notes exchange 2048578 common shares warrant purchase 1000000 shares common stock new april 2011 note 25000 closing company expects retire outstanding 4900000 warrants related 2010 note transaction closed date financial statements it’s contingent upon company closing additional financing clearing requirements prior settlement april 2011 notes april 12 2011 company sold convertible notes “april 2011 notes” investors final maturity date april 12 2014 face amount 165000 april notes bear interest rate 10 per year case default increases 20 per annum principal due third anniversary april 2011 notes interest due april 2011 notes every three months starting three months issuance one year issuance april notes company may elect prepay portion april notes company makes election holders april 2011 notes may elect receive prepayment cash shares common stock combination thereof one year issuance april 2011 notes holder april 2011 note may elect convert portion april 2011 note 015 per share company entered security agreement secure payment performance obligations april 2011 notes pursuant company granted investors security interest assets april unit financing april 14 2011 company issued 27000 units aggregate 81000 “unit” issued perunit price 300 consists 20 shares common stock 6 warrants purchase 6 shares company’s common stock exercise price 038 term 24 months units provide purchasers registration rights company evaluated subsequent events balance sheet date december 31 2010 date financial statements issued management determined additional events would require disclosure financial statements item 9 item 8 financial statements tapimmune inc development stage company consolidated financial statements december 31 2012 report independent registered public accounting firm consolidated balance sheets consolidated statements operations consolidated statement stockholders’ deficit consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm stockholders board directors tapimmune inc audited accompanying consolidated balance sheets tapimmune inca development stage company december 31 2012 2011 related consolidated statements operations stockholders’ deficit cash flows years ended december 31 2012 2011 period july 27 1999 inception december 31 2012 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position tapimmue inc december 31 2012 2011 results operations cash flows years ended december 31 2012 2011 period july 27 1999 inception december 31 2012 conformity accounting principles generally accepted united states america accompanying consolidated financial statements prepared assuming company continue going concern discussed note 1 financial statements company generated revenues since inception incurred losses developing business losses anticipated company requires additional funds meet obligations costs operations factors raise substantial doubt company’s ability continue going concern management’s plans regard described note 1 financial statements include adjustments might result outcome uncertainty dale matheson carrhilton labonte llp chartered accountants vancouver canada may 15 2013 tapimmune inc development stage company consolidated balance sheets commitments contingencies notes 1 3 5 12 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements operations accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2012 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2012 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2012 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2012 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2012 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2012 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2012 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements cash flows supplemental cash flow information noncash investing financing activities note 11 accompanying notes integral part consolidated financial statements tapimmune inc development stage company notes consolidated financial statements december 31 2012 note 1 nature operations tapimmune inc “company” nevada corporation incorporated 1992 development stage company formed purpose building biotechnology business specializing discovery development immunotherapeutics aimed treatment cancer therapies infectious diseases autoimmune disorders transplant tissue rejection since inception company party various collaborative research agreements “cra” working universities carry development licensed technology providing tapimmune option acquire rights commercialize additional technologies developed within cra lead product candidate wholly owned ongoing license royalty resulting license agreements immunotherapy vaccine company completing preclinical work anticipation clinical trials specifically company obtained expanded three us international patents tested various viral vectors licensed viral vector working towards production clinical grade vaccine company plans continue development lead product vaccine clinical trials oncology infectious diseases alone partnership vaccine developers consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2012 company working capital deficiency 4191211 excluding derivative liabilities recorded current liabilities incurred significant losses since inception losses anticipated development stage raising substantial doubt company’s ability continue going concern ability company continue going concern dependent raising additional capital fund ongoing research development maintenance protection patents accommodation certain debt obligations ultimately generating future profitable operations planned expenditures relating future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities management addressing going concern remediation seeking new sources capital restructuring retiring debt conversion equity debt settlement arrangements creditors cost reduction programs seeking possible joint venture participation management’s plans intended return company financial stability improve continuing operations company continuing initiatives raise capital private placements related party loans institutional sources meet immediate working capital requirements additional funding raised equity debt placements 2011 2012 management intends continue restructuring outstanding debt equity instruments additional capital required currently expand programs including preclinical work establish future manufacturing contracts necessary clinical trials lead tap transporters antigen processing vaccine infectious disease adjuvant technology strategic partnerships needed continue product development portfolio fund development costs measures successful may contribute reduce risk going concern uncertainties company next twelve months certainty company able arrange sufficient funding satisfy current debt obligations continue development products marketability note 2 summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america principles consolidation financial statements include accounts company whollyowned subsidiaries genemax pharmaceuticals inc “gpi” genemax pharmaceuticals canada inc “gpc” significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stock based transactions fair value components convertible notes payable foreign exchange gains losses allocation costs research development accrued liabilities matters impacting company’s ability continue going concern contingencies also involve use estimates assumptions fair value measurements objective asc 820 fair value measurements disclosures increase consistency comparability fair value measurements expand disclosures fair value measurements asc 820 defines fair value establishes framework measuring fair value generally accepted accounting principles expands disclosures fair value measurements asc 820 applies accounting pronouncements require permit fair value measurements require new fair value measurements foreign currency translation functional currency company including subsidiary united states dollars gpc maintains accounting records local currency canadian dollar accordance asc 830 foreign currency matters financial statements companys subsidiary translated united states dollars using period end exchange rates monetary assets liabilities average exchange rates period revenues expenses nonmonetary assets translated historical exchange rates net gains losses resulting foreign exchange translations foreign currency exchange gains losses transactions occurring currency companys functional currency included determination net income period financial instruments concentration credit risk fair values cash accounts payable current monetary liabilities approximate carrying values due immediate shortterm maturity financial instruments companys operations financing activities conducted primarily united states dollars result company subject significant exposure market risks changes foreign currency rates unless otherwise noted managements opinion company exposed significant interest credit risks arising assets classified financial instruments impairment longlived assets longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable circumstances could trigger review include limited significant decreases market price asset significant adverse changes business climate legal factors accumulation costs significantly excess amount originally expected acquisition construction asset current period cash flow operating losses combined history losses forecast continuing losses associated use asset current expectation asset likely sold disposed significantly end estimated useful life recoverability assets measured comparison carrying amounts future undiscounted cash flows assets expected generate impairment loss recognized carrying amount exceeds fair value stockbased compensation company uses blackscholes optionpricing model determine grant date fairvalue stockbased awards asc 718 compensation stock compensation fair value recorded income depending terms conditions award nature relationship recipient award company records grant date fair value income line period earned employees management typically considered vesting period award consultants fair value award recorded income term service period unvested amounts revalued reporting period service period deferred financing costs company defers direct costs incurred connection sale common shares offset proceeds financing upon completion costs incurred connection convertible loans payable deferred amortized financing cost term convertible loans upon conversion loan unamortized amount deferred financing costs charged stockholders’ equity cost financing research development costs company acquired development marketing rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs income taxes company follows liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized income period includes date enactment company recognizes deferred taxes unrealized gains directly within comprehensive income concurrently releases part related valuation allowance resulting nil impact within oci balance sheet december 31 2012 company net operating loss carry forwards however due uncertainty realization company provided full valuation allowance potential deferred tax assets resulting loss carry forwards derivative warrant liability company evaluates convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accordance asc 81010054 81540 accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instruments classification derivative instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date evaluating application asc 81540 management must determine whether instrument embedded feature indexed company’s stock asc 8154015 provides entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions application asc 8154015 affected accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain free standing warrants contain contingently puttable cash settlement fair value financial instruments company follows asc paragraph 825105010 disclosures fair value financial instruments asc paragraph 820103537 measure fair value financial instruments 820103537 establishes framework measuring fair value pursuant gaap expands disclosures fair value measurements increase consistency comparability fair value measurements related disclosures paragraph 820103537 establishes fair value hierarchy prioritizes inputs valuation techniques used measure fair value three 3 broad levels fair value hierarchy gives highest priority quoted prices unadjusted active markets identical assets liabilities lowest priority unobservable inputs three 3 levels fair value hierarchy described level 1 quoted market prices available active markets identical assets liabilities reporting date level 2 pricing inputs quoted prices active markets included level 1 either directly indirectly observable reporting date level 3 pricing inputs generally observable inputs corroborated market data carrying amounts company’s financial assets liabilities cash receivables prepaid expenses deposits accounts payable accrued liabilities research agreement obligations due related parties approximate fair values short term maturity company’s convertible notes payable approximate fair value based upon management’s estimate comparable interest rates would available company similar financial arrangements company revalues derivative warrant derivative conversion option liabilities reporting period recognizes gains losses consolidated statements operations attributable change fair value loss per common share basic loss per share computed dividing loss attributable common stockholders weighted average number common shares outstanding period applicable diluted earnings per share reflect potential dilution securities could share earnings loss company common shares potentially issuable conversion outstanding convertible debentures warrants stock options antidilutive included calculation recently issued accounting pronouncements april 1 2012 company adopted new guidance related presentation comprehensive income main provisions new guidance provide entity reports items comprehensive income option present comprehensive income single statement presents components net income total net income components comprehensive income total comprehensive income total comprehensive income ii two separate consecutive statements whereby entity must present components net income total net income first statement immediately followed financial statement presents components comprehensive income total comprehensive income total comprehensive income new rules eliminate option present components comprehensive income part statement stockholders equity new rules applied retrospectively became effective fiscal years interim periods within fiscal years beginning december 15 2011 january 1 2012 company early adoption permitted adoption new guidance material impact consolidated financial statements company reviewed recently issued accounting pronouncements plans adopt applicable expect adoption pronouncements material impact financial position results operations cash flows note 3 research agreements crucell holland bv “crucell” research license option agreement effective august 7 2003 crucell company’s subsidiary gpi entered fiveyear research license option agreement whereby crucell granted gpi nonexclusive worldwide license research use adenovirus technology company required make certain payments fiveyear term totaling euro €450000 approximately 510100 december 31 2008 243598 €172801 owing crucell agreement year ended december 31 2009 management negotiated settlement outstanding balance requiring €17000 cash payment paid issuance 265000 shares company’s common stock addition retroactively effective august 7 2008 company negotiated amended license agreement use crucell’s adenovirus technology company required make annual license payments anniversary effective date three year term equal €75000 per annum december 31 2012 company accrued 415998 €314703 amended agreement inclusive interest outstanding amounts company currently delinquent making first annual license payment amended license agreement crucell right cancel agreement however date company received notice terminating license agreement management plans negotiate amended payment structure crucell successful would allow company maintain license agreement good standing however certainty license agreement maintained management successfully negotiate new terms mayo clinic license option agreement details regarding license option agreement mayo clinic please refer note 12 note 4 derivative warrant liability fair value company evaluated application asc 48010 distinguishing liabilities equity asc 81540 contracts entity’s equity asc 71810 compensation stock compensation issued outstanding warrants purchase common stock issued convertible notes private placements consulting agreements various debt settlements 2009 2012 based guidance management concluded instruments required accounted derivatives either due ratchet protection feature available exercise price note 5 holder’s right put warrants back company cash certain conditions conversion option feature conversion variable number shares asc 8154025 company records fair value warrants conversion options derivatives balance sheet fair value changes values reflected statements operations “changes fair value derivative liabilities” fair value share purchase warrants recorded balance sheet ‘derivative liability warrants’ fair value conversion options recorded balance sheet ‘derivative liability conversion option’ asc 82010 defines fair value exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date asc 82010 also establishes fair value hierarchy requires entity maximize use observable inputs minimize use unobservable inputs measuring fair value asc 82010 describes three levels inputs may used measure fair value level 1 quoted prices active markets identical assets liabilities level 2 observable inputs level 1 prices quoted prices similar assets liabilities inputs observable corroborated observable market data substantially full term assets liabilities level 3 unobservable inputs supported little market activity financial instruments whose values determined using pricing models discounted cash flow methodologies similar techniques well instruments determination fair value requires significant judgment estimation company’s level 3 liabilities consist derivative liabilities associated warrants issued convertible notes year ended december 31 2011 december 31 2012 company’s derivative liabilities categorized level 3 fair value liabilities inputs used measure financial assets liabilities fall within one level described categorization based lowest level input significant fair value measurement instrument level 3 valuation techniques financial liabilities considered level 3 fair values determined using pricing models discounted cash flow methodologies similar techniques least one significant model assumption input unobservable level 3 financial liabilities consist notes warrants current market securities determination fair value requires significant judgment estimation determining fair value share purchase warrants conversion options given company’s stage development financial position highly subjective identifying appropriate measurement criteria models subject uncertainty several generally accepted pricing models warrants options derivative provisions company chosen value warrants conversion option notes contain ratchet provisions using binomial model following assumptions foregoing assumptions reviewed quarterly subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations financial assets liabilities measured fair value recurring basis financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet derivative liability warrants derivative liability conversion option table provides summary changes fair value including net transfers andor financial assets liabilities measured fair value recurring basis using significant unobservable inputs level 3 years ended december 31 2012 2011 fair value warrants determined using binomial option pricing model valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based us treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate company could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements company continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statement operations net cash settlement value time future fundamental transaction depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based us treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction fair value warrants determined using black scholes option pricing model note 5 convertible notes payable following summary debt instrument transactions relevant current year february 2011 secured convertible notes february 24 2011 company entered securities purchase agreement accredited investors place senior secured convertible notes “february 2011 notes” maturity date three years issuance thereof aggregate principal amount 1184694 consideration notes consisted 944694 cash proceeds including accrued interest 240000 subscribed two holders outstanding demandable 2010 secured convertible notes “2010 notes” holders 2010 notes returned series b series c warrants company cancellation connection issuance february 2011 notes company entered 2011 security agreement note holders securing february 2011 notes company’s assets one year issuance february 2011 notes note holders option convert portion outstanding balance february 2011 notes including accrued interest shares company’s common stock conversion rate 015 per share february 2011 notes bear interest rate 10 per annum except case default case bear interest rate 20 per annum interest due february 2011 notes end three month period starting three months issuance one year issuance february 2011 notes company may elect prepay portion principal company makes election holders may elect receive prepayment cash shares company’s common stock conversion rate 015 per share combination thereof company paid finders’ fee 41500 finder’s fee accounted deferred financing costs amortized term notes december 31 2012 15008 37452 deferred financing costs relates february 2011 notes remains unamortized presented current assets company’s balance sheet connection issuance february 2011 notes company issued 2369388 warrants exercisable common stock 025 five year terms company may force exercise warrants time average volume weighted average price company’s common stock prior ten trading days greater 050 average daily dollar volume company’s common stock sold ten trading days greater 25000 effective registration statement covering resale shares underlying warrants company allocated net proceeds warrants based calculated fair value date issuance fair value warrants recorded 483355 recognized derivative liabilities debt recorded 701339 fair value warrants calculated using binomial option pricing model following assumptions estimated life five years risk free rate 206 dividend yield 0 volatility 199 debt discount accreted three year term february 2011 notes using effective interest rate method year one investors settled principal amount 203836 accrued interest 16419 february 2011 notes exchange december 14 2012 convertible note “december 14 2012 note” year ended december 31 2012 accretion debt discount 160046 recorded february 2011 notes april 2011 secured convertible notes april 4 2011 company entered securities purchase agreement accredited investors place senior secured convertible notes “april 2011 notes” maturity date three years issuance thereof aggregate principal amount 215000 consideration notes consisted 190000 cash proceeds 25000 subscribed holder 2010 notes exchange extinguishment series b series c warrants related 2010 notes connection issuance april 2011 notes company entered 2011 security agreement note holders securing april 2011 notes secondary security interest company’s assets one year issuance april 2011 notes note holders option convert portion outstanding balance april 2011 notes including accrued interest shares company’s common stock conversion rate 015 per share april 2011 notes bear interest rate 10 per annum except case default case bear interest rate 20 per annum interest due april 2011 notes end three month period starting three months issuance one year issuance april 2011 notes company may elect prepay portion principal company makes election holders may elect receive prepayment cash shares company’s common stock conversion rate 015 per share combination thereof company paid finders’ fee 4550 finder’s fee accounted deferred financing costs amortized term notes december 31 2012 1891 37452 deferred financing costs relates april 2011 notes remains unamortized presented current assets company’s balance sheet connection issuance april 2011 notes company issued 430000 warrants exercisable common stock 025 2 year terms company may force exercise warrants time average volume weighted average price company’s common stock prior ten trading days greater 050 average daily dollar volume company’s common stock sold ten trading days greater 25000 effective registration statement covering resale shares underlying warrants company allocated net proceeds warrants based calculated fair value fair value warrants recorded 130720 recognized derivative liabilities debt recorded 84280 fair value warrants calculated using binomial option pricing model following assumptions estimated life two years risk free rate 077 dividend yield 0 volatility 199 debt discount accreted three year term april 2011 notes using effective interest rate method year ended december 31 2012 accretion debt discount 34399 recorded april 2011 notes june 2011 secured convertible note june 6 2011 company entered securities purchase agreement accredited investors place senior secured convertible note “june 2011 note” maturity date three years issuance thereof aggregate principal amount 30000 connection issuance june 2011 note company entered 2011 security agreement note holder securing june 2011 note secondary security interest company’s assets one year issuance june 2011 note holder option convert portion outstanding balance june 2011 note including accrued interest shares company’s common stock conversion rate 015 per share june 2011 note bears interest rate 10 per annum except case default case bears interest rate 20 per annum interest due june 2011 note end three month period starting three months issuance one year issuance june 2011 note company may elect prepay portion principal company makes election holders may elect receive prepayment cash shares company’s common stock conversion rate 015 per share combination thereof connection issuance june 2011 note company issued 60000 warrants exercisable common stock 025 two year terms company may force exercise warrants time average volume weighted average price company’s common stock prior ten trading days greater 050 average daily dollar volume company’s common stock sold ten trading days greater 25000 effective registration statement covering resale shares underlying warrants company allocated net proceeds warrants based calculated fair value fair value warrants recorded 8280 recognized derivative liabilities debt recorded 21720 fair value warrants calculated using binomial option pricing model following assumptions estimated life two years risk free rate 043 dividend yield 0 volatility 199 debt discount accreted three year term june 2011 note using effective interest rate method year ended december 31 2012 accretion debt discount 2772 recorded june 2011 note august 8 2012 convertible note august 8 2012 company entered securities purchase agreement accredited investors place convertible note “august 8 2012 note” maturity date one year issuance thereof aggregate principal amount 111430 consideration notes consisted 92000 cash proceeds 8000 payment finders’ fee original issue discount 11430 note holder option convert portion outstanding balance august 8 2012 note including accrued interest shares company’s common stock conversion rate 009 per share 70 lowest traded price 25 trading days prior conversion august 8 2012 note carries interest company repays note within 90 days issuance company repay note within 90 days onetime interest 5 shall apply principal sum finder’s fee 8000 accounted deferred financing costs amortized term note december 31 2012 4822 37452 deferred financing costs relates august 8 2012 note remains unamortized presented current assets company’s balance sheet company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 155700 recognized derivative liability debt recorded nil transaction resulted accounting loss debt financing 55700 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 019 dividend yield 0 volatility 13977 debt discount accreted one year term august 8 2012 note using effective interest rate method year ended december 31 2012 accretion debt discount 44267 recorded august 8 2012 note august 12 2012 convertible note august 12 2012 company entered securities purchase agreement accredited investors place convertible note “august 12 2012 note” maturity date three months issuance thereof aggregate principal amount 27500 consideration notes consisted 25000 cash proceeds original issue discount 2500 note holder option convert portion outstanding balance august 8 2012 note including accrued interest shares company’s common stock conversion rate 009 per share similar terms future financings favorable terms agreement provides company issue 50000 shares note holder risk premium 50000 shares valued 6250 recorded loss debt financing obligation issue shares august 12 2012 note bears interest rate 10 per annum company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 31100 recognized derivative liability debt recorded nil transaction resulted accounting loss debt financing 6100 fair value conversion option calculated using binomial option pricing model following assumptions estimated life three months risk free rate 011 dividend yield 0 volatility 13831 debt discount accreted three month term august 12 2012 note using effective interest rate method year ended december 31 2012 accretion debt discount 27500 recorded august 12 2012 note company repaid august 12 2012 note default august 20 2012 convertible note august 20 2012 company entered securities purchase agreement accredited investors place convertible note “august 20 2012 note” maturity date one year issuance thereof aggregate principal amount 20000 note holder option convert portion outstanding balance august 8 2012 note including accrued interest shares company’s common stock conversion rate 009 per share 70 lowest traded price 25 trading days prior conversion august 20 2012 note bears interest rate 8 per annum company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 36100 recognized derivative liability debt recorded nil transaction resulted accounting loss debt financing 16100 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 019 dividend yield 0 volatility 14011 debt discount accreted one year term august 20 2012 note using effective interest rate method year ended december 31 2012 accretion debt discount 7288 recorded august 20 2012 note september 18 2012 convertible note september 18 2012 company entered securities purchase agreement accredited investors place convertible note “september 18 2012 note” maturity date one year issuance thereof aggregate principal amount 82500 consideration notes consisted 69000 cash proceeds 6000 payment finders’ fee original issue discount 7500 note holder option convert portion outstanding balance september 18 2012 note including accrued interest shares company’s common stock conversion rate 009 per share 70 lowest traded price 20 trading days prior conversion september 18 2012 note carries interest amortization original issue discount finder’s fee 6000 accounted deferred financing costs amortized term note december 31 2012 4290 37452 deferred financing costs relates september 2012 note remains unamortized presented current assets company’s balance sheet company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 76400 recognized derivative liability debt recorded nil transaction resulted accounting loss debt financing 1400 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 020 dividend yield 0 volatility 14143 debt discount accreted one year term september 2012 note using effective interest rate method year ended december 31 2012 accretion debt discount 2626 recorded september 2012 note october 2012 convertible note october 15 2012 company entered securities purchase agreement accredited investor place convertible note “october 2012 note” maturity date one year issuance thereof aggregate principal amount 340000 consideration notes consisted 310000 cash proceeds 10000 payment legal fee original issue discount 30000 note holder option convert portion outstanding balance october 2012 note including accrued interest shares company’s common stock conversion rate 012 per share new lower issuance price company issues shares reduces conversion exercise price outstanding debt warrants less 012 october 2012 note carries interest rate 8 seven installment payments due note beginning seventh month issuance month thereafter maturity legal fee 10000 accounted deferred financing costs amortized term note december 31 2012 5425 37452 deferred financing costs relates october 2012 note remains unamortized presented current assets company’s balance sheet provided sufficient volume trading company’s common stock criteria met company may elect make payment due installment date shares common stock company elects make payment shares common stock number shares company issues equal amount converted divided lesser conversion price 70 average three lowest closing bid prices shares common stock prior twenty consecutive trading days company elects pay full amount note common shares excluding interest becomes due thereon holder shall receive minimum 2833333 shares company’s common stock amount could substantially higher unless otherwise agreed writing parties time holder convert amount debenture common stock would result holder owning 499 common stock outstanding part agreement company also issued 3000000 warrants note holder exercisable 025share expiring october 31 2016 warrants include price adjustment provisions whereby exercise price adjusted downwards based future grants results share issuance per share amount less 025 per share repricing existing warrants lower price company allocated net proceeds conversion option equity based calculated fair value fair value conversion option recorded 248000 recognized derivative liability equity recorded 62000 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 019 dividend yield 0 volatility 13916 debt discount accreted one year term october 2012 note using effective interest rate method year ended december 31 2012 accretion debt discount 71726 recorded october 2012 note november 1 2012 convertible note year company converted promissory note 100000 note 7 accredited investor three convertible notes 105000 cumulatively three convertible notes assigned third party two notes converted equity november december 2012 note holder converted 73737 principal interest 1262727 shares fair value shares determined 140538 based quoted market prices company recorded 66801 loss settlement debt note 9 third convertible note “november 1 2012 note” issued maturity date six months aggregate principal amount 31471 note holder option convert portion outstanding balance november 1 2012 note including accrued interest shares company’s common stock conversion rate 009 per share 65 lowest bid price 20 trading days prior conversion november 1 2012 note bears interest rate 10 per annum starting november 15 2012 company default certain events november 1 2012 note shall incur interest rate 20 per annum retroactively company allocated 31471 balance november 1 2012 note conversion option debt based calculated fair value fair value conversion option recorded 27300 recognized derivative liability debt recorded 4171 fair value conversion option calculated using binomial option pricing model following assumptions estimated life 049 year risk free rate 009 dividend yield 0 volatility 12726 debt discount accreted 049 year term november 1 2012 note using effective interest rate method year ended december 31 2012 accretion debt discount 9100 recorded november 1 2012 note november 20 2012 convertible note november 20 2012 company entered securities purchase agreement accredited investor place convertible note “november 20 2012 note” maturity date one year issuance thereof aggregate principal amount 55710 consideration notes consisted 50000 cash proceeds 4000 payment finder’s fee original issue discount 5710 note holder option convert portion outstanding balance november 20 2012 note including accrued interest shares company’s common stock conversion rate 009 per share 70 lowest traded price 25 trading days prior conversion august 8 2012 note carries interest company repays note within 90 days issuance company repay note within 90 days onetime interest 5 shall apply principal sum finder’s fee 4000 accounted deferred financing costs amortized term note december 31 2012 3551 37452 deferred financing costs relates november 20 2012 note remains unamortized presented current assets company’s balance sheet company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 69000 recognized derivative liability debt recorded nil transaction resulted accounting loss debt financing 19000 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 016 dividend yield 0 volatility 13471 debt discount accreted one year term november 20 2012 note using effective interest rate method year ended december 31 2012 accretion debt discount 6105 recorded november 20 2012 note december 14 2012 convertible note december 14 2012 company converted part february 2011 notes amount 220255 convertible note “december 14 2012 note” maturity date four months issuance thereof aggregate principal amount 252280 consideration notes consisted 220255 february 2011 notes 10000 payment legal fee original issue discount 22025 december 14 2012 note repayable four equal installments accrued interest starting january 18 2013 subsequently day following calendar months company elect pay installments cash shares company’s common stock december 14 2012 note bears interest rate 8 per annum event default certain conditions interest accrue rate 18 per annum note holder option convert portion outstanding balance december 14 2012 note including accrued interest shares company’s common stock conversion rate 70 three lowest closing bid prices 20 trading days prior conversion december 2012 december 14 2012 note assigned third party company paid first installment 65032 consisting principal interest 1078477 shares fair value shares determined 96523 based quoted market price 009 per share company recorded 31491 loss settlement debt note 9 company allocated 189210 balance december 14 2012 note conversion option debt based calculated fair value fair value conversion option recorded 94100 recognized derivative liability debt recorded 95110 fair value conversion option calculated using binomial option pricing model following assumptions estimated life 035 year risk free rate 006 dividend yield 0 volatility 10088 debt discount accreted 045 year term december 14 2012 note using effective interest rate method year ended december 31 2012 accretion debt discount 12798 recorded november 1 2012 note december 18 2012 convertible note december 18 2012 company entered securities purchase agreement accredited investors place convertible notes “december 18 2012 notes” maturity date one year issuance thereof aggregate principal amount 50000 note holders option convert portion outstanding balance november 20 2012 note including accrued interest shares company’s common stock conversion rate 010 per share december 18 2012 notes carry interest rate 9 due payable maturity date note 6 loans payable december 31 2012 unsecured loan advance third party amount 10000 december 31 2011 7000 due demand loan accruing interest 10 per annum note 7 promissory note year ended december 31 2011 company issued note amount 100000 towards future legal services matured july 24 2011 december 31 2012 company received legal services amount 100000 note bears interest 10 per annum may converted shares equal lower 009 65 arithmetic average lowest closing bid prices company’s shares consecutive twenty day trading period prior notice conversion year ended december 31 2012 company issued 500000 shares holder note exchange note holder’s agreement forbear pursuing collections actions outstanding note 9 converted promissory note three convertible notes note 5 year ended december 31 2012 company issued additional promissory notes amount 67942 38000 promissory notes issued officer director company note 8 promissory notes interest charges fixed repayment terms note 8 related party transactions year ended december 31 2012 company entered transactions certain officers directors company follows incurred 295600 2011 248400 management consulting directors’ fees 90000 2011 90000 research development services paid officers directors period b recorded 124209 2011 389824 stock based compensation fair value options granted management granted vested period c converted 50000 2011 25000 debt due related parties period settled shares issued 38000 2011 nil promissory notes officer director company note 7 related party transactions stock based consideration involving provision services recorded exchange amount established agreed related parties representing fair value company accounted debt settlement transactions related parties management’s estimate fair value using amounts similar arm’s length settlements debt settled december 31 2012 company amounts owing directors officers 366697 2011 322905 amounts due related parties unsecured noninterest bearing specific terms repayment note 9 capital stock share capital prior march 27 2007 authorized capital company consisted 50000000 common shares 0001 par value 5000000 nonvoting preferred shares 0001 par value march 27 2007 company’s articles incorporation amended increase authorized shares common stock 50000000 shares common stock 200000000 shares june 28 2007 company completed reverse stock split thereby issuing 1 new share 25 outstanding shares company’s common stock accordingly company’s authorized share capital decreased 200000000 common shares 80000000 common shares january 22 2009 authorized shares common stock increased 80000000 shares 500000000 shares effective july 10 2009 company executed 1 10 reverse stock split simultaneously reducing authorized shares common stock 50000000 common shares 0001 par value effective february 21 2010 company increased authorized shares common stock 50000000 shares 150000000 common shares company maintained authorized shares preferred stock 5000000 prior period share transactions included company’s stock transactions balances retroactively restated transactions described 2012 share transactions march 15 2012 company issued 333334 shares restricted common stock related parties pursuant debt settlement agreements settle 50000 outstanding trade payable time issuance fair value shares determined 50000 based quoted market price 015 per share march 15 2012 company issued 400000 shares restricted common stock pursuant debt settlement consulting agreement time issuance fair value shares determined 71200 based quoted market price 015 per share company recorded 9930 gain settlement debt march 15 2012 company issued 789778 shares restricted common stock settlement accrued interest outstanding 2011 notes time issuance fair value shares determined 118467 based quoted market price 015 per share gain loss recorded settlement march 2012 company received subscription proceeds 85000 subscribers purchased 733334 share units 015 per unit consists 1 share company’s common stock half warrant exercisable 040 expires two years fair value warrants determined 5133 april 2012 company received subscription proceeds 345000 subscribers purchased 2300000 share units 015 per unit consists 1 share company’s common stock half warrant exercisable 040 expires two years fair value warrants determined 123000 april 2012 company issued 100000 shares restricted common stock pursuant debt settlement consulting agreement time issuance fair value shares determined 18500 based quoted market price 0185 per share company recorded 18758 gain settlement april 2012 company issued 933333 restricted common shares 015 per share proceeds 140000 received october 2011 private placement april 2012 company issued 1000000 common shares consultant pursuant consulting agreement effective october 1 2011 april 2012 company issued 163334 shares restricted common stock settlement accrued interest outstanding 2011 notes time issuance fair value shares determined 24500 based quoted market price 015 per share gain loss recorded settlement may 2012 company issued 14000000 common shares consultants pursuant consulting agreement note 12 time issuance fair value shares determined 1918000 based quoted market price 0137 per share june 2012 company issued 35179 shares restricted common stock pursuant consulting agreement fair value shares determined 6000 based quoted market price 017 per share august 2012 company issued 500000 shares restricted common stock pursuant consulting agreement fair value shares determined 74000 based quoted market price 0148 per share september 2012 company issued 500000 shares restricted common stock holder promissory note exchange note holder’s agreement forebear pursuing collection action note 7 fair value shares determined 72750 based quoted market price 0146 per share november 2012 company issued 437063 shares restricted common stock election holder convert part convertible debt note 5 conversion price 0572 per share fair value shares determined 55944 based quoted market price 0128 per share company recorded 30944 loss settlement debt november 2012 company issued 597185 shares restricted common stock election holder convert part convertible debt note 5 conversion price 0586 per share fair value shares determined 63003 based quoted market price 0106 per share company recorded 28003 loss settlement debt november 2012 company issued 228479 shares restricted common stock election holder convert part convertible debt note 5 conversion price 0601 per share fair value shares determined 21591 based quoted market price 0095 per share company recorded 7854 loss settlement debt december 2012 company issued 1078477 shares restricted common stock payment installment 65032 convertible debt note 5 conversion price 0603 per share fair value shares determined 96523 based quoted market price 009 per share company recorded 31491 loss settlement debt 2011 share transactions march 21 2011 company issued 641023 shares restricted common stock pursuant debt settlement warrant extinguishment agreement settle 83333 2010 notes partial extinguishment series b series c warrants time issuance fair value shares determined 115384 based quoted market price 018 per share recorded carrying value debt company recognized loss 87734 partial settlement 2010 notes partial extinguishment series b series c warrants march 23 2011 company issued 1180000 shares restricted common stock pursuant various consulting agreements time issuance fair value shares determined 227432 based quoted market price 018 per share march 23 2011 company issued 885295 shares restricted common stock pursuant debt settlement agreements settle 150500 outstanding trade payables time issuance fair value shares determined 172633 based quoted market price 0195 per share company recorded 22133 loss settlement debt march 23 2011 company issued 441177 shares restricted common stock related parties pursuant debt settlement agreements settle 75000 outstanding trade payables time issuance fair value shares determined 86030 based quoted market price 0195 per share company recorded calculated loss settlement 11030 statement operations march 30 2011 company issued 2048578 shares restricted common stock pursuant exchange agreement settle 233333 2010 notes time issuance fair value shares determined 450687 based quoted market price 022 per share discounted carrying amount 2010 note march 30 2011 77421 company recorded difference fair value accreted amount 373266 loss settlement debt april 5 2011 company issued 500000 shares restricted common stock pursuant consulting agreement time issuance fair value shares determined 125000 based quoted market price 025 per share april 25 2011 company issued 350000 shares restricted common stock pursuant consulting agreement time issuance fair value shares determined 87500 based quoted market price 025 per share april 25 2011 company issued 366783 shares restricted common stock pursuant debt settlement agreements settle 84315 outstanding trade payables time issuance fair value shares determined 91696 based quoted market price 025 per share company recorded 7381 loss settlement debt april 25 2011 company issued 20000 shares restricted common stock pursuant debt settlement agreement settle 4575 outstanding trade payables time agreement fair value shares determined 6800 based quoted market price 034 per share company recorded 2225 loss settlement debt april 25 2011 company issued 108696 shares restricted common stock related parties pursuant debt settlement agreement settle 25000 outstanding accounts payables time issuance fair value shares determined 27174 based quoted market price 025 per share company recorded calculated loss settlement 2174 statement operations april 2011 company received subscription proceeds 90000 issued 600001 shares common stock private placement subscribers purchased one unit 300 subscription proceeds unit consists 20 shares company’s common stock 6 warrants exercisable 025 expire two years june 1 2011 586858 shares company’s restricted common stock returned treasury due adjustment final settlement 233333 2010 notes return shares resulted 134977 reduction previously calculated loss debt settlement july 7 2011 company received subscription proceeds 65000 issued 325000 shares common stock private placement subscribers purchased one unit 200 subscription proceeds unit consists 10 shares company’s common stock 6 warrants exercisable 025 expire two years fair value warrants determined 33600 august 19 2011 company received subscription proceeds 45000 issued 225000 shares common stock private placement subscribers purchased one unit 200 subscription proceeds unit consists 10 shares company’s common stock 6 warrants exercisable 025 expire two years fair value warrants determined 23400 october 1 2011 company issued 44405 shares common stock pursuant consulting services agreement time issuance shares quoted market value 020 per share 9000 recorded stockbased consulting fees october november 2011 company received subscription proceeds 635000 converted debt 115250 december 31 2012 company issued 4068334 shares common stock private placement 140000 subscription proceeds common shares yet issued subscribers purchased one unit 015 subscription proceeds unit consists 1 share company’s common stock half warrant exercisable 040 expires two years fair value warrants determined 287000 november 19 2011 company issued 100000 shares common stock pursuant consulting services agreement company determined market value shares 027 per share 27000 recorded stockbased consulting fees december 13 2011 company issued 500000 shares common stock pursuant consulting service agreements settlement pursuant consulting service termination agreements company determined market value shares 022 per share recorded 107700 gain settlement debt stock compensation plan october 14 2009 company adopted 2009 stock incentive plan “2009 plan” supersedes replaces 2007 stock plan 2009 plan allows issuance 10000000 common shares options granted plan shall prices terms determined board directors september 7 2010 company granted 250000 stock options exercise price 035 per share vesting monthly twenty four month period director company term options ten years fair value new grant estimated 47500 019 per option using blackscholes option pricing model risk free interest rate 261 dividend yield 0 expected volatility 2496 expected life 10 years expensed portion value options year ended december 31 2011 1979 recorded stock based management compensation february 16 2011 company granted total 850000 stock options exercise price 017 per share consultants management vest monthly twentyfour month period term options ten years additionally february 16 2011 company approved repricing 2928000 stock options issued consultants management options exercise price 097 repriced 017 per share company recognized aggregate incremental fair value repriced options 40260 incremental fair value determined using blackscholes option pricing model weighted average assumptions follows expected life 348 years expected volatility 199 dividend yield 0 riskfree rate 14 march 16 2011 company granted 2000000 stock options management exercise price 019 per share 1000000 vested immediately remaining vest monthly twenty four month period aggregate fair value new grants estimated 522500 018 per option using blackscholes option pricing model weighted average assumptions follows risk free interest rate 24 dividend yield 0 expected volatility 248 expected life 643 years june 8 2011 company granted 250000 stock options consultant exercise price 017 per share 125000 vested immediately remaining vest monthly twenty four month period aggregate fair value grant estimated 42500 017 per option using blackscholes option pricing model weighted average assumptions follows risk free interest rate 298 dividend yield 0 expected volatility 2384 expected life 10 years april 30 2012 company granted 250000 stock options management exercise price 018 per share vesting monthly thirty six month period aggregate fair value grant estimated 45000 018 per option using blackscholes option pricing model weighted average assumptions follows risk free interest rate 195 dividend yield 0 expected volatility 1990 expected life 10 years may 8 2012 company granted 250000 stock options consultant exercise price 017 per share vesting monthly twelve month period aggregate fair value grant estimated 40000 017 per option using blackscholes option pricing model weighted average assumptions follows risk free interest rate 171 dividend yield 0 expected volatility 1990 expected life 10 years expensed portion value granted vested options year ended december 31 2012 204427 2011 456081 recorded stock based consulting management fees share purchase options summary company’s stock options december 31 2012 changes period presented december 31 2012 intrinsic value vested options equal nil 2011 nil summary status company’s unvested options december 31 2012 presented share purchase warrants february 24 2011 company issued 2369388 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant securities purchase agreement note 5 fair value warrants 483355 recognized derivative liabilities using binomial option pricing model expected life 5 years risk free interest rate 206 dividend yield 0 expected volatility 199 march 21 2011 company issued 250000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant