Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2022 to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. Our management, with participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2022 to provide reasonable assurance that the information required to be disclosed by us in this Annual Report was (a) reported within the time periods specified by SEC rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, to allow timely decisions regarding any required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the framework in Internal Control—Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.
Cybersecurity
We utilize information technology for internal and external communications with vendors, clinical sites, banks, investors and shareholders. Loss, disruption or compromise of these systems could significantly impact operations and results.
We are not aware of any material cybersecurity violation or occurrence. We believe our efforts toward prevention of such violation or occurrence, including system design and controls, processes and procedures, training and monitoring of system access, limit, but may not prevent unauthorized access to our systems.
Other than temporary disruption to operations that may be caused by a cybersecurity breach, we consider cash transactions to be the primary risk for potential loss. We and our financial institution take steps to minimize the risk by requiring multiple levels of authorization and other controls.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter ended December 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Inherent Limitations on Effectiveness of Internal Controls
In designing and evaluating the disclosure controls and procedures, management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Our management, including our Chief Executive Officer and Chief Accounting Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item and not set forth below will be set forth in the sections headed “Election of Directors,” “Executive Officers” and “Delinquent Section 16(a) Reports” in our definitive proxy statement for our 2022 Annual Meeting of Stockholders, or our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2022 and is incorporated herein by reference.
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial and accounting officer or controller, or persons performing similar functions, known as the Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct is available on our website at www.markertherapeutics.com under the Corporate Governance section of our Investors page. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be set forth in the section headed “Executive Compensation” in our Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item will be set forth in the section headed “Securities Authorized for Issuance Under Equity Compensation Plans” and “Security Ownership of Certain Beneficial Owners and Management” in our Proxy Statement and is incorporated herein by reference.
The information required by Item 201(d) of Regulation S-K will be set forth in the section headed “Executive Compensation” and “Information Regarding the Board of Directors and Corporate Governance” in our Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item will be set forth in the section headed “Transactions with Related Persons and Indemnification” and “Information Regarding the Board of Directors and Corporate Governance” in our Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item will be set forth in the section headed “Principal Accountant Fees and Services” in our Proxy Statement and is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The documents filed as part of this report are as follows:
1. The financial statements and accompanying report of independent registered public accounting firm are set forth immediately following the signature page of this report on pages F-1 through F-25.
2. All financial statement schedules are omitted because they are inapplicable, not required or the information is included elsewhere in the financial statements or the notes thereto.
3. The following is a list of exhibits filed as part of this Annual Report on Form 10-K.
EXHIBIT INDEX
Incorporated by Reference
Exhibit
number
Exhibit description
Form
File no.
Exhibit
Filing
date
Filed
herewith
3.1
Certificate of Incorporation
8-K
001-37939
3.4
10/17/18
3.2
Certificate of Amendment to Certificate of Incorporation of Marker Therapeutics, Inc.
8-K
001-37939
3.1
5/27/22
3.3
Certificate of Amendment to Certificate of Incorporation of Marker Therapeutics, Inc.
8-K
001-37939
3.1
1/26/23
3.4
Bylaws of Marker Therapeutics, Inc.
8-K
000-37939
3.6
10/17/18
4.0
Form of Common Stock Certificate of Marker Therapeutics, Inc.
8-A/A
000-37939
4.1
10/17/18
4.24
Form of Marker Warrant
8-K
001-37939
2.1
5/15/18
4.25
Description of Common Stock of Marker Therapeutics, Inc.
