Marker Therapeutics, Inc. - FORM 10-Q/A

Attached files

file	filename
EX-32.1 - Marker Therapeutics, Inc.	exhibit32-1.htm
EX-31.2 - Marker Therapeutics, Inc.	exhibit31-2.htm
EX-31.1 - Marker Therapeutics, Inc.	exhibit31-1.htm
EX-32.2 - Marker Therapeutics, Inc.	exhibit32-2.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

S Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2010

£ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____ to _____.

Commission File Number: 000-27239

TAPIMMUNE INC.

(Name of registrant in its charter)

NEVADA		88-0277072
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2815 Eastlake Avenue East, Suite 300 Seattle		98102
(Address of principal executive offices)		(Zip Code)

	(206) 336-5560
	(Issuer's telephone number)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

£ Large accelerated filer £ Accelerated filer

£ Non-accelerated filer (Do not check S Smaller reporting company

if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £ No S

As of October 31, 2010, the Company had 40,256,026 shares of common stock issued and outstanding.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A (the “Form 10-Q/A”) to the Quarterly Report on Form 10-Q for TapImmune Inc. (“we” or the “Company”) for the quarterly period ended September 30, 2010, initially filed with the Securities and Exchange Commission (the “SEC”) on November 22, 2010 (the “Original Filing”), is being filed to report restated Stockholders’ deficit and Accumulated paid-in capital relating to revaluation and reclassification of accounting for debt settlement transactions in fiscal year ended December 2009 and recognition of derivative liabilities relating to embedded warrants in the convertible notes in the current period. The restatement of the Company’s accounting for the debt settlement transactions and recognition of derivative liabilities arose in connection with comments received from the staff of the SEC in its review of the Company’s periodic SEC filings.

As a result, and as previously disclosed in filings made with the SEC, on April 6, 2011, the Board of Directors of the Company, determined that the Company’s previously issued consolidated unaudited financial statements and reports filed with the SEC for the quarterly period ended September 30, 2010 should not be relied upon. For a more detailed description of the effects of the restatement, see further discussion in Note 1A, “Restatement of Consolidated Financial Statements” to our consolidated financial statements included in Part I, Item 1 of this report.

For the convenience of the reader, this Form 10-Q/A sets forth the Original Filings in their entirety. However, this Form 10-Q/A only amends and restates Items 1 and 2 of Part I of the Original Filing, in each case, solely as a result of, and to reflect, the restatement and comments of the SEC, and no other information in the Original Filing is amended hereby. The foregoing items have not been updated to reflect other events occurring after the Original Filings or to modify or update those disclosures affected by subsequent events. In addition, pursuant to the rules of the SEC, Item 6 of Part II of the Original Filings has been amended to contain currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, and are attached as Exhibits 31.1, 31.2, 32.1 and 32.2 to this report.

Except for the foregoing amended information, this Form 10-Q/A continues to speak as of the dates of the Original Filings, and the Company has not updated the disclosures contained herein to reflect events that occurred at a later date. Other events occurring after the filings of the Original Filings or other disclosures necessary to reflect subsequent events will be addressed in any reports filed with the SEC subsequent to the date of this filing.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Description	Page

Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009	3

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009 and for the Period from July 27, 1999 (Inception of Development Stage) to September 30, 2010 (Unaudited)	4

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 and for the Period from July 27, 1999 (Inception of Development Stage) to September 30, 2010 (Unaudited)	5

Notes to the Consolidated Financial Statements (Unaudited)	6

TAPIMMUNE INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

	September 30, 2010			December 31, 2009
	(Unaudited) (As restated)			(As restated)
ASSETS
Current Assets
Cash	$	144,741		$	141,431
Due from government agency		1,051			1,033
Prepaid expenses and deposits (Note 8)		700			214,501
Deferred financing costs (Note 5)		148,131			-

	$	294,623		$	356,965

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued liabilities	$	655,978		$	586,556
Research agreement obligations (Note 3)		119,080			45,676
Derivative liability – conversion option (Note 4)		262,933			-
Derivative liability – warrants (Note 4)		1,068,375			-
Convertible note payable (Note 5)		370,740			203,021
Notes payable and secured loan (Note 5)		-			135,000
Due to related parties (Note 6)		157,479			16,100
		2,634,585			986,353



Stockholders’ Deficit
Capital stock (Note 7)
Common stock, $0.001 par value, 150,000,000 shares authorized
40,256,026 shares issued and outstanding (2009 – 38,361,674)		40,256			38,362
Additional paid-in capital		40,049,859			37,289,357
Shares and warrants to be issued		27,523			513,733
Deficit accumulated during the development stage		(42,398,754	)		(38,411,114	)
Accumulated other comprehensive loss		(58,846	)		(59,726	)
		(2,339,962	)		(629,388	)

	$	294,623		$	356,965

RESTATEMENT (Note 1(A))

Commitments and Contingencies (Notes 1, 3, 5 and 9)

The accompanying notes are an integral part of these consolidated financial statements.

TAPIMMUNE INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,						July 27, 1999 (inception of development stage) to September 30,
	2010 (As restated)			2009 (As restated)			2010 (As restated)			2009 (As restated)			2010 (As restated)

Expenses
Consulting fees	$	28,000		$	86,514		$	66,699		$	319,950		$	1,837,905
Consultant compensation – stock-based (Note 6)		70,015			27,500			1,142,141			27,500			4,933,958
Depreciation		-			56			-			3,741			213,227
General and administrative		32,827			12,760			142,870			54,266			2,551,326
Interest and finance charges (Note 4 and 5)		458,565			319,969			794,418			577,073			4,705,021
Management fees (Note 5)		54,300			63,300			198,400			190,942			2,392,877
Management compensation – stock- based (Notes 5 and 6)		325,977			-			973,977			23,500			3,821,027
Professional fees		170,657			213,079			584,564			462,747			3,899,013
Research and development (Note 5)		93,517			25,069			243,380			28,979			5,660,772
Research and development – stock-based		-			-			-			-			612,000
		1,233,858			748,247			4,146,449			1,688,697			30,627,126

Net Loss Before Other Items		(1,233,858	)		(748,247	)		(4,146,449	)		(1,688,697	)		(30,627,126	)

Other Items
Foreign exchange (loss) gain		(2,022	)		(31,400	)		(3,572	)		(44,706	)		41,018
Changes in fair value of derivative liabilities (Note 4)		191,867			-			1,724,217			-			1,724,217
Loss on debt financing (Note 5)		-			-			(1,615,425	)		-			(1,615,425	)
Gain (loss) on settlement of debt (Note 1A)		30,000			(11,314	)		53,589			(12,529,302	)		(11,949,383	)
Interest income		-			83			-			2,746			33,344
Loss on disposal of assets		-			-			-			(5,399	)		(5,399	)

Net Loss for the Period		(1,014,013	)		(790,878	)		(3,987,640	)		(14,265,358	)		(42,398,754	)

Deficit Accumulated During the Development Stage, beginning of period		(41,384,741	)		(34,286,586	)		(38,411,114	)		(20,812,106	)		-

Deficit Accumulated During the Development Stage, end of period	$	(42,398,754	)	$	(35,077,464	)	$	(42,398,754	)	$	(35,077,464	)	$	(42,398,754	)

Basic and Diluted Net Loss per Share	$	(0.03	)	$	(0.02	)	$	(0.10	)	$	(0.08	)

Weighted Average Number of Common Shares Outstanding		40,042,202			35,982,604			39,650,563			13,727,147

The accompanying notes are an integral part of these consolidated financial statements.

TAPIMMUNE INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,			Nine Months Ended September 30,			July 27, 1999 (inception of development stage) to September 30,
	2010 (As restated)			2009 (As restated)			2010 (As restated)

Cash Flows from Operating Activities
Net loss	$	(3,987,640	)	$	(14,265,358	)	$	(42,398,754	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		-			3,740			213,228
Non-cash loss on debt financing		1,615,425			-			1,615,425
Changes in fair value of derivative liabilities		(1,724,217	)		-			(1,724,217	)
(Gain) loss on settlement of debts		(53,589	)		12,529,302			11,949,383
Loss on disposal of assets		-			5,399			5,399
Non-cash interest and finance fees		771,799			480,423			4,319,888
Stock-based compensation		2,116,118			51,000			9,383,235
Changes in operating assets and liabilities:
Due from government agency		(31	)		32,255			(1,064	)
Prepaid expenses and receivables		(30,700	)		(90,480	)		(24,700	)
Deferred financing costs		41,381			-			41,381
Accounts payable and accrued liabilities		327,727			589,287			2,813,740
Research agreement obligations		73,404			(25,467	)		337,211
Net Cash Used in Operating Activities		(850,323	)		(689,899	)		(13,469,845	)

Cash Flows from Investing Activities
Purchase of furniture and equipment		-			-			(218,626	)
Cash acquired on reverse acquisition		-			-			423,373
Net Cash Provided by Investing Activities		-			-			204,747

Cash Flows from Financing Activities
Issuance of common stock, net		-			-			9,622,125
Convertible notes		712,254			350,000			1,370,704
Notes and loans payable		-			135,000			919,845
Subscription advances		-			200,000			-
Advances from related parties		141,379			50,153			1,497,165
Net Cash Provided by Financing Activities		853,633			735,153			13,409,839

Net Increase in Cash		3,310			45,254			144,741

Cash, Beginning of Period		141,431			987			-

Cash, End of Period	$	144,741		$	46,241		$	144,741

Supplemental cash flow information and non-cash investing and financing activities: (refer to Note 8)

The accompanying notes are an integral part of these consolidated financial statements.