debt settlement agreement note 5 fair value warrants 43750 recognized derivative liabilities using binomial option pricing model expected life 5 years risk free interest rate 077 dividend yield 0 expected volatility 199 april 4 2011 company issued 430000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant securities purchase agreement note 5 fair value warrants 130720 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 077 dividend yield 0 expected volatility 199 april 4 2011 company issued 1000000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant debt settlement agreement note 5 fair value warrants 304000 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 077 dividend yield 0 expected volatility 199 april 25 2011 company issued 180000 share purchase warrants acquire equivalent number common shares company exercise price 038 per share exercise period five years issuance date warrants issued pursuant private placement 90000 fair value warrants 50760 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 077 dividend yield 0 expected volatility 199 june 6 2011 company issued 60000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant securities purchase agreement note 5 fair value warrants 8280 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 043 dividend yield 0 expected volatility 199 july 2011 company issued 275000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date fair value warrants 58850 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 049 dividend yield 0 expected volatility 199 october 2011 company issued 600000 share purchase warrants acquire equivalent number common shares company exercise price 020 per share exercise period five years issuance date fair value warrants 117000 recognized derivative liabilities using binomial option pricing model expected life 5 years risk free interest rate 140 dividend yield 0 expected volatility 199 november 2011 company issued 2034167 share purchase warrants acquire equivalent number common shares company exercise price 040 per share exercise period two years issuance date warrants issued pursuant private placement 610250 fair value warrants 390560 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 029 dividend yield 0 expected volatility 199 march 2012 company issued 366668 share purchase warrants acquire equivalent number common shares company exercise price 040 per share exercise period two years issuance date warrants issued pursuant private placement 110000 included within equity fair value warrants determined 5133 using blackscholes option pricing model expected life 2 years risk free interest rate 037 dividend yield 0 expected volatility 63 april 2012 company issued 1150000 share purchase warrants acquire equivalent number common shares company exercise price 040 per share exercise period two years issuance date warrants issued pursuant private placement included within equity fair value warrants determined 123000 using blackscholes option pricing model expected life 2 years risk free interest rate 027 dividend yield 0 expected volatility 1466 october 2012 company issued 3000000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period four years issuance date warrants issued pursuant convertible debt included within equity residual fair value warrants determined 62000 december 2012 company issued 1000000 share purchase warrants acquire equivalent number common shares company exercise price 010 per share exercise period five years issuance date warrants issued pursuant private placement included within equity fair value warrants determined 178000 using blackscholes option pricing model expected life 5 years risk free interest rate 087 dividend yield 0 expected volatility 1990 summary company’s share purchase warrants december 31 2012 2011 changes year presented note 10 income taxes company identified quantified significant temporary differences company’s tax financial bases assets liabilities result deferred tax assets except company’s net operating loss carryforwards amounting approximately 18201000 december 31 2012 2011 13629000 may available reduce future year’s taxable income carry forwards begin expire utilized commencing 2012 future tax benefits may arise result losses recognized financial statements realization meet likely test accordingly company recorded 100 valuation allowance potential deferred tax asset relating tax loss carry forwards company reviews valuation allowance requirements annual basis based management’s expectations future operations circumstances change resulting change management’s judgment recoverability future tax assets impact change valuation allowance would reflected current operations disclosures company’s policy accrue amounts known likely interest penalties related unrecognized tax charges likely penalties interest provision income taxes additionally asc 74010 requires company recognize financial statements impact tax position likely sustained upon examination based technical merits position company incurred taxable losses tax years since inception accordingly provision taxes recorded current prior fiscal year actual income tax provisions differ expected amounts calculated applying combined federal state corporate income tax rates company’s loss income taxes temporary adjusted appropriate temporary permanent tax basis differences components differences follows company’s estimated deferred tax assets follows criteria recognizing future income tax assets met due uncertainty realization valuation allowance 100 recorded current prior year company filed income tax returns several years us entities within consolidated group companies canadian corporate tax returns end 2007 filed taxing authorities prescribe penalties failing file certain tax returns supplemental disclosures upon filing andor review could penalties interest assessed penalties vary jurisdiction assessing practices authorities company incurred losses since inception anticipated risk exposure penalties income tax liability determined low however certain jurisdictions may assess penalties failing file returns disclosures failing file supplementary information associated foreign ownership debt equity positions inherent uncertainties arise tax positions taken expected taken respect transfer pricing intercompany charges allocations financing charges fees related party transactions tax credits tax based incentives stock based transactions management considered likelihood significance possible penalties associated current intended filing positions determined based assessment penalties would expected material note 11 supplemental cash flow information noncash investing financing activities pursuant february 2011 note settlement agreement entered year ended december 31 2012 company issued december 14 2012 note amount 252280 220255 deemed partial settlement february 2011 note 5 pursuant promissory note settlement agreement entered year ended december 31 2012 company issued november 1 2012 notes amount 105000 deemed full settlement promissory note 7 pursuant 2010 note settlement warrant extinguishment agreements entered year ended december 31 2011 company issued february 2011 notes amount 240000 80000 deemed partial settlement 2010 series b series c warrants note 5 pursuant warrant extinguishment agreement entered year ended december 31 2011 company issued april 2011 note amount 25000 partial settlement 2010 series b series c warrants note 5 see notes 5 9 additional disclosure noncash transactions note 12 contingencies commitments contingencies tax filings company filed income tax returns several years certain operating jurisdictions note 10 may subject possible compliance penalties interest management currently able make reliably measurable provision possible liability penalties interest time company may liable amounts upon assessment penalties interest assessed future recorded period amounts determinable commitments combined research operating obligations effective may 25 2010 company entered research license option agreement mayo clinic development possible commercial use cancer vaccine subject approval guidance united states food drug administration “fda” mayo clinic plans conduct phase human clinical trial “phase trial” test develop company’s technology company agreed period option upon approval fda conduct phase trials pay costs incurred mayo clinic exceed total 841000 parties agree within 30 days mayo clinic informs company writing receipt fda approval parties shall enter formal research agreement management anticipates phase 1 trials begin second quarter 2013 initial payment 250000 required within 30 days receiving notice mayo clinic phase 1 trial commence management services agreement february 2011 company approved employment agreement dr wilson initial term 2 years may automatically extended successive oneyear terms employment agreement provides annual compensation 180000 grant option acquire 2000000 shares company’s common stock 019 per share 50 vested march 16 2011 remainder vest monthly period two years 41667 per month options shall exercisable least five years consultant agreements april 2012 company entered investors’ relation consulting agreement one year term onetime right terminate agreement six month anniversary consulting agreement provides company issue 620690 shares consultant monthly payment 7500 april 2012 company entered financial consulting service agreements included compensation 14000000 shares common stock whereby company agreed issue additional shares consultants restore holdings 248 fully diluted capitalization company completes reorganization recapitalization liquidity event eighteen months commencing signing agreements rental lease agreement december 2011 company entered lease agreement start january 2012 two year period company pay monthly basic rent 7152 additional rent operating costs 220 total operating expenses property company obligations various research consulting agreements december 31 2014 aggregate minimum annual payments years ending december 31 follows accounts payable accrued liabilities note 13 subsequent events company default secured notes issued february 2011 second year amortization payments made holders anniversary notes february 2013 april 2013 interest charges accrued 20 per year note holders made demands interest rate penalty discussions company resolve matter company default october 2012 note tonaquint due late filing annual report concurrent filing default cured lender made claims default provisions management working closely mitigate negate claims item 9 item 8financial statements financial statements incorporated herein reference pages end report supplementary data applicable item 9 item 8financial statements tapimmune inc development stage company consolidated financial statements december 31 2011 report independent registered public accounting firm consolidated balance sheets consolidated statements operations consolidated statement stockholders’ deficit consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm stockholders board directors tapimmune inc audited accompanying consolidated balance sheets tapimmune inca development stage company december 31 2011 2010 related consolidated statements operations stockholders’ deficit cash flows years ended december 31 2011 2010 period july 27 1999 inception december 31 2011 financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position tapimmue inc december 31 2011 2010 results operations cash flows years ended december 31 2011 2010 period july 271999 inception december 31 2011 conformity accounting principles generally accepted united states america accompanying consolidated financial statements prepared assuming company continue going concern discussed note 1 financial statements company generated revenues since inception incurred losses developing business losses anticipated company requires additional funds meet obligations costs operations factors raise substantial doubt company’s ability continue going concern management’s plans regard described note 1 financial statements include adjustments might result outcome uncertainty described note 1a company restated 2010 consolidated financial statements correct classification measurement certain share purchase warrants liabilities instead equity “dmcl” dale matheson carrhilton labonte llp chartered accountants vancouver canada april 12 2012 tapimmune inc development stage company consolidated balance sheets commitments contingencies notes 1 3 5 12 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements operations accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2011 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2011 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2011 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2011 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2011 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2011 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements cash flows supplemental cash flow information noncash investing financing activities note 11 accompanying notes integral part consolidated financial statements tapimmune inc development stage company notes consolidated financial statements december 31 2011 note 1nature operations tapimmune inc “company” nevada corporation incorporated 1992 development stage company formed purpose building biotechnology business specializing discovery development immunotherapeutics aimed treatment cancer therapies infectious diseases autoimmune disorders transplant tissue rejection since inception company party various collaborative research agreements “cra” working universities carry development licensed technology providing tapimmune option acquire rights commercialize additional technologies developed within cra lead product candidate wholly owned ongoing license royalty resulting license agreements immunotherapy vaccine company completing preclinical work anticipation clinical trials specifically company obtained expanded three us international patents tested various viral vectors licensed viral vector working towards production clinical grade vaccine company plans continue development lead product vaccine clinical trials oncology infectious diseases alone partnership vaccine developers consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2011 company working capital deficiency 2174817 excluding derivative liabilities recorded current liabilities incurred significant losses since inception losses anticipated development stage raising substantial doubt company’s ability continue going concern ability company continue going concern dependent raising additional capital fund ongoing research development maintenance protection patents accommodation certain debt obligations ultimately generating future profitable operations planned expenditures relating future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities management addressing going concern remediation seeking new sources capital restructuring retiring debt conversion equity debt settlement arrangements creditors cost reduction programs seeking possible joint venture participation management’s plans intended return company financial stability improve continuing operations company continuing initiatives raise capital private placements related party loans institutional sources meet immediate working capital requirements company able substantially complete ongoing restructuring plans second half 2009 additional funding equity debt settlements retired notes payable certain debt obligations satisfied 2010 additional funding raised equity debt placements continuing restructuring debt equity instruments additional capital required currently expand programs including preclinical work establish future manufacturing contracts necessary clinical trials lead tap transporters antigen processing vaccine infectious disease adjuvant technology strategic partnerships needed continue product development portfolio fund development costs measures successful may contribute reduce risk going concern uncertainties company next twelve months certainty company able arrange sufficient funding satisfy current debt obligations continue development products marketability note 1a restatement consolidated financial statements restatement relating classification valuation derivative liabilities years ended december 31 2010 2009 management restated consolidated financial statements years ended december 31 2010 2009 relating company’s accounting share purchase warrants issued part private placement transactions consulting service agreements debt settlement transactions since latter half 2009 previously fair value share purchase warrants determined using blackscholes valuation model alternate methodology time issuance classified within shareholders’ equity following discussions auditors company reviewed terms conditions underlying outstanding share purchase warrants determined accounting warrants reviewed specifically company issued warrants purchase common stock may require company successor purchase unexercised warrants cash amount equal fair value following announcement specified events defined “fundamental transactions” eg merger sale substantially assets tender offer going private share exchange cash settlement provisions require use blackscholes model calculating cash payment value event fundamental transaction delisting consequence provisions management believes share purchase warrants classified liability balance sheets measured fair value changes fair value reported results operations reporting period coming conclusion management evaluated application asc 48010 distinguishing liabilities equity asc 81540 contracts entity’s equity asc 71810 compensation stock compensation issued outstanding warrants purchase common stock issued private placements consulting debt settlement transactions summary guidance requires share purchase warrant equity instrument classified liability equity whenever company could required settle equity instrument transferring cash assets fundamental transaction clause creates situation warrants may contingently puttable back company cash settlement result company restated accounting share purchase warrants recorded fair value warrants “derivative liability warrants” balance sheet changes fair value time reflected statements operations “changes fair value derivative liabilities” net loss year ended december 31 2010 decreased 1558028 due recognition derivative liabilities impact restatement consolidated statement operations year ended december 31 2010 shown following table impact restatement consolidated statement operations year ended december 31 2009 shown following table note 2summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america principles consolidation financial statements include accounts company whollyowned subsidiaries genemax pharmaceuticals inc “gpi” genemax pharmaceuticals canada inc “gpc” significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stock based transactions fair value components convertible notes payable foreign exchange gains losses allocation costs research development accrued liabilities matters impacting company’s ability continue going concern contingencies also involve use estimates assumptions fair value measurements objective asc 820 fair value measurements disclosures increase consistency comparability fair value measurements expand disclosures fair value measurements asc 820 defines fair value establishes framework measuring fair value generally accepted accounting principles expands disclosures fair value measurements asc 820 applies accounting pronouncements require permit fair value measurements require new fair value measurements foreign currency translation functional currency company including subsidiary united states dollars gpc maintains accounting records local currency canadian dollar accordance asc 830 foreign currency matters financial statements companys subsidiary translated united states dollars using period end exchange rates monetary assets liabilities average exchange rates period revenues expenses nonmonetary assets translated historical exchange rates net gains losses resulting foreign exchange translations foreign currency exchange gains losses transactions occurring currency companys functional currency included determination net income period financial instruments concentration credit risk fair values cash accounts payable current monetary liabilities approximate carrying values due immediate shortterm maturity financial instruments companys operations financing activities conducted primarily united states dollars result company subject significant exposure market risks changes foreign currency rates unless otherwise noted managements opinion company exposed significant interest credit risks arising assets classified financial instruments impairment longlived assets longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable circumstances could trigger review include limited significant decreases market price asset significant adverse changes business climate legal factors accumulation costs significantly excess amount originally expected acquisition construction asset current period cash flow operating losses combined history losses forecast continuing losses associated use asset current expectation asset likely sold disposed significantly end estimated useful life recoverability assets measured comparison carrying amounts future undiscounted cash flows assets expected generate impairment loss recognized carrying amount exceeds fair value stockbased compensation company uses blackscholes optionpricing model determine grant date fairvalue stockbased awards asc 718 compensation stock compensation fair value recorded income depending terms conditions award nature relationship recipient award company records grant date fair value income line period earned employees management typically considered vesting period award consultants fair value award recorded income term service period unvested amounts revalued reporting period service period deferred financing costs company defers direct costs incurred connection sale common shares offset proceeds financing upon completion costs incurred connection convertible loans payable deferred amortized financing cost term convertible loans upon conversion loan unamortized amount deferred financing costs charged stockholders’ equity cost financing research development costs company acquired development marketing rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs income taxes company follows liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized income period includes date enactment company recognizes deferred taxes unrealized gains directly within comprehensive income concurrently releases part related valuation allowance resulting nil impact within oci balance sheet december 31 2011 company net operating loss carry forwards however due uncertainty realization company provided full valuation allowance potential deferred tax assets resulting loss carry forwards derivative warrant liability company evaluates convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accordance asc 81010054 81540 accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instruments classification derivative instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date evaluating application asc 81540 management must determine whether instrument embedded feature indexed company’s stock asc 8154015 provides entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions application asc 8154015 affected accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain free standing warrants contain contingently puttable cash settlement fair value financial instruments company follows asc paragraph 825105010 disclosures fair value financial instruments asc paragraph 820103537 measure fair value financial instruments 820103537 establishes framework measuring fair value pursuant gaap expands disclosures fair value measurements increase consistency comparability fair value measurements related disclosures paragraph 820103537 establishes fair value hierarchy prioritizes inputs valuation techniques used measure fair value three 3 broad levels fair value hierarchy gives highest priority quoted prices unadjusted active markets identical assets liabilities lowest priority unobservable inputs three 3 levels fair value hierarchy described level 1 quoted market prices available active markets identical assets liabilities reporting date level 2 pricing inputs quoted prices active markets included level 1 either directly indirectly observable reporting date level 3 pricing inputs generally observable inputs corroborated market data carrying amounts company’s financial assets liabilities cash receivables prepaid expenses deposits accounts payable accrued liabilities research agreement obligations due related parties approximate fair values short term maturity company’s convertible notes payable approximate fair value based upon management’s estimate comparable interest rates would available company similar financial arrangements company revalues derivative warrant derivative conversion option liabilities reporting period recognizes gains losses consolidated statements operations attributable change fair value loss per common share basic loss per share computed dividing loss attributable common stockholders weighted average number common shares outstanding period applicable diluted earnings per share reflect potential dilution securities could share earnings loss company common shares potentially issuable conversion outstanding convertible debentures warrants stock options antidilutive included calculation recently issued accounting pronouncements june 2011 fasb issued asu 201105 amends asc topic 220 comprehensive income amendment entity option present total comprehensive income components net income components comprehensive income either single continuous statement comprehensive income two separate consecutive statements choices entity required present component net income along total net income component comprehensive income along total comprehensive income total amount comprehensive income asu eliminates option present components comprehensive income part statement changes stockholders equity amendments asu change items must reported comprehensive income item comprehensive income must reclassified net income amendments asu applied retrospectively additionally fasb issued second amendment asc topic 220 december 2011 asu 201112 allows companies ability defer certain aspects asu 201105 public entities amendments effective fiscal years interim periods within years beginning december 15 2011 amendments require transition disclosures september 15 2011 fasb issued asu 201108 intangibles goodwill simplifies entity required test goodwill impairment asu allow entity first assess qualitative factors determine whether necessary perform twostep quantitative goodwill impairment test asu entity would required calculate fair value reporting unit unless entity determines based qualitative assessment likely fair value less carrying amount asu includes number factors consider conducting qualitative assessment asu effective annual interim goodwill impairment tests performed fiscal years beginning december 15 2011 early adoption permitted company reviewed recently issued accounting pronouncements plans adopt applicable expect adoption pronouncements material impact financial position results operations cash flows note 3research agreements crucell holland bv “crucell” research license option agreement effective august 7 2003 crucell company’s subsidiary genemax pharmaceuticals inc “gpi” entered fiveyear research license option agreement whereby crucell granted gpi nonexclusive worldwide license research use adenovirus technology company required make certain payments fiveyear term totaling euro €450000 approximately 510100 december 31 2008 243598 €172801 owing crucell agreement year ended december 31 2009 management negotiated settlement outstanding balance requiring €17000 cash payment paid issuance 265000 shares company’s common stock refer note 9 addition retroactively effective august 7 2008 company negotiated amended license agreement use crucell’s adenovirus technology company required make annual license payments anniversary effective date three year term equal €75000 per annum december 31 2011 company accrued 259752 €181250 amended agreement inclusive interest outstanding amounts company currently delinquent making first annual license payment amended license agreement crucell right cancel agreement however date company received notice terminating license agreement management plans negotiate amended payment structure crucell successful would allow company maintain license agreement good standing however certainty license agreement maintained management successfully negotiate new terms note 4derivative warrant liability fair value company evaluated application asc 48010 distinguishing liabilities equity asc 81540 contracts entity’s equity asc 71810 compensation stock compensation issued outstanding warrants purchase common stock issued convertible notes private placements consulting agreements various debt settlements 2009 2011 based guidance management concluded instruments required accounted derivatives either due ratchet protection feature available exercise price note 5 holder’s right put warrants back company cash certain conditions asc 8154025 company records fair value warrants derivatives balance sheet fair value changes values reflected statements operations “changes fair value derivative liabilities” fair value share purchase warrants recorded balance sheet ‘derivative liabilities warrants’ asc 82010 defines fair value exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date asc 82010 also establishes fair value hierarchy requires entity maximize use observable inputs minimize use unobservable inputs measuring fair value asc 82010 describes three levels inputs may used measure fair value level 1 quoted prices active markets identical assets liabilities level 2 observable inputs level 1 prices quoted prices similar assets liabilities inputs observable corroborated observable market data substantially full term assets liabilities level 3 unobservable inputs supported little market activity financial instruments whose values determined using pricing models discounted cash flow methodologies similar techniques well instruments determination fair value requires significant judgment estimation company’s level 3 liabilities consist derivative liabilities associated warrants issued convertible notes year ended december 31 2010 december 31 2011 company’s derivative liabilities categorized level 3 fair value liabilities inputs used measure financial assets liabilities fall within one level described categorization based lowest level input significant fair value measurement instrument level 3 valuation techniques financial liabilities considered level 3 fair values determined using pricing models discounted cash flow methodologies similar techniques least one significant model assumption input unobservable level 3 financial liabilities consist notes warrants current market securities determination fair value requires significant judgment estimation determining fair value share purchase warrants conversion options given company’s stage development financial position highly subjective identifying appropriate measurement criteria models subject uncertainty several generally accepted pricing models warrants options derivative provisions company chosen value warrants conversion option notes contain ratchet provisions using binomial model following assumptions series c warrants contingently exercisable following exercise series b warrants series b series c warrants expired may 19 2011 foregoing assumptions reviewed quarterly subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations financial assets liabilities measured fair value recurring basis financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet derivative liability warrants derivative liability conversion option table provides summary changes fair value including net transfers andor financial assets liabilities measured fair value recurring basis using significant unobservable inputs level 3 year ended december 31 2011 2010 fair value warrants determined using binomial option pricing model valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based us treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statement operations net cash settlement value time future fundamental transaction depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based us treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction fair value warrants determined using black scholes option pricing model note 5convertible notes payable following summary debt instrument transactions relevant current period february 2011 secured convertible notes february 24 2011 company entered securities purchase agreement accredited investors place senior secured convertible notes “february 2011 notes” maturity date three years issuance thereof aggregate principal amount 1184694 consideration notes consisted 944694 cash proceeds including accrued interest 240000 subscribed two holders outstanding demandable 2010 secured convertible notes “2010 notes” holders 2010 notes returned series b series c warrants company cancellation connection issuance february 2011 notes company entered 2011 security agreement note holders securing february 2011 notes company’s assets one year issuance february 2011 notes note holders option convert portion outstanding balance february 2011 notes including accrued interest shares company’s common stock conversion rate 015 per share february 2011 notes bear interest rate 10 per annum except case default case bear interest rate 20 per annum interest due february 2011 notes end three month period starting three months issuance one year issuance february 2011 notes company may elect prepay portion principal company makes election holders may elect receive prepayment cash shares company’s common stock conversion rate 015 per share combination thereof company paid finders’ fee 41500 finder’s fee accounted deferred financing costs amortized term notes december 31 2011 28879 32291 deferred financing costs relates february 2011 notes remains unamortized presented longterm assets company’s balance sheet connection issuance february 2011 notes company issued 2369388 warrants exercisable common stock 025 five year terms company may force exercise warrants time average volume weighted average price company’s common stock prior ten trading days greater 050 average daily dollar volume company’s common stock sold ten trading days greater 25000 effective registration statement covering resale shares underlying warrants reviewing fundamental transaction clause contained warrants company revised interim accounting 2011 notes company allocated net proceeds warrants based calculated fair value date issuance fair value warrants recorded 483355 recognized derivative liabilities debt recorded 701339 fair value warrants calculated using binomial option pricing model following assumptions estimated life five years risk free rate 206 dividend yield 0 volatility 199 debt discount accreted three year term february 2011 notes using effective interest rate method year ended december 31 2011 accretion debt discount 136715 recorded february 2011 notes april 2011 secured convertible notes april 4 2011 company entered securities purchase agreement accredited investors place senior secured convertible notes “april 2011 notes” maturity date three years issuance thereof aggregate principal amount 215000 consideration notes consisted 190000 cash proceeds 25000 subscribed holder 2010 notes exchange extinguishment series b series c warrants related 2010 notes connection issuance april 2011 notes company entered 2011 security agreement note holders securing april 2011 notes secondary security interest company’s assets one year issuance april 2011 notes note holders option convert portion outstanding balance april 2011 notes including accrued interest shares company’s common stock conversion rate 015 per share april 2011 notes bear interest rate 10 per annum except case default case bear interest rate 20 per annum interest due april 2011 notes end three month period starting three months issuance one year issuance april 2011 notes company may elect prepay portion principal company makes election holders may elect receive prepayment cash shares company’s common stock conversion rate 015 per share combination thereof company paid finders’ fee 4550 finder’s fee accounted deferred financing costs amortized term notes december 31 2011 3412 32291 deferred financing costs relates april 2011 notes remains unamortized presented longterm assets company’s balance sheet connection issuance april 2011 notes company issued 430000 warrants exercisable common stock 025 2 year terms company may force exercise warrants time average volume weighted average price company’s common stock prior ten trading days greater 050 average daily dollar volume company’s common stock sold ten trading days greater 25000 effective registration statement covering resale shares underlying warrants company allocated net proceeds warrants based calculated fair value fair value warrants recorded 130720 recognized derivative liabilities debt recorded 84280 fair value warrants calculated using binomial option pricing model following assumptions estimated life two years risk free rate 077 dividend yield 0 volatility 199 debt discount accreted three year term april 2011 notes using effective interest rate method year ended december 31 2011 accretion debt discount 53162 recorded april 2011 notes june 2011 secured convertible note june 6 2011 company entered securities purchase agreement accredited investors place senior secured convertible note “june 2011 note” maturity date three years issuance thereof aggregate principal amount 30000 connection issuance june 2011 note company entered 2011 security agreement note holder securing june 2011 note secondary security interest company’s assets one year issuance june 2011 note holder option convert portion outstanding balance june 2011 note including accrued interest shares company’s common stock conversion rate 015 per share june 2011 note bears interest rate 10 per annum except case default case bears interest rate 20 per annum interest due june 2011 note end three month period starting three months issuance one year issuance june 2011 note company may elect prepay portion principal company makes election holders may elect receive prepayment cash shares company’s common stock conversion rate 015 per share combination thereof connection issuance june 2011 note company issued 60000 warrants exercisable common stock 025 two year terms company may force exercise warrants time average volume weighted average price company’s common stock prior ten trading days greater 050 average daily dollar volume company’s common stock sold ten trading days greater 25000 effective registration statement covering resale shares underlying warrants company allocated net proceeds warrants based calculated fair value fair value warrants recorded 8280 recognized derivative liabilities debt recorded 21720 fair value warrants calculated using binomial option pricing model following assumptions estimated life two years risk free rate 043 dividend yield 0 volatility 199 debt discount accreted three year term june 2011 note using effective interest rate method year ended december 31 2011 accretion debt discount 1575 recorded june 2011 note following summary debt instrument transactions relevant current prior period may 2010 secured convertible notes may 24 2010 company entered securities purchase agreement accredited investors place 2010 notes maturity date one year issuance thereof aggregate principal amount 1530000 gross consideration 1275000 consisted 712254 cash proceeds company 212746 services 350000 subscribed holder matured 2009 convertible debenture connection issuance notes company entered 2010 security agreement note holders securing 2010 notes company’s assets 2010 note holders option convert outstanding balance notes including accrued interest shares company’s common stock maximum conversion rate 030 per share time 2010 notes placed 20 discount face value bore interest except case event default case would bear interest rate 18 per annum principal interest due 2010 notes due 9 equal monthly installments starting september 2010 subject satisfaction certain customary conditions including effectiveness registration statement certain minimums amount value shares company’s common stock traded overthecounter bulletin board company could elect pay amounts due installment date either cash shares common stock shares common stock company issued payment installment date would issued price would equal lesser 030 per share 85 average volumeweighted average prices company’s common stock overthecounter bulletin board twenty trading days immediately preceding applicable installment date company paid finders’ fee 64000 issued 1400000 broker’s warrants described valued 167000 finder’s fee fair value broker’s warrants accounted deferred financing costs amortized term notes year ended december 31 2011 66267 deferred financing costs amortized remaining balance 38626 recognized loss settlement debt february 2011 company negotiated early settlement 640000 outstanding 2010 notes cancellation 4000000 series warrants 3200000 series b warrants 4000000 series c warrants pursuant settlement agreement company paid 480000 cash issued 240000 february 2011 notes agreement holders released company remaining obligations securities purchase agreement entered fiscal year 2010 security agreement conditions related issuance 2010 notes march 2011 company entered debt settlement warrant extinguishment agreement settle 83333 2010 notes retire 625000 series warrants 500000 series b warrants 625000 series c warrants company issuing 2010 note holder 641023 shares common stock new warrant purchase 250000 shares common stock note 9 addition company also entered agreement settle remaining 233333 2010 notes exchange 2048578 common shares note 9 company entered agreement former 2010 note holder extinguish 4900000 warrants related 2010 note extinguish warrants new warrant purchase 1000000 shares common stock new april 2011 note 25000 year ended december 31 2011 company settled outstanding 2010 notes settlement 2010 notes completed cash payments share warrant issuances issuance february 2011 notes aggregate fair value consideration 1194844 resulted gain debt settlement 307136 addition negotiated early extinguishment series b c warrants resulted gain 290500 note 6loans payable december 31 2011 unsecured loan advance third party amount 7000 december 31 2010 425000 due demand loan accruing interest 10 per annum note 7promissory note year ended december 31 2011 company issued note amount 100000 december 31 2010 nil towards future legal services matured july 24 2011 december 31 2011 company received legal services amount 68072 difference 31928 recorded prepaid expenses deposits note bears interest 10 per annum may converted shares conversion price 023 per share lenders option note became due july 24 2011 company default repayment december 31 2011 company renegotiating settlement note 8related party transactions year ended december 31 2011 company entered transactions certain officers directors company follows incurred 248400 2010 329177 management directors’ fees 90000 2010 72000 research development services paid officers directors period b recorded 389824 2010 1087916 stock based compensation fair value options granted management granted vested period c converted 25000 2010 nil debt due related parties period settled shares related party transactions stock based consideration involving provision services recorded exchange amount established agreed related parties representing fair value company accounted debt settlement transactions related parties management’s estimate fair value using amounts similar arm’s length settlements debt settled december 31 2011 company amounts owing directors officers 322905 2010 259305 amounts due related parties unsecured noninterest bearing specific terms repayment note 9capital stock share capital prior march 27 2007 authorized capital company consisted 50000000 common shares 0001 par value 5000000 nonvoting preferred shares 0001 par value march 27 2007 company’s articles incorporation amended increase authorized shares common stock 50000000 shares common stock 200000000 shares june 28 2007 company completed reverse stock split thereby issuing 1 new share 25 outstanding shares company’s common stock accordingly company’s authorized share capital decreased 200000000 common shares 80000000 common shares january 22 2009 authorized shares common stock increased 80000000 shares 500000000 shares effective july 10 2009 company executed 1 10 reverse stock split simultaneously reducing authorized shares common stock 50000000 common shares 0001 par value effective february 21 2010 company increased authorized shares common stock 50000000 shares 150000000 common shares company maintained authorized shares preferred stock 5000000 prior period share transactions included company’s stock transactions balances retroactively restated transactions described 2011 share transactions march 21 2011 company issued 641023 shares restricted common stock pursuant debt settlement warrant extinguishment agreement settle 83333 2010 notes partial extinguishment series b series c warrants time issuance fair value shares determined 115384 based quoted market price 018 per share recorded carrying value debt company recognized loss 87734 partial settlement 2010 notes partial extinguishment series b series c warrants march 23 2011 company issued 1180000 shares restricted common stock pursuant various consulting agreements time issuance fair value shares determined 227432 based quoted market price 018 per share march 23 2011 company issued 885295 shares restricted common stock pursuant debt settlement agreements settle 150500 outstanding trade payables time issuance fair value shares determined 172633 based quoted market price 0195 per share company recorded 22133 loss settlement debt march 23 2011 company issued 441177 shares restricted common stock related parties pursuant debt settlement agreements settle 75000 outstanding trade payables time issuance fair value shares determined 86030 based quoted market price 0195 per share company recorded calculated loss settlement 11030 statement operations march 30 2011 company issued 2048578 shares restricted common stock pursuant exchange agreement settle 233333 2010 notes time issuance fair value shares determined 450687 based quoted market price 022 per share discounted carrying amount 2010 note march 30 2011 77421 company recorded difference fair value accreted amount 373266 loss settlement debt april 5 2011 company issued 500000 shares restricted common stock pursuant consulting agreement time issuance fair value shares determined 125000 based quoted market price 025 per share april 25 2011 company issued 350000 shares restricted common stock pursuant consulting agreement time issuance fair value shares determined 87500 based quoted market price 025 per share april 25 2011 company issued 366783 shares restricted common stock pursuant debt settlement agreements settle 84315 outstanding trade payables time issuance fair value shares determined 91696 based quoted market price 025 per share company recorded 7381 loss settlement debt april 25 2011 company issued 20000 shares restricted common stock pursuant debt settlement agreement settle 4575 outstanding trade payables time agreement fair value shares determined 6800 based quoted market price 034 per share company recorded 2225 loss settlement debt april 25 2011 company issued 108696 shares restricted common stock related parties pursuant debt settlement agreement settle 25000 outstanding accounts payables time issuance fair value shares determined 27174 based quoted market price 025 per share company recorded calculated loss settlement 2174 statement operations april 2011 company received subscription proceeds 90000 issued 600001 shares common stock private placement subscribers purchased one unit 300 subscription proceeds unit consists 20 shares company’s common stock 6 warrants exercisable 025 expire two years june 1 2011 586858 shares company’s restricted common stock returned treasury due adjustment final settlement 233333 2010 notes return shares resulted 134977 reduction previously calculated loss debt settlement july 7 2011 company received subscription proceeds 65000 issued 325000 shares common stock private placement subscribers purchased one unit 200 subscription proceeds unit consists 10 shares company’s common stock 6 warrants exercisable 025 expire two years fair value warrants determined 33600 august 19 2011 company received subscription proceeds 45000 issued 225000 shares common stock private placement subscribers purchased one unit 200 subscription proceeds unit consists 10 shares company’s common stock 6 warrants exercisable 025 expire two years fair value warrants determined 23400 october 1 2011 company issued 44405 shares common stock pursuant consulting services agreement time issuance shares quoted market value 020 per share 9000 recorded stockbased consulting fees october november 2011 company received subscription proceeds 635000 converted debt 115250 december 31 2011 company issued 4068334 shares common stock private placement 140000 subscription proceeds common shares yet issued subscribers purchased one unit 015 subscription proceeds unit consists 1 share company’s common stock half warrant exercisable 040 expires two years fair value warrants determined 287000 november 19 2011 company issued 100000 shares common stock pursuant consulting services agreement company determined market value shares 027 per share 27000 recorded stockbased consulting fees december 13 2011 company issued 500000 shares common stock pursuant consulting service agreements settlement pursuant consulting service termination agreements company determined market value shares 022 per share recorded 107700 gain settlement debt 2010 share transactions january 28 2010 company issued 450000 shares common stock pursuant consulting services agreement time issuance shares quoted market value 052 per share 234000 recorded stockbased consulting fees january 28 2010 company issued 265000 shares common stock pursuant debt settlement agreement refer note 3 shares valued time debt settlement agreement 092 per share quoted market price shares 092 per share time debt settlement agreement april 14 2010 company issued 10400 shares common stock correct error share registry occurred data exchange identified change transfer agent april 26 2010 company issued 80000 shares common stock pursuant consulting services agreement time issuance shares quoted market value 036 per share 28800 recorded stockbased consulting fees may 1 2010 company issued 40000 shares common stock pursuant consulting services agreement time issuance shares quoted market value 032 per share 12800 recorded stockbased consulting fees may 4 2010 90412 trade debt settled exchange 361647 common shares company may 4 2010 company issued 687305 common shares pursuant conversion 2009 secured debenture face value 135000 plus accrued interest approximately 49155 refer note 5 stock compensation plan october 14 2009 company adopted 2009 stock incentive plan “2009 plan” supersedes replaces 2007 stock plan 2009 plan allows issuance 10000000 common shares options granted plan shall prices terms determined board directors september 7 2010 company granted 250000 stock options exercise price 035 per share vesting monthly twenty four month period director company term options ten years fair value new grant estimated 47500 019 per option using blackscholes option pricing model risk free interest rate 261 dividend yield 0 expected volatility 2496 expected life 10 years expensed portion value options year ended december 31 2010 1979 recorded stock based management compensation february 16 2011 company granted total 850000 stock options exercise price 017 per share consultants management vest monthly twentyfour month period term options ten years additionally february 16 2011 company approved repricing 2928000 stock options issued consultants management options exercise price 097 repriced 017 per share company recognized aggregate incremental fair value repriced options 40260 incremental fair value determined using blackscholes option pricing model weighted average assumptions follows expected life 348 years expected volatility 199 dividend yield 0 riskfree rate 14 march 16 2011 company granted 2000000 stock options management exercise price 019 per share 1000000 vested immediately remaining vest monthly twenty four month period aggregate fair value new grants estimated 522500 018 per option using blackscholes option pricing model weighted average assumptions follows risk free interest rate 24 dividend yield 0 expected volatility 248 expected life 643 years june 8 2011 company granted 250000 stock options consultant exercise price 017 per share 125000 vested immediately remaining vest monthly twenty four month period aggregate fair value grant estimated 42500 017 per option using blackscholes option pricing model weighted average assumptions follows risk free interest rate 298 dividend yield 0 expected volatility 2384 expected life 10 years expensed portion value granted vested options year ended december 31 2011 456081 2010 1134477 recorded stock based consulting management fees share purchase options summary company’s stock options december 31 2011 changes period presented december 31 2011 intrinsic value vested options equal nil 2010 nil summary status company’s unvested options december 31 2011 presented share purchase warrants january 19 2010 company issued 600000 share purchase warrants acquire equivalent number common shares company exercise price 050 per share exercise period three years issuance date 600000 share purchase warrants acquire equivalent number common shares company exercise price 060 per share exercise period three years issuance date warrants issued pursuant consulting services agreement fair value warrants 615000 recognized derivative liabilities using binomial option pricing model expected life 3 years risk free interest rate 138 dividend yield 0 expected volatility 199 february 8 2010 company issued 750000 share purchase warrants acquire equivalent number common shares company exercise price 050 per share exercise period five years issuance date warrants issued pursuant debt settlement agreement fair value warrants 432000 recognized derivative liabilities using binomial option pricing model expected life 5 years risk free interest rate 226 dividend yield 0 expected volatility 199 may 24 2010 company issued series warrants purchase shares common stock 5 year term series b warrants purchase shares common stock term shorter 18 months ii one year effective registration statement series c warrants purchase shares