10-K
001-37939
4.25
3/12/20
10.1
Form of Restructuring Agreement dated May 28, 2015
8-K
000-27239
10.1
6/3/15
10.2
Amended and Restated Restructuring Agreement, dated as of June 2, 2015
8-K
000-27239
10.1
6/5/15
10.3
Form of Securities Purchase Agreement (including registration rights)
8-K
001-37939
10.1
6/8/18
10.4
Registration Rights Agreement
8-K
001-37939
2.1
5/15/18
10.5
Exclusive License Agreement between Baylor College of Medicine and Marker Therapeutics, Inc. dated March 16, 2018***
10-K
001-37939
10.21
3/15/19
10.6
Sponsored Research Contract between Baylor College of Medicine and Marker Therapeutics, Inc. dated November 16, 2018***
10-K
001-37939
10.22
3/15/19
10.7
2009 Stock Incentive Plan*
DEF14-C
000-27239
B
1/29/10
90
Table of Contents
Incorporated by Reference
Exhibit
number
Exhibit description
Form
File no.
Exhibit
Filing
date
Filed
herewith
10.8
2014 Omnibus Stock Ownership Plan, as amended through August 29, 2017*
8-K
001-37939
10.1
9/5/17
10.9
Amendment to 2014 Omnibus Stock Ownership Plan, as amended *
8-K
001-37939
4.4
10/17/18
10.10
Form of Stock Option Award Agreement –Employee*
8-K
001-37939
10.3
10/23/18
10.11
Form of Stock Option Award Agreement – Non-Employee Director*
S-8
333-228056
10.1
10/30/18
10.12
Form of Stock Option Award Agreement – Consultant*
8-K
001-37939
10.2
10/23/18
10.13
Form of Restricted Stock Award Agreement – Consultant*
10-Q
000-27239
10.7
11/16/15
10.14
Employment Agreement between TapImmune Inc. and Peter Hoang dated as of September 22, 2017*
8-K
001-37939
10.1
9/25/17
10.15
Employment Agreement by and between TapImmune Inc. and Michael J. Loiacono dated as of August 25, 2016*
8-K
000-27239
10.1
8/25/16
10.16
Amendment to Employment Agreement between Marker Therapeutics, Inc. and Michael J. Loiacono dated as of November 27, 2018*
8-K
001-37939
10.2
12/3/18
10.17
Employment Agreement between Marker Therapeutics, Inc. and Anthony Kim dated as of November 27, 2018*
8-K
001-37939
10.3
12/3/18
10.18
Consulting Agreement between Dr. Juan Vera and Marker Therapeutics, Inc. dated October 19, 2018*
8-K
001-37939
10.1
10/23/18
10.19
Form of Director and Officer Indemnification Agreement*
10-K
001-37939
10.39
3/15/19
10.20
Amendment to Employment Agreement between Marker Therapeutics, Inc. and Peter Hoang, dated March 14, 2019*
10-K
001-37939
10.40
3/15/19
10.21
Employment Agreement between Marker Therapeutics, Inc. and Mythili Koneru, dated February 6, 2019.*
10-Q
001-37939
10.3
5/10/19
10.22
Marker Therapeutics, Inc. 2020 Equity Incentive Plan
S-8
333-239136
99.1
6/12/20
10.23
Form of Stock Option Grant Notice and Stock Option Agreement under the Marker Therapeutics, Inc. 2020 Equity Incentive Plan.
10-Q
001-37939
10.1
11/9/20
10.24
Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under the Marker Therapeutics, Inc. 2020 Equity Incentive Plan.
10-Q
001-37939
10.2
11/9/20
10.25
Form of Common Stock Purchase Warrant
8-K
000-27239
4.1
8/14/14
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Incorporated by Reference
Exhibit
number
Exhibit description
Form
File no.