TAPIMMUNE INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2010 (UNAUDITED)

NOTE 1A: RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

Restatement relating to accounting for debt settlement transactions in fiscal year ended December 2009

We have restated our consolidated financial statements as of and for the nine months ended September 30, 2009 for changes to the Company’s accounting for debt settlement transactions. We had accounted for the equity issuance in settlement of $3,181,206 of debt by estimating the fair value from third party debt assignments instead of the quoted market value of the stock. Additionally, in connection with the debt settlement, the Company issued 2,000,000 shares pursuant to a consulting services agreement using a block discount from the quoted value of the stock. Following discussions with the SEC in connection with comments issued by the staff of the SEC, the Company determined that its accounting for debt settlement transactions should be reviewed. As a result, we reviewed GAAP guidance, which states that, ‘a quoted market price in an active market is the best evidence of fair value and should be used as the basis for the measurement, if available’. Based on this guidance we have concluded that the difference of $13,137,038 between the fair value recognized using the quoted market price and the debt settled amounts should be recognized as loss on debt settlement.

The impact of the restatement on the consolidated financial statements as of and for the three and nine months ended September 30, 2009, and from July 27, 1999 (inception) to September 30, 2009 is shown in the following tables:

As reported			Adjustment		As restated
Balance sheet data — December 31, 2009
Additional paid-in capital	$	24,152,319	$	13,137,038		$	37,289,357
Deficit accumulated during the development stage		(25,274,076)		(13,137,038)			(38,411,114)
Total stockholders’ equity	$	(629,388)	$	—		$	(629,388)

As reported			Adjustment		As restated
Consolidated Statement of Operations data For the three months ended September 30, 2009
Deficit Accumulated during the Development Stage, beginning of period		(21,149,548)		(13,137,038)			(34,286,586)
Deficit Accumulated during the Development Stage, end of period		(21,940,426)		(13,137,038)			(35,077,464)

As reported			Adjustment		As restated
Consolidated Statement of Operations data For the nine months ended September 30, 2009
Gain (loss) on settlement of debt	$	607,736	$	(13,137,038)		$	(12,529,302)
Net loss for the period		(1,128,320)		(13,137,038)			(14,265,358)
Deficit Accumulated during the Development Stage, end of period		(21,940,426)		(13,137,038)			(35,077,464)
BASIC AND DILUTED NET LOSS PER SHARE	$	(0.08)	$	(0.96)		$	(1.04)

As reported			Adjustment		As restated
Consolidated Statement of Operations data July 27, 1999 (inception) to September 30, 2009
Gain (loss) on settlement of debt	$	780,746	$	(13,137,038)		$	(12,356,292)
Net loss for the period		(21,940,426)		(13,137,038)			(35,077,464)
Deficit Accumulated during the Development Stage, end of period	$	(21,940,426)	$	(13,137,038)		$	(35,077,464)


As reported			Adjustment		As restated
Consolidated Statement of Cash Flows data For the nine months ended September 30, 2009
Net loss	$	(1,128,320)	$	(13,137,038)		$	(14,265,358)
Gain on settlement of debt		(607,736)		13,137,038			12,529,302
NET CASH USED IN OPERATING ACTIVITIES	$	(689,899)	$	-		$	(689,899)

As reported			Adjustment		As restated
Consolidated Statement of Cash Flows data From July 27, 1999 (inception) to September 30, 2009
Net loss	$	(21,940,426)	$	(13,137,038)		$	(35,077,464)
Gain on settlement of debt		(780,746)		13,137,038			12,356,292
NET CASH USED IN OPERATING ACTIVITIES	$	(12,187,695)	$	-		$	(12,187,695)

Restatement relating to recognition of derivative liabilities for the period ended June 30, 2010

We have restated our consolidated financial statements as of and for the nine months ended September 30, 2010 related to the Company’s accounting for embedded warrants in the convertible notes issued during the nine months ended September 30, 2010. We had recorded the fair value of the Series A Warrants, Series B Warrants and Series C Warrants to equity. Following discussions with the SEC in connection with comments issued by the staff of the SEC, the Company determined that its accounting for the warrants should be reviewed. As a result, we evaluated the application of ASC 815 Derivatives and Hedging (formerly SFAS No. 133) and ASC 815-40 Contracts in an Entity’s Own Equity to the issued and outstanding warrants to purchase common stock that were issued with the convertible notes during the nine months ended September 30, 2010 and those issued as finders’ fees. Based on the guidance in ASC 815 and ASC 815-40-25, the Company concluded these instruments are required to be accounted for as derivatives due to a ratchet down protection feature available on the exercise price (Note 5). Under ASC 815-40-25, the Company has recorded the fair value of these derivatives on its balance sheet at fair value with changes in the values reflected in the statements of operations as “Changes in fair value of derivative liabilities”.

The impact of the restatement on the consolidated financial statements as of and for the three and nine months ended September 30, 2010, and from July 27, 1999 (inception) to September 30, 2010 is shown in the following tables:

As reported			Adjustment		As restated
Balance sheet data — September 30, 2010

Deferred financing costs	$	-	$	148,131		$	148,131
Total Assets		146,492		148,131			294,623
Derivative liability – conversion option		-		262,933			262,933
Derivative liability - warrants		-		1,068,375			1,068,375
Total liabilities	$	1,303,277	$	1,331,308		$	2,634,585
Additional paid-in capital*		28,187,821		11,862,038			40,049,859
Deficit accumulated during the development stage*		(29,353,539)		13,045,215			(42,398,754)
Stockholders’ Deficit	$	(1,156,785)	$	1,183,177		$	(2,339,962)

* Includes adjustments relating to accounting for debt settlement transactions in fiscal year ended December 2009

As reported			Adjustment		As restated
Consolidated Statement of Operations data For the three months ended September 30, 2010
Interest and finance charges		400,820		57,745			458,565
Net Loss Before Other Items		(1,176,113)		(57,745)			(1,233,858)
Changes in fair value of derivative liabilities		-		191,867			191,867
Loss on debt financing		-		(1,615,425)			(1,615,425)
Net Loss for the period		(1,148,135)		134,122			(1,014,013)
Deficit Accumulated during the Development Stage, beginning of period*		(28,205,404)		(13,179,337)			(41,384,741)
Deficit Accumulated during the Development Stage, end of period*		(29,353,539)		(13,045,215)			(42,398,754)

BASIC AND DILUTED NET LOSS PER SHARE	$	(0.03)	$	(0.00)		$	(0.03)
* Includes adjustments relating to accounting for debt settlement transactions in fiscal year ended December 2009

As reported			Adjustment		As restated
Consolidated Statement of Operations data For the nine months ended September 30, 2010
Consulting fees	$	130,699	$	(64,000)		$	66,699
Interest and finance charges		713,449		80,969			794,418
Net Loss Before Other Items		(4,129,480)		(16,969)			(4,146,449)
Changes in fair value of derivative liabilities		-		1,724,217			1,724,217
Loss on debt financing		-		(1,615,425)			(1,615,425)
Net Loss for the period		(4,079,463)		91,823			(3,987,640)
Deficit Accumulated during the Development Stage, beginning of period*		(25,274,076)		(13,137,038)			(38,411,114)
Deficit Accumulated during the Development Stage, end of period*		(29,353,539)		(13,045,215)			(42,398,754)

BASIC AND DILUTED NET INCOME (LOSS) PER SHARE	$	(0.10)	$	(0.00)		$	(0.10)
* Includes adjustments relating to accounting for debt settlement transactions in fiscal year ended December 2009

As reported			Adjustment		As restated
Consolidated Statement of Operations data From July 27, 1999 (inception) to September 30, 2010
Consulting fees	$	1,901,905	$	(64,000)		$	1,837,905
Interest and finance charges		4,624,052		80,969			4,705,021
Net Loss Before Other Items		(30,610,157)		(16,969)			(30,627,126)
Changes in fair value of derivative liabilities		-		1,724,217			1,724,217
Loss on debt financing		-		(1,615,425)			(1,615,425)
Gain (loss) on settlement of debt		1,187,655		(13,137,038)			(11,949,383)
Net Loss for the period		(29,353,539)		(13,045,215)			(42,398,754)
Deficit Accumulated during the Development Stage, end of period	$	(29,353,539)		(13,045,215)			(42,398,754)


As reported			Adjustment		As restated
Consolidated Statement of Cash Flows data For the nine months ended September 30, 2010
Net loss	$	(4,079,463)	$	91,823		$	(3,987,640)
Non-cash loss on debt financing		-		1,615,425			1,615,425
Changes in fair value of derivative liabilities		-		(1,724,217)			(1,724,217)
Non-cash interest and financing charges		713,449		58,350			771,799
Deferred financing costs		-		41,381			41,381
Accounts payable and accrued liabilities		410,489		(82,762)			327,727
NET CASH USED IN OPERATING ACTIVITIES	$	(850,323)	$	-		$	(850,323)

As reported			Adjustment		As restated
Consolidated Statement of Cash Flows data From July 27, 1999 (inception) to September 30, 2010
Net loss	$	(29,353,539)	$	(13,045,215)		$	(42,398,754)
Non-cash loss on debt financing		-		1,615,425			1,615,425
Changes in fair value of derivative liabilities		-		(1,724,217)			(1,724,217)
Gain on settlement of debt		(1,187,655)		13,137,038			11,949,383
Non-cash interest and financing charges		4,261,538		58,350			4,319,888
Deferred financing costs		-		41,381			41,381
Accounts payable and accrued liabilities		2,896,502		(82,762)			2,813,740
NET CASH USED IN OPERATING ACTIVITIES	$	(13,469,845)	$	-		$	(13,469,845)

NOTE 1: NATURE OF OPERATIONS

TapImmune Inc. (the “Company”), a Nevada corporation incorporated in 1992, is a development stage company which was formed for the purpose of building a biotechnology business specializing in the discovery and development of immunotherapeutics aimed at the treatment of cancer, and therapies for infectious diseases, autoimmune disorders and transplant tissue rejection.

Since inception, TapImmune and the University of British Columbia (“UBC”) have been parties to various Collaborative Research Agreements (“CRA”) appointing UBC to carry out development of the licensed technology and providing TapImmune the option to acquire the rights to commercialize any additional technologies developed within the CRA. The lead product candidate, now wholly owned and with no ongoing license or royalty, resulting from these license agreements is an immunotherapy vaccine, on which the Company has been completing pre-clinical work in anticipation of clinical trials. Specifically, the Company has obtained and expanded on three U.S. and international patents, tested various viral vectors, licensed a viral vector and is working towards production of a clinical grade vaccine. The Company plans to continue development of the lead product vaccine through to clinical trials in both oncology and infectious diseases alone or in partnership with other vaccine developers.

These consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As at September 30, 2010, the Company had a working capital deficit of $2,340,000 and has incurred significant losses since inception. Further losses are anticipated in the development stage raising substantial doubt as to the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on raising additional capital to fund ongoing research and development, maintenance and protection of patents, accommodation from certain debt obligations and ultimately on generating future profitable operations. Planned expenditures relating to future clinical trials of the Company’s immunotherapy vaccine will require significant additional funding. The Company is dependent on future financings to fund ongoing research and development as well as working capital requirements. The Company’s future capital requirements will depend on many factors including the rate and extent of scientific progress in its research and development programs, the timing, cost and scope involved in clinical trials, obtaining regulatory approvals, pursuing further patent protections and the timing and costs of commercialization activities.

Management is addressing going concern remediation through seeking new sources of capital, restructuring and retiring debt through conversion to equity and debt settlement arrangements with creditors, cost reduction programs and seeking possible joint venture participation. Management’s plans are intended to return the company to financial stability and improve continuing operations. The Company is continuing initiatives to raise capital through private placements, related party loans and other institutional sources to meet immediate working capital requirements.

The Company was able to substantially complete ongoing restructuring plans in the second half of 2009. Additional funding and equity for debt settlements have retired notes payable and some of the other debt obligations were satisfied. Additional capital is required now to expand programs including pre-clinical work and to establish future manufacturing contracts necessary for clinical trials for the lead TAP (Transporters of Antigen Processing) vaccine and infectious disease adjuvant technology. Strategic partnerships will be needed to continue the product development portfolio and fund development costs. These measures, if successful, may contribute to reduce the risk of going concern uncertainties for the Company over the next twelve months.

There is no certainty that the Company will be able to raise sufficient funding to satisfy current debt obligations or to continue development of products to marketability. Currently, the Company does not have sufficient funds available to meet an upcoming payment on secured convertible notes issued in May 2010, and the stipulated market conditions allowing for the repayment of those secured convertible notes in shares of our common stock do not exist. If we fail to raise additional capital or modify the terms with the holders of the convertible notes we will default on our secured convertible notes and the note holders may make claims on the assets of the Company should a cure not be made within the allowable limits. Management is negotiating with potential investors and the note holders to ensure that additional financing is made available and that we do not default on the secured convertible notes.

NOTE 2: UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR AN INTERIM PERIOD

Basis of Presentation

These unaudited interim consolidated financial statements may not include all information and footnotes required by US GAAP for complete financial statement disclosure. However, except as disclosed herein, there have been no material changes in the information contained in the notes to the audited consolidated financial statements for the year ended December 31, 2009, included in the Company’s Form 10-K, which was filed with the Securities and Exchange Commission. These unaudited interim consolidated financial statements should be read in conjunction with the audited financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation and consisting solely of normal recurring adjustments have been made. Operating results for the three months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

Recent Accounting Pronouncements

The Company has reviewed recently issued accounting pronouncements and plans to adopt those that are applicable to it. It does not expect the adoption of these pronouncements to have a material impact on its financial position, results of operations or cash flows.

Interim results are not necessarily indicative of results for a full year. The information included in this quarterly report on Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K filed on April 15, 2010, with the U.S. Securities and Exchange Commission.

NOTE 3: RESEARCH AGREEMENTS

Crucell Holland B.V. (“Crucell”) – Research License and Option Agreement

Effective August 7, 2003, Crucell and our subsidiary GeneMax Pharmaceuticals, Inc. (“GPI”) entered into a five-year research license and option agreement whereby Crucell granted to GPI a non-exclusive worldwide license for the research use of its adenovirus technology. The Company was required to make certain payments over the five-year term totaling Euro €450,000 (approximately $510,100).

At December 31, 2008, $243,598 (€172,801) was owing to Crucell under this agreement. During the year ended December 31, 2009, management negotiated a settlement of the outstanding balance requiring a €17,000 cash payment (paid) and the issuance of 265,000 shares of the Company’s common stock (issued, refer to Note 6).

In addition, retroactively effective August 7, 2008, the Company negotiated an amended license agreement for the use of Crucell’s adenovirus technology. The Company is required to make annual license payments on the anniversary of the effective date for the three year term equal to €75,000 per annum. As at September 30, 2010, the Company had accrued $119,080 (€87,500; December 31, 2009: $45,676 (€31,250)) under the amended agreement. The Company is currently delinquent on making its 2009 1st year annual license payment. Settlement of the licensing fee can be made with as little as 10% in cash and the balance in restricted stock. As a result, the impact on going concern of settling the debt or restructuring it should be minimal.

NOTE 4: DERIVATIVE WARRANT LIABILITY AND FAIR VALUE

The Company has evaluated the application of ASC 815 Derivatives and Hedging (formerly SFAS No. 133) and ASC 815-40 Contracts in an Entity’s Own Equity to the issued and outstanding warrants to purchase common stock that were issued with the convertible notes during the nine months ended September 30, 2010 and those issued as finders’ fees. Based on the guidance in ASC 815 and ASC 815-40-25, the Company concluded these instruments were required to be accounted for as derivatives due to a ratchet down protection feature available on the exercise price (Note 5). Under ASC 815-40-25, the Company records the fair value of these derivatives on its balance sheet at fair value with changes in the values reflected in the statements of operations as “Changes in fair value of derivative liabilities”. These derivative instruments disclosed on the balance sheet under ‘Derivative liabilities – warrants’.

ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820-10 describes three levels of inputs that may be used to measure fair value: Level 1 – Quoted prices in active markets for identical assets or liabilities; Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. The Company’s Level 3 liabilities consist of the derivative liabilities associated with the warrants issued with the convertible notes during the nine months ended September 30, 2010. At September 30, 2010, all of the Company’s derivative liabilities were categorized as Level 3 fair value liabilities. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Level 3 Valuation Techniques

Financial liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial liabilities consist of the notes and warrants for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation.

Determining fair value of warrants and conversion options, given the company’s stage of development and financial position, is highly subjective and identifying appropriate measurement criteria and models is subject to uncertainty. There are several generally accepted pricing models for warrants and options and derivative provisions. The Company has chosen to value the conversion option on the notes that contain ratchet down provisions using the Binomial model under the following assumptions:

	At Initial Recognition				September 30, 2010
	Expected Life (Years)	Risk free Rate	Dividend yield	Volatility	Expected Life (Years)	Risk free Rate	Dividend yield	Volatility
Series A Warrants	2.5	0.40%	0.00%	199%	2.0	0.42%	0.00%	199%
Series B Warrants	1.0	0.35%	0.00%	199%	0.6	0.19%	0.00%	199%
Series C Warrants	-	-	-	-	-	-	-	-
Conversion Option	1.0	0.35%	0.00%	199%	0.6	0.19%	0.00%	199%

The Series C Warrants are contingently exercisable following the exercise of the Series B Warrants. The fair value of the Series C Warrants was determined to be nominal.

The foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuations.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheet under Derivative liability – warrants and Derivative liability – conversion option:

		As of September 30, 2010
		Fair Value Measurements Using
	Carrying Value	Level 1	Level 2	Level 3	Total
Derivative liability - warrants	$ 1,068,375	-	-	$ 1,068,375	$ 1,068,375
Derivative liability – conversion option	262,933	-	-	262,933	262,933
Total	$ 1,331,308	-	-	$ 1,331,308	$ 1,331,308

The table below provides a summary of the changes in fair value, including net transfers, in and/or out, of financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2010:

	Fair Value Measurements Using Level 3 Inputs
	Derivative liability - warrants	Derivative liability – conversion option	Total
Beginning balance as of May 24, 2010	$ 2,270,125	$ 785,400	$ 3,055,525
Total unrealized gains or losses included in net loss	(1,201,750)	(522,467)	(1,724,217)
Transfers in and/or out of Level 3	-	-	-
Ending balance at September 30, 2010	$ 1,068,375	$ 262,933	$ 1,331,308

NOTE 5: CONVERTIBLE NOTE PAYABLE

The following is a summary of debt instrument transactions that are relevant to the current and prior period:

	Face Value	Principal Repayment	Unamortized Note Discount	Balance at September 30, 2010

2010 Secured Convertible Notes
Senior Secured Notes, due May 19, 2011	$ 1,530,000	$ (170,000)	$ 989,260	$ 370,740

During the nine months ended September 30, 2010, the Company entered into a securities purchase agreement with accredited investors to place Senior Secured Convertible Notes (the “Notes”) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $1,530,000 for gross consideration of $1,275,000. The $1,275,000 consisted of $712,254 in cash proceeds to the Company, $212,746 of current services and $350,000 was subscribed for by the holder of an outstanding and due 2009 convertible debenture. In connection with the issuance of the notes, the Company entered into a Security Agreement with the note holders secured by all of the Company’s assets.

The Notes were placed at a 20% discount from their face value and bear no interest except in event of default in which case they bear interest at the rate of 18% per annum. The principal and any interest due on the Notes are due in 9 equal monthly installments starting in September 2010. Subject to the satisfaction of certain customary conditions (including the effectiveness of a registration statement and certain minimums on the amount and value of the shares of our common stock traded on the Over-the-Counter Bulletin Board), the Company may elect to pay amounts due on any installment date in either cash or shares of its common stock. Any shares of its common stock that the Company issues as payment on an installment date will be issued at a price which is equal to the lesser of $0.30 per share or 85% of the average of the volume-weighted average prices of the Company’s common stock on the Over-the-Counter Bulletin Board on each of the twenty trading days immediately preceding the applicable installment date.

In connection with the issuance of the Notes, the Company issued 6,375,000 Series A Warrants, 5,100,000 Series B Warrants and 6,375,000 Series C Warrants, in each case, to purchase fully-paid and nonassessable shares of its common stock (together, the “Warrants”). The initial exercise price of theWarrants is $0.30 per share.