common stock 5 year term exercised extent series b warrants exercised initial exercise price series warrants 030 per share warrants exercisable 6375000 shares common stock aggregate initial exercise price series b warrants 030 per share warrants exercisable 5100000 shares common stock aggregate initial exercise price series c warrants 30 per share warrants exercisable 6375000 shares common stock addition company issued 1400000 brokers warrant’s exercisable terms conditions note holders warrants described 500000 series warrants400000 series b warrants 500000 series c warrants february 24 2011 company issued 2369388 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant securities purchase agreement note 5 fair value warrants 483355 recognized derivative liabilities using binomial option pricing model expected life 5 years risk free interest rate 206 dividend yield 0 expected volatility 199 march 21 2011 company issued 250000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant debt settlement agreement note 5 fair value warrants 43750 recognized derivative liabilities using binomial option pricing model expected life 5 years risk free interest rate 077 dividend yield 0 expected volatility 199 april 4 2011 company issued 430000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant securities purchase agreement note 5 fair value warrants 130720 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 077 dividend yield 0 expected volatility 199 april 4 2011 company issued 1000000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant debt settlement agreement note 5 fair value warrants 304000 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 077 dividend yield 0 expected volatility 199 april 25 2011 company issued 180000 share purchase warrants acquire equivalent number common shares company exercise price 038 per share exercise period five years issuance date warrants issued pursuant private placement 90000 fair value warrants 50760 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 077 dividend yield 0 expected volatility 199 june 6 2011 company issued 60000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date warrants issued pursuant securities purchase agreement note 5 fair value warrants 8280 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 043 dividend yield 0 expected volatility 199 july 2011 company issued 275000 share purchase warrants acquire equivalent number common shares company exercise price 025 per share exercise period five years issuance date fair value warrants 58850 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 049 dividend yield 0 expected volatility 199 october 2011 company issued 600000 share purchase warrants acquire equivalent number common shares company exercise price 020 per share exercise period five years issuance date fair value warrants 117000 recognized derivative liabilities using binomial option pricing model expected life 5 years risk free interest rate 140 dividend yield 0 expected volatility 199 november 2011 company issued 2034167 share purchase warrants acquire equivalent number common shares company exercise price 040 per share exercise period two years issuance date warrants issued pursuant private placement 610250 fair value warrants 390560 recognized derivative liabilities using binomial option pricing model expected life 2 years risk free interest rate 029 dividend yield 0 expected volatility 199 summary company’s share purchase warrants december 31 2011 changes period presented note 10 income taxes company identified quantified significant temporary differences company’s tax financial bases assets liabilities result deferred tax assets except company’s net operating loss carryforwards amounting approximately 13629000 december 31 2011 2010 12217000 may available reduce future year’s taxable income carry forwards begin expire utilized commencing 2012 future tax benefits may arise result losses recognized financial statements realization meet likely test accordingly company recorded 100 valuation allowance potential deferred tax asset relating tax loss carry forwards company reviews valuation allowance requirements annual basis based management’s expectations future operations circumstances change resulting change management’s judgment recoverability future tax assets impact change valuation allowance would reflected current operations disclosures company’s policy accrue amounts known likely interest penalties related unrecognized tax charges likely penalties interest provision income taxes additionally asc 74010 requires company recognize financial statements impact tax position likely sustained upon examination based technical merits position company incurred taxable losses tax years since inception accordingly provision taxes recorded current prior fiscal year actual income tax provisions differ expected amounts calculated applying combined federal state corporate income tax rates company’s loss income taxes temporary adjusted appropriate temporary permanent tax basis differences components differences follows company’s estimated deferred tax assets follows criteria recognizing future income tax assets met due uncertainty realization valuation allowance 100 recorded current prior year company filed income tax returns several years us entities within consolidated group companies canadian corporate tax returns end 2007 filed taxing authorities prescribe penalties failing file certain tax returns supplemental disclosures upon filing andor review could penalties interest assessed penalties vary jurisdiction assessing practices authorities company incurred losses since inception anticipated risk exposure penalties income tax liability determined low however certain jurisdictions may assess penalties failing file returns disclosures failing file supplementary information associated foreign ownership debt equity positions inherent uncertainties arise tax positions taken expected taken respect transfer pricing intercompany charges allocations financing charges fees related party transactions tax credits tax based incentives stock based transactions management considered likelihood significance possible penalties associated current intended filing positions determined based assessment penalties would expected material note 11supplemental cash flow information noncash investing financing activities pursuant 2010 note settlement warrant extinguishment agreements entered period company issued february 2011 notes amount 240000 80000 deemed partial settlement 2010 series b series c warrants note 5 pursuant warrant extinguishment agreement entered period company issued april 2011 note amount 25000 partial settlement 2010 series b series c warrants note 5 see notes 5 9 additional disclosure noncash transactions note 12contingencies commitments contingencies tax filings company filed income tax returns several years certain operating jurisdictions note 10 may subject possible compliance penalties interest management currently able make reliably measurable provision possible liability penalties interest time company may liable amounts upon assessment penalties interest assessed future recorded period amounts determinable commitments combined research operating obligations effective may 25 2010 company entered research license option agreement mayo clinic development possible commercial use cancer vaccine subject approval guidance united states food drug administration “fda” mayo clinic plans conduct phase human clinical trial “phase trial” test develop company’s technology company agreed period option upon approval fda conduct phase trials pay costs incurred mayo clinic exceed total 841000 parties agree within 30 days mayo clinic informs company writing receipt fda approval parties shall enter formal research agreement management anticipates phase 1 trails begin second quarter 2012 intial payment 250000 required within 30 days receiving notice mayo clinic phase 1 trail commence management services agreement february 2011 company approved employment agreement dr wilson initial term 2 years may automatically extended successive oneyear terms employment agreement provides annual compensation 180000 grant option acquire 2000000 shares company’s common stock 019 per share 50 vested march 16 2011 remainder vest monthly period two years 41667 per month options shall exercisable least five years rental lease agreement december 2011 company entered lease agreement start january 2012 two year period company pay monthly basic rent 7152 additional rent operating costs 220 total operating expenses property company obligations various agreements december 31 2014 aggregate minimum annual payments years ending december 31 follows note 13subsequent events march 15 2012 company issued 400000 shares restricted common stock settlement 72000 debt accumulated consultants addition company settled 50000 management compensation owing officers directors 333334 restricted common shares march 15 2012 company issued total 733334 restricted common shares 015 per share proceeds 110000 private placement march 15 2012 company settled aggregate 118466 accrued interest payments february 2011 notes 789778 restricted common shares item 9 item 8financial statements tapimmune inc development stage company consolidated financial statements december 31 2013 report independent registered public accounting firm consolidated balance sheets consolidated statements operations comprehensive loss consolidated statement stockholders’ deficit consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm stockholders board directors tapimmune inc audited accompanying consolidated balance sheets tapimmune inc “company” december 31 2013 2012 related consolidated statements operations comprehensive loss stockholders’ deficit cash flows years ended financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position company december 31 2013 2012 results operations cash flows years ended conformity accounting principles generally accepted united states america accompanying consolidated financial statements prepared assuming company continue going concern discussed note 1 financial statements company accumulated deficit 55426635and reported loss 5532552 year ended december 31 2013 raising substantial doubt company’s ability continue going concern company requires additional funds meet obligations costs operations factors raise substantial doubt company’s ability continue going concern management’s plans regard described note 1 financial statements include adjustments might result outcome uncertainty “dmcl” dale matheson carrhilton labonte llp chartered accountants vancouver canada april 14 2014 tapimmune inc development stage company consolidated balance sheets commitments contingencies notes 1 3 5 12 subsequent events note 15 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements operations comprehensive loss accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2013 number shares reflected reverse 100 1 stock split completed company january 10 2014 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2013 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2013 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2013 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2013 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2013 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statement stockholders’ deficit july 27 1999 inception december 31 2013 accompanying notes integral part consolidated financial statements tapimmune inc development stage company consolidated statements cash flows supplemental cash flow information noncash investing financing activities note 11 accompanying notes integral part consolidated financial statements tapimmune inc development stage company notes consolidated financial statements december 31 2013 note 1nature operations tapimmune inc “company” nevada corporation incorporated 1992 clinicalstage immunotherapy specializing development innovative peptide genebased immunotherapeutics vaccines treatment oncology infectious disease unlike vaccine technologies narrowly address initiation immune response tapimmunes prime boost approach broadly stimulates cellular immune system enhancing function killer tcells thelper cells restoring antigen presentation tumor cells allowing recognition killing immune system phase study mayo clinic currently evaluating safety immune responses set proprietary her2neu antigens part prime her2neu breast cancer vaccine second phase 1 trial underway mayo ovarian breast cancer folate alpha folate receptor alpha expressed nearly 50 breast cancers addition 95 ovarian cancers treatment options surgery chemotherapy leaving important urgent clinical need new therapeutic time recurrence relatively short type cancer survival prognosis extremely poor recurrence usa alone approximately 30000 ovarian cancer patients newly diagnosed every year folate receptor antigens applicable ovarian triple negative breast cancer diseases treatment options beyond surgery chemotherapy therefore company hopeful might ideal candidate orphan drug status indications phase 2 advancement assessed late 2014 tapimmune exclusive option license set peptides successful phase 1 trials addition enhancing visibility cancer infected cells patient’s immune system critical aspect effective vaccine regard tapimmune’s polystart nucleic acidbased technology provides fourfold increase target cell specific naturally processed antigenic epitopes cells surface increased cell surface presentation corresponding increases activated helper andor longlived killer tcell populations effectively seek work destroy patient’s cancer cells company also exploiting emerging field vaccinomics development vaccines applicable broad patient population tapimmunes immunotherapy technologies also aimed prevention emerging viral pathogens pandemics biodefense consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2013 company working capital deficiency 8768003 incurred significant losses since inception development business losses anticipated development stage raising substantial doubt company’s ability continue going concern ability company continue going concern dependent raising additional capital fund clinical trials ongoing research development maintenance protection patents accommodation certain debt obligations ultimately generating future profitable operations planned expenditures relating current future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities management addressing going concern remediation seeking new sources capital restructuring retiring debt conversion equity debt settlement arrangements creditors cost reduction programs seeking possible joint venture participation management’s plans intended return company financial stability improve continuing operations company continuing initiatives raise capital private placements related party loans institutional sources meet immediate working capital requirements additional funding raised equity debt placements 2012 2013 early 2014 company completed significant restructuring outstanding debt equity instruments equity refer note 15 subsequent events additional capital required expand programs including preclinical work progress clinical trials lead vaccine candidates strategic partnerships needed continue product development portfolio fund development costs measures successful may contribute reduce risk going concern uncertainties company next twelve months certainty company able arrange sufficient funding satisfy current debt obligations continue development products marketability note 2summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america principles consolidation financial statements include accounts company whollyowned subsidiaries genemax pharmaceuticals inc “gpi” genemax pharmaceuticals canada inc “gpc” significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stock based transactions fair value components convertible notes payable foreign exchange gains losses accrued liabilities matters impacting company’s ability continue going concern contingencies also involve use estimates assumptions fair value measurements objective asc 820 fair value measurements disclosures increase consistency comparability fair value measurements expand disclosures fair value measurements asc 820 defines fair value establishes framework measuring fair value generally accepted accounting principles expands disclosures fair value measurements asc 820 applies accounting pronouncements require permit fair value measurements require new fair value measurements foreign currency translation functional currency company including us subsidiary united states dollars gpc maintains accounting records local currency canadian dollar accordance asc 830 foreign currency matters financial statements companys subsidiary translated united states dollars using period end exchange rates monetary assets liabilities average exchange rates period revenues expenses nonmonetary assets translated historical exchange rates exchange gains losses translations included accumulated comprehensive income loss separate component stockholders equity net gains losses resulting foreign currency exchange gains losses transactions occurring currency companys functional currency included determination net income period financial instruments concentration credit risk fair values cash accounts payable current monetary liabilities approximate carrying values due immediate shortterm maturity financial instruments companys operations financing activities conducted primarily united states dollars result company subject significant exposure market risks changes foreign currency rates unless otherwise noted managements opinion company exposed significant interest credit risks arising assets classified financial instruments impairment longlived assets longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable circumstances could trigger review include limited significant decreases market price asset significant adverse changes business climate legal factors accumulation costs significantly excess amount originally expected acquisition construction asset current period cash flow operating losses combined history losses forecast continuing losses associated use asset current expectation asset likely sold disposed significantly end estimated useful life recoverability assets measured comparison carrying amounts future undiscounted cash flows assets expected generate impairment loss recognized carrying amount exceeds fair value stockbased compensation company uses blackscholes optionpricing model determine grant date fairvalue stockbased awards asc 718 compensation stock compensation fair value recorded income depending terms conditions award nature relationship recipient award company records grant date fair value income line period earned employees management typically considered vesting period award consultants fair value award recorded income term service period unvested amounts revalued reporting period service period deferred financing costs company defers direct costs incurred connection sale common shares offset proceeds financing upon completion costs incurred connection convertible loans payable deferred amortized financing cost term convertible loans upon conversion loan unamortized amount deferred financing costs charged stockholders’ equity cost financing research development costs company acquired development marketing rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs income taxes company follows liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized income period includes date enactment company recognizes deferred taxes unrealized gains directly within comprehensive income concurrently releases part related valuation allowance resulting nil impact within oci balance sheet december 31 2013 company net operating loss carry forwards however due uncertainty realization company provided full valuation allowance potential deferred tax assets resulting loss carry forwards derivative warrant liability company evaluates convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accordance asc 81010054 81540 accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instruments classification derivative instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date evaluating application asc 81540 management must determine whether instrument embedded feature indexed company’s stock asc 8154015 provides entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions application asc 8154015 affected accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain free standing warrants contain contingently puttable cash settlement fair value financial instruments company follows asc paragraph 825105010 disclosures fair value financial instruments asc paragraph 820103537 measure fair value financial instruments 820103537 establishes framework measuring fair value pursuant gaap expands disclosures fair value measurements increase consistency comparability fair value measurements related disclosures paragraph 820103537 establishes fair value hierarchy prioritizes inputs valuation techniques used measure fair value three 3 broad levels fair value hierarchy gives highest priority quoted prices unadjusted active markets identical assets liabilities lowest priority unobservable inputs three 3 levels fair value hierarchy described level 1 quoted market prices available active markets identical assets liabilities reporting date level 2 pricing inputs quoted prices active markets included level 1 either directly indirectly observable reporting date level 3 pricing inputs generally observable inputs corroborated market data carrying amounts company’s financial assets liabilities cash due government agency accounts payable accrued liabilities research agreement obligations due related parties approximate fair values short term maturity company’s convertible notes payable approximate fair value based upon management’s estimate comparable interest rates would available company similar financial arrangements company revalues derivative warrant derivative conversion option liabilities reporting period recognizes gains losses consolidated statements operations attributable change fair value loss per common share basic loss per share computed dividing loss attributable common stockholders weighted average number common shares outstanding period applicable diluted earnings per share reflect potential dilution securities could share earnings loss company common shares potentially issuable conversion outstanding convertible debentures warrants stock options antidilutive included calculation recently issued accounting pronouncements april 1 2012 company adopted new guidance related presentation comprehensive income main provisions new guidance provide entity reports items comprehensive income option present comprehensive income single statement presents components net income total net income components comprehensive income total comprehensive income total comprehensive income ii two separate consecutive statements whereby entity must present components net income total net income first statement immediately followed financial statement presents components comprehensive income total comprehensive income total comprehensive income new rules eliminate option present components comprehensive income part statement stockholders equity new rules applied retrospectively became effective fiscal years interim periods within fiscal years beginning december 15 2011 january 1 2012 company early adoption permitted adoption new guidance material impact consolidated financial statements company reviewed recently issued accounting pronouncements plans adopt applicable expect adoption pronouncements material impact financial position results operations cash flows note 3research agreements crucell holland bv “crucell” research license option agreement effective august 7 2003 crucell company’s subsidiary gpi entered fiveyear research license option agreement addition retroactively effective august 7 2008 company negotiated amended license agreement use crucell’s adenovirus technology company required make annual license payments anniversary effective date three year term equal €75000 per annum three years december 2011 december 31 2013 company accrued 492365 €378384 amended agreement inclusive interest outstanding amounts company made use crucell technology current work asked received work product management hopes settle outstanding amounts crucell 2014 formally terminate research license mayo clinic license option agreement details regarding license option agreement mayo clinic please refer note 12 note 4derivative warrant liability fair value company evaluated application asc 48010 distinguishing liabilities equity asc 81540 contracts entity’s equity asc 71810 compensation stock compensation issued outstanding warrants purchase common stock issued convertible notes private placements consulting agreements various debt settlements 2009 2012 based guidance management concluded instruments required accounted derivatives either due ratchet protection feature available exercise price note 5 holder’s right put warrants back company cash certain conditions conversion option feature conversion variable number shares asc 8154025 company records fair value warrants conversion options derivatives balance sheet fair value changes values reflected statements operations “changes fair value derivative liabilities” fair value share purchase warrants recorded balance sheet ‘derivative liability warrants’ fair value conversion options recorded balance sheet ‘derivative liability conversion option’ asc 82010 defines fair value exchange price would received asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date asc 82010 also establishes fair value hierarchy requires entity maximize use observable inputs minimize use unobservable inputs measuring fair value asc 82010 describes three levels inputs may used measure fair value level 1 quoted prices active markets identical assets liabilities level 2 observable inputs level 1 prices quoted prices similar assets liabilities inputs observable corroborated observable market data substantially full term assets liabilities level 3 unobservable inputs supported little market activity financial instruments whose values determined using pricing models discounted cash flow methodologies similar techniques well instruments determination fair value requires significant judgment estimation company’s level 3 liabilities consist derivative liabilities associated warrants conversion options issued convertible notes year ended december 31 2013 december 31 2013 company’s derivative liabilities categorized level 3 fair value liabilities inputs used measure financial assets liabilities fall within one level described categorization based lowest level input significant fair value measurement instrument level 3 valuation techniques financial liabilities considered level 3 fair values determined using pricing models discounted cash flow methodologies similar techniques least one significant model assumption input unobservable level 3 financial liabilities consist notes warrants current market securities determination fair value requires significant judgment estimation determining fair value share purchase warrants conversion options given company’s stage development financial position highly subjective identifying appropriate measurement criteria models subject uncertainty several generally accepted pricing models warrants options derivative provisions company chosen value warrants conversion option notes contain ratchet provisions using binomial model following assumptions foregoing assumptions reviewed quarterly subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations financial assets liabilities measured fair value recurring basis financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet derivative liability warrants derivative liability conversion option table provides summary changes fair value including net transfers andor financial assets liabilities measured fair value recurring basis using significant unobservable inputs level 3 years ended december 31 2013 2012 fair value warrants determined using binomial option pricing model valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based us treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate company could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements company continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statement operations net cash settlement value time future fundamental transaction depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based us treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction fair value warrants determined using american binomial option pricing model note 5convertible notes payable following summary debt instrument transactions relevant previous year february 2011 secured convertible notes february 24 2011 company entered securities purchase agreement accredited investors place senior secured convertible notes “february 2011 notes” maturity date three years issuance thereof aggregate principal amount 1184694 consideration notes consisted 944694 cash proceeds including accrued interest february 2011 notes bear interest rate 10 per annum except case default case bear interest rate 20 per annum company paid finders’ fee 41500 notes connection issuance february 2011 notes company issued 23694 warrants exercisable common stock 2500 five year terms company allocated net proceeds warrants based calculated fair value date issuance fair value warrants recorded 483355 recognized derivative liabilities debt recorded 701339 fair value warrants calculated using binomial option pricing model following assumptions estimated life five years risk free rate 206 dividend yield 0 volatility 199 debt discount accreted three year term february 2011 notes using effective interest rate method year ended december 31 2012 one investors settled principal amount 203836 accrued interest 16419 february 2011 notes exchange december 14 2012 convertible note “december 14 2012 note” april 2011 secured convertible notes april 4 2011 company entered securities purchase agreement accredited investors place senior secured convertible notes “april 2011 notes” maturity date three years issuance thereof aggregate principal amount 215000 consideration notes consisted 190000 cash proceeds 25000 subscribed holder 2010 notes exchange extinguishment warrants related 2010 notes april 2011 notes bear interest rate 10 per annum except case default case bear interest rate 20 per annum company paid finders’ fee 4550 connection issuance april 2011 notes company issued 4300 warrants exercisable common stock 2500 2 year terms company allocated net proceeds warrants based calculated fair value fair value warrants recorded 130720 recognized derivative liabilities debt recorded 84280 fair value warrants calculated using binomial option pricing model following assumptions estimated life two years risk free rate 077 dividend yield 0 volatility 199 debt discount accreted three year term april 2011 notes using effective interest rate method june 2011 secured convertible note june 6 2011 company entered securities purchase agreement accredited investors place senior secured convertible note “june 2011 note” maturity date three years issuance thereof aggregate principal amount 30000 june 2011 note bears interest rate 10 per annum except case default case bears interest rate 20 per annum connection issuance june 2011 note company issued 600 warrants exercisable common stock 2500 two year terms company allocated net proceeds warrants based calculated fair value fair value warrants recorded 8280 recognized derivative liabilities debt recorded 21720 fair value warrants calculated using binomial option pricing model following assumptions estimated life two years risk free rate 043 dividend yield 0 volatility 199 debt discount accreted three year term june 2011 note using effective interest rate method august 8 2012 convertible note august 8 2012 company entered securities purchase agreement accredited investors place convertible note “august 8 2012 note” maturity date one year issuance thereof aggregate principal amount 111430 consideration notes consisted 92000 cash proceeds 8000 payment finders’ fee original issue discount 11430 company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 100000 recognized derivative liability debt recorded nil fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 019 dividend yield 0 volatility 13977 debt discount accreted one year term august 8 2012 note using effective interest rate method year ended december 31 2013 investor converted principal amount 111430 accrued interest august 8 2012 note common shares note 9 august 12 2012 convertible note august 12 2012 company entered securities purchase agreement accredited investors place convertible note “august 12 2012 note” maturity date three months issuance thereof aggregate principal amount 27500 consideration notes consisted 25000 cash proceeds original issue discount 2500 agreement provides company issue 500 shares note holder risk premium 500 shares valued 6250 recorded loss debt financing obligation issue shares august 12 2012 note bears interest rate 10 per annum company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 31100 recognized derivative liability debt recorded nil transaction resulted accounting loss debt financing 6100 fair value conversion option calculated using binomial option pricing model following assumptions estimated life three months risk free rate 011 dividend yield 0 volatility 13831 debt discount accreted three month term august 12 2012 note using effective interest rate method august 20 2012 convertible note august 20 2012 company entered securities purchase agreement accredited investors place convertible note “august 20 2012 note” maturity date one year issuance thereof aggregate principal amount 20000 august 20 2012 note bears interest rate 8 per annum company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 36100 recognized derivative liability debt recorded nil transaction resulted accounting loss debt financing 16100 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 019 dividend yield 0 volatility 14011 debt discount accreted one year term august 20 2012 note using effective interest rate method september 18 2012 convertible note september 18 2012 company entered securities purchase agreement accredited investors place convertible note “september 18 2012 note” maturity date one year issuance thereof aggregate principal amount 82500 consideration notes consisted 69000 cash proceeds 6000 payment finders’ fee original issue discount 7500 company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 75000 recognized derivative liability debt recorded nil fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 020 dividend yield 0 volatility 14143 debt discount accreted one year term september 2012 note using effective interest rate method year ended december 31 2013 investor converted principal amount accrued interest 81360 common shares note 9 balance 24990 remaining company repaid 20000 full settlement recognized 4990 gain settlement debt october 2012 convertible note october 15 2012 company entered securities purchase agreement accredited investor place convertible note “october 2012 note” maturity date one year issuance thereof aggregate principal amount 340000 consideration notes consisted 310000 cash proceeds 10000 payment legal fee original issue discount 30000 october 2012 note carries interest rate 8 part agreement company also issued 30000 warrants note holder exercisable 2500 per share expiring october 31 2016 company allocated net proceeds conversion option equity based calculated fair value fair value conversion option recorded 248000 recognized derivative liability equity recorded 62000 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 019 dividend yield 0 volatility 13916 debt discount accreted one year term october 2012 note using effective interest rate method october 9 2012 convertible note october 9 2012 company converted accounts payable 100000 convertible notes “october 9 2012 note” note terms repayment interest charges certain events default note incur interest rate 20 per year ended december 31 2013 note amended assigned third party price adjustment features ratified company converted 53690 shares companynote 9 november 1 2012 convertible note year company converted promissory note 100000 note 7 accredited investor three convertible notes 105000 cumulatively three convertible notes assigned third party two notes converted equity november december 2012 note holder converted 73737 principal interest 12627 shares fair value shares determined 140538 based quoted market prices note 9the third convertible note “november 1 2012 note” issued maturity date six months aggregate principal amount 31471 november 1 2012 note bears interest rate 10 per annum starting november 15 2012 company default certain events november 1 2012 note shall incur interest rate 20 per annum retroactively company allocated 31471 balance november 1 2012 note conversion option debt based calculated fair value fair value conversion option recorded 27300 recognized derivative liability debt recorded 4171 fair value conversion option calculated using binomial option pricing model following assumptions estimated life 049 year risk free rate 009 dividend yield 0 volatility 12726 debt discount accreted 049 year term november 1 2012 note using effective interest rate method year ended december 31 2013 investor converted november 1 2012 note accrued interest 5128 common shares note 9 november 20 2012 convertible note november 20 2012 company entered securities purchase agreement accredited investor place convertible note “november 20 2012 note” maturity date one year issuance thereof aggregate principal amount 55710 consideration notes consisted 50000 cash proceeds 4000 payment finder’s fee original issue discount 5710 onetime interest 5 applied principal sum note part agreement company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 50000 recognized derivative liability debt recorded nil fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 016 dividend yield 0 volatility 13471 debt discount accreted one year term november 20 2012 note using effective interest rate method december 14 2012 convertible note december 14 2012 company converted part february 2011 notes amount 220255 convertible note “december 14 2012 note” maturity date four months issuance thereof aggregate principal amount 252280 consideration notes consisted 220255 february 2011 notes 10000 payment legal fee original issue discount 22025 december 14 2012 note bears interest rate 8 per annum event default certain conditions interest accrue rate 18 per annum december 2012 december 14 2012 note assigned third party company paid first installment 65032 consisting principal interest 10785 shares fair value shares determined 96523 based quoted market price 900 per share note 9 company allocated 189210 balance december 14 2012 note conversion option debt based calculated fair value fair value conversion option recorded 94100 recognized derivative liability debt recorded 95110 fair value conversion option calculated using binomial option pricing model following assumptions estimated life 035 year risk free rate 006 dividend yield 0 volatility 10088 debt discount accreted 045 year term december 14 2012 note using effective interest rate method year ended december 31 2013 investor converted remaining balance note accrued interest 189210 december 14 2012 note common shares note 9 december 18 2012 convertible note december 18 2012 company entered securities purchase agreement accredited investors place convertible notes “december 18 2012 notes” maturity date one year issuance thereof aggregate principal amount 50000 december 18 2012 notes carry interest rate 9 due payable maturity date january 5 2013 convertible notes january 5 2013 company exchanged amounts due consultant related parties convertible notes “january 5 2013 notes” terms repayment interest charges aggregate principal amount 567729 330000 due related parties july 2013 consultant assigned 115000 convertible note third party amendments adjustment conversion price ratified company december 31 2013 452729 january 5 2013 notes outstanding january 31 2013 convertible note january 31 2013 company converted accounts payable 24134 convertible note “january 31 2013 note” maturity date sixteen months note terms repayment interest charges conversion note occurs following conditions date company files certificate designation creating class series convertible preferred stock “series convertible preferred stock” voting rights per share equal one thousand 1000 shares common stock rate five shares common stock postreverse stock split basis share series convertible preferred stock ii automatically convertible common shares upon occurrence 1001 reverse stock split company may convert january 31 2013 note shares series convertible preferred stock conversion price four dollars 4 per share series convertible preferred stock series convertible preferred stock duly authorized outstanding date company enacts 1001 reverse stock split january 31 2013 note automatically convert shares series convertible preferred stock conversion price four dollars 4 per share series convertible preferred stock february 27 2013 convertible note february 27 2013 company entered securities purchase agreement accredited investor place convertible note “february 27 2013 note” maturity date one year issuance thereof aggregate principal amount 58500 consideration notes consisted 46000 cash proceeds 4000 payment finders’ fee original issue discount 8500 company accrued onetime interest 5 per agreement company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 44700 recognized derivative liability debt recorded 5300 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 017 dividend yield 0 volatility 12376 debt discount accreted one year term february 27 2013 note using effective interest rate method april 2 2013 convertible note april 2 2013 company exchanged accounts payable convertible notes “april 2 2013 note” aggregate principal amount 80967 note holder option convert portion outstanding balance note shares company’s common stock conversion rate 700 per share note incur interest rate 8 per year unless company defaults certain conditions case note incur interest rate 20 per year april 18 2013 convertible note april 18 2013 company entered securities purchase agreement accredited investor place convertible note “april 18 2013 note” maturity date eight months issuance thereof aggregate principal amount 60000 consideration notes consisted 50000 cash proceeds 5000 payment transaction costs original issue discount 5000 april 18 2013 note carries interest rate 8 per year unless note default certain conditions case interest rate would 18 per year company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 27800 recognized derivative liability debt recorded 27200 fair value conversion option calculated using binomial option pricing model following assumptions estimated life eight months risk free rate 010 dividend yield 0 volatility 11582 debt discount accreted eight month term april 18 2013 note using effective interest rate method year ended december 31 2013 investor converted 31733 part principal accrued interest april 18 2013 note common shares note 9 may 2 2013 convertible notes may 2 2013 company issued convertible notes “may 2 2013 note” aggregate principal amount 50000 note matures may 31 2014 would start accrue interest 10 per year february 15 2014 note automatically convertible series b convertible preferred shares ‘series b preferred shares” company enacts 1001 reverse stock split series b preferred shares convertible rate seven shares common stock note 15 may 5 2013 convertible note may 5 2013 company exchanged accounts payable convertible notes “may 5 2013 note” aggregate principal amount 45000 note holder option convert portion outstanding balance may 5 2013 note shares company’s common stock conversion rate 700 per share note incur interest rate 8 per year unless company defaults certain conditions case note incur interest rate 20 per year may 14 2013 convertible note may 14 2013 company entered securities purchase agreement accredited investor place convertible note “may 14 2013 note” maturity date one year issuance thereof aggregate principal amount 126000 company also issued 20000 warrants note holder exercisable 600 per share four year term consideration notes consisted 110000 cash proceeds 5000 payment finders’ fee original issue discount 11000 may 14 2013 note carries interest rate 8 per year unless note default case note incur interest rate 18 per year company allocated net proceeds conversion option warrants based calculated fair values fair value conversion option recorded 62678000 fair value warrants recorded 52322 recognized derivative liabilities debt recorded nil fair value conversion option calculated using black scholes option pricing model following assumptions estimated life four years risk free rate 04 dividend yield 0 volatility 161 debt discount accreted one year term may 14 2013 note using effective interest rate method june 27 2013 convertible note june 27 2013 company entered securities purchase agreement accredited investor place convertible note “june 27 2013 note” maturity date one year issuance thereof aggregate principal amount 37620 consideration notes consisted 30000 cash proceeds 3000 payment finder’s fee original issue discount 4620 company accrued onetime interest 5 per agreement company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 30200 recognized derivative liability debt recorded 2800 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 015 dividend yield 0 volatility 15641 debt discount accreted one year term june 27 2013 note using effective interest rate method june 19 2013 convertible note june 2013 consultant assigned 115000 convertible note third party amendments ratified company “june 19 2013 note” maturity date one year issuance thereof aggregate principal amount 115000 june 19 2013 note carries interest rate 10 per year unless note default certain conditions case interest rate would 20 per year company allocated net proceeds conversion option based calculated fair value fair value conversion option recorded 31600 recognized derivative liability debt recorded 83400 fair value conversion option calculated using binomial option pricing model following assumptions estimated life one year risk free rate 015 dividend yield 0 volatility 15646 debt discount accreted one year term june 19 2013 note using effective interest rate method year ended december 31 2013 third party converted principal amount 83000 accrued interest june 19 2013 note 108188 common shares note 9 july 12 2013 convertible note july 2013 company entered securities purchase agreement accredited investor place convertible note “july 12 2013 note” maturity date one year issuance thereof aggregate principal amount 125000 company also issued 41667 warrants note holder exercisable 300 per share five year term consideration notes consisted 110000 cash proceeds 15000 payment finders’ fee original issue discount 11000 july 12 2013 note carries interest rate 8 per year unless note default case note incur interest rate 18 per year company allocated net proceeds conversion option warrants based calculated fair values fair value conversion option recorded 59615 fair value warrants recorded 54385 recognized derivative liabilities debt recorded nil fair value conversion option calculated using binomial option pricing model following assumptions estimated life fiveyear risk free rate 14 dividend yield 0 volatility 199 debt discount accreted one year term july 12 2013 note using effective interest rate method year ended december 31 2013 investor converted principal amount accrued interest 28200 july 12 2013 note 50000 common shares note 9 october 2013 convertible notes october 2013 company entered securities purchase agreements accredited investors place convertible notes “october 2013 notes” maturity date six months issuance thereof aggregate principal amount 55000 october 2013 notes carry interest charges unless note default case note incur interest rate 20 per year company allocated net proceeds conversion option based calculated fair value full value recorded fair value conversion option debt recorded nil fair value conversion option calculated using binomial option pricing model following assumptions estimated life six months risk free rate 010 dividend yield 0 volatility 199 debt discount accreted six month term october 2013 notes using effective interest rate method november 2013 convertible notes november 2013 company entered securities purchase agreements accredited investors place convertible notes “november 2013 notes” maturity date six months issuance thereof aggregate principal amount 80000 consideration notes consisted 77000 cash proceeds original issue discount 3000 november 2013 notes carry interest charges original issue discount unless note default case note incur interest rate 20 per year company allocated net proceeds conversion option based calculated fair value full value recorded fair value conversion option debt recorded nil fair value conversion option calculated using binomial option pricing model following assumptions estimated life six months risk free rates 010 004 dividend yield 0 volatility 199 debt discount accreted six month term november 2013 notes using effective interest rate method december 2013 convertible notes december 2013 company entered securities purchase agreements accredited investors place convertible notes “december 2013 notes i” maturity date six months issuance thereof aggregate principal amount 250000 december 2013 notes carry interest charges unless note default case note incur interest rate 20 per year company allocated net proceeds conversion option based calculated fair value full value recorded fair value conversion option debt recorded nil fair value conversion option calculated using binomial option pricing model following assumptions estimated life six months risk free rates 010 dividend yield 0 volatility 199 debt discount accreted six month term december 2013 notes using effective interest rate method december 2013 convertible notes ii december 2013 company entered securities purchase agreements accredited investors place convertible notes “december 2013 notes ii” maturity date six months issuance thereof aggregate principal amount 536400 consideration notes consisted 141000 conversion accounts payable 267950 cash proceeds 100000 received year ended december 31 2012 subscription proceeds 27450 interest costs conversion notes occurs following conditions date company files certificate designation creating class series b convertible preferred stock voting rights per share equal one thousand 1000 shares common stock ii automatically convertible common shares upon occurrence 1001 reverse stock split rate seven shares common stock postreverse stock split basis share series b convertible preferred stock company may convert december 2013 convertible notes ii shares series b convertible preferred stock conversion price one dollar per share series b convertible preferred stock series b convertible preferred stock duly authorized outstanding date company enacts 1001 reverse stock split december 2013 convertible notes ii automatically convert shares series b convertible preferred stock conversion price one dollar per share series b convertible preferred stock amount december 2013 notes ii outstanding february 15 2014 carry interest rate 10 per year ended december 31 2013 company recorded accretion debt discount 1110831 convertible notes subsequent year ended december 31 2013 company substantially converted convertible debt shares common stock company restructuring plan note 15 note 6loans payable december 31 2013 unsecured loan advances amount 42200 december 31 2012 10000 due demand 40000 loans bear interest 10 per annum 2200 advanced directors company note 8 note 7promissory note year ended december 31 2012 company issued promissory notes amount 67942 38000 promissory notes issued officer director company note 8 promissory notes bear interest charges fixed repayment terms year ended december 31 2013 company converted 210000 accounts payable promissory note payable preset schedule payments starting april 2013 late payments incur interest rate 9 per year company made payments default payment schedule payments default accruing interest 9 per year subsequent year ended december 31 2013 note holder converted outstanding principal accrued interest 1400000 post reverse stock split common shares note 15 note 8related party transactions year ended december 31 2013 company entered transactions certain officers directors company follows incurred 366500 2012 391600 management consulting directors’ fees 129000 2012 90000 research development services paid officers directors year b recorded 46988 2012 124209 stock based compensation fair value options granted management granted vested year c converted nil 2012 50000 debt due related parties year settled shares issued nil 2012 38000 promissory notes officer director company note 7 e borrowed 2200 2012 nil loan officer director company note 6 related party transactions stock based compensation involving provision services recorded exchange amount established agreed related parties representing fair value company accounted debt settlement transactions related parties management’s estimate fair value using amounts similar arm’s length settlements debt settled december 31 2013 company amounts owing directors officers 369345 2012 373346 fees 370200 loans advances loan amounting 2200 bearing 10 per year interest amounts due related parties unsecured noninterest bearing specific terms repayment subsequent year ended december 31 2013 related parties settled 613845 debt shares common stock company note 15 note 9capital stock share capital prior march 27 2007 authorized capital company consisted 50000000 common shares 0001 par value 5000000 nonvoting preferred shares 0001 par value march 27 2007 company’s articles incorporation amended increase authorized shares common stock 50000000 shares common stock 200000000 shares june 28 2007 company completed reverse stock split thereby issuing 1 new share 25 outstanding shares company’s common stock accordingly company’s authorized share capital decreased 200000000 common shares 80000000 common shares january 22 2009 authorized shares common stock increased 80000000 shares 500000000 shares effective july 10 2009 company executed 1 10 reverse stock split simultaneously reducing authorized shares common stock 50000000 common shares 0001 par value effective february 21 2010 company increased authorized shares common stock 50000000 shares 150000000 common shares company maintained authorized shares preferred stock 5000000 subsequent year ended december 31 2013 january 6 2014 company designated 1200000 series preferred shares “series convertible preferred stock” share series convertible preferred