Exhibit
Filing
date
Filed
herewith
10.26
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series A
8-K
000-27239
4.6
1/12/15
10.27
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series C
8-K
000-27239
4.8
1/12/15
10.28
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series D
8-K
000-27239
4.9
1/12/15
10.29
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series E
8-K
000-27239
4.10
1/12/15
10.30
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series A-1
8-K
000-27239
4.6
3/10/15
10.31
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series E-1
8-K
000-27239
4.10
3/10/15
10.32
Form of Amended Series A Warrant
8-K
000-27239
4.2
8/11/16
10.33
Form of Amended Series C Warrant
8-K
000-27239
4.3
8/11/16
10.34
Form of Amended Series D Warrant
8-K
000-27239
4.4
8/11/16
10.35
Form of Amended Series E Warrant
8-K
000-27239
4.5
8/11/16
10.36
Form of Amended Series A-1 Warrant
8-K
000-27239
4.6
8/11/16
10.37
Form of Amended Series D-1 Warrant
8-K
000-27239
4.7
8/11/16
10.38
Form of Series F Warrant
8-K
000-27239
4.9
8/11/16
10.39
Form of Series F-1 Warrant
8-K
000-27239
4.10
8/11/16
10.40
Form of August 2016 Private Placement Warrant
8-K
000-27239
4.1
8/11/16
10.41
Form of 2016 Private Placement Agent Warrant
8-K
000-27239
4.11
8/11/16
10.42
Form of June 2017 Private Placement Warrant
8-K
001-37939
4.1
6/22/17
10.43
Form of 2017 Private Placement Agent Warrant
8-K
001-37939
4.2
6/22/17
10.44
Form of Warrant Amendment Agreement August 2016 Private Placement
8-K
000-27239
10.3
8/11/16
10.45
Form of Warrant Exercise Agreement
8-K
001-37939
10.3
6/22/17
10.46
Form of Private Placement Warrant
8-K
001-37939
4.1
6/8/18
10.47
Form of Private Placement Warrant
8-K
001-37393
4.2
6/8/18
92
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Incorporated by Reference
Exhibit
number
Exhibit description
Form
File no.
Exhibit
Filing
date
Filed
herewith
10.48
Services Agreement, between Wilson Wolf Manufacturing
Corporation and Marker Therapeutics, Inc., effective April 12,
2022
8-K
001-37939
10.1
4/26/22
1049
Purchase Agreement, by and between Marker Therapeutics, Inc.
and Lincoln Park Capital Fund, LLC, dated December 12, 2022
8-K
001-37939
10.1
12/13/22
10.50
Registration Rights Agreement, by and between Marker
Therapeutics, Inc. and Lincoln Park Capital Fund, LLC dated
December 12, 2022
8-K
001-37393
10.2
12/13/22
21.1
List of Subsidiaries
X
23.1
Consent of Marcum LLP, an independent public accounting firm.
X
24.1
Powers of Attorney (included on signature page)
X
31.1
Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14a
X
31.2
Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14a
X
32.1
Certification of Chief Executive Officer pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002#
X
32.2
Certification of Chief Financial Officer pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002#
X
101.INS
XBRL Instance Document
X
101.SCH
XBRL Taxonomy Extension Schema Document
X
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
X
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 filed herewith)
* Executive management contract or compensatory plan or arrangement.
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Table of Contents
** Confidential treatment has been granted as to certain portions of this exhibit pursuant to Rule 406 of the Securities Act of 1933, as amended, or Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
*** Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for conditional treatment and this exhibit has been submitted separately with the SEC.
# These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350 and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
ITEM 16. FORM 10-K SUMMARY
None.
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 22, 2023
Marker Therapeutics, Inc.
By:
/s/ Peter Hoang
Peter Hoang
Chief Executive Officer (Principal Executive Officer)
By:
/s/ Michael J. Loiacono
Michael J. Loiacono
Chief Accounting Officer (Principal Financial and Accounting Officer)
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POWER OF ATTORNEY
Each of the undersigned officers and directors of Marker Therapeutics, Inc., hereby constitutes and appoints Peter Hoang and Michael J. Loiacono, their true and lawful attorney-in-fact and agent, for them and in their name, place and stead, in any and all capacities, to sign their name to any and all amendments to this Report on Form 10-K, and other related documents, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys, full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned for himself hereby ratifies and confirms all that said attorney shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on March 22, 2023 on behalf of the registrant and in the capacities indicated.