The Company paid a finders fee of $64,000 and issued 1,400,000 broker’s warrants (described below) valued at $165,100. The finder’s fee and fair value of the broker’s warrants was accounted for as deferred financing costs, and is being amortized over the term of the notes. At September 30, 2010, $148,131 remains unamortized and is presented in Current assets on the Company’s Balance sheet.

	Issued to Note holders		Issued as broker’s warrants		Maximum Exercise price		Term

Series A Warrants		6,375,000		500,000	$	0.30	5 Years
Series B Warrants		5,100,000		400,000		0.30	1 Year
Series C Warrants *		6,375,000		500,000		0.30	5 Years
* The Series C Warrants are only exercisable proportionately with the exercise of the Series B Warrants.

The Notes and Warrants include price adjustment provisions whereby the exercise price will be adjusted downwards based on future sales, issuances, or conversions of equity or debt, which results in a share issuance at a per share amount less than $0.30 per share. The calculated lower per share amount from the future transaction will be the adjusted conversion rate available to the Note and Warrant holders.

The economic characteristics and risks of the embedded Conversion option in the Notes (“Conversion option”) are not considered clearly and closely related to the economic characteristics and risks of the host debt contract. The price adjustment features included in the embedded Conversion option and the Warrants are not considered indexed to Company’s own stock. Pursuant to the guidance of ASC 815-10, the embedded Conversion option in the Notes meet the characteristics of a derivative instrument and must be valued separately from the host debt contract. In accordance with ASC 815-40-25, the Company has evaluated the Notes’ conversion option and recorded $785,400 as the initial fair value of the Conversion option Derivative liability. The fair value was determined using the Binomial option pricing model with current assumptions as outlined in the following paragraphs.

As a result of certain price adjustment clauses related to the Warrants, the Warrants are not included in the Company’s equity. The Company has recorded the fair value of these Warrants and the brokers’ warrants as “Derivative liability – warrants” initially in the amount of $2,270,125. (Note 4)

The proceeds received for the Notes were initially allocated to the embedded Conversion option and then to the Warrants based on their estimated fair value. The difference of $1,615,425 between the gross consideration of the Notes for $1,250,000 and the fair value of the calculated derivative liabilities amounting to $2,890,425 was accounted for under ‘Loss on debt financing’ in the consolidated statements of operations.

To September 30, 2010, accretion of the debt discount relative to the 2010 secured convertible notes was equal to $540,740. The Company made the first $170,000 monthly principal repayment in September 2010.

	Face Value		Unamortized Note Discount		Balance at September 30, 2010		Balance at December 31, 2009
2009 Convertible Debenture
Unsecured Convertible Note, 10% interest, due February 28, 2010	$	350,000	$	-	$	-	$	203,021

On August 31, 2009, the Company completed a convertible debenture financing of $350,000 issuing a convertible promissory note bearing interest at 10% per annum. The note was due on February 28, 2010. The unpaid amount of principal and accrued interest could have been converted at any time at the holder's option into shares of the Company's common stock at a price of $0.80 per share.

Under the terms of the debenture agreement, the note would have automatically converted to equity if, during the term of the note, the Company had received funding equal to or exceeding $2,000,000 through the sale of its shares of common stock or additional debt instruments that were convertible into common stock during the term of the debenture. The holders had the option to convert the debentures into 3,500,000 common shares of the Company or receive payment in full.

The Company recognized the embedded beneficial conversion feature of $139,571 as additional paid-in capital as the convertible notes were issued with an intrinsic value conversion feature. Additionally, the Company issued 437,500 non-transferable and registerable share purchase warrants. Management estimated the fair value of the warrants to be $210,429. As the relative fair value of the warrants and beneficial conversion feature together were greater than the face values of the debentures, these were limited to the face value of the loan.

During the nine months ended September 30, 2010, the holder converted the principal amount of the debenture into the 2010 secured convertible notes as described above and waived the accrued interest in the amount of $23,589.

	Face Value		Unamortized Note Discount		Balance at September 30, 2010		Balance at December 31, 2009

2009 Secured Debentures
Secured Notes, 30% interest	$	135,000	$	-	$	-	$	135,000

In connection with the Debentures, the Company issued a total of 270,000 stock purchase warrants which have a term of two years from the date of issuance. Management estimated the fair value of these warrants to be $60,000 using the Black-Scholes pricing model.

During the nine months ended September 30, 2010, the Company issued 687,305 common shares pursuant to the conversion of the 2009 secured debentures with a face value of $135,000 plus accrued interest of $49,155.

NOTE 6: RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2010, the Company entered into transactions with certain officers and directors of the Company as follows:

(a)

incurred $198,400 (2009 - $190,942) in management fees and $54,000 (2009 - $24,000) in research and development paid to officers and directors during the period;

(b)

recorded $973,977 (2009 - $23,500) in stock based compensation for the fair value of options granted to management that were granted and or vested during the period;

(c)

incurred $Nil (2009 - $64,850) in interest and finance charges on promissory notes due to related parties during the period, which were settled in connection with an equity issuance effective June 4, 2009; and

(d)

incurred $Nil (2009 - $134,218) in interest and finance charges related to an agreement to issue warrants in connection with extending the terms of the promissory notes due to related parties during the period.

(e)

Issued a $nil (2009 - $15,000) secured promissory note bearing interest at 30% per annum and issued 30,000 transferable and registrable share purchase warrants with an exercise price of $0.20 per share for an exercise period of up to two years from the issuance date to a direct family member of an officer of the Company.

All related party transactions (other than stock based consideration) involving provision of services were recorded at the exchange amount, which is the amount established and agreed to by the related parties. The Company accounted for the debt settlement transactions with related parties at management’s estimate of fair value, which is evidenced by the quoted market price of the Company’s shares.

At September 30, 2010, the Company had amounts owing to directors and officers of $157,479 (September 30, 2009 - $41,100). These amounts were in the normal course of operations. Amounts due to related parties are unsecured, non-interest bearing and have no specific terms of repayment.

NOTE 7: CAPITAL STOCK

Share Capital

Prior to January 22, 2009, the authorized capital of the Company consisted of 20,000,000 shares of common stock and 5,000,000 shares of preferred stock. On January 22, 2009, the Company increased its authorized shares of common stock from 80,000,000 shares of common stock to 500,000,000 shares of common stock. Effective July 10, 2009, the Company executed a further 1 for 10 reverse stock split while simultaneously reducing the authorized shares of common stock to 50,000,000 common shares with a $0.001 par value and maintaining 5,000,000 non-voting preferred shares with a $0.001 par value. Effective February 21, 2010, the Company increased its authorized shares of common stock from 50,000,000 common shares to 150,000,000 common shares. The Company maintained its authorized shares of preferred stock at 5,000,000.

All prior period share transactions included in the company’s stock transactions and balances have been retroactively restated to give effect to the 1 for 10 reverse stock split noted above.

2010 Share Transactions

On January 28, 2010, the Company issued 250,000 shares of its common stock pursuant to a consulting services agreement. At the time of issuance the shares had a fair value of $0.52 per share, as quoted in an observable market, and $130,000 was recorded as stock-based consulting fees.

On January 28, 2010, the Company issued 100,000 shares of its common stock pursuant to a consulting services agreement. At the time of issuance the shares had a fair value of $0.52 per share, as quoted in an observable market, and $52,000 was recorded as stock-based consulting fees.

On January 28, 2010, the Company issued 100,000 shares of its common stock pursuant to a consulting services agreement. At the time of issuance the shares had a fair value of $0.52 per share and $52,000 was recorded as stock-based consulting fees.

On January 28, 2010, the Company issued 265,000 shares of its common stock pursuant to a debt settlement agreement (refer to Note 3).

On April 14, 2010, the Company issued 10,400 shares of its common stock for the loss of share certificate in the data exchange with the change in transfer agent.

On April 26, 2010, the Company issued 80,000 shares of its common stock pursuant to a consulting services agreement. At the time of issuance the shares had a fair value of $0.36 per share, as quoted in an observable market, and $28,800 was recorded as stock-based consulting fees.

On May 1, 2010, the Company issued 40,000 shares of its common stock pursuant to a consulting services agreement. At the time of issuance the shares had a fair value of $0.32 per share, as quoted in an observable market, and $12,800 was recorded as stock-based consulting fees.

On May 4, 2010, $90,412 of trade debt was settled in exchange for 361,647 common shares of the Company.

On May 4, 2010, the Company issued 687,305 common shares pursuant to the conversion of the 2009 secured debenture with a face value of $135,000 plus accrued interest of approximately $49,155 (refer to Note 4).

Stock Compensation Plan

On October 14, 2009, the Company adopted the 2009 Stock Incentive Plan (the “2009 Plan”) which supersedes and replaces the 2007 Stock Plan. The 2009 Plan allows for the issuance of up to 10,000,000 common shares. Options granted under the Plan shall be at prices and for terms as determined by the Board of Directors.

On June 8, 2007, a total of 632,000 stock options were granted, under s 2007 Stock Option plan, at an exercise price of $2.50 per share. The term of these options is ten years. Of the 632,000 options granted, 310,000 vested upon grant, 242,000 vested in one year, 40,000 vested in two years and 40,000 vested in three years. The aggregate fair value of these options was estimated at $1,179,600, or $1.90 per option, using the Black-Scholes option pricing model with a risk free interest rate of 5.26%, a dividend yield of 0%, an expected volatility of 83%, and expected lives between 2 and 5 years. The earned portion of the value of these options during the three months ended March 31, 2010 was $Nil (2009 - $13,167) which was recorded as stock based management fees.