stock outstanding time company enacts 100 1 reverse stock split series convertible preferred stock shall automatically convert five shares company’s common stock postsplit basis subsequent year ended december 31 2013 january 10 2014 company completed reverse stock split thereby issuing 1 new share 100 outstanding shares company’s common stock amending company’s articles incorporation increase authorized shares common stock 150000000 shares common stock 500000000 shares note 15 also february 18 2014 company’s board directors approved creation class 1500000 preferred stock par value 0001 called series b convertible preferred stock “series b convertible preferred stock” terms series b convertible preferred stock · rank pari passu common stock respect rights liquidation winding dissolution · dividend rights except may declared board sole absolute discretion · shall right cast one thousand 1000 votes share held record matters submitted vote holders corporation’s common stock · shall automatically convert shares common stock upon occurrence reverse stock split corporation’s common stock every 100 shares corporation’s common stock outstanding time certificate designation filed secretary state nevada exchanged one share corporation’s common stock share series b convertible preferred stock converting seven shares corporation’s common stock number 1001 reverse stock split prior period share transactions included company’s stock transactions balances retroactively restated reverse stock splits described 2013 share transactions january 2013 company issued 2313 shares common stock conversion one two november 1 2012 notes note 5 conversion price 662 per share february 2013 company issued 2500 common shares fair value 28925 consultant pursuant consulting agreement february 2013 company issued 18986 common shares cashless conversion 30000 warrants exercise price 572 march 2013 company issued 100000 common shares fair value 10010 consultant pursuant consulting agreement january march 2013 company issued 31763 shares common stock conversion december 14 2012 note 5 conversion price 603 per share january may 2013 company issued 19444 shares common stock partial conversion september 18 2012 note 5 average conversion price 360 per share february march 2013 company issued 10500 shares common stock partial conversion august 8 2012 note 5 average conversion price 681 per share april 2013 company issued 2815 shares common stock conversion balance november 1 2012 notes note 5 conversion price 607 per share april september 2013 company issued 264649 shares common stock partial settlement debt amount 510572 455311 shares remain issued respect debt shares fair value approximately 910000 december 31 2013 april 2013 company issued 2500 shares restricted common stock settlement agreement former director company may july 2013 company issued 53690 shares common stock fair value 248278 conversion october 9 2012 convertible notes note 5 may june 2013 company issued 30000 shares common stock fair value 137200 conversion balances august 8 2012 note november 20 2013 note 5 july september 30 2013 company issued 108188 shares common stock fair value 181606 conversion june 19 2013 convertible note 5 august 2013 company issued 50000 shares common stock fair value 52500 conversion july 12 2013 convertible note 5 august september 2013 company issued 36000 shares obligated issue additional 20472 shares common stock fair value 52960 conversion november 20 2012 convertible note 5 september 2013 company issued 10000 shares common stock fair value 10500 partial conversion september 18 2012 note 5 november 2013 company issued 12000 shares common stock fair value 13340 partial conversion september 18 2012 note 5 november 2013 company issued 45333 shares common stock fair value 134187 partial conversion april 18 2013 note 5 march 2013 company received 242950 private placement issued 34707 shares equal number warrants december 2013 company entered rescission agreements whereby company replaced shares warrants december 2013 convertible notes ii 34707 shares warrants returned treasury note 5 company records shares issued noncash consideration conversion debt fair value result settlements conversions company recorded loss settlement debt 2560045 2012 share transactions march 15 2012 company issued 3333 shares restricted common stock related parties pursuant debt settlement agreements settle 50000 outstanding trade payable time issuance fair value shares determined 50000 based quoted market price 1500 per share march 15 2012 company issued 4000 shares restricted common stock fair value 71200 pursuant debt settlement consulting agreement march 15 2012 company issued 7898 shares restricted common stock settlement accrued interest outstanding 2011 notes march 2012 company received subscription proceeds 85000 subscribers purchased 7333 share units 1500 per unit consists 1 share company’s common stock half warrant exercisable 4000 expires two years fair value warrants determined 5133 april 2012 company received subscription proceeds 345000 subscribers purchased 23000 share units 1500 per unit consists 1 share company’s common stock half warrant exercisable 4000 expires two years fair value warrants determined 123000 april 2012 company issued 1000 shares restricted common stock fair value 18500 pursuant debt settlement consulting agreement april 2012 company issued 9333 restricted common shares 1500 per share proceeds 140000 received october 2011 private placement april 2012 company issued 10000 common shares consultant pursuant consulting agreement effective october 1 2011 april 2012 company issued 1633 shares restricted common stock fair value 24500 settlement accrued interest outstanding 2011 notes may 2012 company issued 140000 common shares fair value 1918000 consultants pursuant consulting agreement june 2012 company issued 352 shares restricted common stock fair value 6000 pursuant consulting agreement august 2012 company issued 5000 shares restricted common stock fair value 74000 pursuant consulting agreement september 2012 company issued 5000 shares restricted common stock fair value 72750 holder promissory note exchange note holder’s agreement forebear pursuing collection action note 7 november 2012 company issued 4371 shares restricted common stock fair value 55944 election holder convert part convertible debt note 5 conversion price 572 per share november 2012 company issued 5972 shares restricted common stock fair value 63003 election holder convert part convertible debt note 5 conversion price 586 per share november 2012 company issued 2285 shares restricted common stock fair value 21591 election holder convert part convertible debt note 5 conversion price 601 per share december 2012 company issued 10788 shares restricted common stock fair value 96523 payment installment 65032 convertible debt note 5 conversion price 603 per share company records shares issued noncash consideration conversion debt fair value result settlements conversions 2012 company recorded loss settlement debt 59219 stock compensation plan october 14 2009 company adopted 2009 stock incentive plan “2009 plan” supersedes replaces 2007 stock plan 2009 plan allows issuance 100000 common shares options granted plan shall prices terms determined board directors april 30 2012 company granted 2500 stock options officer exercise price 1800 per share vesting monthly thirty six month period aggregate fair value grant estimated 45000 1800 per option using blackscholes option pricing model weighted average assumptions follows risk free interest rate 195 dividend yield 0 expected volatility 1990 expected life 10 years may 8 2012 company granted 2500 stock options consultant exercise price 1700 per share vesting monthly twelve month period aggregate fair value grant estimated 40000 1700 per option using blackscholes option pricing model weighted average assumptions follows risk free interest rate 171 dividend yield 0 expected volatility 1990 expected life 10 years expensed portion value granted vested options year ended december 31 2013 132093 2012 204427 recorded stock based consulting management fees share purchase options summary company’s stock options december 31 2013 2012 changes years presented december 31 2013 intrinsic value vested options equal nil 2012 nil summary status company’s unvested options december 31 2013 presented share purchase warrants march 2012 company issued 3667 share purchase warrants acquire equivalent number common shares company exercise price 40 per share exercise period two years issuance date warrants issued pursuant private placement 110000 included within equity fair value warrants determined 5133 using blackscholes option pricing model expected life 2 years risk free interest rate 037 dividend yield 0 expected volatility 63 april 2012 company issued 11500 share purchase warrants acquire equivalent number common shares company exercise price 4000 per share exercise period two years issuance date warrants issued pursuant private placement included within equity fair value warrants determined 123000 using blackscholes option pricing model expected life 2 years risk free interest rate 027 dividend yield 0 expected volatility 1466 october 2012 company issued 30000 share purchase warrants acquire equivalent number common shares company exercise price 2500 per share exercise period four years issuance date warrants issued pursuant convertible debt included within equity residual fair value warrants determined 62000 december 2012 company issued 10000 share purchase warrants acquire equivalent number common shares company exercise price 1000 per share exercise period five years issuance date warrants issued pursuant private placement included within equity fair value warrants determined 178000 using blackscholes option pricing model expected life 5 years risk free interest rate 087 dividend yield 0 expected volatility 1990 may 2013 company issued 20000 share purchase warrants acquire equivalent number common shares company exercise price 600 per share exercise period four years issuance date warrants issued pursuant convertible debt price adjustment features residual fair value warrants determined 52322 recognized derivative liability july 2013 company issued 41667 share purchase warrants acquire equivalent number common shares company exercise price 400 per share exercise period five years issuance date warrants issued pursuant convertible debt price adjustment features residual fair value warrants determined 54385 recognized derivative liability summary company’s share purchase warrants december 31 2013 2012 changes year presented note 10 income taxes company identified quantified significant temporary differences company’s tax financial bases assets liabilities result deferred tax assets except company’s net operating loss carryforwards amounting approximately 22154000 december 31 2013 2012 18713000 may available reduce future year’s taxable income carry forwards begin expire utilized commencing 2015 future tax benefits may arise result losses recognized financial statements realization meet likely test accordingly company recorded 100 valuation allowance potential deferred tax asset relating tax loss carry forwards company reviews valuation allowance requirements annual basis based management’s expectations future operations circumstances change resulting change management’s judgment recoverability future tax assets impact change valuation allowance would reflected current operations disclosures company’s policy accrue amounts known likely interest penalties related unrecognized tax charges likely penalties interest provision income taxes additionally asc 74010 requires company recognize financial statements impact tax position likely sustained upon examination based technical merits position company incurred taxable losses tax years since inception accordingly provision taxes recorded current prior fiscal year actual income tax provisions differ expected amounts calculated applying combined federal state corporate income tax rates company’s loss income taxes temporary adjusted appropriate temporary permanent tax basis differences components differences follows company’s estimated deferred tax assets follows criteria recognizing future income tax assets met due uncertainty realization valuation allowance 100 recorded current prior year company filed income tax returns several years us entities within consolidated group companies canadian corporate tax returns end 2007 filed taxing authorities prescribe penalties failing file certain tax returns supplemental disclosures upon filing andor review could penalties interest assessed penalties vary jurisdiction assessing practices authorities company incurred losses since inception anticipated risk exposure penalties income tax liability determined low however certain jurisdictions may assess penalties failing file returns disclosures failing file supplementary information associated foreign ownership debt equity positions inherent uncertainties arise tax positions taken expected taken respect transfer pricing intercompany charges allocations financing charges fees related party transactions tax credits tax based incentives stock based transactions management considered likelihood significance possible penalties associated current intended filing positions determined based assessment penalties would expected material note 11supplemental cash flow information noncash investing financing activities pursuant february 2011 note settlement agreement entered year ended december 31 2012 company issued december 14 2012 notes amount 252280 220255 deemed partial settlement february 2011 note pursuant promissory note settlement agreement entered year ended december 31 2012 company issued november 1 2012 notes amount 105000 deemed full settlement promissory note 7 see notes 5 9 additional disclosure noncash transactions note 12contingencies commitments contingencies consultant litigation may 2012 company issued 112000 postconsolidated shares common stock two consultants company contested validity services provided initially able delay sale contested shares company successful recovering contested shares claim alleged damages approximately 362000 plus costs one consultants result contesting issuance shares filed supreme court new york claim damages difference market price time company able delay sale shares market price time sale shares result judicial decision new york consultant received bond payment approximately 100000 company used secure temporary restraining order issuance stock company pursuing litigation american arbitration association potential loss litigation presently yet determinable tax filings company filed income tax returns several years certain operating jurisdictions note 10 may subject possible compliance penalties interest management currently able make reliably measurable provision possible liability penalties interest time company may liable amounts upon assessment penalties interest assessed future recorded period amounts determinable commitments combined research operating obligations effective may 25 2010 company entered research license option agreement mayo clinic development possible commercial use cancer vaccine subject approval guidance united states food drug administration “fda” mayo clinic plans conduct phase human clinical trial “phase trial” test develop company’s technology company agreed period option upon approval fda conduct phase trials pay costs incurred mayo clinic exceed total 841000 510000 paid third party subsequent sponsored research agreement 330000 accrued december 31 2013 management anticipates phase 1 trials complete end 2014 management services agreement february 2011 company approved employment agreement dr wilson initial term 2 years may automatically extended successive oneyear terms employment agreement provides annual compensation 180000 grant option acquire 20000 shares company’s common stock 1900 per share 50 vested march 16 2011 remainder vest monthly period two years 417 per month options shall exercisable least five years consultant agreements may 2012 company entered one year consulting services agreement superseding previous management consulting agreement consultant “consultant a” provide expertise areas finance corporate development management board tapimmune consulting services agreement provides consulting fee 12000 per month may 2012 december 2012 10000 following four months company also granted 2500 options consultant vesting equally twelve months exercise price 1700 ten year term november 2013 company entered advisory agreement consultant provide expertise areas finance corporate restructuring corporate development management board tapimmune one year term advisory agreement provides advisory fee 10000 per month november 2013 may 2014 six months extendable additional six months subject mutual agreement company also grant 250000 shares consultant post restructuring company’s debtnote 15 december 2012 company entered one year consulting agreement starting january 1 2013 company owned director company provide consulting services relating immunotherapies technologies interest company consulting agreement provides consulting fee 3500 per month 2500 shall payable cash 1000 paid common stock agreement extended additional oneyear period mutual written consent december 31 2013 consulting agreement extended note 13accounts payable accrued liabilities accounts payable accrued liabilities note 14 restatement consolidated financial statements consolidated financial statements year ended december 31 2012 restated revise company’s accounting derivative liabilities certain accounts fair value certain derivative liabilities adjusted record effect conversion certain convertible notes proper classification liabilities impact restatement consolidated financial statements year ended december 31 2012 shown following table note 15subsequent events january 6 2014 company designated 1200000 series preferred shares “series convertible preferred stock” share series convertible preferred stock outstanding time company enacts reverse stock split series convertible preferred stock shall automatically convert five shares company’s common stock postsplit basis january 10 2014 shareholders board directors company approved reverse stock split whereby every one hundred shares common stock held stockholder exchanged one share company’s common stock january 10 2014 company amended articles incorporation increase authorized share capital 150000000 shares common stock 5000000 shares preferred stock 500000000 shares common stock 5000000 shares preferred stock february 18 2014 company’s board directors approved creation class 1500000 preferred stock par value 0001 called series b convertible preferred stock “series b convertible preferred stock” terms series b convertible preferred stock · rank pari passu common stock respect rights liquidation winding dissolution · dividend rights except may declared board sole absolute discretion · shall right cast one thousand 1000 votes share held record matters submitted vote holders corporation’s common stock · shall automatically convert shares common stock upon occurrence reverse stock split corporation’s common stock every 100 shares corporation’s common stock outstanding time certificate designation filed secretary state nevada exchanged one share corporation’s common stock share series b convertible preferred stock converting seven shares corporation’s common stock number 1001 reverse stock split january february 2014 company converted debt totaling approximately 3498000 874555 shares series convertible preferred stock february 20 2014 874555 shares series convertible preferred stock converted 4372774 shares common stock debt included 746696 principal interest due related parties converted 933370 common shares february 2014 company converted debt totaling approximately 1374000 1374307 shares series b convertible preferred stock february 20 2014 1374307 shares series b convertible preferred stock converted 9620150 shares common stock february 20 2014 company issued 168787 shares common stock · 5000 restricted common shares exchange legal fees · 150000 restricted common shares pursuant consulting agreement · 13787 restricted common shares exchange legal fees march 24 2014 company issued 145000 shares common stock one person settlement approximately 127040 debt april 4 2014 company issued 244764 shares common stock person settlement approximately 214446 debt february 2014 company entered one year media investor relations service contract consultant contract provides company make 100000 payment signing contract 200000 shares restricted common stock 100000 issued immediately additional 100000 restricted common stock within 10 business days upon company’s successful listing nasdaq nyse mkt exchange march 18 2014 third party entered option agreement company assign technology license agreement “license agreement” mayo foundation medical education research “mayo” following terms · company issue 100000 share purchase warrants common stock price 400 per share five year term compensation receiving option · company exercising option completing assignment option third party issuing additional 100000 share purchase warrants common stock price 400 per share five year term 25 royalties mayo receive license agreement · pay third party 400000 payments made third party mayo either cash shares company’s common stock equal amount divided 400 item 9 item 8 financial statements financial statements incorporated herein reference pages end report supplementary data applicable item 9 item 8financial statements tapimmune inc consolidated financial statements december 31 2014 reports independent registered public accounting firms consolidated balance sheets consolidated statements operations comprehensive loss consolidated statement stockholders’ equity deficit consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm audit committee board directors stockholders tapimmune inc audited accompanying consolidated balance sheet tapimmune inc “company” december 31 2014 related consolidated statements operations comprehensive loss changes stockholders’ equity deficit cash flows year ended consolidated financial statements responsibility company’s management responsibility express opinion consolidated financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audit included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects consolidated financial position tapimmune inc december 31 2014 results operations cash flows year ended conformity accounting principles generally accepted united states america accompanying consolidated financial statements prepared assuming company continue going concern discussed note 2 consolidated financial statements company suffered historical losses operations negative working capital matters raise substantial doubt company’s ability continue going concern management’s plans concerning matters also discussed note 2 consolidated financial statements accompanying consolidated financial statements include adjustments might result outcome uncertainty marcum llp new york ny april 15 2015 report independent registered public accounting firm stockholders board directors tapimmune inc audited accompanying consolidated balance sheet tapimmune inc “company” december 31 2013 related consolidated statement operations comprehensive loss stockholders’ deficit cash flows year ended financial statements responsibility company’s management responsibility express opinion financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion consolidated financial statements present fairly material respects financial position company december 31 2013 results operations cash flows years ended conformity accounting principles generally accepted united states america accompanying consolidated financial statements prepared assuming company continue going concern discussed note 1 financial statements company accumulated deficit 55426635and reported loss 5532552 year ended december 31 2013 raising substantial doubt company’s ability continue going concern company requires additional funds meet obligations costs operations factors raise substantial doubt company’s ability continue going concern management’s plans regard described note 1 financial statements include adjustments might result outcome uncertainty “dmcl” dale matheson carrhilton labonte llp chartered accountants vancouver canada april 14 2014 tapimmune inc consolidated balance sheets accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements operations comprehensive loss accompanying notes integral part consolidated financial statements tapimmune inc consolidated statement stockholders’ equity deficit accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements cash flows accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements cash flows accompanying notes integral part consolidated financial statements tapimmune inc notes consolidated financial statements december 31 2014 note 1nature operations tapimmune inc “company” nevada corporation incorporated 1992 biotechnology company focusing immunotherapy specializing development innovative peptide genebased immunotherapeutics vaccines treatment oncology infectious disease unlike vaccine technologies narrowly address initiation immune response tapimmunes approach broadly stimulates cellular immune system enhancing function killer tcells thelper cells restoring antigen presentation tumor cells allowing recognition killing immune system phase study mayo clinic currently evaluating safety immune responses set proprietary her2neu antigens part prime her2neu breast cancer vaccine second phase trial underway mayo clinic “mayo” ovarian breast cancer folate receptor alpha folate receptor alpha expressed nearly 50 breast cancers addition 95 ovarian cancers treatment options surgery chemotherapy leaving important urgent clinical need new therapeutic time recurrence relatively short type cancer survival prognosis extremely poor recurrence usa alone approximately 30000 ovarian cancer patients newly diagnosed every year folate receptor antigens applicable ovarian triple negative breast cancer diseases treatment options beyond surgery chemotherapy therefore company hopeful might ideal candidate orphan drug status indications phase ii advancement assessed second quarter 2015 tapimmune exclusive option license set peptides successful phase 1 trials addition enhancing visibility cancer infected cells patient’s immune system critical aspect effective vaccine regard tapimmune’s polystart™ nucleic acidbased technology provides fourfold increase target cell specific naturally processed antigenic epitopes cells surface increased cell surface presentation corresponding increases activated helper andor longlived killer tcell populations effectively seek work destroy patient’s cancer cells company also exploiting emerging field vaccinomics development vaccines applicable broad patient population tapimmunes immunotherapy technologies also aimed prevention emerging viral pathogens pandemics biodefense consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2014 company working capital deficiency incurred significant losses since inception development business losses anticipated raising substantial doubt company’s ability continue going concern ability company continue going concern dependent raising additional capital fund clinical trials ongoing research development maintenance protection patents accommodation certain debt obligations ultimately generating future profitable operations planned expenditures relating current future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities management addressing going concern remediation seeking new sources capital restructuring retiring debt conversion equity debt settlement arrangements creditors cost reduction programs seeking possible joint venture participation management’s plans intended return company financial stability improve continuing operations company continuing initiatives raise capital private placements related party loans institutional sources meet immediate working capital requirements historically company raised capital issuances various financial instruments company recently completed significant restructuring outstanding debt equity instruments equity additional capital required expand programs including preclinical work progress clinical trials lead vaccine candidates strategic partnerships needed continue product development portfolio fund development costs measures successful may contribute reduce risk going concern uncertainties company next twelve months certainty company able arrange sufficient funding satisfy current debt obligations continue development products marketability note 2summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america “gaap” principles consolidation financial statements include accounts company whollyowned subsidiaries genemax pharmaceuticals inc “gpi” genemax pharmaceuticals canada inc “gpc” significant intercompany balances transactions eliminated upon consolidation fourth quarter fiscal 2014 company dissolved gpc longer canadian subsidiary use estimates preparation company’s financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include deferred taxes related tax balances disclosures determining fair value stockbased compensation stock based transactions fair value components convertible notes payable accrued liabilities matters impacting company’s ability continue going concern contingencies also involve use estimates assumptions fair value measurements fair value certain company’s financial instruments including cash equivalents accrued compensation accrued liabilities approximate cost short maturities company measures fair value certain financial assets liabilities recurring basis fair value hierarchy used rank quality reliability information used determine fair values financial assets liabilities carried fair value classified disclosed one following three categories • level 1quoted prices unadjusted active markets identical assets liabilities • level 2inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities • level 3unobservable inputs supported little market activity significant fair value assets liabilities financial instruments concentration credit risk fair values cash accounts payable current monetary liabilities approximate carrying values due immediate shortterm maturity financial instruments company’s operations financing activities conducted primarily united states dollars result company subject significant exposure market risks changes foreign currency rates unless otherwise noted managements opinion company exposed significant interest credit risks arising assets liabilities classified financial instruments prior period reclassifications certain prior period amounts combined december 31 2013 consolidated financial statements reclassified comparability december 31 2014 presentation reclassifications effect previously reported net loss stockbased compensation stockbased compensation measured grant date based fair value award fair value award ultimately expected vest recognized expense straightline basis requisite service period generally vesting period expense recognized portion award expected vest reduced estimated forfeiture rate forfeiture rate determined time grant revised necessary subsequent periods actual forfeitures differ estimates expected term expected term options represents period company’s stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility company computes stock price volatility expected terms based historical common stock trading prices riskfree interest rate company bases riskfree interest rate implied yield available us treasury zerocoupon issues equivalent remaining term expected dividend company never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore uses expected dividend yield zero valuation models company recognizes fair value stock options granted nonemployees stockbased compensation expense period related services received deferred financing costs company defers direct costs incurred connection sale common shares offset proceeds financing upon completion costs incurred connection convertible loans payable deferred amortized financing cost term convertible loans upon conversion loan unamortized amount deferred financing costs charged stockholders’ equity cost financing research development costs company acquired development marketing rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs income taxes company follows asset liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized income period includes date allowances deferred tax assets derivative liability company evaluates convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accordance asc 81010054 81540 accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instrument classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date evaluating application asc 81540 management must determine whether instrument embedded feature indexed company’s stock asc 8154015 provides entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions application asc 8154015 affected accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain free standing warrants contain contingently puttable cash settlement company evaluated application asc 48010 distinguishing liabilities equity asc 81540 contracts entity’s equity asc 71810 compensation stock compensation issued outstanding warrants purchase common stock issued convertible notes private placements consulting agreements various debt settlements 2009 2012 based guidance management concluded instruments required accounted derivatives either due ratchet protection feature available exercise price note 5 holder’s right put warrants back company cash certain conditions conversion option feature conversion variable number shares asc 8154025 company records fair value warrants conversion options derivatives balance sheet fair value changes values reflected statements operations “changes fair value derivative liabilities” fair value share purchase warrants recorded balance sheet ‘derivative liability warrants’ fair value conversion options recorded balance sheet ‘derivative liability conversion option’ loss per common share basic loss per share computed dividing loss attributable common stockholders weighted average number common shares outstanding period applicable diluted earnings per share reflect potential dilution securities could share earnings loss company common shares potentially issuable conversion outstanding convertible debentures warrants stock options antidilutive included calculation net loss per share applicable common stockholders options warrants convertible debt outstanding considered antidilutive years ended december 31 2014 2013 due net losses following securities included diluted net loss per share calculation effect antidilutive periods presented recently issued accounting pronouncements accounting standards update 201410 development stage entities topic 915 elimination certain financial reporting requirements including amendment variable interest entities guidance topic 810 consolidation removes incremental financial reporting requirements development stage entities including removal reporting cumulative results operations cash flows period inception end current period update effective first annual period beginning december 15 2014 early adoption permitted company adopted change effective form 10q filing period ending september 30 2014 accounting standard update asu 201415 presentation financial statementsgoing concern subtopic 20540 disclosure uncertainties entity’s ability continue going concern amendments update effective annual period ending december 15 2016 annual periods interim periods thereafter early application permitted company currently evaluating impact update consolidated financial statements note 3accounts payable accrued liabilities accounts payable accrued liabilities fiscal 2014 company converted 2415000 accounts payable accrued liabilities 1836000 shares common stock fair value shares based trading price stock date conversion 4349000 company recorded loss extinguishment 1934000 note 4research agreements crucell holland bv “crucell” research license option agreement effective august 7 2003 crucell company’s subsidiary gpi entered fiveyear research license option agreement addition retroactively effective august 7 2008 company negotiated amended license agreement use crucell’s adenovirus technology company required make annual license payments anniversary effective date three year term equal 91000 per annum three years december 2011 december 31 2013 2014 company accrued 492365 amended agreement inclusive 15 interest outstanding amounts company made use crucell technology current work asked received work product management hopes settle outstanding amounts crucell 2015 formally terminate research license note 5derivative liability 2014 company entered numerous extinguishment agreements various holders result derivative liability associated bifurcated conversion options extinguished date conversion recorded loss extinguishment statement operations inputs utilized final mark market follows summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants categorized within level 3 fair value hierarchy years ended 2014 2013 follows foregoing assumptions recalculated every reporting period subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations financial assets liabilities measured fair value recurring basis financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet derivative liability warrants derivative liability conversion option transfers level 1 2 3 year ended december 31 2014 following table presents changes level 3 liabilities measured fair value year ended december 31 2014 valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based us treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate company could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements company continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statements operations net cash settlement value time future transactions company consolidates merges another entity depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based us treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction note 6convertible notes payable following table summarizes company’s outstanding convertible note obligations issuance convertible preferred stock year company issued 418000 convertible notes carried interest rate converted shortly thereafter see extinguishment loss preferred stock immediately common stock debt converted preferred stock immediately converted common stock year note holders included convertible notes loans payable promissory notesrelated party due related party exchanged approximately 47 million debt 05 million accrued interest shares preferred stock immediately converted 140 million shares common stock fair value approximately 31 million total loss extinguishment associated note conversions 249 million includes extinguishment derivative liability conversion option 07 million note 7loans payable december 31 2014 unsecured loan payable amount nil december 31 2013 42200 year ended december 31 2014 investors converted 37000 related party converted 5200 loan preferred stock immediately converted common stock see note 6 note 8promissory notes related party company outstanding promissory notes amount 52942 december 31 2013 277942 23000 promissory notes officer director company promissory notes bear interest charges fixed repayment terms year ended december 31 2014 note holder converted outstanding principal 210000 accrued interest 12000 preferred stock immediately converted common shares see note 6 year ended december 31 2014 15000 2013 nil promissory notes repaid officer director company note 9due related parties year ended december 31 2014 company outstanding promissory notes amount nil december 31 2013 369000 fiscal year 2014 related parties converted notes 369000 preferred stock immediately converted common stock see note 6 note 10 capital stock split increase authorized shares february 18 2014 company completed reverse stock split thereby issuing 1 new share 100 outstanding shares company’s common stock amended company’s articles incorporation increase authorized shares common stock 150000000 shares common stock 500000000 shares share capital january 6 2014 company designated 1250000 series preferred shares par value 0001 “series convertible preferred stock” share series convertible preferred stock automatically converted five 5 shares company’s common stock upon occurrence 1100 reverse stock split february 18 2014 company created class 1500000 preferred shares par value 0001 called series b convertible preferred stock “series b convertible preferred stock” terms series b convertible preferred stock · rank pari passu common stock respect rights liquidation winding dissolution · dividend rights except may declared board sole absolute discretion · shall right cast one thousand 1000 votes share held record matters submitted vote holders corporation’s common stock · shall automatically convert seven 7 shares common upon occurrence 1100 reverse stock split prior period share transactions included company’s stock transactions balances retroactively restated reverse stock splits described shares outstanding preferred shares december 31 2014 share transactions consulting services year ended december 31 2014 company issued aggregate 811000 shares common stock exchange consulting services performance complete fair value common stock recognized approximately 954000 private placements year ended december 31 2014 company entered securities purchase agreement single institutional investor sale 1886792 units purchase price 106 per unit total purchase price 1836000 net finders’ fee 164000 unit consists one common share one share purchase warrant exercisable 117 period 5 years company also issued 94340 placement agent share purchase warrants acquire equivalent number common shares company exercise price 1325 per share exercise period five years issuance date warrants included within equity fair value warrants determined 111000 using blackscholes option pricing model contractual term 5 years risk free interest rate 166 dividend yield 0 expected volatility 1503 year ended december 31 2014 company received subscription proceeds 265000 units unit consists one share common stock one share purchase warrant exercisable 250 period 3 years company also issued 5250 shares common stock finders’ fee relating subscription proceeds fair value common stock determined 5250 stock compensation plan october 14 2009 company adopted 2009 stock incentive plan “2009 plan” supersedes replaces 2007 stock plan 2009 plan allows issuance 100000 common shares options granted plan shall prices terms determined board directors expensed portion value granted vested options year ended december 31 2014 15000 2013 132093 recorded stock based consulting management fees share purchase options summary company’s stock options december 31 2014 2013 changes years presented december 31 2014 intrinsic value vested options equal nil 2013 nil summary status company’s unvested options december 31 2014 presented share purchase warrants september 2014 company issued 100000 share purchase warrants acquire equivalent number common shares company exercise price 115 per share exercise period five years issuance date warrants issued pursuant service agreement fair value warrants determined 105000 using blackscholes option pricing model contractual term 5 years risk free interest rate 163 dividend yield 0 annual volatility 15018 march 2014 company issued 100000 share purchase warrants acquire equivalent number common shares company exercise price 400 per share exercise period four years issuance date warrants issued pursuant technology option agreement fair value warrants determined 303000 recorded general administrative expenses weighted average assumptions used blackscholes optionpricing model value warrants volatility 1566 risk free rate 14 term 4 years dividend rate 0 company used blackscholes optionpricing model resultant fair value significantly different monte carlo option pricing model august 2014 company repriced 100000 warrants reducing exercise price 400 106 result company recorded incremental fair value 14000 year ended december 31 2014 summary company’s share purchase warrants december 31 2014 changes year presented note 11 income taxes income tax provision benefit years ended december 31 2014 2013 follows effects temporary differences give rise significant portions deferred tax assets december 31 2014 2013 follows company assesses likelihood deferred tax assets realized extent realization likely valuation allowance established based upon history losses management believes likely future benefits deferred tax assets realized established full valuation allowance years ended december 31 2014 2013 company filed us tax returns since inception process filing tax returns years ended december 31 2014 2013 2012 2011 2010 2009 net operating losses “nols” available reduce future taxable income returns filed assuming returns filed december 31 2014 2013 company approximately 30686428 26982085 respectively federal nols may available offset future taxable income federal net operating loss carryforwards utilized expire beginning 2023 company also filed canadian tax returns gpc dissolved fourth quarter fiscal year 2014 company could subject fines penalties filing tax returns company know quantum fines penalties liabilities accrued fiscal year 2014 accordance section 382 internal revenue code usage company’s net operating loss carryforwards may limited event change ownership full section 382 analysis prepared nols could subject limitation section 382 years ended december 31 2014 2013 expected tax expense benefit based us federal statutory rate reconciled actual tax provision benefit follows asc 740 prescribes recognition threshold measurement attribute financial statement recognition measurement tax positions taken expected taken tax return benefits recognized tax position must morelikelythannot sustained upon examination taxing authorities december 31 2014 2013 unrecognized tax benefits company recognizes accrued interest penalties income tax expense amounts accrued payment interest penalties december 31 2014 2013 company currently aware issues review could result significant payments accruals material deviation position next year note 12contingencies commitments contingencies consultant litigation may 2012 company issued 112000 postconsolidated shares common stock two consultants company contested validity services provided initially able delay sale contested shares company successful recovering contested shares claim alleged damages approximately 362000 plus costs one consultants result contesting issuance shares filed supreme court new york claim damages difference market price time company able delay sale shares market price time sale shares result judicial decision new york consultant received bond payment approximately 100000 company used secure temporary restraining order issuance stock following hearings international arbitration tribunal held new york may 1316 arbitrator ordered july 18 2014 consultant pay tapimmune 196204 plus 9 interest date award company attempting collect award mr gardner law firm used pursue gardner action awarded judgment us 210255 unpaid legal fees “gs judgment” shareholders company acquired gs judgment full converted judgment preferred shares company turn converted common stock subsequently released company liability related thereto july 18 2014 international center dispute resolution international arbitration tribunal issued final award matter tapimmune inc vs michael gardner awarding tapimmune 196204 plus postaward interest rate 9 per year award stemmed dispute discussed mr gardner regarding may 2012 consulting agreement arbitrator found fraudulently induced entering said agreement “1 misrepresentations would could company including raising funds 2 omissions reputation ability obtain assist obtaining financing tapimmune” among reasons attempting collect award mr gardner one suppliers fischer scientific awarded judgment us 51000 equal amount owed intend settling matter second quarter 2015 note 13subsequent events 1 january 12 2015 company entered securities purchase agreement certain accredited investors sale 7320000 units purchase price 020 per unit total purchase price approximately 1250000 net finders’ fee offering expenses approximately 214000 unit consisting one share company’s common stock ii one series warrant purchase one share common stock iii one series b warrant purchase one share common stock iv one series c warrant purchase one share common stock v one series warrant purchase one share common stock vi one series e warrant purchase one share common stock series b c e warrants collectively “january 2015 warrants” series warrants exercisable 150 per share five year term series b warrants exercisable 040 per share six month term series c warrants exercisable 100 per share five year term series warrants exercisable 075 per share extent series b warrants exercised five year term date series b warrants exercised series e warrants exercisable 125 per share extent series c warrants exercised five year term date series c warrants exercised pursuant placement agent agreement company agreed issue warrants purchase aggregate 5 aggregate number shares common stock sold offering placement agents placement agent warrants substantially terms january 2015 warrants 2 march 9 2015 company entered securities purchase agreement certain accredited investors sale 5000000 units purchase price 020 per unit total purchase price approximately 950000 net finders’ fee offering expenses approximately 50000 unit consisting one share company’s common stock ii one series warrant purchase one share common stock iii one series b warrant purchase one share common stock iv one series c warrant purchase one share common stock v one series warrant purchase one share common stock vi one series e warrant purchase one share common stock series b c e warrants collectively “march 2015 warrants” march 2015 warrants substantially terms january 2015 warrants pursuant placement agent agreement company agreed issue warrants purchase aggregate 25 aggregate number shares common stock sold offering placement agents placement agent warrants substantially terms march 2015 warrants item 9 item 8 financial statements financial statements incorporated herein reference pages end report supplementary data applicable item 9 item 15 exhibits financial statement schedules documents filed part report follows 1 financial statements accompanying report independent registered public accounting firm set forth immediately following signature page report pages 2 financial statement schedules omitted inapplicable required information included elsewhere financial statements notes thereto 3 following list exhibits filed part annual report form 10k exhibit index executive management contract compensatory plan arrangement confidential treatment granted certain portions exhibit pursuant rule 406 securities act 1933 amended rule 24b2 securities exchange act 1934 amended portions exhibit indicated asterisks omitted pursuant request conditional treatment exhibit submitted separately sec item 16 form 10k summary none signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized dated march 12 2020 marker therapeutics inc peter hoang peter hoang chief executive officer principal executive officer anthony kim anthony kim chief financial officer principal financial accounting officer power attorney undersigned officers directors marker therapeutics inc hereby constitutes appoints peter hoang anthony kim true lawful attorneyinfact agent name place stead capacities sign name amendments report form 10k related documents cause filed securities exchange commission granting unto said attorneys full power authority perform act thing necessary proper done premises fully intents purposes undersigned could personally present undersigned hereby ratifies confirms said attorney shall lawfully cause done virtue hereof s1 pursuant requirements securities exchange act 1934 report signed following persons march 12 2020 behalf registrant capacities indicated signature title date peter hoang president chief executive officer director principal executive officer march 12 2020 peter hoang frederick wasserman director march 12 2020 frederick wasserman david laskowpooley director march 12 2020 david laskowpooley john wilson director march 12 2020 john wilson juan vera director march 12 2020 juan vera n david eansor director march 12 2020 n david eansor steve elms director march 12 2020 steve elms anthony kim chief financial officer principal financial accounting officer march 12 2020 anthony kim s2 marker therapetuics inc consolidated financial statements december 31 2019 report independent registered public accounting firm consolidated balance sheets consolidated statements operations consolidated statements stockholders’ equity deficit consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm stockholders board directors marker therapeutics inc opinion financial statements audited accompanying consolidated balance sheets marker therapeutics inc “company” december 31 2019 2018 related consolidated statements operations stockholders’ equity deficit cash flows two years period ended december 31 2019 related notes collectively referred “financial statements” opinion financial statements present fairly material respects financial position company december 31 2019 2018 results operations cash flows two years period ended december 31 2019 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states pcaob companys internal control financial reporting december 31 2019 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission coso 2013 report dated march 12 2020 expressed unqualified opinion effectiveness company’s internal control financial reporting basis opinion financial statements responsibility companys management responsibility express opinion companys financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion marcum llp marcum llp served company’s auditor since 2014 new york ny march 12 2020 report independent registered public accounting firm internal control financial reporting stockholders board directors marker therapeutics inc opinion internal control financial reporting audited marker therapeutics incs “company” internal control financial reporting december 31 2019 based criteria established internal controlintegrated framework 2013 issued committee sponsoring organizations treadway commission opinion company maintained material respects effective internal control financial reporting december 31 2019 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states “pcaob” consolidated balance sheets december 31 2019 2018 related consolidated statements operations stockholders’ equity deficit cash flows related notes two years period ended december 31 2019 company report dated march 12 2020 expressed unqualified opinion financial statements basis opinion companys management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying “management annual report internal control financial reporting” responsibility express opinion companys internal control financial reporting based audit public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audit accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate marcum llp marcum llp new york ny march 12 2020 marker therapeutics inc consolidated balance sheets accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statements operations accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statements stockholders’ equity deficit accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statements cash flows accompanying notes integral part consolidated financial statements marker therapeutics inc notes consolidated financial statements fiscal years december 31 2019 2018 note 1 nature operations marker therapeutics inc delaware corporation “company” “we” clinicalstage immunooncology company specializing development commercialization novel cellbased immunotherapies innovative peptidebased vaccines treatment hematological malignancies solid tumor indications company’s multitaaspecific cell technology based selective expansion nonengineered tumorspecific cells recognize tumor associated antigens tumor targets kill tumor cells expressing targets cells designed recognize multiple tumor targets produce broad spectrum antitumor activity company incorporated nevada 1992 reincorporated delaware october 2018 note 2 basis presentation management plans accompanying consolidated financial statements prepared conformity accounting principles generally accepted united states america reference footnotes applicable guidance meant refer authoritative us generally accepted accounting principles “gaap” found accounting standards codification “asc” accounting standards update “asu” financial accounting standards board “fasb” company generated revenue product sales date company successfully obtain regulatory approval commercialize product candidates company able generate product revenue achieve profitability company subject risks common companies biotechnology industry future success company dependent ability successfully complete development obtain regulatory approval product candidates manage growth organization obtain additional financing necessary order develop launch commercialize product candidates compete successfully companies industry financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america “gaap” opinion management accompanying consolidated financial statements reflect adjustments consisting normal recurring adjustments considered necessary fair presentation annual results note 3 significant accounting policies principles consolidation consolidated financial statements include accounts company whollyowned subsidiaries marker cell therapy inc genemax pharmaceuticals inc dormant subsidiary wholly owns genemax pharmaceuticals canada inc significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s consolidated financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include valuation allowance deferred tax assets determining fair value stockbased compensation stockbased transactions fair value components warrant liabilities accrued liabilities liquidity financial condition management’s plans december 31 2019 company cash equivalents approximately 439 million company’s activities since inception consisted principally acquiring product technology rights raising capital performing research development successful completion company’s development programs ultimately attainment profitable operations dependent future events including among things ability access potential markets secure financing successfully progress product candidates preclinical clinical development obtain regulatory approval one product candidates maintain enforce intellectual property rights develop customer base attract retain motivate qualified personnel develop strategic alliances collaborations inception company funded combination equity debt financings company expects continue incur substantial losses next several years development phase fully execute business plan company need complete certain research development activities clinical trials company’s product candidates require regulatory approval prior commercialization activities span many years require substantial expenditures complete may ultimately unsuccessful delays completing activities could adversely impact company plans meet capital requirements primarily issuances debt equity securities longer term revenue sales product candidates approved based company’s revised clinical research development plans revised timing expectations related progress programs company expects cash equivalents december 31 2019 enable company fund operating expenses capital expenditure requirements second quarter 2021 company based estimate assumptions may prove wrong company could utilize available capital resources sooner currently expects furthermore company’s operating plan may change may need additional funds sooner planned order meet operational needs capital requirements product development commercialization numerous risks uncertainties associated development commercialization company’s product candidates extent company may enter additional collaborations third parties participate development commercialization company unable estimate amounts increased capital outlays operating expenditures associated current anticipated clinical trials company’s future funding requirements depend many factors · initiates continues clinical trials product candidates · continues research development product candidates seeks discover additional product candidates · seeks regulatory approvals product candidates successfully complete clinical trials · maintains enforces intellectual property rights · establishes sales marketing distribution infrastructure scaleup manufacturing capabilities commercialize product candidates may receive regulatory approval · evaluates strategic transactions company may undertake · enhances operational financial information management systems hires additional personnel including personnel support development product candidates product candidate approved commercialization efforts research development intellectual property acquired company evaluates whether acquired intangible assets business applicable accounting standards additionally company evaluates whether acquired assets alternative future use intangible assets alternative future use considered acquired inprocess research development acquired inprocess research development assets part business combination value consideration paid expensed acquisition date future costs develop assets recorded research development expense incurred cash equivalents credit risk company considers highly liquid investments maturity three months less purchased cash equivalents cash equivalents december 31 2019 consisted cash certificates deposit institutions united states balances certain institutions exceeded federal deposit insurance corporation insured limits us government agency securities company maintains cash accounts excess federal deposit insurance corporation “fdic” insured limits 250000 december 31 2019 approximately 01 million cash uninsured based upon fdic insurance coverage limits property equipment leasehold improvements furniture equipment software recorded cost depreciated using straightline method estimated useful lives related assets range three five years leasehold improvements amortized shorter estimated useful life remaining lease term fair value measurements company follows accounting standards codification “asc” 820 “fair value measurements disclosures” “asc 820” company’s financial assets liabilities remeasured reported fair value reporting period remeasured reported fair value least annually using fair value hierarchy broken three levels level inputs defined follows · level 1 quoted prices unadjusted active markets identical assets liabilities · level 2 inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities · level 3 unobservable inputs supported little market activity significant fair value assets liabilities financial instruments concentration credit risk patents patent application costs although company believes patents underlying technology continuing value amount future benefits derived patents uncertain patent costs therefore expensed incurred stockbased compensation company incurs stockbased compensation expense related issuance common stock options company estimates fair value stock options granted using blackscholes option pricing model blackscholes option pricing model developed use estimating fair value traded options vesting restrictions fully transferable addition option valuation models require input highly subjective assumptions including expected stock price volatility expected option life company amortizes fair value awards expected vest straightline basis requisite service period awards expected volatility based historical volatility expected life options granted based historical expected life riskfree interest rate based us treasury yield effect time grant forfeiture rate based historical data dividend yield based fact dividends paid historically none currently expected paid foreseeable future expected term expected term options represents period company’s stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility company computes stock price volatility expected terms based historical common stock trading prices riskfree interest rate company bases riskfree interest rate implied yield available u treasury zerocoupon issues equivalent remaining term expected dividend company never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore uses expected dividend yield zero valuation models company recognizes fair value stock options granted nonemployees stockbased compensation expense period related services received research development costs research development expenses consist expenses incurred performing research development activities including compensation benefits research development employees consultants facilities expenses overhead expenses cost laboratory supplies manufacturing expenses fees paid third parties outside expenses research development costs expensed incurred clinical trial development costs incurred third parties expensed contracted work performed company accrues costs incurred services provided monitoring status clinical trial project invoices received external service providers company estimates depend timeliness accuracy data provided vendors regarding status project total project spending company adjusts accrual actual costs become known contingent milestone payments due third parties research development arrangements milestone payment obligations expensed milestone events achieved income taxes company follows asset liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized statement operations period includes date allowances deferred tax assets tax benefits recognized tax positions likely sustained upon examination tax authorities amount recognized measured largest amount benefit greater 50 percent likely realized upon settlement liability “unrecognized tax benefits” recorded tax benefits claimed company’s tax returns meet recognition measurement standards december 31 2019 2018 liability unrecognized tax benefits required reported guidance also discusses classification related interest penalties income taxes company’s policy record interest penalties uncertain tax positions component income tax expense interest penalties recorded years ended december 31 2019 2018 warrant liability company evaluates options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accounting treatment requires carrying amounts embedded derivatives markedtomarket balance sheet date carried fair value fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instrument classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date management must determine whether instrument embedded feature indexed company’s stock entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions exercise affects accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain freestanding warrants contain contingently putable cash settlement grant income company recognizes grant income accordance terms stipulated grant awarded company’s collaborators mayo foundation u department defense various situations company receives certain payments us department defense reimbursement clinical supplies payments nonrefundable dependent company’s ongoing future performance company adopted policy recognizing payments received revenue accordance accounting standards update 201409 “revenue contracts customers topic 606” issued financial accounting standards board loss per common share basic loss per share includes weighted average common shares outstanding without consideration potentially dilutive securities diluted loss per share includes weighted average common shares outstanding potentially dilutive common stock equivalent shares calculation new accounting standards time new accounting pronouncements issued financial accounting standards board “fasb” standard setting bodies adopt specified effective date unless otherwise discussed company believe impact recently issued standards yet effective material impact financial position results operations upon adoption recent accounting standards adopted year leases february 2016 fasb issued asu 201602 leases topic 842 order increase transparency comparability among organizations among provisions recognizing lease assets lease liabilities balance sheet leases classified operating leases previous gaap public companies asu 201602 effective fiscal years beginning december 15 2018 including interim periods within periods using modified retrospective approach early adoption permitted transition entities may also elect package practical expedients must applied entirety leases commencing adoption date unless lease modified permits entities reassess existence lease b lease classification c determination initial direct costs adoption date effectively allows entities carryforward accounting conclusions previous us gaap july 2018 fasb issued asu 201811 leases topic 842 targeted improvements provides entities optional transition method apply guidance topic 842 adoption date rather earliest period presented company adopted topic 842 january 1 2019 using optional transition method apply new guidance january 1 2019 rather earliest period presented elected package practical expedients described based analysis january 1 2019 company recorded right use assets approximately 637000 lease liability approximately 670000 eliminated deferred rent approximately 33000 improvements nonemployee sharebased payment accounting june 2018 fasb issued asu 201807 “improvements nonemployee sharebased payment accounting” simplifies accounting sharebased payments granted nonemployees goods services asu guidance payments nonemployees would aligned requirements sharebased payments granted employees amendments effective fiscal years beginning december 15 2019 interim periods within fiscal years beginning december 15 2020 company early adopted new standard effective january 1 2019 adoption standard material impact company’s consolidated financial statements recent accounting standards yet adopted income taxes december 2019 fasb issued asu 201912 “income taxes topic 740 simplifying accounting income taxes “asu 201912” intended simplify various aspects related accounting income taxes asu 201912 removes certain exceptions general principles topic 740 also clarifies amends existing guidance improve consistent application guidance effective fiscal years interim periods within fiscal years beginning december 15 2020 early adoption permitted company currently evaluating impact standard consolidated financial statements related disclosures note 4 asset acquisition asset acquisition october 17 2018 company completed acquisition marker cell therapy inc formerly known marker therapeutics inc privatelyheld delaware corporation “marker cell” accordance terms agreement plan merger reorganization dated may 15 2018 “merger agreement” among company timberwolf merger sub inc delaware corporation whollyowned subsidiary company “merger sub” marker october 17 2018 pursuant merger agreement merger sub merged marker cell “merger” marker cell surviving corporation becoming whollyowned subsidiary company connection merger company changed name marker therapeutics inc marker cell changed name marker cell therapy inc effective time merger former marker cell stockholders received aggregate 13914255 shares company’s common stock equaled number shares company’s common stock issued outstanding immediately prior effective time merger ii aggregate 5046003 warrants equaled number company’s warrants stock options issued outstanding immediately prior effective time merger securities purchase agreements october 17 2018 concurrent completion merger company issued certain accredited investors private placement transaction “financing” aggregate 17500000 shares common stock warrants purchase 13437500 shares common stock exercise price 500 per share fiveyear term gross proceeds 70 million pursuant terms securities purchase agreements dated june 8 2018 among company certain accredited investors “securities purchase agreements” accounting treatment marker’s intellectual property yet received regulatory approval 1160 million purchase price paid assets expensed company’s statement operations fiscal year ended december 31 2018 common stock issued asset acquisition valued 1160 million equal 13914255 common shares issued marker multiplied 834 closing price company’s common stock october 17 2018 note 5 net loss per share applicable common shareholders net loss per share applicable common stockholders basic loss per common share computed dividing net loss weighted average number common shares outstanding reporting period diluted loss per common share computed similarly basic loss per common share except reflects potential dilution could occur dilutive securities obligations issue common stock exercised converted common stock following table sets forth computation loss per share years ended december 31 2019 2018 respectively following securities rounded thousand included diluted net loss per share calculation effect antidilutive periods presented note 6 property equipment property equipment consist following december 31 2019 2018 respectively depreciation expense year ended december 31 2019 105000 furniture computer equipment placed use january 1 2019 therefore depreciation expense recorded year ended december 31 2018 note 7 leases company leases office space agreements classified operating leases expire various dates 2022 company’s lease liabilities result lease corporate headquarters houston texas expires 2021 jacksonville florida office space expires 2022 leases require contingent rental payments impose financial restrictions contain residual value guarantees certain company’s leases include renewal options escalation clauses renewal options included calculation lease liabilities right use assets company reasonably certain exercise options variable expenses generally represent company’s share landlord’s operating expenses company act lessor leases classified financing leases company excludes shortterm leases initial terms 12 months less new accounting guidance accounting policy election recognizes rent expense straightline basis lease term fiscal year ended december 31 2019 company two lease agreements office florida atlantic research development authority laboratory space located texas medical center houston included shortterm lease expense december 31 2019 company operating lease liabilities approximately 484000 right use assets approximately 455000 included consolidated balance sheet following summarizes quantitative information company’s operating leases maturities company’s operating leases excluding shortterm leases follows total rental expense company’s operating leases 220000 175600 years ended december 31 2019 2018 respectively f 16 note 8 accounts payable accrued liabilities accounts payable accrued liabilities consist following december 31 2019 2018 respectively note 9 warrant liability weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants categorized within level 3 fair value hierarchy years ended 2019 2018 respectively foregoing assumptions recalculated every reporting period subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations following table presents changes level 3 warrant liabilities reflected accrued expenses measured fair value years ended december 31 2019 2018 respectively f 17 note 10 fair value measurements financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet warrant liability transfers level 1 2 3 years ended december 31 2019 2018 respectively valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based u treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate company could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements company continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statements operations net cash settlement value time future transactions company consolidates merges another entity depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based u treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction note 11 stockholders’ equity preferred stock company authorized 5000000 shares preferred stock 0001 par value per share issuance preferred stock rights privileges restrictions including voting rights dividend conversion rights redemption privileges liquidation preferences shall determined company’s board directors upon issuance date company issued preferred shares common stock company authorized 150000000 shares common stock 0001 par value per share issuance significant 2019 2018 common stock transactions follows 2019 common stock transactions consulting arrangements twelve months ended december 31 2019 company issued 47400 shares common stock connection consulting agreements fair value common stock approximately 265000 recognized stockbased compensation expense general administrative expenses f 18 board compensation twelve months ended december 31 2019 company issued aggregate 29040 shares common stock nonemployee directors fair value common stock approximately 174000 recognized stockbased compensation expense general administrative expenses 2018 common stock transactions merger pursuant merger discussed note 4 company issued 13914255 shares common stock shareholders marker cell therapy inc fair market value shares issued pursuant merger 1160 million securities purchase agreements pursuant financing discussed note 4 company issued 17500000 shares common stock participating accredited investors net proceeds transaction offering costs 62 million 638 million common stock purchase agreement may 14 2018 company’s largest stockholder eastern capital limited entered common stock purchase agreement company pursuant purchased 1300000 shares common stock price per share 240 providing gross proceeds company 312 million exercise repricing warrants held existing institutional investors may 14 2018 certain institutional holders outstanding warrants entered warrant exercise agreements company provide amendment exercise price warrants exercised 250 per share upon closing warrant exercise agreements institutional holders immediately exercised warrants 782505 shares common stock providing aggregate proceeds company approximately 20 million fair value relating modification exercise prices repriced exercised warrants treated deemed dividend statement stockholders’ equity 728000 weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants included modification follows f 19 exercise stock warrants addition exercise repricing warrants discussed twelve months ended december 31 2018 certain outstanding warrants exercised warrant holders providing aggregate proceeds company approximately 24 million resulted issuance 716819 shares common stock additionally 280760 stock warrants exercised cashless basis resulted approximately 204000 warrant shares cancelled due use cashless exercise provisions exercise stock options january 2018 10416 shares common stock issued pursuant stock option exercises exercise price equal 174 per share consulting arrangements twelve months ended december 31 2018 company issued 274012 shares common stock connection consulting agreements fair value common stock approximately 18 million recognized stockbased compensation expense 17 million general administrative expenses 01 million research development expenses 2018 management board compensation twelve months ended december 31 2018 company issued 53774 shares common stock connection board director management agreements fair value common stock approximately 05 million recognized stockbased compensation expense general administrative expenses 7561 shares common stock fair value 01 million withheld satisfy certain payroll liabilities applicable award former director note 12 warrants share purchase warrants summary company’s share purchase warrants december 31 2019 2018 respectively changes period presented 2019 warrant transactions exercise stock warrants twelve months ended december 31 2019 certain outstanding warrants exercised 190258 shares common stock providing aggregate proceeds company approximately 759000 f 20 additionally twelve months ended december 31 2019 company issued 9449 shares common stock upon cashless exercises stock warrants resulted cancellation 7211 shares common stock subject warrants 2018 warrant transactions merger pursuant merger discussed note 4 company issued 5046003 stock warrants shareholders marker cell therapy inc exercise price 299 per share fiveyear term securities purchase agreements pursuant financing discussed note 4 company issued 13437500 stock warrants certain accredited investors exercise price 500 per share fiveyear term exercise repricing warrants held existing institutional investors may 14 2018 certain institutional holders outstanding warrants entered warrant exercise agreements company provide amendment exercise price warrants exercised 250 per share upon closing warrant exercise agreements institutional holders immediately exercised warrants 782505 shares common stock providing aggregate proceeds company approximately 20 million fair value relating modification exercise prices repriced exercised warrants treated deemed dividend statement stockholders’ equity 728000 weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants included modification follows exercise stock warrants addition exercise repricing warrants discussed twelve months ended december 31 2018 certain outstanding warrants exercised warrant holders providing aggregate proceeds company approximately 24 million resulted issuance 716819 shares common stock additionally 280760 stock warrants exercised cashless basis resulted approximately 204000 warrant shares cancelled due use cashless exercise provisions f 21 note 13 stock option plans options purchase shares common stock 2014 stock omnibus plan march 19 2014 board adopted 2014 omnibus stock option plan “2014 plan” replaced 2009 stock incentive plan 2014 plan allowed grants stock options restricted shares stock bonuses equitybased awards employees nonemployee directors company awards 2014 plan may prices terms determined board directors may vesting requirements determined board provided exercise price stock option must least equal fair market value defined 2014 plan share stock grant date granted exercise price option may reduced without approval company’s stockholders certain limited circumstances stock split take action respect stock option would treated repricing rules regulations new york stock exchange 2014 plan amended february 2015 provide grants consultants november 2015 increase number shares reserved issuance plan 06 million shares ii provide board committee administering plan full discretion vesting period servicevesting awards plan including grant awards less minimum vesting requirement terms defined plan iii provide board committee administering plan ability grant stock bonuses executive officers august 29 2017 2014 plan amended increase shares reserved plan 14 million shares october 16 2018 2014 plan amended increase shares reserved plan 80 million shares december 31 2019 approximately 25 million options available issued 2014 plan f 22 stock options summary company’s stock option activity follows stock options blackscholes option pricing model used estimate fair value stock options granted company’s sharebased compensation plans weighted average assumptions used calculating fair values stock options granted years ended december 31 2019 2018 respectively follows following table sets forth stockbased compensation expenses recorded respective periods december 31 2019 total stockbased compensation cost related unvested awards yet recognized 149 million expected weighted average period compensation costs recognized 30 years future option grants impact compensation expense recognized note 14 grant income years ended december 31 2019 2018 company received 02 million grant awarded mayo foundation us department defense phase ii clinical trial tpiv200 grant compensated company clinical supplies manufactured provided company clinical study accordance accounting standards update 201409 “revenue contracts customers topic 606” issued financial accounting standards board company recorded 02 million grant income revenue note 15 commitments contingencies arbitration proceeding brought company financial industry regulatory authority inc broker seeking paid approximately 1 million compensation two 2018 transactions warrant conversion private placement brokered another broker’s claims based placement agent agreement private placement brokered 2017 alleges entitled compensation 2018 transactions company believes defenses allegations intends vigorously defend matter note 16 legal proceedings time company may party ordinary routine litigation incidental business company knows material active pending legal proceedings company involved plaintiff material proceeding pending litigation proceedings company’s directors officers affiliates registered beneficial shareholder adverse party material interest adverse company’s interest note 17 related party transactions following table sets forth related party transaction expenses recorded respective periods sponsored research agreement baylor college medicine “bcm” november 16 2018 furtherance bcm license agreement contemplated terms thereof company entered sponsored research agreement “sra” bcm provided conduct research company credentialed personnel bcm’s center cell gene therapy years ended december 31 2019 2018 company incurred approximately 69000 77000 respectively bcm sra clinical supply agreement bcm september 9 2019 furtherance bcm license agreement contemplated terms thereof company entered clinical supply agreement “csa” bcm provided bcm provide company multi tumor antigen specific products year ended december 31 2019 company incur expenses csa consulting agreement dr juan vera october 19 2018 closing company’s merger company entered consulting agreement dr juan vera member company’s board directors serve company’s chief development officer september 1 2019 dr vera became employee company consulting agreement terminated years ended december 31 2019 2018 company incurred approximately 233000 61000 respectively expenses dr vera’s consulting agreement note 18 income taxes company income tax expense due operating losses incurred years ended december 31 2019 2018 effects temporary differences give rise significant portions deferred tax assets december 31 2019 2018 follows company assesses likelihood deferred tax assets realized extent realization likely valuation allowance established based upon history losses management believes likely future benefits deferred tax assets realized established full valuation allowance years ended december 31 2019 2018 valuation allowance increased 47 million december 31 2019 company research development tax credit carryforwards 730000 available offset future federal income taxes research development tax credit carryforwards begin expire 2030 company approximately 738 million federal 474 million state net operating losses “nol”s may available offset future taxable income federal net operating loss carryforwards 419 million utilized expire 2029 2037 federal net operating loss carryforwards 319 million generated 2018 thereafter subject 80 limitation taxable income expire carry forward indefinitely state net operating loss carryforwards 219 million utilized begin expire 2035 state net operating loss carryforwards 255 million generated 2018 thereafter subject 80 limitation taxable income expire carry forward indefinitely accordance section 382 internal revenue code usage company’s net operating loss carryforwards may limited event change ownership full section 382 analysis prepared nols could subject limitation section 382 company’s income tax returns 2015 2018 still open subject audit addition net operating losses arising prior years also subject examination time utilized future years ended december 31 2019 2018 expected tax expense benefit based u federal statutory rate reconciled actual tax provision benefit follows asc 740 prescribes recognition threshold measurement attribute financial statement recognition measurement tax positions taken expected taken tax return benefits recognized tax position must morelikelythannot sustained upon examination taxing authorities december 31 2019 2018 unrecognized tax benefits company recognizes accrued interest penalties income tax expense amounts accrued payment interest penalties december 31 2019 2018 company currently aware issues review could result significant payments accruals material deviation position next year note 19 subsequent event aspire common stock purchase agreement february 28 2020 company entered common stock purchase agreement “purchase agreement” aspire capital fund llc “aspire capital” provides upon terms subject conditions limitations set forth therein aspire capital committed purchase aggregate 300 million shares company’s common stock 30month term purchase agreement consideration entering purchase agreement concurrently execution purchase agreement company issued aspire capital 345357 shares company’s common stock “commitment shares” purchase agreement trading day selected company right sole discretion present aspire capital purchase notice “purchase notice” directing aspire capital principal purchase 100000 shares company’s common stock per business day 300 million company’s common stock aggregate per share price “purchase price” equal lesser •the lowest sale price company’s common stock purchase date •the arithmetic average three 3 lowest closing sale prices company’s common stock ten 10 consecutive trading days ending trading day immediately preceding purchase date company aspire capital also may mutually agree increase number shares may sold much additional 2000000 shares per business day addition date company submits purchase notice aspire capital amount equal least 100000 shares company also right sole discretion present aspire capital volumeweighted average price purchase notice “vwap purchase notice” directing aspire capital purchase amount stock equal 30 aggregate shares company’s common stock traded principal market next trading day “vwap purchase date” subject maximum number shares company may determine purchase price per share pursuant vwap purchase notice generally 97 volumeweighted average price company’s common stock traded principal market vwap purchase date purchase price adjusted reorganization recapitalization noncash dividend stock split similar transaction occurring periods used compute purchase price company may deliver multiple purchase notices vwap purchase notices aspire capital time term purchase agreement long recent purchase completed purchase agreement provides company aspire capital shall effect sales purchase agreement purchase date closing sale price company’s common stock less 025 trading volume requirements restrictions purchase agreement company control timing amount sales company’s common stock aspire capital aspire capital right require sales company obligated make purchases company directed company accordance purchase agreement limitations use proceeds financial business covenants restrictions future fundings rights first refusal participation rights penalties liquidated damages purchase agreement purchase agreement may terminated company time discretion without cost company aspire capital agreed neither agents representatives affiliates shall engage direct indirect shortselling hedging company’s common stock time prior termination purchase agreement proceeds company receives purchase agreement expected used working capital general corporate purposes purchase agreement provides number shares may sold pursuant purchase agreement limited 9232814 shares including commitment shares exchange cap represents 1999 company’s outstanding shares common stock february 28 2020 unless stockholder approval obtained issue 1999 limitation apply time exchange cap reached times thereafter average price paid shares issued purchase agreement equal greater 241 closing sale price immediately preceding execution purchase agreement company required permitted issue shares common stock purchase agreement issuance would breach obligations rules regulations nasdaq global market concurrently entering purchase agreement company also entered registration rights agreement aspire capital pursuant company filed sec prospectus supplement company’s effective shelf registration statement form s3 file 333232122 registering shares common stock may offered aspire capital time including commitment shares item 15 exhibits following exhibits filed annual report form 10k exhibit number description exhibit 311 certification principal executive officer pursuant securities exchange act 1934 rule 13a14a 15d14a 312 certification acting principal accounting officer pursuant securities exchange act 1934 rule 13a14a 15d14a 321 certification principal executive officer pursuant 18 usc section 322 certification acting principal accounting officer pursuant 18 usc section signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tapimmune inc denis corin denis corin president chief executive officer principal executive officer date may 8 2009 patrick mcgowan patrick mcgowan secretary treasurer chief financial officeracting principal accounting officer director date may 8 2009 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated alan p lindsay alan p lindsay director date may 8 2009 glynn wilson glynn wilson director date may 8 2009 item 15 exhibits following exhibits filed annual report form 10k exhibit number description exhibit 311 certification principal executive officer pursuant securities exchange act 1934 rule 13a14a 15d14a 312 certification acting principal accounting officer pursuant securities exchange act 1934 rule 13a14a 15d14a 321 certification principal executive officer pursuant 18 usc section 322 certification acting principal accounting officer pursuant 18 usc section signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tapimmune inc glynn wilson glynn wilson chairman chief executive officer principal executive officer date april 13 2010 tracy moore tracy moore secretary treasurer chief financial officer acting principal accounting officer director date april 13 2010 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated denis corin denis corin president director date april 13 2010 item 15 exhibits following exhibits filed part registration statement exhibit numbers correspond exhibit requirements regulation sk filed herewith executive management contract compensatory plan arrangement portions exhibit indicated asterisks omitted pursuant request confidential treatment exhibit submitted separately sec signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tapimmune inc glynn wilson glynn wilson chairman chief executive officer principal executive officer acting principal accounting officer date april 14 2016 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated 84 item 15 exhibits financial statement schedules documents filed part report follows 1 financial statements accompanying report independent registered public accounting firm set forth immediately following signature page report pages 2 financial statement schedules omitted inapplicable required information included elsewhere financial statements notes thereto 3 exhibits required filed report able incorporated reference listed “exhibit index” following financial statements b exhibits required item 601 regulation sk submitted incorporated reference listed separate section herein immediately following “exhibit index” incorporated herein reference c applicable item 16 form 10k summary none signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized dated march 15 2019 marker therapeutics inc peter hoang peter hoang chief executive officer principal executive officer anthony kim anthony kim chief financial officer principal accounting officer power attorney undersigned officers directors marker therapeutics inc hereby constitutes appoints peter hoang anthony kim true lawful attorneyinfact agent name place stead capacities sign name amendments report form 10k related documents cause filed securities exchange commission granting unto said attorneys full power authority perform act thing necessary proper done premises fully intents purposes undersigned could personally present undersigned hereby ratifies confirms said attorney shall lawfully cause done virtue hereof pursuant requirements securities exchange act 1934 report signed following persons march 15 2019 behalf registrant capacities indicated signature title date peter hoang president chief executive officer director march 15 2019 peter hoang frederick wasserman director march 15 2019 frederick wasserman david laskowpooley director march 15 2019 david laskowpooley john wilson director march 15 2019 john wilson juan vera director march 15 2019 juan vera n david eansor director march 15 2019 n david eansor anthony kim chief financial officer march 15 2019 anthony kim s1 marker therapeutics inc consolidated financial statements december 31 2018 report independent registered public accounting firm shareholders board directors marker therapeutics inc opinion financial statements audited accompanying consolidated balance sheets marker therapeutics inc “company” december 31 2018 2017 related consolidated statements operations stockholders’ equity deficit cash flows two years period ended december 31 2018 related notes collectively referred “financial statements” opinion financial statements present fairly material respects financial position company december 31 2018 2017 results operations cash flows two years period ended december 31 2018 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states pcaob companys internal control financial reporting december 31 2018 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission coso 2013 report dated march 15 2019 expressed unqualified opinion effectiveness company’s internal control financial reporting basis opinion financial statements responsibility companys management responsibility express opinion companys financial statements based audits public accounting firm registered pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion marcum llp marcum llp served company’s auditor since 2014 new york ny march 15 2019 marker therapeutics inc consolidated balance sheets accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statements operations accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statement stockholders’ equity deficit accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statements cash flows accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statements cash flows accompanying notes integral part consolidated financial statements marker therapeutics inc notes consolidated financial statements december 31 2018 note 1nature operations marker therapeutics inc delaware corporation formerly known tapimmune inc “company” “we” clinicalstage immunooncology company specializing development commercialization innovative cellbased immunotherapies treatment hematological malignancies solid tumor indications novel peptidebased vaccines treatment breast ovarian cancers company’s cellbased immunotherapy technology based selective expansion nonengineered tumorspecific cells recognize tumor associated antigens ie tumor targets kill tumor cells expressing targets infused patients population cells recognizes multiple tumor targets produce broad spectrum antitumor activity company genetically engineer cells compared current engineered cart tcrbased approaches products significantly less expensive manufacture ii appear markedly less toxic iii associated potentially meaningful clinical benefit result company believes portfolio cell therapies potentially compelling therapeutic product profile compared current genemodified cart tcrbased therapies addition company’s folate receptor alpha program tpiv200 breast ovarian cancers her2neu program tpiv100110 five phase ii clinical trials parallel company working proprietary nucleic acidbased antigen expression technology named polystart™ improve ability immune system recognize destroy diseased cells company incorporated nevada 1992 reincorporated delaware october 2018 connection marker transaction october 17 2018 company completed previously announced acquisition marker cell therapy inc formerly known marker therapeutics inc privatelyheld delaware corporation “marker cell” accordance terms agreement plan merger reorganization dated may 15 2018 “merger agreement” among company timberwolf merger sub inc delaware corporation whollyowned subsidiary company “merger sub” marker october 17 2018 pursuant merger agreement merger sub merged marker cell “merger” marker cell surviving corporation becoming whollyowned subsidiary company connection merger company changed name marker therapeutics inc marker cell changed name marker cell therapy inc effective time merger former marker cell stockholders received aggregate 13914255 shares company’s common stock equaled number shares company’s common stock issued outstanding immediately prior effective time merger ii aggregate 5046003 warrants equaled number company’s warrants stock options issued outstanding immediately prior effective time merger note 2basis presentation management plans accompanying financial statements prepared conformity accounting principles generally accepted united states america reference footnotes applicable guidance meant refer authoritative us generally accepted accounting principles “gaap” found accounting standards codification “asc” accounting standards update “asu” financial accounting standards board “fasb” company generated revenue product sales date company successfully obtain regulatory approval commercialize product candidates company able generate product revenue achieve profitability company subject risks common companies biotechnology industry future success company dependent ability successfully complete development obtain regulatory approval product candidates manage growth organization obtain additional financing necessary order develop launch commercialize product candidates compete successfully companies industry financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america “gaap” opinion management accompanying audited consolidated financial statements reflect adjustments consisting normal recurring adjustments considered necessary fair presentation annual results note 3significant accounting policies principles consolidation financial statements include accounts company whollyowned subsidiaries marker cell therapy inc genemax pharmaceuticals inc dormant subsidiary wholly owns genemax pharmaceuticals canada inc significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include valuation allowance deferred tax assets determining fair value stockbased compensation stockbased transactions fair value components warrant liabilities accrued liabilities prior period reclassification prior period grant income included income expense december 31 2017 consolidated statement operations reclassified revenues comparability december 31 2018 presentation reclassification effect previously reported net loss research development intellectual property acquired company concluded acquisition marker cell therapy inc completed october 17 2018 accounted asset acquisition rather business combination accounting standards codification asc 805 business combinations merger accounted asset acquisition substantially fair value assets acquired concentrated group similar assets furthermore acquired assets outputs employees assets acquired company merger included license associated intellectual property documentation records related materials marker’s intellectual property received regulatory approval 1160 million purchase price paid assets immediately expensed company’s statement operations research development intellectual property acquired revenue recognition company yet generated revenue product sales company’s source revenue 2018 2017 grants grant funds received costs incurred company records grant revenue upon receipt cash equivalents credit risk company considers highly liquid investments maturity three months less purchased cash equivalents cash equivalents december 31 2018 consisted cash certificates deposit institutions united states balances certain institutions exceeded federal deposit insurance corporation insured limits us government agency securities company maintains cash accounts excess federal deposit insurance corporation “fdic” insured limits 250000 december 31 2018 2017 approximately 34 million 49 million respectively cash uninsured based upon fdic insurance coverage limits property equipment leasehold improvements furniture equipment software recorded cost depreciated using straightline method estimated useful lives related assets range three five years leasehold improvements amortized shorter estimated useful life remaining lease term rent deferred rent company recognizes rent expense leases increasing annual rents straightline basis term lease amount rent expense excess cash payments classified deferred rent lease incentives received deferred amortized term lease fair value measurements company follows accounting standards codification “asc” 820 “fair value measurements disclosures” “asc 820” company’s financial assets liabilities remeasured reported fair value reporting period remeasured reported fair value least annually using fair value hierarchy broken three levels level inputs defined follows ·level 1 quoted prices unadjusted active markets identical assets liabilities ·level 2 inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities ·level 3 unobservable inputs supported little market activity significant fair value assets liabilities financial instruments concentration credit risk patents patent application costs although company believes patents underlying technology continuing value amount future benefits derived patents uncertain patent costs therefore expensed incurred stockbased compensation company incurs stockbased compensation expense related restricted stock units stock options fair value restricted stock determined closing market price companys common stock date grant company estimates fair value stock options granted using blackscholes option pricing model blackscholes option pricing model developed use estimating fair value traded options vesting restrictions fully transferable addition option valuation models require input highly subjective assumptions including expected stock price volatility expected option life company amortizes fair value awards expected vest straightline basis requisite service period awards expected volatility based historical volatility expected life options granted based historical expected life riskfree interest rate based us treasury yield effect time grant forfeiture rate based historical data company records stockbased compensation expense awards expected vest dividend yield based fact dividends paid historically none currently expected paid foreseeable future expected term expected term options represents period company’s stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility company computes stock price volatility expected terms based historical common stock trading prices riskfree interest rate company bases riskfree interest rate implied yield available u treasury zerocoupon issues equivalent remaining term expected dividend company never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore uses expected dividend yield zero valuation models company recognizes fair value stock options granted nonemployees stockbased compensation expense period related services received research development costs research development expenses consist expenses incurred performing research development activities including compensation benefits research development employees consultants facilities expenses overhead expenses cost laboratory supplies manufacturing expenses fees paid third parties outside expenses research development costs expensed incurred clinical trial development costs incurred third parties expensed contracted work performed company accrues costs incurred services provided monitoring status clinical trial project invoices received external service providers company estimates depend timeliness accuracy data provided vendors regarding status project total project spending company adjusts accrual actual costs become known contingent milestone payments due third parties research development arrangements milestone payment obligations expensed milestone events achieved income taxes company follows asset liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized statement operations period includes date allowances deferred tax assets tax benefits recognized tax positions likely sustained upon examination tax authorities amount recognized measured largest amount benefit greater 50 percent likely realized upon settlement liability “unrecognized tax benefits” recorded tax benefits claimed company’s tax returns meet recognition measurement standards december 31 2018 2017 liability unrecognized tax benefits required reported guidance also discusses classification related interest penalties income taxes company’s policy record interest penalties uncertain tax positions component income tax expense interest penalties recorded years ended december 31 2018 2017 warrant liability company evaluates options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accounting treatment requires carrying amounts embedded derivatives markedtomarket balance sheet date carried fair value fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instrument classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date management must determine whether instrument embedded feature indexed company’s stock entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions exercise affects accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain freestanding warrants contain contingently