Signature
Title
Date
/s/ Peter Hoang
President, Chief Executive Officer and Director (Principal Executive Officer)
March 22, 2023
Peter Hoang
/s/ N. David Eansor
Chairman
March 22, 2023
N. David Eansor
/s/ David Laskow-Pooley
Director
March 22, 2023
David Laskow-Pooley
/s/ John Wilson
Director
March 22, 2023
John Wilson
/s/ Juan Vera
Director
March 22, 2023
Juan Vera
/s/ Katharine Knobil
Director
March 22, 2023
Katharine Knobil
/s/ Steve Elms
Director
March 22, 2023
Steve Elms
/s/ Michael J. Loiacono
Chief Accounting Officer (Principal Financial and Accounting Officer)
March 22, 2023
Michael J. Loiacono
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Table of Contents
MARKER THERAPEUTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND DECEMBER 31, 2021
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 688 )
F-2
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations
F-5
Consolidated Statements of Stockholders’ Equity
F-6
Consolidated Statements of Cash Flows
F-7
Notes to the Consolidated Financial Statements
F-8
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Marker Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Marker Therapeutics, Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has incurred significant losses and needs to raise additional funds to sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
Table of Contents
Asset Impairment - Determination of Impairment Indicators on Long Lived Assets and Right-of-Use Assets - Refer to Note 3 to the Consolidated Financial Statements.
Critical Audit Matter Description
Property, plant and equipment and right-of-use assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. As of December 31, 2022, the carrying value of the Company’s property plant and equipment was $12.3 million, and right-of-use assets $5.5 million.
We have identified the determination of impairment indicators for property, plant and equipment and right-of-use assets as a critical audit matter due to the significant judgments management makes when determining whether events or changes in circumstances have occurred indicating that the carrying amounts of an asset group may not be recoverable. Auditing management’s judgments required a high degree of auditor judgment when performing audit procedures to evaluate whether management appropriately identified impairment indicators.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the evaluation of indicators of impairment included the following, among others:
● We evaluated the reasonableness of management’s impairment indicator analysis by performing the following procedures:
● We inquired of management whether there are change of plans and circumstances affecting the use of property, plant and equipment or assets under lease;
● We inspected minutes of the board of directors to understand if there were factors that would represent potential impairment indicators for property, plant and equipment and right-of-use assets;
● We evaluated the assumptions and the mathematical accuracy of the undiscounted cash flows used by management, for the asset recovery test.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2014 .
Houston, TX
March 22, 2023
F-3
Table of Contents
MARKER THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
December 31,
2022
2021
ASSETS
Current assets:
Cash and cash equivalents
$
11,782,172
$
42,351,145
Restricted cash
—
1,146,186
Prepaid expenses and deposits
2,435,079
2,484,634
Other receivables
2,402,004
237
Total current assets
16,619,255
45,982,202
Non-current assets:
Property, plant and equipment, net
12,323,143
10,096,861
Construction in progress
—
2,225,610
Right-of-use assets, net
5,479,786
9,830,461
Total non-current assets
17,802,929
22,152,932
Total assets
$
34,422,184
$
68,135,134
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
4,704,611
$
11,134,913
Related party deferred revenue
2,500,000
—
Deferred revenue
—
1,146,186
Lease liability
577,198
620,490
Total current liabilities
7,781,809
12,901,589
Non-current liabilities:
Lease liability, net of current portion
7,039,338
11,247,950
Total non-current liabilities
7,039,338
11,247,950
Total liabilities
14,821,147
24,149,539
Stockholders' equity:
Preferred stock - $ 0.001 par value, 5 million shares authorized and 0 shares issued and outstanding at December 31, 2022 and 2021, respectively