On October 14, 2009, the Company granted a total of 3,326,000 stock options at an exercise price of $0.97 per share to consultants and management, of which 1,913,000 vested immediately and the remaining 1,413,000 vest in one year. The term of the options is ten years. Additionally, on October 14, 2009, the Company approved the repricing of certain stock options issued to consultants and management. Options with an exercise price of $2.50 were repriced to $0.97 per share and the aggregate fair value of the repriced options is $5,840. The aggregate fair value of the new grants was estimated at $3,192,960, or $0.96 per option, using the Black-Scholes option pricing model with a risk free interest rate of 2.36%, a dividend yield of 0%, an expected volatility of 236%, and an expected life of 5 years. The recognized portion of the value of these options during the nine months ended September 30, 2010 was $339,120 (2009 - $Nil) which was recorded as stock based consulting and management compensation.

On September 7, 2010, the Company granted 250,000 stock options at an exercise price of $0.35 per share to a director of the Company, vesting monthly over a twenty four month period. The term of the options is ten years. The fair value of the new grant was estimated at $47,500, or $0.19 per option, using the Black-Scholes option pricing model with a risk free interest rate of 2.61%, a dividend yield of 0%, an expected volatility of 249.6%, and an expected life of 10 years. The expensed portion of the value of these options during the three months ended September 30, 2010 was $1,979, which was recorded as stock based management compensation.

A summary of the Company’s stock options as of September 30, 2010 and changes during the period is presented below:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Life

Balance, December 31, 2009		3,618,000	$	0.97		9.60
Issued		250,000		0.35		9.95
Cancelled		-		-		-

Balance, September 30, 2010		3,868,000	$	0.93		8.92

A summary of the status of the Company’s unvested options as of September 30, 2010 is presented below:

	Number of Shares			Weighted Average Grant-Date Fair Value

Unvested, December 31, 2009		1,413,000		$	0.97
Granted		250,000			0.19
Vested		(10,417	)		0.19
Cancelled		-			-

Unvested, September 30, 2010		1,652,583		$	0.84

Share Purchase Warrants

On January 19, 2010, the Company issued 600,000 share purchase warrants to allow the holders to acquire an equivalent number of common shares of the Company, at an exercise price of $0.50 per share for an exercise period of up to three years from the issuance date, and 600,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.60 per share and for an exercise period of up to three years from the issuance date. The warrants were issued pursuant to a consulting services agreement. The fair value of these warrants was determined to be $648,000, using the Black-Scholes option pricing model with an expected life of 3 years, a risk free interest rate of 1.38%, a dividend yield of 0%, and an expected volatility of 235%.

On February 8, 2010, the Company issued 750,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.50 per share and for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to a debt settlement agreement. The fair value of these warrants was determined to be $100,000, equal to the amount of debt being settled.

On May 24, 2010, the Company issued Series A Warrants to purchase shares of its common stock with a 5 year term. Series B Warrants to purchase shares of its common stock with a term that is shorter of (i) 18 months or (ii) one year from an effective registration statement. Series C Warrants to purchase shares of its common stock with a 5 year term, which can only be exercised to the extent that the Series B Warrants are exercised. The initial exercise price of the Series A Warrants is $0.30 per share, and such warrants are exercisable into 6,375,000 shares of common stock in the aggregate. The initial exercise price of the Series B Warrants is $0.30 per share, and such warrants are exercisable into 5,100,000 shares of common stock in the aggregate. The initial exercise price of the Series C Warrants is $.30 per share, and such warrants are exercisable into 6,375,000 shares of common stock. In addition, the Company issued 1,400,000 brokers warrant’s which are exercisable on the same terms and conditions as the note holders warrants described above (500,000 Series A Warrants;400,000 Series B Warrants; 500,000 Series C Warrants).

A summary of the Company’s stock purchase warrants as of September 30, 2010 and changes during the period is presented below:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Life

Balance, December 31, 2009		4,112,800		$	1.19		3.71
Issued		21,200,000			0.32		3.28
Exercised, cancelled or expired		(444,500	)		1.22		-

Balance, September 30, 2010		24,868,300		$	0.44		3.49

NOTE 8: SUPPLEMENTAL CASH FLOW INFORMATION

As of September 30, 2010, the prepaid portion of the fair value of shares issued pursuant to consulting services agreements was $nil (December 31, 2009 - $214,501).

During the nine months ended September 30, 2010, $100,000 of accounts payable was settled by the issuance of 750,000 share purchase warrants, exercisable at $0.50 per share for a 5 year period (refer to Note 6).

During the nine months ended September 30, 2010, $90,412 of accounts payable was settled by the issuance of 361,647 restricted common shares at a deemed price of $0.25 per share (refer to Note 6).

Pursuant to a consulting arrangement entered into during the period, the Company issued 600,000 share purchase warrants with an exercise price of $0.50 per share and 600,000 share purchase warrants with an excerise price of $0.60 per share exercisable for a three year period (refer to Note 6).

See Notes 5 and 8 for additional disclosure on non-cash transactions.

	Nine Months Ended September 30,
	2010		2009

Interest paid	$	-	$	-
Income taxes paid	$	-	$	-

NOTE 9: CONTINGENCY AND COMMITMENTS

Contingency

The Company has not filed income tax returns for several years in certain operating jurisdictions, and may be subject to possible compliance penalties and interest. Management is currently not able to make a reliably measurable provision for possible liability for penalties and interest, if any, at this time. The Company may be liable for such amounts upon assessment. Penalties and interest, if assessed in the future, will be recorded in the period such amounts are determinable.

Commitment

Effective December 10, 2009, the Company entered into a twelve month public relations retainer agreement. Pursuant to the terms of the agreement, the Company agreed to: (i) pay a monthly fee of $6,500 through November 30, 2010, (ii) issue 200,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.50 per share and for an exercise period of up to five years from the issuance date (issued), and (iii) issue 200,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.60 per share for an exercise period of up to five years from the issuance date (issued). The fair value of these warrants was determined to be $204,000 using the Black-Scholes option pricing model.

Under a resolution dated September 7, 2010, the Company had agreed to compensate a director for their services by the payment of a $50,000 bonus from a future financing.

Combined Research and Operating Obligations

Effective May 25, 2010, the Company entered into a research and license option agreement with Mayo Clinic for the development and possible commercial use of a breast cancer vaccine. Subject to the approval and guidance of the United States Food and Drug Administration (“FDA”) Mayo Clinic plans to conduct a Phase I human clinical trial (“Phase I Trial”) to test and develop the technology. As part of the consideration for the Option granted herein, the Company agrees that it shall, during the period of the option and upon approval of FDA to conduct the above mentioned Phase I Trial, pay all the costs incurred by Mayo and invoiced to the Company, but not to exceed a total of $841,000, as sponsored research funding for Mayo Clinic to conduct such Phase I Trial. Mayo Clinic shall apply for the necessary approvals with the FDA to conduct such Phase I Trial and promptly inform the Company of the receipt of such approval. Both Parties agree that within 30 days after Mayo Clinic informs the Company in writing about the receipt of FDA approval to initiate the Phase I Trial, parties shall enter into a investigator initiated research agreement.

The Company has obligations under various agreements through December 31, 2013. The aggregate minimum annual payments for the years ending December 31 are as follows:

2010	$	125,622
2011		513,825
2012		445,500
2013		25,000
	$	1,109,947

NOTE 10: SUBSEQUENT EVENTS

Management is negotiating with potential investors and the note holders to ensure that additional financing is made available and that we do not default on the secured convertible notes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, that involve risks and uncertainties. All statements other than statements relating to historical matters including statements to the effect that we “believe”, “expect”, “anticipate”, “plan”, “target”, “intend” and similar expressions should be considered forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a number of important factors, including factors discussed in this section and elsewhere in this quarterly report on Form 10-Q, and the risks discussed in our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis, judgment, belief or expectation only as the date hereof. We assume no obligation to update these forward-looking statements to reflect events or circumstance that arise after the date hereof.

As used in this quarterly report: (i) the terms “we”, “us”, “our”, “TapImmune” and the “Company” mean TapImmune Inc. and its wholly owned subsidiary, GeneMax Pharmaceuticals Inc. which wholly owns GeneMax Pharmaceuticals Canada Inc., unless the context otherwise requires; (ii) “SEC” refers to the Securities and Exchange Commission; (iii) “Securities Act” refers to the Securities Act of 1933, as amended; (iv) “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; and (v) all dollar amounts refer to United States dollars unless otherwise indicated.

The following should be read in conjunction with our unaudited consolidated interim financial statements and related notes for the three and nine months ended September 30, 2010 included in this quarterly report, as well as our Annual Report on Form 10-K for the year ended December 31, 2009 and other filings that we have made with the SEC.

Overview

We are a biotechnology company whose strategic vision is to develop and market products specializing in the application of discoveries in cellular and molecular immunology and cancer biology to the development of proprietary therapeutics aimed at the treatment and eradication of cancer and prevention of infectious diseases. Our core technologies are based on an understanding of the function of a protein pump known as “TAP”, which is located within cells and which is essential to the processing of foreign (microbial) or autologous antigens, and subsequent presentation to the immune system for eradication of the cancer or infected cell. In addition, through strategic partnerships, we plan to license additional technologies that are synergistic to TAP. We currently have none of our product candidates on the market and are focusing on the development and testing of our product candidates.

The current standard therapies for cancer treatment include surgery, radiation therapy and chemotherapy. However, we believe that these treatments are not precise in targeting only cancerous cells and often fail to remove or destroy all of the cancer. The remaining cancer cells may then grow into new tumors, which can be resistant to further chemotherapy or radiation, which may result in death. In the United States, deaths from cancer are second only to cardiovascular deaths.

The Immunotherapy Industry for Cancer

Management believes that there is a critical need for more effective cancer therapies. Management further believes that the global market for effective cancer treatments is large, and that immunotherapies representing potential treatments for metastatic cancer are an unmet need in the area of oncology.

The human immune system appears to have the potential to clear cancers from the body, based on clinical observations that some tumors spontaneously regress when the immune system is activated. Most cancers are not very “immunogenic”, however, meaning that the cancers are not able to induce an immune response because they no longer express sufficient levels of key proteins on their cell surface, known as Major Histocompatability Class I or MHC Class I proteins. In healthy cells, these proteins provide the information to the immune system that defines whether the cell is healthy or, in the case of cancer or viral infection, abnormal. If the MHC Class I proteins signal that the cells are abnormal, then the immune system’s T-cells are activated to attack and kill the infected or malignant cell.