putable cash settlement grant income company recognizes grant income accordance terms stipulated grant awarded company’s collaborators mayo foundation u department defense various situations company receives certain payments us department defense reimbursement clinical supplies payments nonrefundable dependent company’s ongoing future performance company adopted policy recognizing payments received revenue accordance accounting standards update 201409 “revenue contracts customers topic 606” issued financial accounting standards board loss per common share basic loss per share include weighted average common shares outstanding without consideration potentially dilutive securities diluted loss per share include weighted average common shares outstanding potentially dilutive common stock equivalent shares calculation new accounting standards time new accounting pronouncements issued financial accounting standards board “fasb” standard setting bodies adopt specified effective date unless otherwise discussed believe impact recently issued standards yet effective material impact financial position results operations upon adoption recent accounting standards adopted year revenue contracts customers may 2014 fasb issued asu 201409 “revenue contracts customers topic 606” asu 201409 modified asu 201514 “revenue contracts customers topic 606 deferral effective date” asu 201608 “revenue contracts customers topic 606 principal versus agent considerations reporting revenue gross versus net” asu 201610 “revenue contracts customers topic 606 identifying performance obligations licensing” asu 201612 “revenue contracts customers topic 606 narrowscope improvements practical expedients” revenue recognition principle asu 201409 entity recognize revenue depict transfer goods services customers amount reflects consideration entity expects entitled exchange goods services addition new enhanced disclosures required companies may adopt new standard either using full retrospective approach modified retrospective approach practical expedients cumulative effect upon adoption approach company adopted new standard effective january 1 2018 using modified retrospective approach impact adoption asu 201409 reclassify companys grant income revenue recent accounting standards yet adopted improvements nonemployee sharebased payment accounting june 2018 fasb issued asu 201807 “improvements nonemployee sharebased payment accounting” simplifies accounting sharebased payments granted nonemployees goods services asu guidance payments nonemployees would aligned requirements sharebased payments granted employees amendments effective fiscal years beginning december 15 2019 interim periods within fiscal years beginning december 15 2020 early adoption permitted earlier entity’s adoption date topic 606 company currently evaluating impact new standard consolidated financial statements leases february 2016 fasb issued asu 201602 leases topic 842 order increase transparency comparability among organizations among provisions recognizing lease assets lease liabilities balance sheet leases classified operating leases previous gaap public companies asu 201602 effective fiscal years beginning december 15 2018 including interim periods within periods using modified retrospective approach early adoption permitted transition entities may also elect package practical expedients must applied entirety leases commencing adoption date unless lease modified permits entities reassess existence lease b lease classification c determination initial direct costs adoption date effectively allows entities carryforward accounting conclusions previous us gaap july 2018 fasb issued asu 201811 leases topic 842 targeted improvements provides entities optional transition method apply guidance topic 842 adoption date rather earliest period presented company adopted topic 842 january 1 2019 using optional transition method apply new guidance january 1 2019 rather earliest period presented elected package practical expedients described based analysis company expects recognize additional operating liabilities approximately 670000 corresponding rou assets approximately amount january 1 2019 based present value remaining lease payments sec disclosure update simplification august 2018 sec adopted final rule sec release 3310532 disclosure update simplification amending certain disclosure requirements redundant duplicative overlapping outdated superseded addition amendments expanded disclosure requirements analysis stockholders equity interim financial statements amendments analysis changes caption stockholders equity presented balance sheet must provided note separate statement analysis present reconciliation beginning balance ending balance period statement comprehensive income required filed final rule effective november 5 2018 company evaluating impact guidance consolidated financial statements company anticipates first presentation changes shareholders’ equity accordance new guidance included form 10q quarter ended march 31 2019 note 4asset acquisitions asset acquisition october 17 2018 company completed acquisition marker cell therapy inc formerly known marker therapeutics inc privatelyheld delaware corporation “marker cell” accordance terms agreement plan merger reorganization dated may 15 2018 “merger agreement” among company timberwolf merger sub inc delaware corporation whollyowned subsidiary company “merger sub” marker october 17 2018 pursuant merger agreement merger sub merged marker cell “merger” marker cell surviving corporation becoming whollyowned subsidiary company connection merger company changed name marker therapeutics inc marker cell changed name marker cell therapy inc effective time merger former marker cell stockholders received aggregate 13914255 shares company’s common stock equaled number shares company’s common stock issued outstanding immediately prior effective time merger ii aggregate 5046003 warrants equaled number company’s warrants stock options issued outstanding immediately prior effective time merger securities purchase agreements october 17 2018 concurrent completion merger company issued certain accredited investors private placement transaction “financing” aggregate 17500000 shares common stock warrants purchase 13437500 shares common stock exercise price 500 per share fiveyear term gross proceeds 70 million pursuant terms securities purchase agreements dated june 8 2018 among company certain accredited investors “securities purchase agreements” accounting treatment company concluded merger accounted asset acquisition company rather business combination accounting standards codification asc 805 business combinations merger accounted asset acquisition substantially fair value assets acquired concentrated group similar assets furthermore acquired assets outputs employees assets acquired company merger include license associated intellectual property documentation records related materials marker’s intellectual property yet received regulatory approval 1160 million purchase price paid assets expensed company’s statement operations fiscal year ended december 31 2018 common stock issued asset acquisition valued 1160 million equal 13914255 common shares issued marker multiplied 834 closing price company’s common stock october 17 2018 company also considered whether merger accounted reverse acquisition marker purpose merger company acquire assets marker company expand product service offerings former tapimmune marker stockholders hold equal number board seats combined entity company concluded marker would deemed accounting acquirer asc 805 therefore merger reverse acquisition note 5net loss per share applicable common shareholders net loss per share applicable common stockholders basic loss per common share computed dividing net loss weighted average number common shares outstanding reporting period diluted loss per common share computed similarly basic loss per common share except reflects potential dilution could occur dilutive securities obligations issue common stock exercised converted common stock following table sets forth computation loss per share years ended december 31 2018 2017 respectively following securities rounded thousand included diluted net loss per share calculation effect antidilutive periods presented note 6property equipment property equipment consist following december 31 2018 2017 respectively furniture computer equipment placed use january 1 2019 therefore depreciation expense recorded year ended december 31 2018 note 7accounts payable accrued liabilities accounts payable accrued liabilities consist following december 31 2018 2017 respectively note 8warrant liability weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants categorized within level 3 fair value hierarchy years ended december 31 2018 2017 respectively foregoing assumptions recalculated every reporting period subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations following table presents changes level 3 warrant liabilities reflected accrued expenses measured fair value years ended december 31 2018 2017 respectively note 9fair value measurements financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet derivative liability warrants transfers level 1 2 3 years ended december 31 2018 2017 respectively valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based u treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate company could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements company continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statements operations net cash settlement value time future transactions company consolidates merges another entity depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based u treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction note 10stockholders’ equity preferred stock company authorized 5000000 shares preferred stock 00001 par value per share issuance preferred stock rights privileges restrictions including voting rights dividend conversion rights redemption privileges liquidation preferences shall determined company’s board directors upon issuance date company issued preferred shares series preferred stock company designated 1250000 shares series preferred stock 00001 par value per share issuance date company issued series preferred shares series b preferred stock company designated 1500000 shares series b preferred stock 00001 par value per share issuance date company issued series b preferred shares common stock company authorized 150000000 shares common stock 00001 par value per share issuance significant 2018 2017 common stock transactions follows 2018 common stock transactions merger pursuant merger discussed note 4 company issued 13914255 shares common stock shareholders marker cell therapy inc fair market value shares issued pursuant asset acquisition 1160 million securities purchase agreements pursuant financing discussed note 4 company issued 17500000 shares common stock participating accredited investors net proceeds transaction offering costs 62 million 638 million common stock purchase agreement may 14 2018 company’s largest stockholder eastern capital limited entered common stock purchase agreement company pursuant purchased 1300000 shares common stock price per share 240 providing gross proceeds company 312 million exercise repricing warrants held existing institutional investors may 14 2018 certain institutional holders outstanding warrants entered warrant exercise agreements company provide amendment exercise price warrants exercised 250 per share upon closing warrant exercise agreements institutional holders immediately exercised warrants 782505 shares common stock providing aggregate proceeds company approximately 20 million fair value relating modification exercise prices repriced exercised warrants treated deemed dividend statement stockholders’ equity 728000 weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants included modification follows exercise stock warrants addition exercise repricing warrants discussed twelve months ended december 31 2018 certain outstanding warrants exercised warrant holders providing aggregate proceeds company approximately 24 million resulted issuance 716819 shares common stock additionally 280760 stock warrants exercised cashless basis resulted approximately 204000 warrant shares cancelled due use cashless exercise provisions exercise stock options january 2018 10416 shares common stock issued pursuant stock option exercises exercise price equal 174 per share consulting arrangements twelve months ended december 31 2018 company issued 274012 shares common stock connection consulting agreements fair value common stock approximately 18 million recognized stockbased compensation expense 17 million general administrative expenses 01 million research development expenses 2018 management board compensation twelve months ended december 31 2018 company issued 53774 shares common stock connection board director management agreements fair value common stock approximately 05 million recognized stockbased compensation expense general administrative expenses 7561 shares common stock fair value 01 million withheld satisfy certain payroll liabilities applicable award former director 2017 common stock transactions june 2017 private placement transaction june 26 2017 company completed private placement units certain accredited investors private placement transaction company sold 1503567 shares common stock 397 per share fiveyear warrants purchase equal number shares common stock exercise price 397 per share 0125 per warrant one common share one warrant sold together unit total 4095 per unit company issued sold aggregate 1503567 million units aggregate gross proceeds 62 million company incurred 08 million agency fees legal costs connection offering company reduced exercise price warrants purchase aggregate 653187 shares common stock issued investors private placement closed august 2016 600 per share 397 per share addition company issued fiveyear warrants placement agent offering providing purchase 150357 shares company common stock 397 per share june 2017 exercise repricing warrants held existing institutional investors june 23 2017 certain existing institutional shareholders company hold various outstanding warrants ie c e f purchase company common stock entered warrant repricing exercise agreements series e repriced exercised warrants approximately 168000 series e warrants repriced 1500 per share 397 per share exercised immediately gross proceeds approximately 07 million series e warrants purchase approximately 187000 shares company common stock reduced 1500 per share 450 per share series c f repriced warrants additionally exercise prices certain investors series c series f warrants reduced follows fair value relating modification exercise prices repriced warrants treated deemed dividend statement stockholders’ equity 06 million weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants included modification follows 2017 management compensation march 9 2017 company issued 12761 shares stock dr glynn wilson fair value common stock 55000 recognized stockbased compensation general administrative expenses issuance based closing price common stock 431 per share march 9 2017 company issued 5220 shares stock former chief operating officer fair value common stock 22500 recognized stockbased compensation general administrative expenses issuance based closing price common stock 431 per share september 22 2017 company granted mr hoang 250000 shares unregistered fully vested restricted common stock company recorded 08 million stockbased compensation based fair value common stock september 22 2017 70289 shares common stock fair value 02 million withheld closing price companys common stock nasdaq capital market september 22 2017 satisfy certain payroll liabilities applicable award september 22 2017 company granted dr wilson 100000 shares unregistered fully vested restricted common stock company recorded 03 million stockbased compensation based fair value common stock september 22 2017 27350 shares common stock fair value 01 million withheld closing price companys common stock nasdaq capital market september 22 2017 satisfy certain payroll liabilities applicable award consulting arrangements fiscal 2017 company issued 02 million shares common stock part consulting agreements fair value common stock 06 million recognized stockbased compensation general administrative expenses note 11 warrants share purchase warrants summary company’s share purchase warrants december 31 2018 2017 respectively changes period presented 2018 warrant transactions merger pursuant merger discussed note 4 company issued 5046003 stock warrants shareholders marker cell therapy inc exercise price 299 per share fiveyear term securities purchase agreements pursuant financing discussed note 4 company issued 13437500 stock warrants certain accredited investors exercise price 500 per share fiveyear term exercise repricing warrants held existing institutional investors may 14 2018 certain institutional holders outstanding warrants entered warrant exercise agreements company provide amendment exercise price warrants exercised 250 per share upon closing warrant exercise agreements institutional holders immediately exercised warrants 782505 shares common stock providing aggregate proceeds company approximately 20 million fair value relating modification exercise prices repriced exercised warrants treated deemed dividend statement stockholders’ equity 728000 weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants included modification follows exercise stock warrants addition exercise repricing warrants discussed twelve months ended december 31 2018 certain outstanding warrants exercised warrant holders providing aggregate proceeds company approximately 24 million resulted issuance 716819 shares common stock additionally 280760 stock warrants exercised cashless basis resulted approximately 204000 warrant shares cancelled due use cashless exercise provisions 2017 warrant transactions june 2017 private placement transaction june 26 2017 company completed private placement units certain accredited investors private placement transaction company sold 1503567 shares common stock 397 per share fiveyear warrants purchase equal number shares common stock exercise price 397 per share 0125 per warrant one common share one warrant sold together unit total 4095 per unit company issued sold aggregate 1503567 million units aggregate gross proceeds 62 million company incurred 08 million agency fees legal costs connection offering company reduced exercise price warrants purchase aggregate 653187 shares common stock issued investors private placement closed august 2016 600 per share 397 per share june 2017 exercise repricing warrants held existing institutional investors june 23 2017 certain existing institutional shareholders company hold various outstanding warrants ie c e f purchase company common stock entered warrant repricing exercise agreements series e repriced exercised warrants approximately 168000 series e warrants repriced 1500 per share 397 per share exercised immediately gross proceeds approximately 07 million series e warrants purchase approximately 187000 shares company common stock reduced 1500 per share 450 per share series c f repriced warrants additionally exercise prices certain investors series c series f warrants reduced follows fair value relating modification exercise prices repriced warrants treated deemed dividend statement stockholders’ equity 06 million june 2017 agent warrants pursuant agency agreement dated may 12 2017 katalyst securities llc us katalyst agreed act placement agent connection june 26 2017 private placement offering pursuant agreement agreed pay katalyst aggregate cash fee placement agent financial advisory services equal 10 gross proceeds offering ii nonaccountable expense allowance amount seventy thousand dollars 70000 iii fiveyear warrants purchase number shares common stock equal 10 number shares sold offering katalyst warrants terms private placement warrants issued offering based 1503567 shares common stock sold private placement issued fiveyear warrants katalyst providing purchase 150357 shares company common stock 397 per share note 12stock option plans options purchase shares common stock 2014 stock omnibus plan march 19 2014 board adopted 2014 omnibus stock option plan “2014 plan” replaced 2009 stock incentive plan 2014 plan allowed grants stock options restricted shares stock bonuses equitybased awards employees nonemployee directors company awards 2014 plan may prices terms determined board directors may vesting requirements determined board provided exercise price stock option must least equal fair market value defined 2014 plan share stock grant date granted exercise price option may reduced without approval company’s stockholders certain limited circumstances stock split take action respect stock option would treated repricing rules regulations new york stock exchange 2014 plan amended february 2015 provide grants consultants november 2015 increase number shares reserved issuance plan 06 million shares ii provide board committee administering plan full discretion vesting period servicevesting awards plan including grant awards less minimum vesting requirement terms defined plan iii provide board committee administering plan ability grant stock bonuses executive officers august 29 2017 2014 plan amended increase shares reserved plan 14 million shares october 16 2018 2014 plan amended increase shares reserved plan 80 million shares december 31 2018 approximately 34 million options available issued 2014 plan stock options summary company’s employee stock option activity follows stock options summary company’s nonemployee stock option activity follows stock options blackscholes option pricing model used estimate fair value stock options granted company’s sharebased compensation plans weighted average assumptions used calculating fair values stock options granted years ended december 31 2018 2017 respectively follows following table sets forth stockbased compensation expenses recorded respective periods december 31 2018 total stockbased compensation cost related unvested awards yet recognized 147 million expected weighted average period compensation costs recognized 20 years future option grants impact compensation expense recognized note 13grant income years ended december 31 2018 2017 company received 02 million grant awarded mayo foundation us department defense phase ii clinical trial tpiv200 grant compensated company clinical supplies manufactured provided company clinical study accordance accounting standards update 201409 “revenue contracts customers topic 606” issued financial accounting standards board company recorded 02 million grant income revenue note 14commitments contingencies operating lease obligations company party several operating leases december 31 2018 primarily office space certain locations aggregate future minimum annual payments operating leases december 31 2018 follows total rental expense company’s operating leases 175600 121200 years ended december 31 2018 2017 respectively note 15legal proceedings time company may party ordinary routine litigation incidental business company knows material active pending legal proceedings company involved plaintiff material proceeding pending litigation proceedings company’s directors officers affiliates registered beneficial shareholder adverse party material interest adverse company’s interest note 16related party transactions payment made mr john wilson connection merger discussed note 4 mr john wilson former ceo marker cell reimbursed certain funds advanced marker cell prior closing merger following consummation merger connection obligation reimburse mr wilson expenses company paid mr wilson 100000 part transaction expenses company incurred effective time merger part terms thereof mr wilson became director company baylor college medicine “bcm” sponsored research agreement november 16 2018 furtherance bcm license agreement contemplated terms thereof company entered sponsored research agreement “sra” bcm provided conduct research company credentialed personnel baylor’s center cell gene therapy research supervised bcm’s coinvestigators dr vera dr leen set forth named sra fouryear term pursuant sra company agreed pay bcm 256272 years one two sra 76882 paid front 153764 paid equal monthly installments two years final payment 25626 receipt final written report payments years three four covered amendment year ended december 31 2018 company paid bcm 0 sra upfront payment made january 2019 neither dr vera dr leen received payments entitled receive portion payments dr vera dr leen however indirectly benefit payments connection status bcm employees consulting agreementdr vera october 19 2018 closing merger company entered consulting agreement dr juan vera member company’s board directors serve company’s chief development officer consulting agreement provided payment annual base consulting fee 350000 services company discretionary cash payment company maximum 35 base consulting fee award 500000 stock options consulting agreement terminable either party upon 30 days prior written notice one quarter stock options awarded vest first anniversary award remainder vest evenly equal monthly installments threeyear period upon continued performance consulting services dr vera period dr vera accomplished individual field another consulting arrangement parties unrelated company licensed intellectual property bcm resulted research development efforts may pursue similar arrangements future year ended december 31 2018 dr vera paid 60577 company consulting agreement note 17 income taxes company income tax expense due operating losses incurred years ended december 31 2018 2017 effects temporary differences give rise significant portions deferred tax assets december 31 2018 2017 follows december 22 2017 us government enacted comprehensive tax legislation commonly referred tax cuts jobs act “tax act” makes broad complex changes us tax code certain changes may applicable company including limited reducing us federal corporate tax rate 34 percent 21 percent creating new limitation deductible interest expense eliminating corporate alternative minimum tax “amt” modifying rules related uses limitations net operating loss carryforwards generated tax years ending december 31 2017 changing rules pertaining taxation profits earned abroad changes tax rates tax laws accounted period enactment tax act reduces corporate tax rate 21 percent effective january 1 2018 company assesses likelihood deferred tax assets realized extent realization likely valuation allowance established based upon history losses management believes likely future benefits deferred tax assets realized established full valuation allowance years ended december 31 2018 2017 company decreased prior period deferred tax asset 48 million corresponding increase valuation allowance immaterial adjustment related reduction federal tax rates 34 21 impact prior period financial statements consequently valuation allowance increased 81 million december 31 2018 company research development tax credit carryforwards 406000 offset future federal income taxes research development tax credit carryforwards begin expire 2030 company approximately 570 million federal 373 million state net operating losses “nol”s may available offset future taxable income federal net operating loss carryforwards 416 million utilized expire 2029 2037 federal net operating loss carryforwards 154 million generated 2018 subject 80 limitation taxable income expire carry forward indefinitely state net operating loss carryforwards 218 million utilized begin expire 2035 state net operating loss carryforwards 154 million generated 2018 subject 80 limitation taxable income expire carry forward indefinitely accordance section 382 internal revenue code usage company’s net operating loss carryforwards may limited event change ownership full section 382 analysis prepared nols could subject limitation section 382 years ended december 31 2018 2017 expected tax expense benefit based u federal statutory rate reconciled actual tax provision benefit follows asc 740 prescribes recognition threshold measurement attribute financial statement recognition measurement tax positions taken expected taken tax return benefits recognized tax position must morelikelythannot sustained upon examination taxing authorities december 31 2018 2017 unrecognized tax benefits company recognizes accrued interest penalties income tax expense amounts accrued payment interest penalties december 31 2018 2017 company currently aware issues review could result significant payments accruals material deviation position next year exhibit index executive management contract compensatory plan arrangement confidential treatment granted certain portions exhibit pursuant rule 406 securities act 1933 amended rule 24b2 securities exchange act 1934 amended portions exhibit indicated asterisks omitted pursuant request conditional treatment exhibit submitted separately sec item 15exhibits following exhibits filed part registration statement exhibit numbers correspond exhibit requirements regulation sk filed herewith signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tapimmune inc signature title date glynn wilson chairman chief executive officer principal executive officer april 17 2011 glynn wilson denis corin president chief financial officer acting accounting officer director april 17 2011 denis corin item 15 exhibits following exhibits filed part registration statement exhibit numbers correspond exhibit requirements regulation sk exhibit description 31 amended articles incorporation dated february 3 2009 filed exhibit 31 form 8k filed february 6 2009 incorporated herein reference 32 amended articles incorporation dated may 19 1999 filed exhibit 21 registration statement filed form 10sb september 3 1999 incorporated herein reference 33 amended restated bylaws company dated may 10 2004 filed exhibit 31 companys quarterly report form 10qsb filed may 20 2004 incorporated herein reference 41 securities purchase agreement dated may 17 2010 filed exhibit 101 current report form 8k filed may 18 2010 incorporated herein reference 42 registration rights agreement dated may 24 2010 filed exhibit 104 current report form 8k filed may 18 2010 incorporated herein reference 43 security agreement dated may 24 2010 filed exhibit 103 current report form 8k filed may 18 2010 incorporated herein reference 44 form senior secured convertible note filed exhibit 102 current report form 8k filed may 18 2010 incorporated herein reference 45 form series warrants filed exhibit 105 current report form 8k filed may 18 2010 incorporated herein reference 46 form series b warrants filed exhibit 106 current report form 8k filed may 18 2010 incorporated herein reference 47 form series c warrants filed exhibit 107 current report form 8k filed may 18 2010 incorporated herein reference 48 securities purchase agreement dated february 24 2011 filed exhibit 101 current report form 8k filed march 2 2011 incorporated herein reference 49 form convertible note filed exhibit 102 current report form 8k filed march 2 2011 incorporated herein reference 410 security agreement dated february 24 2011 filed exhibit 103 current report form 8k filed march 2 2011 incorporated herein reference 411 form warrant filed exhibit 104 current report form 8k filed march 2 2011 incorporated herein reference 412 form convertible note connection sale april 12 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 413 security agreement dated april 12 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 414 form securities purchase agreement connection sale units april 14 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 415 form warrant connection securities purchase agreement dated april 14 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 416 form warrants issued november 2009 private placements 101 executive services agreement denis corin filed exhibit 101 quarterly report form 10qsb filed november 14 2007 incorporated herein reference 102 amended executive services agreement denis corin filed exhibit 102 quarterly report form 10qsb filed november 14 2007 incorporated herein reference 103 license agreement made march 6 2000 genemax pharmaceuticals ubc dr jefferies filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 104 collaborative research agreement made september 1 2000 genemax pharmaceuticals genemax pharmaceuticals inc ubc filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 105 production services agreement made march 18 2003 company molecular medicine filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 106 biological materials transfer agreement made october 21 2003 company national institutes health filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 107 option settlement agreement made january 23 2006 genemax pharmaceuticals genemax pharmaceuticals inc ubc dr jefferies filed exhibit companys current report form 8k filed january 24 2006 incorporated reference herein 108 2009 stock incentive plan filed exhibit b information statement filed definitive schedule 14c january 29 2010 incorporated herein reference 109 technology option agreement dated june 1 2010 tapimmune inc mayo foundation education research filed exhibit companys current report form 8k filed june 4 2010 incorporated reference herein 1010 employment agreement dr glynn wilson company dated march 16 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 211 subsidiaries tapimmune inc filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 311 certification principal executive officer acting principal accounting officer pursuant securities exchange act 1934 rule 13a14a 15d14a 321 certification principal executive officer acting principal accounting officer pursuant 18 usc section 1350 filed herewith signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated item 15 exhibits financial statement schedules athe documents filed part report follows 1 financial statements accompanying report independent registered public accounting firm set forth immediately following signature page report pages 2 financial statement schedules omitted inapplicable required information included elsewhere financial statements notes thereto 3 exhibits required filed report able incorporated reference listed “exhibit index” following financial statements b exhibits required item 601 regulation sk submitted incorporated reference listed separate section herein immediately following “exhibit index” incorporated herein reference c applicable item 16 form 10k summary applicable signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized dated march 14 2017 tapimmune inc glynn wilson dr glynn wilson chief executive officer principal executive officer michael j loiacono michael j loiacono chief financial officer principal accounting officer power attorney undersigned officers directors tapimmune inc hereby constitutes appoints glynn wilson michael j loiacono true lawful attorneyinfact agent name place stead capacities sign name amendments report form 10k related documents cause filed securities exchange commission granting unto said attorneys full power authority perform act thing necessary proper done premises fully intents purposes undersigned could personally present undersigned hereby ratifies confirms said attorney shall lawfully cause done virtue hereof pursuant requirements securities exchange act 1934 report signed following persons march 14 2017 behalf registrant capacities indicated glynn wilson glynn wilson director sherry grisewood sherry grisewood director david laskowpooley david laskowpooley director mark reddish mark reddish director john bonfiglio john bonfiglio director frederick wasserman frederick wasserman director joshua silverman joshua silverman director michael j loiacono michael j loiacono chief financial officer s1 tapimmune inc consolidated financial statements december 31 2016 report independent registered public accounting firm audit committee board directors shareholders tapimmune inc audited accompanying consolidated balance sheets tapimmune inc “company” december 31 2016 2015 related consolidated statements operations changes stockholders’ equity deficit cash flows years ended financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement company required engaged perform audit internal control financial reporting audit included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audit also includes examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tapimmune inc december 31 2016 2015 consolidated results operations cash flows years ended conformity accounting principles generally accepted united states america accompanying financial statements prepared assuming company continue going concern discussed note 2 financial statements company suffered losses operations require identifying new sources capital fund operations matters raise substantial doubt company’s ability continue going concern management’s plans concerning matters also discussed note 2 consolidated financial statements accompanying financial statements include adjustments might result outcome uncertainty marcum llp new york ny march 14 2017 tapimmune inc consolidated balance sheets accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements operations accompanying notes integral part consolidated financial statements tapimmune inc consolidated statement stockholders’ equity deficit accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements cash flows accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements cash flows accompanying notes integral part consolidated financial statements tapimmune inc notes consolidated financial statements december 31 2016 note 1nature operations tapimmune inc “company” nevada corporation incorporated 1992 biotechnology company focusing immunotherapy specializing development innovative peptide genebased immunotherapeutics vaccines treatment oncology infectious disease unlike vaccine technologies narrowly address initiation immune response tapimmunes approach broadly stimulates cellular immune system enhancing function killer tcells thelper cells restoring antigen presentation tumor cells allowing recognition killing immune system phase study mayo clinic rochester mn evaluating safety immune responses set proprietary her2neu antigens successfully completed results led decision proceed phase ii clinical studies 2017 separate phase study also conducted mayo foundation “mayo” ovarian breast cancer folate receptor alpha folate receptor alpha expressed nearly 50 breast cancers addition 95 ovarian cancers treatment options surgery chemotherapy leaving important urgent clinical need new therapeutic time recurrence relatively short type cancer survival prognosis extremely poor recurrence usa alone approximately 30000 ovarian cancer patients newly diagnosed every year folate receptor antigens applicable ovarian triplenegative breast cancer diseases treatment options beyond surgery chemotherapy therefore company hopeful might ideal candidate orphan drug status indications study successfully completed results led decision proceed multiple phase ii studies 2017 addition enhancing visibility cancer infected cells patient’s immune system critical aspect effective vaccine regard tapimmune’s polystart™ nucleic acidbased technology provides fourfold increase target cell specific naturally processed antigenic epitopes cells surface increased cell surface presentation corresponding increases activated helper andor longlived killer tcell populations effectively seek work destroy patient’s cancer cells liquidity financial condition managements plans consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2016 company cash balances approximately 7851000 historically company incurred significant losses development business ability company continue going concern dependent raising additional capital fund current clinical trials ongoing research development maintenance protection patents ultimately generating future profitable operations planned expenditures relating current future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities management addressing going concern remediation seeking new sources capital continuing initiatives raise capital private placements related party loans institutional sources meet future working capital requirements historically company raised capital issuances various financial instruments 2016 company completed significant restructuring outstanding debt equity instruments equity additional capital required expand programs including preclinical work progress clinical trials lead vaccine candidates strategic partnerships needed continue product development portfolio fund development costs measures successful may contribute reduce risk going concern uncertainties company beyond next twelve months certainty company able arrange sufficient funding continue development products marketability reverse stock split september 13 2016 company’s board directors approved 1for12 reverse stock split company’s authorized issued outstanding common stock reverse stock split became effective september 16 2016 upon effectiveness reverse stock split every twelve shares outstanding common stock combined one share common stock ii number shares common stock outstanding warrant option purchase common stock exercisable proportionally decreased iii exercise price outstanding warrant option purchase common stock proportionately increased historical share per share amounts reflected annual report adjusted reflect reverse stock split note 2summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america “gaap” principles consolidation financial statements include accounts company whollyowned dormant subsidiary genemax pharmaceuticals inc significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include valuation allowance deferred tax assets determining fair value stockbased compensation stockbased transactions fair value components warrant liabilities accrued liabilities fair value measurements company follows accounting standards codification “asc” 820 “fair value measurements disclosures” “asc 820” company’s financial assets liabilities remeasured reported fair value reporting period remeasured reported fair value least annually using fair value hierarchy broken three levels level inputs defined follows · level 1 quoted prices unadjusted active markets identical assets liabilities · level 2 inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities · level 3 unobservable inputs supported little market activity significant fair value assets liabilities financial instruments concentration credit risk patents patent application costs although company believes patents underlying technology continuing value amount future benefits derived patents uncertain patent costs therefore expensed incurred stockbased compensation company follows provisions asc 718 “compensation stock compensation” requires measurement recognition compensation expense sharebased payment awards made employees nonemployee directors consultants including employee stock options stock compensation expense based grant date fair value estimated accordance provisions asc 718 recognized expense requisite service period recorded general administrative expenses stock options warrants granted consideration services rendered nonemployees company recognizes compensation expense accordance requirements asc topic 505 “equity” nonemployee option warrant grants vest immediately upon grant recorded expense vesting period end financial reporting period prior vesting value options warrants calculated using blackscholes optionpricing model remeasured using fair value company’s common stock noncash compensation recognized period adjusted accordingly since fair market value options warrants granted nonemployees subject change future amount future compensation expense include fair value remeasurements stock options warrants fully vested stockbased compensation measured grant date based fair value award fair value award ultimately expected vest recognized expense straightline basis requisite service period generally vesting period expense recognized portion award expected vest reduced estimated forfeiture rate forfeiture rate determined time grant revised necessary subsequent periods actual forfeitures differ estimates expected term expected term options represents period company’s stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility company computes stock price volatility expected terms based historical common stock trading prices riskfree interest rate company bases riskfree interest rate implied yield available u treasury zerocoupon issues equivalent remaining term expected dividend company never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore uses expected dividend yield zero valuation models company recognizes fair value stock options granted nonemployees stockbased compensation expense period related services received research development costs company acquired research development rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs clinical trial expenses include direct costs associated contract research organizations “cros” well patientrelated costs sites trials conducted direct costs associated cros generally payable time materials basis certain enrollment monitoring milestones achieved company incurred costs approximately 3800000 1711000 research development year ended december 31 2016 2015 respectively income taxes company follows asset liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized statement operations period includes date allowances deferred tax assets tax benefits recognized tax positions likely sustained upon examination tax authorities amount recognized measured largest amount benefit greater 50 percent likely realized upon settlement liability “unrecognized tax benefits” recorded tax benefits claimed company’s tax returns meet recognition measurement standards december 31 2016 2015 liability unrecognized tax benefits required reported guidance also discusses classification related interest penalties income taxes company’s policy record interest penalties uncertain tax positions component income tax expense interest penalties recorded years ended december 31 2016 2015 derivative liability company evaluates convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instrument classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date management must determine whether instrument embedded feature indexed company’s stock entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions exercise affects accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain free standing warrants contain contingently puttable cash settlement grant income company recognizes grant income accordance terms stipulated grant awarded company’s collaborators mayo foundation u department defense various situations company receives certain payments us department defense reimbursement clinical supplies payments nonrefundable dependent company’s ongoing future performance company adopted policy recognizing payments grant income received earnings loss per common share basic earnings loss per share include weighted average common shares outstanding without consideration potentially dilutive securities diluted earnings per share include weighted average common shares outstanding potentially dilutive common stock equivalent shares calculation cash credit risk company maintains cash accounts excess federal deposit insurance corporation “fdic” insured limits 250000 december 31 2016 2015 approximately 76 million 63 million respectively cash uninsured based upon fdic insurance coverage limits new accounting pronouncements time new accounting pronouncements issued financial accounting standards board “fasb” standard setting bodies adopt specified effective date unless otherwise discussed believe impact recently issued standards yet effective material impact financial position results operations upon adoption statement cash flows august 2016 fasb issued accounting standards update “asu” 201615 statement cash flows topic 230 amendment provides guidance presentation classification specific cash flow items improve consistency within statement cash flows asu 201615 effective fiscal years interim periods within fiscal years beginning december 15 2017 early adoption permitted company evaluating effect asu 201615 financial statements related disclosures going concern august 2014 fasb issued asu 201415 ”presentation financial statementsgoing concern” defines managements responsibility assess entitys ability continue going concern requires related footnote disclosures substantial doubt ability continue going concern asu 201415 effective company fiscal year ending december 31 2016 early adoption permitted company adopted asu 201415 december 31 2016 consolidated financial statements related disclosures material impact results operations cash flows financial position deferred taxes november 2015 fasb issued asu 201517 ”balance sheet classification deferred taxes” asu 201517 requires deferred tax liabilities assets classified noncurrent classified statement financial position asu 201517 effective financial statements issued fiscal years beginning december 15 2016 interim periods within fiscal years company adopted asu 201517 january 1 2017 adoption material impact company’s financial position results operations compensationstock compensation march 2016 fasb issued asu 201609 compensationstock compensation topic 718 improvements employee sharebased payment accounting asu 201609 companies longer record excess tax benefits certain tax deficiencies additional paidin capital “apic” instead record excess tax benefits tax deficiencies income tax expense benefit income statement apic pools eliminated addition asu 201609 eliminates requirement excess tax benefits realized companies recognize asu 201609 also requires companies present excess tax benefits operating activity statement cash flows rather financing activity furthermore asu 201609 increase amount employer withhold cover income taxes awards still qualify exception liability classification shares used satisfy employer’s statutory income tax withholding obligation employer statutory income tax withholding obligation allowed withhold shares fair value amount taxes owed using maximum statutory tax rate employee’s applicable jurisdictions asu 201609 requires company classify cash paid tax authority shares withheld satisfy statutory income tax withholding obligation financing activity statement cash flows current us gaap specified cash flows classified addition companies elect whether account forfeitures sharebased payments 1 recognizing forfeitures awards occur 2 estimating number awards expected forfeited adjusting estimate likely change currently required amendments asu effective reporting periods beginning january 1 2017 early adoption permitted guidance must adopted period company adopted january 1 2017 company evaluated impact asu 201609 determined adoption impact forfeitures net income taxes material impact company’s future financial statements note 3net loss per share applicable common shareholder net loss per share applicable common stockholders basic loss per common share computed dividing net loss weighted average number common shares outstanding reporting period diluted loss per common share computed similar basic loss per common share except reflects potential dilution could occur dilutive securities obligations issue common stock exercised converted common stock following table sets forth computation loss per share years ended december 31 2016 2015 respectively following securities rounded thousand included diluted net loss per share calculation effect antidilutive periods presented note 4 accounts payable accrued liabilities accounts payable accrued liabilities consist following december 31 2016 2015 respectively note 5research agreements crucell holland b v “crucell” research license option agreement 2003 amended 2008 company acquired research license option agreement crucell use adenoviris technology company made use technology current work asked received work product crucell acquired johnson 2010 december 31 2016 2015 company accrued 492000 amounts owed amended agreement note 6warrant liability weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants categorized within level 3 fair value hierarchy years ended 2016 2015 follows foregoing assumptions recalculated every reporting period subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations following table presents changes level 3 warrant liabilities measured fair value year ended december 31 2016 2015 respectively note 7 fair value measurements financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet derivative liability warrants transfers level 1 2 3 year ended december 31 2016 2015 respectively valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based u treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate company could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements company continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statements operations net cash settlement value time future transactions company consolidates merges another entity depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based u treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction warrant amendment transaction august 10 2016 company holders aggregate 3096665 outstanding series warrants series a1 warrants series c warrants series c1 warrants series warrants series d1 warrants series e warrants series e1 warrants entered warrant amendment agreements “amended warrants” agreed amend terms outstanding series warrants remove provisions previously precluded equity classification treatment company’s balance sheets fair value amended warrants remeasured immediately prior date amendment changes fair value recorded gain 51 million statement operations 155 million reclassified equity note 8promissory notes december 31 2016 company outstanding promissory notes amount 5000 compared two outstanding promissory notes totaling 30000 december 31 2015 one promissory note outstanding due december 31 2016 bears 10 annual interest note 9promissory note related party december 31 2015 company outstanding promissory note amount 23000 owed officer company promissory note bore interest charges fixed repayment terms year ended december 31 2016 note paid full note 10stockholders’ equity preferred stock company authorized 5000000 shares preferred stock 00001 par value per share issuance preferred stock rights privileges restrictions including voting rights dividend conversion rights redemption privileges liquidation preferences shall determined company’s board directors upon issuance date company issued preferred shares series preferred stock company designated 1250000 shares series preferred stock 00001 par value per share issuance date company issued series preferred shares series b preferred stock company designated 1500000 shares series b preferred stock 00001 par value per share issuance date company issued