—
—
Common stock, $ 0.001 par value, 30 million and 15 million shares authorized , 8.4 million and 8.3 million shares issued and outstanding as of December 31, 2022 and 2021, respectively
8,406
8,308
Additional paid-in capital
447,641,680
442,095,642
Accumulated deficit
( 428,049,049 )
( 398,118,355 )
Total stockholders' equity
19,601,037
43,985,595
Total liabilities and stockholders' equity
$
34,422,184
$
68,135,134
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
MARKER THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
2022
2021
Revenues:
Grant income
$
3,513,544
$
1,241,710
Related party service revenue
5,500,000
—
Total revenues
9,013,544
1,241,710
Operating expenses:
Research and development
26,139,323
27,794,879
General and administrative
12,820,004
12,924,826
Total operating expenses
38,959,327
40,719,705
Loss from operations
( 29,945,783 )
( 39,477,995 )
Other income (expenses):
Arbitration settlement
( 232,974 )
( 2,406,576 )
Interest income
248,063
5,700
Net loss
$
( 29,930,694 )
$
( 41,878,871 )
Net loss per share, basic and diluted
$
( 3.58 )
$
( 5.47 )
Weighted average number of common shares outstanding, basic and diluted
8,351,003
7,650,567
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
MARKER THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Total
Common Stock
Additional Paid-
Accumulated
Stockholders'
Shares
Par value
in Capital
Deficit
Equity
Balance at January 1, 2021
5,073,107
$
5,073
$
383,578,984
$
( 356,239,484 )
$
27,344,573
Issuance of common stock for cash (net of offering costs of $ 3.9 million)
3,228,286
3,228
52,549,530
—
52,552,758
Stock options exercised for cash
146
—
3,087
—
3,087
Stock-based compensation
6,329
7
5,964,041
—
5,964,048
Net loss
—
—
—
( 41,878,871 )
( 41,878,871 )
Balance at December 31, 2021
8,307,868
8,308
442,095,642
( 398,118,355 )
43,985,595
Issuance of common shares for cash
60,651
61
202,069
—
202,130
Stock-based compensation
37,252
37
5,343,969
—
5,344,006
Net loss
—
—
—
( 29,930,694 )
( 29,930,694 )
Balance at December 31, 2022
8,405,771
$
8,406
$
447,641,680
$
( 428,049,049 )
$
19,601,037
The accompanying notes are an integral part of these consolidated financial statements.
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MARKER THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
2022
2021
Cash Flows from Operating Activities:
Net loss
$
( 29,930,694 )
$
( 41,878,871 )
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization
2,789,106
2,148,983
Stock-based compensation
5,344,006
5,964,048
Amortization on right-of-use assets
891,343
1,013,655
Loss on disposal of fixed assets
25,995
—
Gain on lease termination
( 278,681 )
—
Changes in operating assets and liabilities:
Prepaid expenses and deposits
49,555
( 426,710 )
Other receivables
( 2,401,767 )
1,000,322
Accounts payable and accrued expenses
( 4,300,939 )
4,141,414
Related party deferred revenue
2,500,000
—
Deferred revenue
( 1,146,186 )
1,146,186
Lease liability
( 513,891 )
( 388,792 )
Net cash used in operating activities
( 26,972,153 )
( 27,279,765 )
Cash Flows from Investing Activities:
Purchase of property and equipment
( 1,456,006 )
( 1,572,161 )
Purchase of construction in progress
( 3,489,130 )
( 1,558,970 )
Net cash used in investing activities
( 4,945,136 )
( 3,131,131 )
Cash Flows from Financing Activities:
Proceeds from issuance of common stock, net
202,130
52,552,758
Proceeds from exercise of stock options
—
3,087
Net cash provided by financing activities
202,130
52,555,845
Net (decrease) increase in cash, cash equivalents and restricted cash
( 31,715,159 )
22,144,949
Cash, cash equivalents and restricted cash at beginning of the period
43,497,331
21,352,382
Cash, cash equivalents and restricted cash at end of the period
$
11,782,172
$
43,497,331
For the Years Ended
December 31,
2022
2021
Supplemental schedule of non-cash financing and investing activities:
Reclassifications between construction in progress and fixed assets
$
4,089,135
$
6,789,098
Capital expenditures included in accounts payable
$
57,607
$
2,160,765
Changes to right-of-use assets and lease liability due to close out of operating leases
$
3,459,332
$
—
The accompanying notes are an integral part of these consolidated financial statements.