In many solid cancer tumors, the TAP protein system does not function and, therefore, the immune system is not stimulated to attack the cancer. Management believes that although a number of cancer therapies have been developed that stimulate the immune system, these approaches have often proven ineffective because the cancers remain invisible to the immune system due to this apparent lack of or low expression of the TAP protein.

By restoring TAP expression to TAP-deficient cells, the MHC Class I protein peptide complexes could signal the immune system to attack the cancer. The strategic vision of TapImmune is to be a product-driven biotechnology company, focusing primarily on use of its patented TAP technology to restore the TAP function within cancerous cells, thus making them immunogenic, or more “visible” to cancer fighting immune cells. Management believes that this cancer vaccine strategy will provide the most viable therapeutic approach that addresses this problem of “non-immunogenicity” of cancer. Management believes that this therapy may have a strong competitive advantage over other cancer therapies, since restoring the TAP protein will direct the immune system to specifically target the cancerous cells without damaging healthy tissue.

As a key part of its overall strategy, and with adequate funding, the company is pursuing the development of prophylactic vaccines against infectious microbes and will also do so in partnership with other vaccine developers. The company intends to develop the TAP technology for use as a vaccine that restores normal immune recognition for the treatment of cancer and supplements immune recognition for the development of prophylactic vaccines.

TapImmune’s Target Market Strategy

With the required funding in place, we will support and expand on our key infectious disease partnerships, including Aeras TB Foundation and the Mayo Clinic. We will also continue product development in oncology either alone as well as with strategic partners including the Mayo Clinic where we expect to have a Phase 1 Breast Cancer clinical trial initiated in early 2011. Cancer encompasses a large number of diseases that affect many different parts of the human body. The diversity of cancer types and their overall prevalence create a large need for new and improved treatments. Management believes that there is a significant market opportunity for a cancer treatment that utilizes the highly specific defense mechanisms of the immune system to attack cancers. Research & Markets (Global Vaccine Market Outlook 2007 – 2010) estimated that the market for cancer vaccines could reach approximately $6 billion in 2010. IMS has estimated that the cancer market will mushroom from $48 billion to $75 billion in 2012 with biopharma companies anticipating that cancer vaccines will grab a large slice of the market (Fierch Biotech, March 23, 2010). The goal of TapImmune management is to have the FDA approve our cancer vaccines within the next few years so that we can secure a portion of this market.

Management also believes that our prophylactic vaccine adjuvant will improve the creation of new vaccines and enhance the efficacy of current vaccines. It will be a key business development strategy to pursue additional partnerships and joint research and development ventures with vaccine manufacturers and pharmaceutical companies to bring new and improved vaccines to market. This strategy includes the development of vaccines for pandemic diseases and for bioterrorism threats. Management believes that our adjuvant will increase the potency of many of the currently available vaccines and lead to the creation of better, more effective new vaccines, thereby allowing us to participate in this large market through novel new products and in combination with existing vaccines.

Research and Development Efforts

We direct our research and development efforts towards the development of immunotherapeutic and prophylactic vaccine products for the treatment of cancer and protection against pathogenic microbes respectively, using our proprietary TAP technology. We have focused our efforts initially on the development of a therapeutic vaccine for applications in cancer treatment while demonstrating the breadth of the TAP technology for the development of prophylactic vaccines and its ability to complement currently approved and emerging products in both cancer therapeutics and prophylactic vaccines against microbes. This approach allows us to pursue our own internal product development while positioning us to enter into multiple partnerships and licensing agreements. Our first generation TAP vaccines that have been used in animal preclinical studies are based on insertion of TAP genes into a proprietary modified adeno virus vector. For clinical studies, we plan to have this product manufactured using the PerC6 cell line licensed from Crucell Holland B.V. (“Crucell”). We have an opportunity to take advantage of our potential partners’ capabilities while reducing our overhead costs. Our relationship with the University of British Columbia (“UBC”) allowed us to conduct contract research and development by employing highly skilled scientists at UBC. The research and development team performed the basic research on the biological function of TAP and related licensed technology as well as preclinical animal studies in cancer and infectious diseases. Moving into the development phase, we plan to initiate a contract with a qualified CRO (contract research organization) for the production of clinical grade vaccine product to be used in preclinical and clinical studies that require production facilities with Good Manufacturing Practices (“GMP”) and Good Laboratory Practices (“GLP”) certification. We will also plan to rely on our new partnerships with Aeras and Mayo Clinic to demonstrate the use of TAP in a new TB and smallpox vaccine candidates as well as new HER2/neu breast cancer vaccine. We also intend to develop second generation vaccines using TAP-encoding DNA plasmids.

Products and Technology in Development

TAP Cancer Vaccine

We previously developed our TAP Cancer Vaccine at the UBC Biomedical Research Centre under an agreement we refer to in this report as our “Collaborative Research Agreement”. This therapeutic cancer vaccine candidate, to be tested in preclinical toxicology studies, will, if successfully developed, include the patented use of the TAP-1 gene to restore the TAP protein, with the objective being to develop the TAP technology as a therapeutic cancer vaccine that will restore the normal immune recognition of cancer cells. The TAP Cancer Vaccine will be targeted at those cancers that are deficient in the TAP protein, which include breast cancer, prostate cancer, lung cancer, liver cancer, melanoma, renal cancer and colorectal cancer.

Management believes that the TAP Cancer Vaccine will deliver the genetic information required for the production of the TAP protein in the target cancer cell. This will trigger the cancer cell’s ability to effectively identify itself to the body’s immune system by transporting the cancer antigen peptides to the cell surface using the individual’s specific MHC Class I proteins. As a result, we believe that the immune response could be targeted to the entire repertoire of cancer antigen peptides produced by the cancer cell, rather than just to a single cancer antigen, as delivered by current cancer vaccines. The TAP Cancer Vaccine could allow the immune response to respond to the cancer even if the TAP protein and genetic information were only delivered to a small portion of the cancer cells. In addition, the TAP Cancer Vaccine would generate an immune response to any TAP-deficient cancer, regardless of the patient’s individual genetic variability either in the MHC Class I proteins or in the cancer-specific proteins and resultant peptides.

In general, a “cancer vaccine” is a therapy whose goal is to stimulate the immune system to attack tumors. Management believes that most current cancer vaccines contain either cancer-specific proteins that directly activate the immune system or contain genetic information, such as DNA, that encodes these cancer-specific proteins. Management believes that there are a number of key conditions that must be met before a cancer vaccine can be effective in generating a therapeutic immune response: (i) the cancer antigen peptide delivered by the vaccine has to be recognized by the immune system as “abnormal” or “foreign” in order to generate a strong and specific T-cell response; (ii) the same cancer antigen peptide has to be displayed on the surface of the cancer cells in association with the MHC Class I proteins; and (iii) these cancer antigen peptides then have to be sufficiently different from normal proteins in order to generate a strong anti-tumor response.

If these conditions are all met, then management believes that such cancer vaccines should generate a sufficiently strong immune response to kill the cancer cells. However, the identification of suitable cancer-specific antigen proteins to use in these therapeutic vaccines has proven extremely complex. In addition, the MHC Class I proteins are highly variable, with over 100 different types in humans and, as a result, any one-cancer antigen peptide will not produce an immune response for all individuals. Cancers are “genetically unstable” and their proteins are highly variable, so that the selected cancer antigen protein may result in the immune system only attacking a small subset of the cancerous cells.

Laboratory Testing of the TAP Cancer Vaccine

We have completed small animal pre-clinical animal testing of our TAP Cancer Vaccine to the extent that is required as a prerequisite for further preclinical toxicology analysis and Investigational New Drug (or “IND”) application to the FDA. The pre-clinical testing of the TAP Cancer Vaccine to date included the evaluation of several strains of vaccinia and adenovirus vectors to assess their respective ability to deliver the correct genetic information allowing expression of the TAP protein in tumors, the selection and licensing of the vector from Crucell and the identification and entering into an agreement, that we refer to in this report as our “Production Services Agreement”, with a CRO, a GMP manufacturer, for subsequent production of the TAP Cancer Vaccine. We have to complete the performance of toxicology studies using the TAP Cancer Vaccine on at least two animal species to confirm its non-toxicity. In addition, we must complete initial vaccine production, and develop internal and external clinical trials, support personnel and infrastructure before commencing clinical trials.

Once the formal pre-clinical testing is completed, we intend to compile and summarize the data and submit it to the United States Federal Drug Administration (or “FDA”) and/or the Canadian Health Canada (or “HC”), and/or other national regulatory agencies, in the form of an investigational new drug application. We anticipate that these applications would include data on vaccine production, animal studies and toxicology studies, as well as proposed protocols for the Phase I human clinical trials, described below.

Phase I Human Clinical Trials

Management believes that, subject to the completion of remaining pre-clinical work and financing, estimated at approximately $5,000,000, the Phase I human clinical trials could commence in 2011 depending on how quickly funding or an appropriate partnership is in place. The Phase I human clinical trials will be designed to provide data on the safety of the TAP Cancer Vaccine when used alone or as a component of a cancer vaccine in humans. If the latter strategy is employed the clinical trial design and specific cancer indication will be dependent upon the collaboration.

Clinical trials to support new drug applications are typically conducted in three sequential phases, although the phases may overlap. During Phase I there is an initial introduction of the therapeutic candidate into healthy human subjects or patients. The drug is tested to assess metabolism, pharmacokinetics and pharmacological actions and safety, including side effects associated with increasing doses. Phase II usually involves studies in a limited patient population to assess the clinical activity of the drug in specific targeted indications, assess dosage tolerance and optimal dosage and continue to identify possible adverse effects and safety risks. If the therapeutic candidate is found to be potentially effective and to have an acceptable safety profile in Phase II evaluations, Phase III trials are undertaken to further demonstrate clinical efficacy and to further test for safety within an expanded patient population at geographically dispersed clinical trial sites.