series b preferred shares common stock company authorized 41666667 shares common stock 00001 par value per share issuance significant 2016 2015 common stock transactions follows 2016 common stock transactions private placements august 10 2016 august 25 2016 company completed private placements units certain accredited investors units consisted one share company’s common stock par value 0001 per share ii one fiveyear warrant purchase one share company common stock 600 company issued sold aggregate 653187 units purchase price per unit 480 aggregate approximately 31 million company incurred approximately 08 million agency fees legal costs estimated fair value warrants approximately 35 million fair value estimated using inputs strike price 600 expected term five years estimated volatility 146 riskfree rate 11 expected dividend rate 0 warrant amendment transaction august 10 2016 company holders outstanding series warrants series a1 warrants series c warrants series c1 warrants series warrants series d1 warrants series e warrants series e1 warrants entered warrant amendment agreements agreed amend terms outstanding series warrants remove provisions previously precluded equity classification treatment company’s balance sheets consideration amendment exercise series c warrants series c1 warrants company issued aggregate 750000 additional shares common stock warrant holders new fiveyear warrants purchase 1000000 shares company common stock exercise price 720 per share warrant exercises august 11 2016 holders aggregate 583333 outstanding series c warrants 416667 series c1 warrants providing purchase one share common stock 600 per share exercised warrants aggregate exercise price 6000000 exercise stock options december 2016 dr john bonfiglio exercised 10417 shares common stock pursuant stock options exercise price equal 174 per share debt settlement may 2016 company issued 10191 common shares part debt conversion agreements 2014 fair value common stock approximately 70000 recognized loss debt settlement agreements income expense 2016 management compensation july 2016 company entered employment agreement dr john bonfiglio relating appointment company’s president chief operating officer part agreement dr john bonfiglio awarded 20833 common shares vest upon earlier listing company’s common stock national securities exchange united states ii first anniversary employment agreement long dr john bonfiglio employed company fair value common stock approximately 103000 recognized stockbased compensation general administrative expense consulting arrangements year ended december 31 2016 company issued 75000 common shares part consulting agreements fair value common stock approximately 480000 recognized stockbased compensation general administrative expense 2015 common stock transactions private placements january 2015 company entered securities purchase agreement certain investors sale 610000 units purchase price 240 per unit total purchase price approximately 1250000 net finders’ fee offering expenses approximately 214000 unit consisting one share company’s common stock ii one series warrant purchase one share common stock iii one series b warrant purchase one share common stock iv one series c warrant purchase one share common stock v one series warrant purchase one share common stock vi one series e warrant purchase one share common stock series b c e warrants hereby collectively referred “january 2015 warrants” series warrants exercisable 1800 per share fiveyear term series b warrants exercisable 480 per share sixmonth term series c warrants exercisable 1200 per share fiveyear term series warrants exercisable 900 per share extent series b warrants exercised fiveyear term date series b warrants exercised series e warrants exercisable 1500 per share extent series c warrants exercised fiveyear term date series c warrants exercised pursuant placement agent agreement company agreed issue warrants purchase 30500 common shares substantially terms january 2015 warrants pay 7 finder’s fee gross proceeds sale securities march 2015 company entered securities purchase agreement certain accredited investors sale 416667 units purchase price 240 per unit total purchase price approximately 950000 net finders’ fee offering expenses approximately 50000 unit consisting one share company’s common stock ii one series warrant purchase one share common stock iii one series b warrant purchase one share common stock iv one series c warrant purchase one share common stock v one series warrant purchase one share common stock vi one series e warrant purchase one share common stock series b c e warrants hereby collectively referred “march 2015 warrants” march 2015 warrants substantially terms january 2015 warrants pursuant placement agent agreement company agreed issue warrants purchase 10417 common shares substantially terms march 2015 warrants pay 35 finder’s fee gross proceeds sale securities 2015 management compensation november 2015 company entered employment agreement dr glynn wilson company’s chief executive officer president chairman company part agreement company granted dr wilson 26250 shares unregistered common stock fully vested company recorded obligation deliver shares 191000 based fair value common stock december 31 2015 company issued shares march 2016 reclassified accrued liability stockholders’ equity deficit nine months ended september 30 2016 adjust withholding tax liability payable cash dr wilson returned 26250 fully vested common shares issued 19018 fully vested common shares note 11warrants share purchase warrants summary company’s share purchase warrants december 31 2016 2015 respectively changes period presented 2016 warrant transactions august 2016 warrant exercises august 11 2016 holders aggregate 583333 outstanding series c warrants 416667 series c1 warrants providing purchase one share common stock 600 per share exercised warrants aggregate exercise price 6000000 august 2016 warrant amendments discussed note 10 stockholders’ equity simultaneous exercise warrants company holders outstanding series warrants series a1 warrants series c warrants series c1 warrants series warrants series d1 warrants series e warrants series e1 warrants entered warrant amendment agreements agreed amend terms existing warrant agreements remove provisions previously caused classified derivative liability opposed equity balance sheet consideration amendment exercise series c warrants series c1 warrants issued aggregate 750000 additional shares common stock warrant holders new fiveyear warrants purchase 1000000 shares common stock exercise price 720 per share “series f andwarrants” value shares treated dividend statement stockholders’ equity 45 million estimated fair value warrants approximately 54 million fair value estimated using inputs strike price 720 expected term five years estimated volatility 146 riskfree rate 11 expected dividend rate 0 addition company issued fiveyear warrants placement agent offering providing purchase 65317 shares company common stock 480 per share estimated fair value warrants approximately 04 million fair value estimated using inputs strike price 480 expected term five years estimated volatility 146 riskfree rate 11 expected dividend rate 0 2015 warrant transactions january 2015 financing january 2015 entered securities purchase agreement certain investors sale 610000 units purchase price 240 per unit total purchase price approximately 1250000 net finders’ fee offering expenses approximately 214000 unit consisting one share company’s common stock ii one series warrant purchase one share common stock iii one series b warrant purchase one share common stock iv one series c warrant purchase one share common stock v one series warrant purchase one share common stock vi one series e warrant purchase one share common stock series b c e warrants hereby collectively referred “january 2015 warrants” series warrants exercisable 1800 per share fiveyear term series b warrants exercisable 480 per share sixmonth term series c warrants exercisable 1200 per share fiveyear term series warrants exercisable 900 per share extent series b warrants exercised fiveyear term date series b warrants exercised series e warrants exercisable 1500 per share extent series c warrants exercised fiveyear term date series c warrants exercised pursuant placement agent agreement agreed issue warrants purchase 30500 common shares substantially terms january 2015 warrants march 2015 financing march 2015 entered securities purchase agreement certain accredited investors sale 416667 units purchase price 240 per unit total purchase price approximately 950000 net finders’ fee offering expenses approximately 50000 unit consisting one share company’s common stock ii one series a1 warrant purchase one share common stock iii one series b1 warrant purchase one share common stock iv one series c1 warrant purchase one share common stock v one series d1 warrant purchase one share common stock vi one series e1 warrant purchase one share common stock series a1 b1 c1 d1 e1 warrants hereby collectively referred “march 2015 warrants” march 2015 warrants substantially terms january 2015 warrants pursuant placement agent agreement agreed issue warrants purchase 10417 common shares substantially terms march 2015 warrants restructuring january march 2015 financings may 2015 entered restructuring agreement investors january 2015 march 2015 financings ·the exercise price series a1 warrants changed 1800 per share 120 per share ·the exercise price series b series b1 warrants changed 480 per share 240 per share ·each warrant series b series b1 existing prior restructuring agreement replaced two warrants series ·the exercise price series c series c1 warrants changed 1200 per share 600 per share ·each warrant series c series c1 existing prior restructuring agreement replaced two warrants series result restructuring agreement issued additional 1026667 series b b1 warrants 1026667 series c c1 warrants following table reflects status outstanding warrants january 2015 march 2015 august 2016 private placement financings including placement agent warrants following amendment agreement private placement note 12stockbased compensation options purchase shares common stock 2009 stock omnibus plan october 14 2009 company adopted 2009 stock incentive plan “2009 plan” 2009 plan allows issuance 8333 common shares options granted plan shall prices terms determined board directors may vesting requirements determined board directors foregoing summary 2009 plan complete qualified entirety reference 2009 stock incentive plan copy filed sec date 3679 options issued 2009 plan 2013 outstanding 2014 stock omnibus plan march 19 2014 board adopted 2014 omnibus stock option plan “2014 plan” 2014 plan allowed grants stock options restricted shares stock bonuses equity based awards employees nonemployee directors company awards 2014 plan may prices terms determined board directors may vesting requirements determined board provided exercise price stock option must least equal fair market value defined 2014 plan share stock grant date granted exercise price option may reduced without approval company’s stockholders certain limited circumstances stock split take action respect stock option would treated repricing rules regulations new york stock exchange 2014 originally approved stock could issued 2014 plan bonus employee executive officers company 166667 shares common stock reserved issuance 2014 plan 2014 plan amended february 2015 provide grants consultants november 2015 increase number shares reserved issuance plan 416667 shares 583334 shares ii provide board committee administering plan full discretion vesting period servicevesting awards plan including grant awards less minimum vesting requirement terms defined plan iii provide board committee administering plan ability grant stock bonuses executive officers date 442500 options issued 2014 plan stock options summary company’s stock option activity follows stock options blackscholes option pricing model used estimate fair value stock options granted company’s sharebased compensation plans weighted average assumptions used calculating fair values stock options granted years ended december 31 2016 2015 respectively follows company recorded 1558409 1705067 stockbased compensation expense years ended december 31 2016 2015 respectively total stockbased compensation cost related unvested awards yet recognized weighted average periods awards expected recognized december 31 2016 follows note 13grant income year ended december 31 2016 company received approximately 231000 grant awarded mayo foundation us department defense phase ii clinical trial tpiv 200 grant paid clinical supplies purchased company note 14contingencies commitments employment agreements november 12 2015 company entered employment agreement dr glynn wilson company’s chief executive officer connection dr wilson’s appointment entered employment agreement company employment agreement provides dr wilson’s base salary 280000 per year eligible annual performance bonus 50 base salary term employment agreement two years automatically extended additional 12 months unless terminated dr wilson company july 18 2016 company appointed dr john bonfiglio company’s president chief operating officer connection dr bonfiglio’s appointment entered employment agreement company employment agreement provides dr bonfiglio’s base salary 260000 per year eligible annual performance bonus 50 base salary term employment agreement two years automatically extended additional 12 months unless terminated dr bonfiglio company august 25 2016 company appointed michael j loiacono company’s chief financial officer chief accounting officer secretary treasurer connection mr loiacono’s appointment entered employment agreement company employment agreement provides mr loiacono’s base salary 200000 per year eligible annual performance bonus 50 base salary term employment agreement two years automatically extended additional 12 months unless terminated mr loiacono company leased facilities multiple monthtomonth leases aggregate approximately 3000 per month principal business office lease agreement expires july 2017 rent approximately 3500 per month minimum rental payments required 2017 operating office leases december 31 2016 approximately 38700 note 15legal proceedings time company may party ordinary routine litigation incidental business know material active pending legal proceedings company involved plaintiff material proceeding pending litigation proceedings directors officers affiliates registered beneficial shareholder adverse party material interest adverse interest note 16income taxes company income tax expense due operating losses incurred years ended december 31 2016 2015 approximately 380000 nonqualified stock options cancelled 2016 due terminations resulted reversal deferred tax asset approximately 140000 cancellations result book income december 31 2016 effects temporary differences give rise significant portions deferred tax assets december 31 2016 2015 follows company assesses likelihood deferred tax assets realized extent realization likely valuation allowance established based upon history losses management believes likely future benefits deferred tax assets realized established full valuation allowance years ended december 31 2016 2015 valuation allowance increased 30 million december 31 2016 company research development tax credit carryforwards 117000 offset future federal income taxes research development tax credit carryforwards begin expire 2029 company approximately 31000000 federal 11200000 state net operating loss “nol”s may available offset future taxable income federal net operating loss carryforwards utilized expire 2029 2036 state net operating loss carryforwards utilized expire 2036 accordance section 382 internal revenue code usage company’s net operating loss carryforwards may limited event change ownership full section 382 analysis prepared nols could subject limitation section 382 years ended december 31 2016 2015 expected tax expense benefit based u federal statutory rate reconciled actual tax provision benefit follows asc 740 prescribes recognition threshold measurement attribute financial statement recognition measurement tax positions taken expected taken tax return benefits recognized tax position must morelikelythannot sustained upon examination taxing authorities december 31 2016 2015 unrecognized tax benefits company recognizes accrued interest penalties income tax expense amounts accrued payment interest penalties december 31 2016 2015 company currently aware issues review could result significant payments accruals material deviation position next year reconciliation company’s effective tax rate statutory us federal rate follows exhibit index 101ins xbrl instance document x 101sch xbrl taxonomy extension schema document x 101cal xbrl taxonomy extension calculation linkbase document x 101def xbrl taxonomy extension definition linkbase document x 101lab xbrl taxonomy extension label linkbase document x 101pre xbrl taxonomy extension presentation linkbase document x executive management contract compensatory plan arrangement confidential treatment granted certain portions exhibit pursuant rule 406 securities act 1933 amended rule 24b2 securities exchange act 1934 amended item 15exhibits following exhibits filed part registration statement exhibit numbers correspond exhibit requirements regulation sk exhibit description 31 amended articles incorporation dated february 3 2009 filed exhibit 31 form 8k filed february 6 2009 incorporated herein reference 32 amended articles incorporation dated may 19 1999 filed exhibit 21 registration statement filed form 10sb september 3 1999 incorporated herein reference 33 amended restated bylaws company dated may 10 2004 filed exhibit 31 companys quarterly report form 10qsb filed may 20 2004 incorporated herein reference 41 securities purchase agreement dated may 17 2010 filed exhibit 101 current report form 8k filed may 18 2010 incorporated herein reference 42 registration rights agreement dated may 24 2010 filed exhibit 104 current report form 8k filed may 18 2010 incorporated herein reference 43 security agreement dated may 24 2010 filed exhibit 103 current report form 8k filed may 18 2010 incorporated herein reference 44 form senior secured convertible note filed exhibit 102 current report form 8k filed may 18 2010 incorporated herein reference 45 form series warrants filed exhibit 105 current report form 8k filed may 18 2010 incorporated herein reference 46 form series b warrants filed exhibit 106 current report form 8k filed may 18 2010 incorporated herein reference 47 form series c warrants filed exhibit 107 current report form 8k filed may 18 2010 incorporated herein reference 48 securities purchase agreement dated february 24 2011 filed exhibit 101 current report form 8k filed march 2 2011 incorporated herein reference 49 form convertible note filed exhibit 102 current report form 8k filed march 2 2011 incorporated herein reference 410 security agreement dated february 24 2011 filed exhibit 103 current report form 8k filed march 2 2011 incorporated herein reference 411 form warrant filed exhibit 104 current report form 8k filed march 2 2011 incorporated herein reference 412 form convertible note connection sale april 12 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 413 security agreement dated april 12 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 414 form securities purchase agreement connection sale units april 14 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 415 form warrant connection securities purchase agreement dated april 14 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 416 form warrants issued november 2009 private placements 101 executive services agreement denis corin filed exhibit 101 quarterly report form 10qsb filed november 14 2007 incorporated herein reference 102 amended executive services agreement denis corin filed exhibit 102 quarterly report form 10qsb filed november 14 2007 incorporated herein reference 103 license agreement made march 6 2000 genemax pharmaceuticals ubc dr jefferies filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 104 collaborative research agreement made september 1 2000 genemax pharmaceuticals genemax pharmaceuticals inc ubc filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 105 production services agreement made march 18 2003 company molecular medicine filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 106 biological materials transfer agreement made october 21 2003 company national institutes health filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 107 option settlement agreement made january 23 2006 genemax pharmaceuticals genemax pharmaceuticals inc ubc dr jefferies filed exhibit companys current report form 8k filed january 24 2006 incorporated reference herein 108 2009 stock incentive plan filed exhibit b information statement filed definitive schedule 14c january 29 2010 incorporated herein reference 109 technology option agreement dated june 1 2010 tapimmune inc mayo foundation education research filed exhibit companys current report form 8k filed june 4 2010 incorporated reference herein 1010 employment agreement dr glynn wilson company dated march 16 2011 filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 211 subsidiaries tapimmune inc filed exhibit companys annual report form 10k filed april 18 2011 incorporated reference herein 311 certification principal executive officer pursuant securities exchange act 1934 rule 13a14a 15d14a 312 certification acting principal accounting officer pursuant securities exchange act 1934 rule 13a14a 15d14a 321 certification principal executive officer pursuant 18 usc section 1350 312 certification acting principal accounting officer pursuant 18 usc section 1350 101ins xbrl instance document 101sch xbrl taxonomy extension schema document 101cal xbrl taxonomy extension calculation linkbase document 101def xbrl taxonomy extension definition linkbase document 101lab xbrl taxonomy extension label linkbase document 101pre xbrl taxonomy extension presentation linkbase document filed herewith signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tapimmune inc glynn wilson glynn wilson chairman principal executive officer date april 16 2012 denis corin denis corin chief financial officer acting principal accounting officer director date april 16 2012 item 15exhibits following exhibits filed part registration statement exhibit numbers correspond exhibit requirements regulation sk exhibit description 101 option agreement dated march 18 2014 company ayer special situations fund lp 311 certification principal executive officer acting principal accounting officer pursuant securities exchange act 1934 rule 13a14a 15d14a 321 certification principal executive officer acting principal accounting officer pursuant 18 usc section 1350 101ins xbrl instance document 1 101sch xbrl taxonomy extension schema document 1 101cal xbrl taxonomy extension calculation linkbase document 1 101def xbrl taxonomy extension definition linkbase document 1 101lab xbrl taxonomy extension label linkbase document 1 101pre xbrl taxonomy extension presentation linkbase document 1 accordance temporary hardship exemption provided rule 201 regulation st date interactive data file required submitted extended six business days signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tapimmune inc glynn wilson chairman chief executive officer principal executive officer acting principal accounting officer date april 14 2014 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated glynn wilson glynn wilson director mark reddish mark reddish director sherry grisewood sherry grisewood director item 15 exhibits financial statement schedules documents filed part report follows 1 financial statements accompanying report independent registered public accounting firm set forth immediately following signature page report pages 2 financial statement schedules omitted inapplicable required information included elsewhere financial statements notes thereto 3 following list exhibits filed part annual report form 10k exhibit index executive management contract compensatory plan arrangement confidential treatment granted certain portions exhibit pursuant rule 406 securities act 1933 amended rule 24b2 securities exchange act 1934 amended portions exhibit indicated asterisks omitted pursuant request conditional treatment exhibit submitted separately sec certifications furnished solely accompany annual report pursuant 18 usc section 1350 filed purposes section 18 securities exchange act 1934 amended incorporated reference filing registrant whether made date hereof regardless general incorporation language filing item 16 form 10k summary none signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized dated march 9 2021 marker therapeutics inc peter hoang peter hoang chief executive officer principal executive officer anthony kim anthony kim chief financial officer principal financial accounting officer power attorney undersigned officers directors marker therapeutics inc hereby constitutes appoints peter hoang anthony kim true lawful attorneyinfact agent name place stead capacities sign name amendments report form 10k related documents cause filed securities exchange commission granting unto said attorneys full power authority perform act thing necessary proper done premises fully intents purposes undersigned could personally present undersigned hereby ratifies confirms said attorney shall lawfully cause done virtue hereof s1 pursuant requirements securities exchange act 1934 report signed following persons march 9 2021 behalf registrant capacities indicated signature title date peter hoang president chief executive officer director principal executive officer march 9 2021 peter hoang frederick wasserman director march 9 2021 frederick wasserman david laskowpooley director march 9 2021 david laskowpooley john wilson director march 9 2021 john wilson juan vera director march 9 2021 juan vera n david eansor director march 9 2021 n david eansor steve elms director march 9 2021 steve elms anthony kim chief financial officer principal financial accounting officer march 9 2021 anthony kim s2 marker therapeutics inc consolidated financial statements december 31 2020 december 31 2019 report independent registered public accounting firm consolidated balance sheets consolidated statements operations consolidated statements stockholders’ equity consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm shareholders board directors marker therapeutics inc opinion financial statements audited accompanying consolidated balance sheet marker therapeutics inc “company” december 31 2020 2019 related consolidated statements operations stockholders’ equity deficit cash flows two years period ended december 31 2020 related notes collectively referred “financial statements” opinion financial statements present fairly material respects financial position company december 31 2020 2019 results operations cash flows two years period ended december 31 2020 conformity accounting principles generally accepted united states america explanatory paragraph going concern accompanying consolidated financial statements prepared assuming company continue going concern fully described note 2 company significant working capital deficiency incurred significant losses needs raise additional funds meet obligations sustain operations conditions raise substantial doubt companys ability continue going concern managements plans regard matters also described note 2 consolidated financial statements include adjustments might result outcome uncertainty basis opinion financial statements responsibility companys management responsibility express opinion companys financial statements based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether due error fraud company required engaged perform audit internal control financial reporting part audits required obtain understanding internal control financial reporting purpose expressing opinion effectiveness companys internal control financial reporting accordingly express opinion audit included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audit also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audit provides reasonable basis opinion critical audit matters critical audit matters arising current period audit financial statements communicated required communicated audit committee 1 relate accounts disclosures material financial statements 2 involved especially challenging subjective complex judgments determined critical audit matters marcum llp marcum llp served company’s auditor since 2014 new york ny march 9 2021 marker therapeutics inc consolidated balance sheets accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statements operations accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statements stockholders’ equity deficit accompanying notes integral part consolidated financial statements marker therapeutics inc consolidated statements cash flows accompanying notes integral part consolidated financial statements marker therapeutics inc notes consolidated financial statements fiscal years december 31 2020 2019 note 1 nature operations marker therapeutics inc delaware corporation “company” “we” clinicalstage immunooncology company specializing development commercialization novel cellbased immunotherapies innovative peptidebased vaccines treatment hematological malignancies solid tumor indications company’s multitaaspecific cell technology based selective expansion nonengineered tumorspecific cells recognize tumor associated antigens tumor targets kill tumor cells expressing targets cells designed recognize multiple tumor targets produce broad spectrum antitumor activity company incorporated nevada 1992 reincorporated delaware october 2018 note 2 financial condition going concern management plans december 31 2020 company cash equivalents approximately 214 million company’s activities since inception consisted principally acquiring product technology rights raising capital performing research development successful completion company’s development programs ultimately attainment profitable operations dependent future events including among things ability access potential markets secure financing successfully progress product candidates preclinical clinical development obtain regulatory approval one product candidates maintain enforce intellectual property rights develop customer base attract retain motivate qualified personnel develop strategic alliances collaborations inception company funded combination equity debt financings company expects continue incur substantial losses next several years development phase fully execute business plan company need complete certain research development activities clinical trials company’s product candidates require regulatory approval prior commercialization activities span many years require substantial expenditures complete may ultimately unsuccessful delays completing activities could adversely impact company plans meet capital requirements primarily issuances debt equity securities longer term revenue sales product candidates approved based company’s clinical research development plans timing expectations related progress programs company expects cash equivalents december 31 2020 enable company fund operating expenses capital expenditure requirements third quarter 2021 factors raise substantial doubt regarding companys ability continue going concern company based estimate assumptions may prove wrong company could utilize available capital resources sooner currently expects furthermore company’s operating plan may change may need additional funds sooner planned order meet operational needs capital requirements product development commercialization numerous risks uncertainties associated development commercialization company’s product candidates extent company may enter additional collaborations third parties participate development commercialization company unable estimate amounts increased capital outlays operating expenditures associated current anticipated clinical trials company’s future funding requirements depend many factors ●initiates continues clinical trials product candidates ●continues research development product candidates seeks discover additional product candidates ●seeks regulatory approvals product candidates successfully complete clinical trials ●maintains enforces intellectual property rights ●establishes sales marketing distribution infrastructure scaleup manufacturing capabilities commercialize product candidates may receive regulatory approval ●evaluates strategic transactions company may undertake ●enhances operational financial information management systems hires additional personnel including personnel support development product candidates product candidate approved commercialization efforts factors raise substantial doubt regarding company’s ability continue going concern accompanying consolidated financial statements prepared going concern basis implies company continue realize assets discharge liabilities normal course business consolidated financial statements include adjustments recoverability classification recorded asset amounts classification liabilities might necessary company unable continue going concern addition foregoing based company’s current assessment company expect material impact longterm liquidity due covid19 pandemic however company continue assess effect pandemic operations including clinical programs extent covid19 pandemic impact company’s business operations depend future developments highly uncertain cannot predicted confidence ultimate geographic spread disease duration outbreak duration effect business disruptions shortterm effects ultimate effectiveness travel restrictions quarantines social distancing requirements business closures united states countries contain treat disease potential economic impact brought duration covid19 may difficult assess predict widespread pandemic could result significant disruption global financial markets reducing company’s ability access capital could future negatively affect company’s liquidity addition recession market correction resulting spread covid19 could materially affect company’s business value common stock note 3 significant accounting policies basis presentation accompanying consolidated financial statements prepared conformity accounting principles generally accepted united states america reference footnotes applicable guidance meant refer authoritative us generally accepted accounting principles “gaap” found accounting standards codification “asc” accounting standards update “asu” financial accounting standards board “fasb” principles consolidation consolidated financial statements include accounts company whollyowned subsidiaries marker cell therapy inc genemax pharmaceuticals inc dormant subsidiary wholly owns genemax pharmaceuticals canada inc significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s consolidated financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include valuation allowance deferred tax assets determining fair value stockbased compensation stockbased transactions fair value components warrant liabilities accrued liabilities cash equivalents credit risk company considers highly liquid investments maturity three months less purchased cash equivalents cash equivalents december 31 2020 consisted cash certificates deposit institutions united states balances certain institutions exceeded federal deposit insurance corporation insured limits us government agency securities company maintains cash accounts excess federal deposit insurance corporation “fdic” insured limits 250000 december 31 2020 approximately 27 million cash uninsured based upon fdic insurance coverage limits property equipment leasehold improvements furniture equipment software recorded cost depreciated using straightline method estimated useful lives related assets range three five years leasehold improvements amortized shorter estimated useful life remaining lease term property equipment construction progress june 2020 company entered lease manufacturing facility houston texas connection manufacturing facility company incurred costs pursuant agreement vendor design engineer build install modular cleanrooms manufacturing facility facilitys construction completed december 2020 certificate occupancy delivered company january 2021 placed service january 2021 costs associated buildout recorded either manufacturing equipment andor leasehold improvements amortized estimated useful life asset andor leasehold lease fair value measurements company follows accounting standards codification “asc” 820 “fair value measurements disclosures” “asc 820” company’s financial assets liabilities remeasured reported fair value reporting period remeasured reported fair value least annually using fair value hierarchy broken three levels level inputs defined follows ●level 1 quoted prices unadjusted active markets identical assets liabilities ●level 2 inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities ●level 3 unobservable inputs supported little market activity significant fair value assets liabilities financial instruments concentration credit risk patents patent application costs although company believes patents underlying technology continuing value amount future benefits derived patents uncertain patent costs therefore expensed incurred stockbased compensation company incurs stockbased compensation expense related issuance common stock options company estimates fair value stock options granted using blackscholes option pricing model blackscholes option pricing model developed use estimating fair value traded options vesting restrictions fully transferable addition option valuation models require input highly subjective assumptions including expected stock price volatility expected option life expected term expected life stock options estimated using simplified method company limited historical information develop reasonable expectations future exercise patterns postvesting employment termination behavior stock options grants simplified method based average vesting tranches contractual life grant expected volatility company computes stock price volatility expected terms based historical common stock trading prices riskfree interest rate company bases riskfree interest rate implied yield available u treasury zerocoupon issues equivalent remaining term expected dividend company never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore uses expected dividend yield zero valuation models company amortizes fair value awards expected vest straightline basis requisite service period awards company recognizes fair value stock options granted nonemployees stockbased compensation expense period related services received company paid cash services forfeitures accounted incurred research development costs research development expenses consist expenses incurred performing research development activities including compensation benefits research development employees consultants facilities expenses overhead expenses cost laboratory supplies manufacturing expenses fees paid third parties outside expenses research development costs expensed incurred clinical trial development costs incurred third parties expensed contracted work performed company accrues costs incurred services provided monitoring status clinical trial project invoices received external service providers company estimates depend timeliness accuracy data provided vendors regarding status project total project spending company adjusts accrual actual costs become known contingent milestone payments due third parties research development arrangements milestone payment obligations expensed milestone events achieved income taxes company follows asset liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized statement operations period includes date allowances deferred tax assets tax benefits recognized tax positions likely sustained upon examination tax authorities amount recognized measured largest amount benefit greater 50 percent likely realized upon settlement liability “unrecognized tax benefits” recorded tax benefits claimed company’s tax returns meet recognition measurement standards december 31 2020 2019 liability unrecognized tax benefits required reported guidance also discusses classification related interest penalties income taxes company’s policy record interest penalties uncertain tax positions component income tax expense interest penalties recorded years ended december 31 2020 2019 warrant liability company evaluates options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accounting treatment requires carrying amounts embedded derivatives markedtomarket balance sheet date carried fair value fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instrument classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date management must determine whether instrument embedded feature indexed company’s stock entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions exercise affects accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain freestanding warrants contain contingently putable cash settlement grant income company recognizes grant income accordance terms stipulated grant awarded company’s collaborators mayo foundation u department defense various situations company receives certain payments us department defense reimbursement clinical supplies payments nonrefundable dependent company’s ongoing future performance company adopted policy recognizing payments received revenue accordance accounting standards update 201409 “revenue contracts customers topic 606” issued financial accounting standards board loss per common share basic loss per share includes weighted average common shares outstanding without consideration potentially dilutive securities diluted loss per share includes weighted average common shares outstanding potentially dilutive common stock equivalent shares calculation new accounting standards time new accounting pronouncements issued financial accounting standards board “fasb” standard setting bodies adopt specified effective date unless otherwise discussed company believe impact recently issued standards yet effective material impact financial position results operations upon adoption recent accounting standards yet adopted income taxes december 2019 fasb issued asu 201912 “income taxes topic 740 simplifying accounting income taxes “asu 201912” intended simplify various aspects related accounting income taxes asu 201912 removes certain exceptions general principles topic 740 also clarifies amends existing guidance improve consistent application guidance effective fiscal years interim periods within fiscal years beginning december 15 2020 early adoption permitted company adopted new standard effective january 1 2021 currently evaluating impact standard consolidated financial statements related disclosures note 4 net loss per share applicable common shareholders net loss per share applicable common stockholders basic loss per common share computed dividing net loss weighted average number common shares outstanding reporting period diluted loss per common share computed similarly basic loss per common share except reflects potential dilution could occur dilutive securities obligations issue common stock exercised converted common stock following table sets forth computation loss per share years ended december 31 2020 2019 respectively following securities rounded thousand included diluted net loss per share calculation effect antidilutive periods presented note 5 receivable pursuant company’s lease agreement manufacturing facility company incurred paid construction invoices directly structural improvements facility building manufacturing modular cleanroom ie leasehold improvements manufacturing equipment time construction invoices received company fixed asset recorded constructioninprogress accordance agreement upon completion facility’s construction company owed 10 million reimbursement landlord receivable recorded provides legal right receive construction reimbursements landlord tenant improvement allowances construction facility completed december 2020 certificate occupancy delivered company january 2021 fiscal year ended 2020 company recorded 10 million receivable consolidated financial statements company expects receive 10 million first half 2021 note 6 property equipment property equipment consist following december 31 2020 2019 respectively depreciation expense years ended december 31 2020 2019 approximately 05 million 01 million respectively june 2020 company entered lease manufacturing facility houston texas connection manufacturing facility company incurred costs pursuant agreement vendor design engineer build eventually install modular cleanrooms manufacturing facility 68 million recorded fixed assets construction progress balance sheet december 31 2020 completion facility’s construction occurred december 2020 company received certificate occupancy january 2021 placed service january 2021 january 2021 costs associated buildout recorded either manufacturing equipment andor leasehold improvements amortized estimated useful life asset andor leasehold lease connection research facility company opened second quarter 2020 company incurred approximately 22 million costs acquiring necessary lab equipment carry experiments 22 million included lab equipment within fixed assets depreciated five years additionally company incurred 03 million leasehold improvements relating research facility note 7 leases company entered new agreement corporate headquarters houston texas commenced august 2020 initial lease term ten years two fiveyear renewal options fixed rent payments initial term approximately 56 million additionally company also responsible share operating expenses december 31 2020 company remaining 41 million lease liability 40 million related rightofuse asset resulting lease corporate headquarters april 2020 company entered lease research facility houston texas lease term 71 months fixed rent payments initial term approximately 11 million december 31 2020 company remaining 08 million lease liability 08 million related rightofuse asset resulting lease research facility june 2020 company entered lease manufacturing facility houston texas initial lease term ten years rent commencement date fourth quarter 2020 two fiveyear renewal options fixed rent payments initial term approximately 98 million additionally company also responsible share operating expenses accordance agreement upon completion facility’s construction company owed 10 million reimbursement landlord receivable recorded provides legal right receive construction reimbursements landlord tenant improvement allowances december 31 2020 company remaining 72 million lease liability 58 million related rightofuse asset resulting lease manufacturing facility company also leases office space agreements classified operating leases expire 2022 december 31 2020 company remaining 02 million lease liability 02 million related rightofuse asset resulting lease jacksonville florida office space expires 2022 leases require contingent rental payments impose financial restrictions contain residual value guarantees certain company’s leases include renewal options escalation clauses renewal options included calculation lease liabilities rightofuse assets company reasonably certain exercise options variable expenses generally represent company’s share landlord’s operating expenses company act lessor leases classified financing leases december 31 2020 company operating lease liabilities approximately 123 million rightofuse assets approximately 108 million included consolidated balance sheet following summarizes quantitative information company’s operating leases maturities company’s operating leases excluding shortterm leases follows note 8 accounts payable accrued liabilities accounts payable accrued liabilities consist following december 31 2020 2019 respectively note 9 warrant liability weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants categorized within level 3 fair value hierarchy years ended 2020 2019 respectively foregoing assumptions recalculated every reporting period subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations following table presents changes level 3 warrant liabilities reflected accrued expenses measured fair value years ended december 31 2020 2019 respectively note 10 fair value measurements financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet warrant liability transfers level 1 2 3 years ended december 31 2020 2019 respectively valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based u treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate company could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements company continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statements operations net cash settlement value time future transactions company consolidates merges another entity depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based u treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction note 11 stockholders’ equity preferred stock company authorized 5000000 shares preferred stock 0001 par value per share issuance preferred stock rights privileges restrictions including voting rights dividend conversion rights redemption privileges liquidation preferences shall determined company’s board directors upon issuance date company issued preferred shares common stock company authorized 150000000 shares common stock 0001 par value per share issuance significant 2020 2019 common stock transactions follows 2020 common stock transactions exercise stock warrants year ended december 31 2020 certain outstanding warrants exercised 05 million shares common stock providing aggregate proceeds company approximately 06 million board compensation year ended december 31 2020 company issued aggregate 01 million shares common stock nonemployee directors fair value common stock approximately 02 million recognized component stockbased compensation expense general administrative expenses aspire capital february 28 2020 company entered common stock purchase agreement “purchase agreement” aspire capital fund llc “aspire capital” provides upon terms subject conditions limitations set forth therein aspire capital committed purchase aggregate 300 million shares company’s common stock 30month term purchase agreement consideration entering purchase agreement company issued aspire capital 03 million shares company’s common stock commitment fee company recorded commitment fee additional paid capital december 31 2020 aspire capital purchased 41 million shares purchase agreement providing aggregate proceeds company approximately 62 million 2019 common stock transactions consulting arrangements year ended december 31 2019 company issued 005 million shares common stock connection consulting agreements fair value common stock approximately 03 million recognized stockbased compensation expense general administrative expenses board compensation year ended december 31 2019 company issued aggregate 003 million shares common stock nonemployee directors fair value common stock approximately 02 million recognized stockbased compensation expense general administrative expenses note 12 warrants share purchase warrants summary company’s share purchase warrants december 31 2020 2019 respectively changes period presented 2020 warrant transactions exercise stock warrants year ended december 31 2020 certain outstanding warrants exercised 05 million shares common stock providing aggregate proceeds company approximately 06 million 2019 warrant transactions exercise stock warrants year ended december 31 2019 certain outstanding warrants exercised 02 million shares common stock providing aggregate proceeds company approximately 08 million note 13 stock option plans options purchase shares common stock 2020 equity incentive plan may 19 2020 board adopted 2020 equity incentive plan 2020 plan replaced 2014 omnibus stock option plan “2014 plan” 2020 plan allows grants stock options restricted shares stock bonuses equitybased awards employees nonemployee directors company awards 2020 plan may prices terms determined board directors may vesting requirements determined board provided exercise price stock option must least equal fair market value defined 2020 plan share stock grant date granted exercise price option may reduced without approval company’s stockholders certain limited circumstances stock split take action respect stock option would treated repricing rules regulations new york stock exchange options granted 2020 plan maximum term ten years date grant options granted 2020 2019 generally vest four years december 31 2020 approximately 47 million options available issued 2020 plan 2014 omnibus stock ownership plan 2014 plan board adopted may 19 2020 subsequently amended time allowed grants stock options restricted shares stock bonuses equitybased awards employees nonemployee directors company terms 2014 plan substantially identical terms 2020 plan described stock options summary company’s stock option activity follows stock options blackscholes option pricing model used estimate fair value stock options granted company’s sharebased compensation plans weighted average assumptions used calculating fair values stock options granted years ended december 31 2020 2019 respectively follows following table sets forth stockbased compensation expenses recorded respective periods december 31 2020 total stockbased compensation cost related unvested awards yet recognized 106 million expected weighted average period compensation costs recognized 22 years future option grants impact compensation expense recognized note 14 grant income years ended december 31 2020 2019 company received 05 million 02 million respectively grant awarded mayo foundation us department defense phase ii clinical trial tpiv200 grant compensated company clinical supplies manufactured provided company clinical study accordance accounting standards update 201409 “revenue contracts customers topic 606” issued financial accounting standards board company recorded 05 million 02 million respectively grant income revenue note 15 commitments contingencies arbitration proceeding brought company financial industry regulatory authority inc broker seeking paid approximately 10 million compensation two financing transactions occurred 2018 warrant conversion private placement brokered another broker’s claims based placement agent agreement private placement brokered 2017 alleges entitled compensation 2018 transactions company believes defenses allegations intends vigorously defend matter note 16 legal proceedings time company may party ordinary routine litigation incidental business company knows material active pending legal proceedings company involved plaintiff material proceeding pending litigation proceedings company’s directors officers affiliates registered beneficial shareholder adverse party material interest adverse company’s interest note 17 related party transactions following