HER2/neu Vaccine Technology – Mayo Clinic

On June 1, 2010, we signed an exclusive licensing option agreement with the Mayo Clinic, Rochester MN for clinical development of a new HER2/neu breast cancer vaccine technology. Under the principle investigator Dr Keith Knutson, an IND application followed by Phase 1 clinical studies could begin as early Q1 2011.

Infectious Disease Application for “TAP” Adjuvant

TapImmune plans to develop or license out our technology for the creation of enhanced viral vaccines, such as for smallpox and others, based on our findings that TAP can augment immune responses. We have presented data showing that increasing TAP expression in TAP-competent antigen presenting cells (APCs) and/or virus infected cells increases the antigenic peptide associated with MHC class I expression on the cell surface, and leads to increased specific T cell-mediated immune responses. We believe this technology can add great value to the creation of new vaccines and enhance those that already exist. Our collaboration with Aeras TB Foundation and Mayo Clinic is evidence of this, and we will continue to pursue additional partnerships and collaborations as a key strategy to expand our R&D program to optimize resources and to reduce costs and development times.

Strategic Relationships

Crucell Holland B.V. Research License and Option Agreement

Effective August 7, 2003, we entered into a five-year research license and option agreement with Crucell Holland B.V. (“Crucell”), whereby Crucell granted us a non-exclusive worldwide license for the research use of its packaging cell (PerC6) technology. We were required to make certain payments over the five-year term totaling Euro €450,000 (approximately $510,100). The license was dormant with an outstanding balance owing of 170,000 Euro ($248,938) that was included in research obligations. Management completed a settlement for the remaining balance including a €17,000 cash payment and the issuance of 265,000 shares of the Company’s restricted common stock.

Effective August 7, 2008, we negotiated an amended license agreement for the use of Crucell’s adenovirus technology. We are required to make annual license payments on the anniversary of the effective date for the three year term equal to €75,000 per annum. As at September 30, 2010, we have accrued $119,080 (€87,500) under the amended agreement.

National Institute of Allergy and Infectious Diseases

We signed a License Agreement with the National Institute of Health (USA) for the use of the Modified Vaccinia Ankora (MVA) virus for the development of vaccines. We will continue to license this technology for the development of prophylactic vaccines against infectious diseases. Under the terms of this agreement, we are required to pay a royalty of $2,500 per year. This license is expected to be renegotiated pending adequate funding.

Aeras Global TB Foundation

On February 1, 2010, we announced our collaboration intent with Aeras Global TB Foundation. Aeras, one of the foremost non-profit organizations is developing new approaches for tuberculosis (“TB”) vaccines, which is dedicated to the development of effective TB vaccine regimens that will prevent tuberculosis in all age groups and will be affordable, available and adopted worldwide.

Mayo Clinic HER2/neo Breat Cancer Vaccine

In June 2010, TapImmune signed an exclusive Licensing Option agreement with the Mayo Clinic in Rochester, Minnesota, for the clinical development of a vaccine technology to treat breast cancer. The technology targets a novel set of antigens on the human epidermal growth factor receptor 2 (HER-2/neu) receptor that were identified in breast cancer patients with pre-existent immunity. It has a number of potential advantages for the development of a breast cancer vaccine that may use both MHC class I and class II pathways to address a broad patient population (Source: Clinical Cancer Research 16[3]:825-34, 2010). The technology may also elicit a longer immune response versus traditional immunotherapies.

The option to license this technology can be exercised after Phase I clinical trials under terms agreed between Mayo Clinic and TapImmune. Upon obtaining IND approval, TapImmune and the Mayo Clinic will likely execute a Sponsored Research agreement.

Mayo Clinic Smallpox Vaccine

On August 4th 2010, we announced a Research and Technology License Option Agreement with Mayo Clinic, Rochester, MN, for the development of a smallpox vaccine. The research will be conducted by Gregory Poland M.D. at Mayo Clinic, to evaluate novel peptide antigens together with TapImmune’s proprietary TAP technology. TapImmune also has an exclusive Option to the smallpox vaccine technology after research studies are completed under the terms of the agreement.

Our collaborator on the new smallpox vaccine, Dr Gregory Poland, is a world-renowned expert on the development of vaccines for infectious disease and leads the Translational Immunovirology and Biodefense Program at the Mayo Clinic. It is the broad goal of TapImmune to determine whether TAP can be a platform technology for improving the efficacy of vaccines designed to combat additional viral threats in the biodefense field.

In preclinical studies our TAP technology improved the efficacy of a vaccinia (Pox) virus vaccine by over a 100 fold.

Other Technology

On February 16, 2004, we added to our technology portfolio by expanding the License Agreement (now assigned under the purchase agreement) with UBC to include a technological method that identifies agonists or antagonists antigen presentation to the immune system by normal and cancerous cells. Management believes that this technology can be used to screen and select new drugs that regulate immune responses.

Intellectual Property, Patents and Trademarks

Patents and other proprietary rights are vital to our business operations. We protect our technology through various United States and foreign patent filings, and maintain trade secrets that we own. Our policy is to seek appropriate patent protection both in the United States and abroad for its proprietary technologies and products. We require each of our employees, consultants and advisors to execute a confidentiality agreement upon the commencement of any employment, consulting or advisory relationship with us. Each agreement provides that all confidential information developed or made known to the individual during the course of the relationship will be kept confidential and not be disclosed to third parties except in specified circumstances. In the case of employees, the agreements provide that all inventions conceived of by an employee shall be our exclusive property.

Patent applications in the United States are maintained in secrecy until patents are issued. There can be no assurance that our patents, and any patents that may be issued to us in the future, will afford protection against competitors with similar technology. In addition, no assurances can be given that the patents issued to us will not be infringed upon or designed around by others or that others will not obtain patents that we would need to license or design around. If the courts uphold existing or future patents containing broad claims over technology used by us, the holders of such patents could require us to obtain licenses to use such technology.

Pursuant to the acquisition agreement with UBC, we acquired the portfolio of intellectual property as follows:

Method of Enhancing Expression of MHC Class I Molecules Bearing Endogenous Peptides

On March 26, 2002, the United States Patent and Trademark Office issued US Patent No. 6,361,770 to UBC for the use of TAP-1 as an immunotherapy against all cancers. The patent is titled “Method of Enhancing Expression of MHC Class I Molecules Bearing Endogenous Peptides” and provides comprehensive protection and coverage to both in vivo and ex vivo applications of TAP-1 as a therapeutic against all cancers with a variety of delivery mechanisms. The inventors were Dr. Jefferies, Dr. Reinhard Gabathuler, Dr. Gerassinmoes Kolaitis and Dr. Gregor S.D. Reid, who collectively assigned the patent to UBC under an assignment agreement. The patent expires March 23, 2014. We have pending applications for patent protection for this patent in Europe and in Japan.

Method of Enhancing an Immune Response

U.S. patent No. 7,378,087, issued May 27 2008. The patent claims relate to methods for enhancing the immune response to tumor cells by introducing the TAP molecule into the infected cells. Patent applications are pending on other aspects of the company’s technology. The inventors were Jefferies, Wilfred A.; Zhang, Qian-Jin; Chen, Susan Shu-Ping; Alimonti, Judie B., who collectively assigned the patent to UBC under an assignment agreement.

Method of Identifying MHC Class I Restricted Antigens Endogenously Processed by a Secretory Pathway

On August 11, 1998, the U.S. Patent and Trademark Office issued US Patent No. 5,792,604 to UBC, being a patent for the use of bioengineered cell lines to measure the output of the MHC Class I restricted antigen presentation pathway as a way to screen for immunomodulating drugs. The patent is titled “Method of Identifying MHC Class I Restricted Antigens Endogenously Processed by a Secretory Pathway.” This patent covers the assay which can identify compounds capable of modulating the immune system. The inventors were Dr. Jefferies, Dr. Gabathuler, Dr. Kolaitis and Dr. Reid, who collectively assigned the patent to UBC under an assignment agreement. The patent expires on March 12, 2016. We have been granted patent protection for this patent in Finland, France, Germany, Italy, Sweden Switzerland and the United Kingdom, and have applied for patent protection in Canada and Japan.

TAP Vaccines and other filings

Patent applications have been filed by TapImmune and UBC in respect of our technologies and those currently under assignment. In December 2006, January, November, and December 2007 we made additional filings as continuations or new filings with regard to the same technologies as well as their applications in infectious diseases. We intend to continue to work with UBC to file additional patent applications with respect to any novel aspects of our technology to further protect our intellectual property portfolio. As disclosed in previous filings, additional patents have been acquired under the execution of the option agreement. An invention that describes the use of bio-acceptable substances to promote the transcription of the TAP-1 gene in TAP-1 expression-deficient cells was filed in July 2009. The patent is entitled “HAT acetylation promoters and uses of compositions thereof in promoting immunogenicity”.

Plan of Operation and Funding

Management believes that as a result of a significant debt settlement and restructuring in July 2009, we are well positioned and have a balance sheet that has been restructured to make it possible to go to the equity market to raise the estimated $5,000,000 necessary over the next two years for expenses associated with the balance of pre-clinical development and completion of toxicology trials for the TAP Cancer Vaccine and prophylactic vaccine development and for various operating expenses.

2008 and 2009 were very challenging years in the capital markets. We have been able to secure over $2,000,000 enabling us to complete our restructure, ensure our important patent work continued along and pursue our business development initiatives. These initiatives resulted in a collaboration agreement with Aeras Global Tuberculosis Foundation, a new license agreement with Crucell Holland and two development and license partnership with the Mayo Clinic, (Rochester MN) giving us the opportunity to advance multiple product candidates to the market.

We are extremely pleased that these world class institutions and leading individuals recently added to our board and advisory board have identified the uniqueness and the potential of our technology platform and the opportunities we are pursuing.