table sets forth related party transaction expenses recorded years ended december 31 2020 2019 respectively agreements baylor college medicine “bcm” november 2018 february 2020 company entered sponsored research agreements bcm provided conduct research company credentialed personnel bcm’s center cell gene therapy september 2019 company entered clinical supply agreement bcm provided bcm provide company multi tumor antigen specific products october 2019 company entered workforce grant agreement bcm provided bcm provide company manpower costs projects manufacturing quality control testing validation run activities august 2020 company entered clinical trial agreement bcm provided bcm provide company investigatorinitiated research studies purchases biotechne corporation company currently utilizing biotechne corporation two brands purchases reagents primarily cytokines mr david eansor member companys board directors serving president protein sciences segment biotechne corporation consulting agreement dr juan vera october 19 2018 closing company’s merger company entered consulting agreement dr juan vera member company’s board directors serve company’s chief development officer september 1 2019 dr vera became employee company consulting agreement terminated note 18 income taxes company income tax expense due operating losses incurred years ended december 31 2020 2019 effects temporary differences give rise significant portions deferred tax assets december 31 2020 2019 follows company assesses likelihood deferred tax assets realized extent realization likely valuation allowance established based upon history losses management believes likely future benefits deferred tax assets realized established full valuation allowance years ended december 31 2020 2019 valuation allowance increased 51 million december 31 2020 company research development tax credit carryforwards 07 million available offset future federal income taxes research development tax credit carryforwards begin expire 2030 company approximately 972 million federal 390 million state net operating losses “nol”s may available offset future taxable income federal net operating loss carryforwards 416 million utilized expire 2029 2037 federal net operating loss carryforwards 556 million generated 2018 thereafter subject 80 limitation taxable income expire carry forward indefinitely state net operating loss carryforwards 219 million utilized begin expire 2035 state net operating loss carryforwards 171 million generated 2018 thereafter subject 80 limitation taxable income expire carry forward indefinitely accordance section 382 internal revenue code usage company’s net operating loss carryforwards may limited event change ownership full section 382 analysis prepared nols could subject limitation section 382 company’s income tax returns 2016 2019 still open subject audit addition net operating losses arising prior years also subject examination time utilized future years ended december 31 2020 2019 expected tax expense benefit based u federal statutory rate reconciled actual tax provision benefit follows asc 740 prescribes recognition threshold measurement attribute financial statement recognition measurement tax positions taken expected taken tax return benefits recognized tax position must morelikelythannot sustained upon examination taxing authorities december 31 2020 2019 unrecognized tax benefits company recognizes accrued interest penalties income tax expense amounts accrued payment interest penalties december 31 2020 2019 company currently aware issues review could result significant payments accruals material deviation position next year march 27 2020 cares act enabled response covid19 pandemic asc 740 effects changes tax rates laws recognized period new legislation enacted cares act made various tax law changes including among things increasing limitation section 163j internal revenue code 1986 amended “irc” 2019 2020 permit additional expensing interest ii enacting technical correction qualified improvement property immediately expensed irc section 168kiii making modifications federal net operating loss rules including permitting federal net operating losses incurred 2018 2019 2020 carried back five preceding taxable years order generate refund previously paid income taxes iv enhancing recoverability alternative minimum tax credits given company’s full valuation allowance position cares act impact financial statements item 15exhibits following exhibits filed part registration statement exhibit numbers correspond exhibit requirements regulation sk exhibit description 31 amended articles incorporation dated february 3 2009 filed exhibit 31 form 8k filed february 6 2009 incorporated herein reference 32 amended articles incorporation dated may 19 1999 filed exhibit 21 registration statement filed form 10sb september 3 1999 incorporated herein reference 33 amended restated bylaws company dated may 10 2004 filed exhibit 31 company’s quarterly report form 10qsb filed may 20 2004 incorporated herein reference 41 securities purchase agreement dated may 17 2010 filed exhibit 101 current report form 8k filed may 18 2010 incorporated herein reference 42 registration rights agreement dated may 24 2010 filed exhibit 104 current report form 8k filed may 18 2010 incorporated herein reference 43 security agreement dated may 24 2010 filed exhibit 103 current report form 8k filed may 18 2010 incorporated herein reference 44 form senior secured convertible note filed exhibit 102 current report form 8k filed may 18 2010 incorporated herein reference 45 form series warrants filed exhibit 105 current report form 8k filed may 18 2010 incorporated herein reference 46 form series b warrants filed exhibit 106 current report form 8k filed may 18 2010 incorporated herein reference 47 form series c warrants filed exhibit 107 current report form 8k filed may 18 2010 incorporated herein reference 48 securities purchase agreement dated february 24 2011 filed exhibit 101 current report form 8k filed march 2 2011 incorporated herein reference 49 form convertible note filed exhibit 102 current report form 8k filed march 2 2011 incorporated herein reference 410 security agreement dated february 24 2011 filed exhibit 103 current report form 8k filed march 2 2011 incorporated herein reference 411 form warrant filed exhibit 104 current report form 8k filed march 2 2011 incorporated herein reference 412 form convertible note connection sale april 12 2011 filed exhibit company’s annual report form 10k filed april 18 2011 incorporated reference herein 413 security agreement dated april 12 2011 filed exhibit company’s annual report form 10k filed april 18 2011 incorporated reference herein 414 form securities purchase agreement connection sale units april 14 2011 filed exhibit company’s annual report form 10k filed april 18 2011 incorporated reference herein 415 form warrant connection securities purchase agreement dated april 14 2011 filed exhibit company’s annual report form 10k filed april 18 2011 incorporated reference herein 416 form warrants issued november 2009 private placements 101 executive services agreement denis corin filed exhibit 101 quarterly report form 10qsb filed november 14 2007 incorporated herein reference 102 amended executive services agreement denis corin filed exhibit 102 quarterly report form 10qsb filed november 14 2007 incorporated herein reference 103 license agreement made march 6 2000 genemax pharmaceuticals ubc dr jefferies filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 104 collaborative research agreement made september 1 2000 genemax pharmaceuticals genemax pharmaceuticals inc ubc filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 105 production services agreement made march 18 2003 company molecular medicine filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 106 biological materials transfer agreement made october 21 2003 company national institutes health filed exhibit annual report form 10ksb year ended december 31 2004 filed april 15 2005 incorporated reference herein 107 option settlement agreement made january 23 2006 genemax pharmaceuticals genemax pharmaceuticals inc ubc dr jefferies filed exhibit company’s current report form 8k filed january 24 2006 incorporated reference herein 108 2009 stock incentive plan filed exhibit b information statement filed definitive schedule 14c january 29 2010 incorporated herein reference 109 technology option agreement dated june 1 2010 tapimmune inc mayo foundation education research filed exhibit company’s current report form 8k filed june 4 2010 incorporated reference herein 1010 employment agreement dr glynn wilson company dated march 16 2011 filed exhibit company’s annual report form 10k filed april 18 2011 incorporated reference herein 211 subsidiaries tapimmune inc filed exhibit company’s annual report form 10k filed april 18 2011 incorporated reference herein 311 certification principal executive officer acting principal accounting officer pursuant securities exchange act 1934 rule 13a14a 15d14a 321 certification principal executive officer acting principal accounting officer pursuant 18 usc section 1350 101ins xbrl instance document 101sch xbrl taxonomy extension schema document 101cal xbrl taxonomy extension calculation linkbase document 101def xbrl taxonomy extension definition linkbase document 101lab xbrl taxonomy extension label linkbase document 101pre xbrl taxonomy extension presentation linkbase document filed herewith signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tapimmune inc glynn wilson glynn wilson chairman chief executive officer principal executive officer acting principal accounting officer date april 15 2015 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated glynn wilson glynn wilson director april 15 2015 sherry grisewood sherry grisewood director april 15 2015 david laskowpooley david laskowpooley director april 15 2015 item 15 exhibits financial statement schedules documents filed part report follows 1 financial statements accompanying report independent registered public accounting firm set forth immediately following signature page report pages 2 financial statement schedules omitted inapplicable required information included elsewhere financial statements notes thereto 3 exhibits required filed report able incorporated reference listed “exhibit index” following financial statements b exhibits required item 601 regulation sk submitted incorporated reference listed separate section herein immediately following “exhibit index” incorporated herein reference c applicable item 16 form 10k summary none signatures pursuant requirements section 13 15 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized dated march 23 2018 tapimmune inc peter hoang peter hoang chief executive officer principal executive officer michael j loiacono michael j loiacono chief financial officer principal accounting officer power attorney undersigned officers directors tapimmune inc hereby constitutes appoints peter hoang michael j loiacono true lawful attorneyinfact agent name place stead capacities sign name amendments report form 10k related documents cause filed securities exchange commission granting unto said attorneys full power authority perform act thing necessary proper done premises fully intents purposes undersigned could personally present undersigned hereby ratifies confirms said attorney shall lawfully cause done virtue hereof pursuant requirements securities exchange act 1934 report signed following persons march 23 2018 behalf registrant capacities indicated signature title date peter hoang president chief executive officer director march 23 2018 peter hoang sherry grisewood director march 23 2018 sherry grisewood glynn wilson director march 23 2018 dr glynn wilson david laskowpooley director march 23 2018 david laskowpooley mark reddish director march 23 2018 mark reddish frederick wasserman director march 23 2018 frederick wasserman joshua silverman director march 23 2018 joshua silverman michael j loiacono chief financial officer march 23 2018 michael j loiacono s1 tapimmune inc consolidated financial statements december 31 2017 report independent registered public accounting firm shareholders board directors tapimmune inc opinion financial statements audited accompanying consolidated balance sheets tapimmune inc “company” december 31 2017 2016 related consolidated statements operations stockholders’ equity deficit cash flows two years period ended december 31 2017 related notes collectively referred “financial statements” opinion financial statements present fairly material respects financial position company december 31 2017 2016 results operations cash flows two years period ended december 31 2017 conformity accounting principles generally accepted united states america explanatory paragraph going concern accompanying consolidated financial statements prepared assuming company continue going concern fully described note 2 company significant working capital deficiency incurred significant losses needs raise additional funds meet obligations sustain operations conditions raise substantial doubt companys ability continue going concern managements plans regard matters also described note 2 consolidated financial statements include adjustments might result outcome uncertainty basis opinion financial statements responsibility companys management responsibility express opinion companys financial statements based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether due error fraud company required engaged perform audit internal control financial reporting part audits required obtain understanding internal control financial reporting purpose expressing opinion effectiveness companys internal control financial reporting accordingly express opinion audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion marcum llp marcum llp served company’s auditor since 2014 new york ny march 23 2018 tapimmune inc consolidated balance sheets accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements operations accompanying notes integral part consolidated financial statements tapimmune inc consolidated statement stockholders’ equity deficit accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements cash flows accompanying notes integral part consolidated financial statements tapimmune inc consolidated statements cash flows accompanying notes integral part consolidated financial statements tapimmune inc notes consolidated financial statements december 31 2017 note 1nature operations tapimmune inc “company” nevada corporation incorporated 1991 biotechnology company focusing immunotherapy specializing development innovative peptide genebased immunotherapeutics vaccines treatment oncology infectious disease unlike vaccine technologies narrowly address initiation immune response tapimmunes approach broadly stimulates cellular immune system enhancing function killer tcells cd8 thelper cd4 cells restoring antigen presentation tumor cells allowing recognition killing immune system phase study mayo clinic rochester mn evaluating safety immune responses set proprietary her2neu antigens successfully completed results led decision proceed phase ii clinical studies 2017 separate phase study also conducted mayo foundation “mayo” ovarian breast cancer folate receptor alpha folate receptor alpha expressed nearly 50 breast cancers addition 95 ovarian cancers treatment options surgery chemotherapy leaving important urgent clinical need new therapeutic time recurrence relatively short type cancer survival prognosis extremely poor recurrence usa alone approximately 30000 ovarian cancer patients newly diagnosed every year folate receptor antigens applicable ovarian triplenegative breast cancer diseases treatment options beyond surgery chemotherapy therefore company hopeful might ideal candidate orphan drug status indications study successfully completed results led decision proceed multiple phase ii studies 2017 addition enhancing visibility cancer infected cells patient’s immune system critical aspect effective vaccine regard tapimmune’s polystart™ nucleic acidbased technology provides fourfold increase target cell specific naturally processed antigenic epitopes cells surface increased cell surface presentation corresponding increases activated helper andor longlived killer tcell populations effectively seek work destroy patient’s cancer cells note 2summary significant accounting policies basis presentation financial statements presented united states dollars prepared accordance accounting principles generally accepted united states america “gaap” principles consolidation financial statements include accounts company whollyowned dormant subsidiary genemax pharmaceuticals inc significant intercompany balances transactions eliminated upon consolidation use estimates preparation company’s financial statements conformity gaap requires management make estimates assumptions affect certain reported amounts disclosures accordingly actual results could differ materially estimates significant areas requiring management’s estimates assumptions include valuation allowance deferred tax assets determining fair value stockbased compensation stockbased transactions fair value components warrant liabilities accrued liabilities liquidity financial condition managements plans consolidated financial statements prepared basis going concern contemplates realization assets satisfaction liabilities normal course business december 31 2017 company cash balances approximately 51 million historically company incurred significant losses development business ability company continue going concern dependent raising additional capital fund current clinical trials ongoing research development maintenance protection patents ultimately generating future profitable operations planned expenditures relating current future clinical trials company’s immunotherapy vaccine require significant additional funding company dependent future financings fund ongoing research development well working capital requirements company’s future capital requirements depend many factors including rate extent scientific progress research development programs timing cost scope involved clinical trials obtaining regulatory approvals pursuing patent protections timing costs commercialization activities management addressing going concern seeking new sources capital continuing initiatives raise capital private placements related party loans institutional sources meet future working capital requirements sources revenue provide incoming cash flows sustain future operations ability pursue planned business activities dependent upon successful efforts raise additional capital factors raise substantial doubt regarding ability continue going concern historically company raised capital issuances various financial instruments 2016 company completed significant restructuring outstanding debt equity instruments equity additional capital required expand programs including preclinical work progress clinical trials lead vaccine candidates strategic partnerships needed continue product development portfolio fund development costs measures successful may contribute reduce risk going concern uncertainties company beyond next twelve months certainty company able arrange sufficient funding continue development products marketability fair value measurements company follows accounting standards codification “asc” 820 “fair value measurements disclosures” “asc 820” company’s financial assets liabilities remeasured reported fair value reporting period remeasured reported fair value least annually using fair value hierarchy broken three levels level inputs defined follows •level 1 quoted prices unadjusted active markets identical assets liabilities •level 2 inputs level 1 observable either directly indirectly unadjusted quoted prices similar assets liabilities unadjusted quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities •level 3 unobservable inputs supported little market activity significant fair value assets liabilities financial instruments concentration credit risk patents patent application costs although company believes patents underlying technology continuing value amount future benefits derived patents uncertain patent costs therefore expensed incurred stockbased compensation company incurs stockbased compensation expense related restricted stock units stock options fair value restricted stock determined closing market price companys common stock date grant company estimates fair value stock options granted using blackscholes option pricing model blackscholes option pricing model developed use estimating fair value traded options vesting restrictions fully transferable addition option valuation models require input highly subjective assumptions including expected stock price volatility expected option life company amortizes fair value awards expected vest straightline basis requisite service period awards expected volatility based historical volatility expected life options granted based historical expected life riskfree interest rate based us treasury yield effect time grant forfeiture rate based historical data company records stockbased compensation expense awards expected vest dividend yield based fact dividends paid historically none currently expected paid foreseeable future expected term expected term options represents period company’s stockbased awards expected outstanding based simplified method halflife vesting end contractual term expected volatility company computes stock price volatility expected terms based historical common stock trading prices riskfree interest rate company bases riskfree interest rate implied yield available u treasury zerocoupon issues equivalent remaining term expected dividend company never declared paid cash dividends common shares plan pay cash dividends foreseeable future therefore uses expected dividend yield zero valuation models company recognizes fair value stock options granted nonemployees stockbased compensation expense period related services received research development costs company acquired research development rights certain technologies rights licenses acquired considered rights unproven technology may alternate future uses therefore expensed incurred research development costs clinical trial expenses include direct costs associated contract research organizations “cros” well patientrelated costs sites trials conducted direct costs associated cros generally payable time materials basis certain enrollment monitoring milestones achieved company incurred costs approximately 53 million 38 million research development year ended december 31 2017 2016 respectively income taxes company follows asset liability method accounting income taxes method deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts assets liabilities respective tax balances potential deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years differences expected recovered settled effect potential deferred tax assets liabilities change tax rates recognized statement operations period includes date allowances deferred tax assets tax benefits recognized tax positions likely sustained upon examination tax authorities amount recognized measured largest amount benefit greater 50 percent likely realized upon settlement liability “unrecognized tax benefits” recorded tax benefits claimed company’s tax returns meet recognition measurement standards december 31 2017 2016 liability unrecognized tax benefits required reported guidance also discusses classification related interest penalties income taxes company’s policy record interest penalties uncertain tax positions component income tax expense interest penalties recorded years ended december 31 2017 2016 derivative liability company evaluates convertible debt options warrants contracts determine contracts embedded components contracts qualify derivatives separately accounted accounting treatment requires carrying amount embedded derivatives markedtomarket balance sheet date carried fair value event fair value recorded liability change fair value period recorded statement operations either income expense upon conversion exercise modification terms derivative instrument marked fair value conversion date related fair value reclassified equity circumstances embedded conversion option convertible instrument required bifurcated also embedded derivative instruments convertible instrument required bifurcated derivative instruments accounted single compound derivative instrument classification financial instruments including whether instruments recorded liabilities equity reassessed end reporting period equity instruments initially classified equity become subject reclassification reclassified liability fair value instrument reclassification date derivative instrument liabilities classified balance sheet current noncurrent based whether netcash settlement derivative instrument expected within 12 months balance sheet date management must determine whether instrument embedded feature indexed company’s stock entity use twostep approach evaluate whether equitylinked financial instrument embedded feature indexed stock including evaluating instrument’s contingent exercise settlement provisions exercise affects accounting certain freestanding warrants contain exercise price adjustment features ii convertible notes containing fullratchet antidilution protections iii certain freestanding warrants contain contingently puttable cash settlement grant income company recognizes grant income accordance terms stipulated grant awarded company’s collaborators mayo foundation u department defense various situations company receives certain payments us department defense reimbursement clinical supplies payments nonrefundable dependent company’s ongoing future performance company adopted policy recognizing payments grant income received loss per common share basic loss per share include weighted average common shares outstanding without consideration potentially dilutive securities diluted loss per share include weighted average common shares outstanding potentially dilutive common stock equivalent shares calculation cash credit risk company maintains cash accounts excess federal deposit insurance corporation “fdic” insured limits 250000 december 31 2017 2016 approximately 49 million 76 million respectively cash uninsured based upon fdic insurance coverage limits new accounting pronouncements time new accounting pronouncements issued financial accounting standards board “fasb” standard setting bodies adopt specified effective date unless otherwise discussed believe impact recently issued standards yet effective material impact financial position results operations upon adoption recent accounting pronouncements adopted year going concern august 2014 fasb issued asu 201415 “presentation financial statementsgoing concern” defines managements responsibility assess entitys ability continue going concern requires related footnote disclosures substantial doubt ability continue going concern asu 201415 effective company fiscal year ending december 31 2016 early adoption permitted company adopted asu 201415 december 31 2017 consolidated financial statements related disclosures material impact results operations cash flows financial position deferred taxes november 2015 fasb issued asu 201517 “balance sheet classification deferred taxes” asu 201517 requires deferred tax liabilities assets classified noncurrent classified statement financial position asu 201517 effective financial statements issued fiscal years beginning december 15 2016 interim periods within fiscal years company adopted asu 201517 january 1 2017 adoption material impact company’s financial position results operations compensationstock compensation march 2016 fasb issued asu 201609 compensationstock compensation topic 718 improvements employee sharebased payment accounting asu 201609 companies longer record excess tax benefits certain tax deficiencies additional paidin capital “apic” instead record excess tax benefits tax deficiencies income tax expense benefit income statement apic pools eliminated addition asu 201609 eliminates requirement excess tax benefits realized companies recognize asu 201609 also requires companies present excess tax benefits operating activity statement cash flows rather financing activity furthermore asu 201609 increase amount employer withhold cover income taxes awards still qualify exception liability classification shares used satisfy employer’s statutory income tax withholding obligation employer statutory income tax withholding obligation allowed withhold shares fair value amount taxes owed using maximum statutory tax rate employee’s applicable jurisdictions asu 201609 requires company classify cash paid tax authority shares withheld satisfy statutory income tax withholding obligation financing activity statement cash flows current us gaap specified cash flows classified addition companies elect whether account forfeitures sharebased payments 1 recognizing forfeitures awards occur 2 estimating number awards expected forfeited adjusting estimate likely change currently required amendments asu effective reporting periods beginning january 1 2017 early adoption permitted guidance must adopted period company adopted january 1 2017 company evaluated impact asu 201609 determined adoption impact forfeitures net income taxes material impact company’s future financial statements statement cash flows august 2016 fasb issued accounting standards update “asu” 201615 statement cash flows topic 230 amendment provides guidance presentation classification specific cash flow items improve consistency within statement cash flows asu 201615 effective fiscal years interim periods within fiscal years beginning december 15 2017 early adoption permitted company adopted december 31 2017 company evaluated impact asu 201615 determined adoption material impact company’s financial position results operations recent accounting pronouncements yet adopted accounting certain financial instruments round features july 13 2017 fasb issued twopart accounting standards update “asu” 201711 accounting certain financial instruments round features ii replacement indefinite deferral mandatorily redeemable financial instruments certain nonpublic entities certain mandatorily redeemable noncontrolling interests scope exception asu effective public business entities fiscal years interim periods within fiscal years beginning december 15 2018 interim periods within annual period early adoption permitted company evaluating impact adopting standard consolidated financial statements disclosures compensationstock compensation may 2017 fasb issued asu 201709 compensationstock compensation topic 718 scope modification accounting clarifies account change terms conditions sharebased payment award modification new guidance modification accounting required fair value vesting conditions classification award equity liability changes result change terms conditions effective prospectively annual period beginning december 15 2017 interim periods within annual period early adoption permitted company currently evaluating impact adopting standard consolidated financial statements disclosures expect significant impact revenue contracts customers may 2014 fasb issued asu 201409 “revenue contracts customers topic 606” asu 201409 modified asu 201514 “revenue contracts customers topic 606 deferral effective date” asu 201608 “revenue contracts customers topic 606 principal versus agent considerations reporting revenue gross versus net” asu 201610 “revenue contracts customers topic 606 identifying performance obligations licensing” asu 201612 “revenue contracts customers topic 606 narrowscope improvements practical expedients” revenue recognition principle asu 201409 entity recognize revenue depict transfer goods services customers amount reflects consideration entity expects entitled exchange goods services addition new enhanced disclosures required companies may adopt new standard either using full retrospective approach modified retrospective approach practical expedients cumulative effect upon adoption approach company adopt new standard effective january 1 2018 using modified retrospective approach impact adoption asu 201409 reclassify companys grant income revenue note 3net loss per share applicable common shareholder net loss per share applicable common stockholders basic loss per common share computed dividing net loss weighted average number common shares outstanding reporting period diluted loss per common share computed similar basic loss per common share except reflects potential dilution could occur dilutive securities obligations issue common stock exercised converted common stock following table sets forth computation loss per share years ended december 31 2017 2016 respectively following securities rounded thousand included diluted net loss per share calculation effect antidilutive periods presented note 4accounts payable accrued liabilities accounts payable accrued liabilities consist following december 31 2017 2016 respectively note 5research agreement obligations 2003 company entered license agreement foreign based thirdparty certain adenovirus technology license agreement amended several times inception 2008 time amended restated fixed threeyear term expiring 2011 time company pursue technology undertaken work area covered technology license neither company thirdparty took actions pursuant license agreement company carried historical accrual approximately 05 million amended license agreement related certain obligations provided license agreement license agreement governed laws foreign jurisdiction company sought obtained legal advice related accrued obligations expired license agreement company relied upon judicial conclusion opined upon outside legal counsel applicable foreign jurisdiction court foreign jurisdiction would grant relief releasing company liability license agreement accordance accounting standards codification 405 “extinguishment liabilities” company recorded debt extinguishment gain 05 million reduced liability amount owed 0 year ended december 31 2017 note 6warrant liability weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants categorized within level 3 fair value hierarchy years ended 2017 2016 respectively foregoing assumptions recalculated every reporting period subject change based primarily management’s assessment probability events described occurring accordingly changes assessments could materially affect valuations following table presents changes level 3 warrant liabilities reflected accrued expenses measured fair value year ended december 31 2017 2016 respectively note 7fair value measurements financial assets liabilities measured fair value recurring basis summarized disclosed balance sheet derivative liability warrants transfers level 1 2 3 year ended december 31 2017 2016 respectively valuation warrants subjective affected changes inputs valuation model including price per share common stock historical volatility stock price riskfree rates based u treasury security yields expected term warrants dividend yield changes assumptions materially affect fair value estimate company could ultimately incur amounts settle warrant cash settlement value significantly different carrying value liability financial statements company continue classify fair value warrants liability warrants exercised expire amended way would longer require warrants classified liability changes fair value common stock warrants liability recognized component income expense statements operations net cash settlement value time future transactions company consolidates merges another entity depend upon value following inputs time consideration value per share company’s common stock volatility company’s common stock remaining term warrant announcement date riskfree interest rate based u treasury security yields company’s dividend yield warrant requires use volatility assumption equal greater 100 100day volatility function determined trading day immediately following announcement fundamental transaction warrant amendment transaction august 10 2016 company holders aggregate 3096665 outstanding series warrants series a1 warrants series c warrants series c1 warrants series warrants series d1 warrants series e warrants series e1 warrants entered warrant amendment agreements “amended warrants” agreed amend terms outstanding series warrants remove provisions previously precluded equity classification treatment company’s balance sheets fair value amended warrants remeasured immediately prior date amendment changes fair value recorded gain 51 million statement operations 155 million reclassified equity note 8stockholders’ equity preferred stock company authorized 5000000 shares preferred stock 00001 par value per share issuance preferred stock rights privileges restrictions including voting rights dividend conversion rights redemption privileges liquidation preferences shall determined company’s board directors upon issuance date company issued preferred shares series preferred stock company designated 1250000 shares series preferred stock 00001 par value per share issuance date company issued series preferred shares series b preferred stock company designated 1500000 shares series b preferred stock 00001 par value per share issuance date company issued series b preferred shares common stock company authorized 41666667 shares common stock 00001 par value per share issuance significant 2017 2016 common stock transactions follows 2017 common stock transactions june 2017 private placement transaction june 26 2017 company completed private placement units certain accredited investors private placement transaction company sold 1503567 shares common stock 397 per share fiveyear warrants purchase equal number shares common stock exercise price 397 per share 0125 per warrant one common share one warrant sold together unit total 4095 per unit company issued sold aggregate 1503567 units aggregate gross proceeds 62 million company incurred 08 million agency fees legal costs connection offering company reduced exercise price warrants purchase aggregate 653187 shares common stock issued investors private placement closed august 2016 600 per share 397 per share addition company issued fiveyear warrants placement agent offering providing purchase 150357 shares company common stock 397 per share june 2017 exercise repricing warrants held existing institutional investors june 23 2017 certain existing institutional shareholders company hold various outstanding warrants ie c e f purchase company common stock entered warrant repricing exercise agreements series e repriced exercised warrants approximately 168000 series e warrants repriced 1500 per share 397 per share exercised immediately gross proceeds approximately 07 million series e warrants purchase approximately 187000 shares company common stock reduced 1500 per share 450 per share series c f repriced warrants additionally exercise prices certain investors series c series f warrants reduced follows fair value relating modification exercise prices repriced warrants treated deemed dividend statement stockholders’ equity 06 million weighted average summary quantitative information respect valuation methodology significant unobservable inputs used company’s common stock purchase warrants included modification follows 2017 management compensation march 9 2017 company issued 12761 shares stock dr glynn wilson fair value common stock 55000 recognized stockbased compensation general administrative expenses issuance based closing price common stock 431 per share march 9 2017 company issued 5220 shares stock former chief operating officer fair value common stock 22500 recognized stockbased compensation general administrative expenses issuance based closing price common stock 431 per share september 22 2017 company granted mr hoang 250000 shares unregistered fully vested restricted common stock company recorded 08 million stockbased compensation based fair value common stock september 22 2017 70289 shares common stock fair value 02 million withheld closing price companys common stock nasdaq capital market september 22 2017 satisfy certain payroll liabilities applicable award september 22 2017 company granted dr wilson 100000 shares unregistered fully vested restricted common stock company recorded 03 million stockbased compensation based fair value common stock september 22 2017 27350 shares common stock fair value 01 million withheld closing price companys common stock nasdaq capital market september 22 2017 satisfy certain payroll liabilities applicable award consulting arrangements fiscal 2017 company issued 02 million shares common stock part consulting agreements fair value common stock 06 million recognized stockbased compensation general administrative expenses 2016 common stock transactions private placements august 10 2016 august 25 2016 company completed private placements units certain accredited investors units consisted one share company’s common stock par value 0001 per share ii one fiveyear warrant purchase one share company common stock 600 company issued sold aggregate 653187 units purchase price per unit 480 aggregate approximately 31 million company incurred approximately 08 million agency fees legal costs warrant amendment transaction august 10 2016 company holders outstanding series warrants series a1 warrants series c warrants series c1 warrants series warrants series d1 warrants series e warrants series e1 warrants entered warrant amendment agreements agreed amend terms outstanding series warrants remove provisions previously precluded equity classification treatment company’s balance sheets consideration amendment exercise series c warrants series c1 warrants company issued aggregate 750000 additional shares common stock warrant holders new fiveyear warrants purchase 1000000 shares company common stock exercise price 720 per share warrant exercises august 11 2016 holders aggregate 583333 outstanding series c warrants 416667 series c1 warrants providing purchase one share common stock 600 per share exercised warrants aggregate exercise price 6000000 exercise stock options december 2016 dr john bonfiglio exercised 10417 shares common stock pursuant stock options exercise price equal 174 per share debt settlement may 2016 company issued 10191 common shares part debt conversion agreements 2014 fair value common stock approximately 70000 recognized loss debt settlement agreements income expense 2016 management compensation july 2016 company entered employment agreement dr john bonfiglio relating appointment company’s president chief operating officer part agreement dr john bonfiglio awarded 20833 common shares vest upon earlier listing company’s common stock national securities exchange united states ii first anniversary employment agreement long dr john bonfiglio employed company fair value common stock approximately 103000 recognized stockbased compensation general administrative expense consulting arrangements year ended december 31 2016 company issued 75000 common shares part consulting agreements fair value common stock approximately 480000 recognized stockbased compensation general administrative expense note 9warrants share purchase warrants summary company’s share purchase warrants december 31 2017 2016 respectively changes period presented following table reflects status outstanding warrants december 31 2017 warrant transactions june 2017 private placement transaction june 26 2017 company completed private placement units certain accredited investors private placement transaction company sold 1503567 shares common stock 397 per share fiveyear warrants purchase equal number shares common stock exercise price 397 per share 0125 per warrant one common share one warrant sold together unit total 4095 per unit company issued sold aggregate 1503567 units aggregate gross proceeds 62 million company incurred 08 million agency fees legal costs connection offering company reduced exercise price warrants purchase aggregate 653187 shares common stock issued investors private placement closed august 2016 600 per share 397 per share june 2017 exercise repricing warrants held existing institutional investors june 23 2017 certain existing institutional shareholders company hold various outstanding warrants ie c e f purchase company common stock entered warrant repricing exercise agreements series e repriced exercised warrants approximately 168000 series e warrants repriced 1500 per share 397 per share exercised immediately gross proceeds approximately 07 million series e warrants purchase approximately 187000 shares company common stock reduced 1500 per share 450 per share series c f repriced warrants additionally exercise prices certain investors series c series f warrants reduced follows fair value relating modification exercise prices repriced warrants treated deemed dividend statement stockholders’ equity 06 million june 2017 agent warrants pursuant agency agreement dated may 12 2017 katalyst securities llc us katalyst agreed act placement agent connection june 26 2017 private placement offering pursuant agreement agreed pay katalyst aggregate cash fee placement agent financial advisory services equal 10 gross proceeds offering ii nonaccountable expense allowance amount seventy thousand dollars 70000 iii fiveyear warrants purchase number shares common stock equal 10 number shares sold offering katalyst warrants terms private placement warrants issued offering based 1503567 shares common stock sold private placement issued fiveyear warrants katalyst providing purchase 150357 shares company common stock 397 per share 2016 warrant transactions august 2016 warrant exercises august 11 2016 holders aggregate 583333 outstanding series c warrants 416667 series c1 warrants providing purchase one share common stock 600 per share exercised warrants aggregate exercise price 6000000 august 2016 warrant amendments discussed note 8 stockholders’ equity simultaneous exercise warrants company holders outstanding series warrants series a1 warrants series c warrants series c1 warrants series warrants series d1 warrants series e warrants series e1 warrants entered warrant amendment agreements agreed amend terms existing warrant agreements remove provisions previously caused classified derivative liability opposed equity balance sheet consideration amendment exercise series c warrants series c1 warrants issued aggregate 750000 additional shares common stock warrant holders new fiveyear warrants purchase 1000000 shares common stock exercise price 720 per share “series f andwarrants” value shares fair value warrants treated dividend statement stockholders’ equity 45 million august 2016 private placement transaction august 10 2016 august 25 2016 company completed private placements units certain accredited investors units consisted one share company’s common stock par value 0001 per share ii one fiveyear warrant purchase one share company common stock 600 company issued sold aggregate 653187 units purchase price per unit 480 aggregate approximately 31 million company incurred approximately 08 million agency fees legal costs addition company issued fiveyear warrants placement agent offering providing purchase 65317 shares company common stock 480 per share note 10stock option plans options purchase shares common stock 2014 stock omnibus plan march 19 2014 board adopted 2014 omnibus stock option plan “2014 plan” replaced 2009 stock incentive plan 2014 plan allowed grants stock options restricted shares stock bonuses equity based awards employees nonemployee directors company awards 2014 plan may prices terms determined board directors may vesting requirements determined board provided exercise price stock option must least equal fair market value defined 2014 plan share stock grant date granted exercise price option may reduced without approval company’s stockholders certain limited circumstances stock split take action respect stock option would treated repricing rules regulations new york stock exchange 2014 plan amended february 2015 provide grants consultants november 2015 increase number shares reserved issuance plan 06 million shares ii provide board committee administering plan full discretion vesting period servicevesting awards plan including grant awards less minimum vesting requirement terms defined plan iii provide board committee administering plan ability grant stock bonuses executive officers august 29 2017 2014 plan amended increase shares reserved plan 14 million shares december 31 2017 approximately 533000 options available issued 2014 plan stock options summary company’s stock option activity follows stock options blackscholes option pricing model used estimate fair value stock options granted company’s sharebased compensation plans weighted average assumptions used calculating fair values stock options granted years ended december 31 2017 2016 respectively follows company recorded 26 million 16 million stockbased compensation expense general administrative expenses years ended december 31 2017 2016 respectively company recorded 01 million stockbased compensation expense research development year ended december 31 2017 note 11grant income years ended december 31 2017 2016 company received 02 million grant awarded mayo foundation us department defense phase ii clinical trial tpiv200 grant compensated company clinical supplies manufactured provided company clinical study note 12contingencies commitments employment agreements august 25 2016 company appointed michael j loiacono company’s chief financial officer chief accounting officer secretary treasurer connection mr loiacono’s appointment entered employment agreement company employment agreement provides mr loiacono’s base salary 200000 per year eligible annual performance bonus 50 base salary term employment agreement two years automatically extended additional 12 months unless terminated mr loiacono company september 22 2017 company appointed peter hoang company’s president chief executive officer connection mr hoang’s appointment entered employment agreement company employment agreement provides mr hoang’s base salary 362500 per year eligible annual performance bonus 50 base salary addition first anniversary employment agreement mr hoang eligible receive grant stock options purchase number shares common stock equal one percent thenoutstanding common stock company term employment agreement three years automatically extended additional 12 months unless terminated mr hoang company september 22 2017 company entered amended employment agreement dr glynn wilson company’s strategic advisor amended employment agreement provides dr wilson’s base salary 205000 per year eligible annual performance bonus 50 base salary addition upon first anniversary execution amendment employment agreement dr wilson eligible receive additional grant restricted common stock equal 300000 term employment agreement december 31 2018 operating lease obligations company party several operating leases december 31 2017 primarily office space certain locations future minimum lease payments company’s operating leases december 31 2017 next five years thereafter following rounded nearest thousand total rental expense company’s operating leases 121200 82500 years ended december 31 2017 2016 respectively note 13legal proceedings time company may party ordinary routine litigation incidental business company knows material active pending legal proceedings company involved plaintiff material proceeding pending litigation proceedings company’s directors officers affiliates registered beneficial shareholder adverse party material interest adverse company’s interest company involved litigation years ended december 31 2017 2016 note 14income taxes company income tax expense due operating losses incurred years ended december 31 2017 2016 approximately 62000 nonqualified stock options cancelled 2017 due terminations resulted reversal deferred tax asset approximately 16000 cancellations result book income december 31 2017 effects temporary differences give rise significant portions deferred tax assets december 31 2017 2016 follows december 22 2017 us government enacted comprehensive tax legislation commonly referred tax cuts jobs act “tax act” makes broad complex changes us tax code certain changes may applicable company including limited reducing us federal corporate tax rate 35 percent 21 percent creating new limitation deductible interest expense eliminating corporate alternative minimum tax “amt” modifying rules related uses limitations net operating loss carryforwards generated tax years ending december 31 2017 changing rules pertaining taxation profits earned abroad changes tax rates tax laws accounted period enactment tax act reduces corporate tax rate 21 percent effective january 1 2018 company assesses likelihood deferred tax assets realized extent realization likely valuation allowance established based upon history losses management believes likely future benefits deferred tax assets realized established full valuation allowance years ended december 31 2017 2016 consequently deferred tax asset valuation allowance increased 29 million december 31 2017 company research development tax credit carryforwards 117000 offset future federal income taxes research development tax credit carryforwards begin expire 2029 company approximately 417 million federal 219 million state net operating loss “nol”s may available offset future taxable income federal net operating loss carryforwards utilized expire 2029 2037 state net operating loss carryforwards utilized expire 2037 accordance section 382 internal revenue code usage company’s net operating loss carryforwards may limited event change ownership full section 382 analysis prepared nols could subject limitation section 382 years ended december 31 2017 2016 expected tax expense benefit based u federal statutory rate reconciled actual tax provision benefit follows asc 740 prescribes recognition threshold measurement attribute financial statement recognition measurement tax positions taken expected taken tax return benefits recognized tax position must morelikelythannot sustained upon examination taxing authorities december 31 2017 2016 unrecognized tax benefits company recognizes accrued interest penalties income tax expense amounts accrued payment interest penalties december 31 2017 2016 company currently aware issues review could result significant payments accruals material deviation position next year upon completion 2017 us income tax return 2018 may identify additional remeasurement adjustments recorded deferred tax liabilities onetime transition tax continue assess provision income taxes future guidance issued currently anticipate significant revisions necessary revisions treated accordance measurement period guidance outlined staff accounting bulletin 118 reconciliation company’s effective tax rate statutory us federal rate follows exhibit index executive management contract compensatory plan arrangement confidential treatment granted certain portions exhibit pursuant rule 406 securities act 1933 amended rule 24b2 securities exchange act 1934 amended