We have not generated any cash flows from operations to fund our operations and activities due primarily to the nature of lengthy product development cycles that are normal to the biotech industry. Therefore, we must raise additional funds in the future to continue operations. We intend to finance our operating expenses with further issuances of common stock and/or debt. Although we do not currently have funds to continue operations for more than four months, we believe that future investment, if successful, should be adequate to fund our operations over the next 24 months. Thereafter, we expect we will need to raise additional capital to meet long-term operating requirements. Our future success and viability are dependent on our ability to raise additional capital through further private offerings of our stock or loans from private investors. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or not available on acceptable terms, we may not be able to conduct our proposed business operations successfully, which could significantly and materially restrict or delay our overall business operations.

Results of Operations

In this discussion of the Company’s results of operations and financial condition, amounts, other than per-share amounts, have been rounded to the nearest thousand dollars.

In this Amendment No. 1, we have restated the amounts in our three months and six months results of operations and financial condition, where applicable.

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

We are a development stage company. We recorded a net loss of $1,014,000 during the three months ended September 30, 2010 compared to net loss of $791,000 for the three months ended September 30, 2009.

Operating costs increased to $1,234,000 during the three months ended September 30, 2010 compared to $748,000 in the prior period. Significant changes in operating expenses are outlined as follows:

Consulting fees decrerased to $28,000 during the three months ended September 30, 2010 compared to $87,000 during the prior period, due primarily to business development services relating to debt restructuring that were in place during the prior period.

Consulting compensation – stock-based increased to $70,000 during the three months ended September 30, 2010 from $28,000 during the prior period. The current period expense consists of the fair value of option, stock and warrant grants earned during the period.

General and administrative expenses increased to $33,000 in the three months ended September 30, 2010 from $13,000 in the prior period, with the increase resulting primarily from a higher investor relations and travel related activities in the current period.

Interest and finance charges increased to $459,000 during the three months ended September 30, 2010 from $320,000 during the prior period. Current and prior period interest charges are primarily accretion of interest and the fair value of warrants issued with convertible debentures and promissory notes, respectively.

Management fees decreased to $54,000 during the three months ended September 30, 2010 from $63,000 during the prior period. Our Board of Directors and management were reorganized during the prior year, and as of June 1, 2009, a portion of the fees paid or accrued to our Chief Executive Officer have been allocated to research and development.

Management compensation – stock-based increased to $326,000 during the three months ended September 30, 2010 from $nil during the prior period. The current period expense consists of the fair value of option grants earned during the period.

Professional fees decreased to $171,000 during the three months ended September 30, 2010 from $213,000 during the prior period, due to significant activity relating to financing and debt restructuring in the prior period.

Research and development increased to $94,000 during the three months ended September 30, 2010 from $25,000 during the prior period. The increase in expense in the current period is due to an option fee payment for licensing technology made to Mayo Foundation for education. Also, our Board of Directors and management were reorganized during the year, and as of June 1, 2009, a portion of the fees paid or accrued to our Chief Executive Officer has been allocated to research and development.

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

We recorded a net loss of $3,988,000 during the nine months ended September 30, 2010 compared to a net loss of $14,265,000 for the nine months ended September 30, 2009.

Operating costs increased to $4,146,000 during the nine months ended September 30, 2010 compared to $1,689,000 in the prior period. Significant changes in operating expenses are outlined as follows:

Consulting fees decreased to $67,000 during the nine months ended September 30, 2010 from $320,000 during the prior period, due primarily to business development services relating to debt restructuring that were in place during the prior period.

Consulting compensation – stock-based increased to $1,142,000 during the nine months ended September 30, 2010 from $27,500 during the prior period. The current period expense consists of the fair value of option, stock and warrant grants earned during the period.

General and administrative expenses increased to $143,000 in the nine months ended September 30, 2010 from $54,000 in the prior period, with the increase resulting primarily from a higher investor relations activities in the current period.

Interest and finance charges increased to $794,000 during the nine months ended September 30, 2010 from $577,000 during the prior period. Current and prior period interest charges are primarily accretion of interest and the fair value of warrants issued with convertible debentures and promissory notes, respectively.

Management fees increased slightly to $198,000 during the nine months ended September 30, 2010 from $191,000 during the prior period. Our Board of Directors and management were reorganized during the prior year, and as of June 1, 2009, a portion of the fees paid or accrued to our Chief Executive Officer have been allocated to research and development.

Management compensation – stock-based increased to $974,000 during the nine months ended September 30, 2010 from $24,000 during the prior period. The current and prior period expense consists of the fair value of option grants earned during the period.

Professional fees increased to $585,000 during the nine months ended September 30, 2010 from $463,000 during the prior period due to significant activity relating to financing and debt restructuring in the current period].

Research and development increased to $243,000 during the nine months ended September 30, 2010 from $29,000 during the prior period. The increase in expense in the current period is due to an option fee payment for licensing technology made to Mayo Foundation for education. Also, our Board of Directors and management were reorganized during the year, and as of June 1, 2009, a portion of the fees paid or accrued to our Chief Executive Officer has been allocated to research and development.

Liquidity and Capital Resources

Since inception, we have continued to incur development related expenses which have resulted in the accumulation of a substantial deficit during the development stage. We will require significant additional financial resources and will be dependant on future financings to fund our ongoing research and development as well as other working capital requirements.

As of September 30, 2010, we had total assets of $295,000, total liabilities of $2,635,000 and a deficit of $42,399,000 accumulated during the development stage. Generally, we have financed our operations through the proceeds from convertible notes and the private placement of equity securities as noted in financing activities section below.

Cash and Working Capital

We had cash and cash equivalents of $145,000 as of September 30, 2010, compared to cash of $141,000 at December 31, 2009 and $46,000 at September 30, 2009. We had working capital deficiency of $2,340,000 as of September 30, 2010, compared to a working capital deficiency of $629,000 as of December 31, 2009 and working capital deficiency of $760,000 as of September 30, 2009.

Operating Activities

Net cash used in operating activities during the nine months ended September 30, 2010 was $850,000 compared to $690,000 during the prior period. We had no revenues during the current or prior periods. Operating expenditures increased during the current period due to higher legal fees associated with debt and note settlement, a new agreement with Mayo Foundation, higher non-cash stock-based management fee and higher consulting fees for investor relation services provided by Financial Insights offset by lower consulting fee.

Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2010 was $Nil compared to $Nil during the prior period.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2010 was $854,000 compared to $735,000 during the prior period. Current period financing consisted of advances from related parties and proceeds from convertible notes and prior period financing included proceeds from the same sources in addition to advances from notes and loans payable and equity.

At September 30, 2010, we had 3,868,000 stock options and 24,868,300 share purchase warrants outstanding. The outstanding stock options had a weighted average exercise price of $0.93 per share, with the warrants having a weighted average exercise price of $0.45 per share. Accordingly, as of September 30, 2010, the outstanding options and warrants represented a total of 28,736,300 shares issuable for proceeds of approximately $14,788,000, if these options and warrants were exercised in full. The exercise of these options and warrants is completely at the discretion of the holders. There is no assurance that any of these options or warrants will be exercised or that those warrants that contain a cashless exercise provision will not be exercised on a cashless basis.

As of September 30, 2010, we anticipate that we will need significant financing to enable us to meet our anticipated expenditures for the next 24 months, which are expected to be in the range of $5,000,000 assuming a single Phase 1 clinical trial.

Going Concern

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations and pay our liabilities arising from our business operations when they come due. We intend to finance our anticipated operating expenses with further issuances of common stock through private placement offerings or loans from private investors. Management believes that the Company will be able to continue limited operations with accommodations from debt holders and additional temporary short term funding over the next twelve months. Due to capital market conditions, funding continues to be challenging. It is unlikely the Company will be able to continue as a going concern past a twelve month horizon if significant equity funding is not raised within this period.

Off-Balance Sheet Arrangements

Other than as disclosed in the financial statements, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Policies

Our consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Refer to Note 2 of our consolidated financial statements for our year ended December 31, 2009 for a summary of significant accounting policies.

Item 3. Quantitive and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are not effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with United States generally accepted accounting principles (“US GAAP”).

As of September 30, 2010, management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, as at September 30, 2010 such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below.

The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) inadequate entity level controls due to an ineffective audit committee resulting from a lack of independent members on the current audit committee and a lack of outside directors on our board of directors; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; (4) ineffective controls over period end financial disclosure and reporting processes; (5) incorrect classification of fair value of warrants to additional paid-in capital instead of as a derivative liability on the balance sheet.

Management believes that none of the material weaknesses set forth above had a material adverse effect on the Company's financial results for the nine months ended September 30, 2010, but management is most concerned that the material weakness in entity level controls set forth in item (1) results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, it could result in a material misstatement in our financial statements in future periods.

We are committed to improving our financial organization. As part of this commitment, we will continue to enhance our internal control over financial reporting by: i) expanding our personnel, ii) improving segregate duties consistent with control objectives, iii) appointing one or more outside directors to our board of directors who shall be appointed to our audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management; and iv) preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the ineffective audit committee and a lack of outside directors on our Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel will result in improved segregation of duties and provide more checks and balances within the financial reporting department.

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and are committed to taking further action by implementing additional enhancements or improvements, or deploying additional human resources as may be deemed necessary.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the nine months ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

As of the date of this Quarterly Report, no director, officer, affiliate or beneficial owner of more than 5% of our common stock is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceeding. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

Item 1A. Risk Factors

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are included with this Quarterly Report on Form 10-Q:

	Exhibit Number	Description of Exhibit
	31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1933, as amended.
	31.2	Certification of Acting Principal Accounting Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1933, as amended.
	32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Acting Principal Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TAPIMMUNE INC.

	/s/ Glynn Wilson ________________________________
	Glynn Wilson Chairman and Principal Executive Officer Date: October 13, 2011.
	/s/ Denis Corin __________________________________
	Denis Corin Chief Financial Officer and Acting Principal Accounting Officer Date: October 13, 2011.

Marker Therapeutics, Inc. - FORM 10-Q/A - October 14, 2011

Attached files

Marker Therapeutics, Inc. Reports