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MARKER THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS DECEMBER 31, 2022 AND 2021
NOTE 1: NATURE OF OPERATIONS
Marker Therapeutics, Inc., a Delaware corporation (the “Company” or “we”), is a clinical-stage immuno-oncology company specializing in the development and commercialization of novel T cell-based immunotherapies for the treatment of hematological malignancies and solid tumor indications. The Company’s multiTAA-specific T cell technology is based on the selective expansion of non-engineered, tumor-specific T cells that recognize tumor associated antigens, which are tumor targets, and kill tumor cells expressing those targets. These T cells are designed to recognize multiple tumor targets to produce broad spectrum anti-tumor activity. The Company was incorporated in Nevada in 1992 and reincorporated in Delaware in October 2018.
Reverse Stock Split
On January 26, 2023, the Company effected a one-for-ten ( 1-for-10 ) reverse stock split of its common stock (the “Reverse Stock Split”) and a corresponding reduction in the total number of authorized shares of its common stock from 300,000,000 to 30,000,000 . The Reverse Stock Split, which was approved by stockholders at an annual stockholder meeting on May 24, 2022, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on January 26, 2023. The Reverse Stock Split was effective on January 26, 2023. All references to common stock, warrants to purchase common stock, options to purchase common stock, share data, per share data and related information contained in the consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. Payment for fractional shares resulting from the reverse stock split amounted to $ 394.80 .
NOTE 2: FINANCIAL CONDITION, GOING CONCERN AND MANAGEMENT PLANS
As of December 31, 2022, the Company had cash and cash equivalents of approximately $ 11.8 million. The Company’s activities since inception have consisted principally of acquiring product and technology rights, raising capital, and performing research and development. Successful completion of the Company’s development programs and, ultimately, the attainment of profitable operations are dependent on future events, including, among other things, its ability to access potential markets; secure financing; successfully progress its product candidates through preclinical and clinical development; obtain regulatory approval of one or more of its product candidates; maintain and enforce intellectual property rights; develop a customer base; attract, retain and motivate qualified personnel; and develop strategic alliances and collaborations. From inception, the Company has been funded by a combination of equity and debt financings.
On March 16, 2021, the Company issued an aggregate of 3,228,286 shares of its common stock, for net proceeds of $ 52.6 million.
In August 2021, the Company entered into a Controlled Equity Offering SM Sales Agreement (the “ATM Agreement”) with Cantor Fitzgerald & Co. and RBC Capital Markets, LLC (the “Sales Agents”), pursuant to which the Company can offer and sell, from time to time at its sole discretion through the Sales Agents, shares of its common stock having an aggregate offering price of up to $ 75.0 million. Any shares of its common stock sold will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-258687), which the SEC declared effective on August 19, 2021; however, our use of the shelf registration statement on Form S-3 will be limited for so long as we are subject to General Instruction I.B.6 of Form S-3, which limits the amounts that we may sell under the registration statement and in accordance with the ATM agreement. The Sales Agents will be entitled to compensation under the Sales Agreement at a commission rate equal to 3.0 % of the gross sales price per share sold under the ATM Agreement, and the Company has provided each of the Sales Agents with indemnification and contribution rights. During the year ended December 31, 2022, the Company sold 60,651 shares of its common stock under the ATM Agreement for net proceeds of $ 0.2 million.
In August 2021, the Company received notice of a Product Development Research award totaling approximately $ 13.1 million from the Cancer Prevention and Research Institute of Texas (“CPRIT”) to support the Company’s Phase 2 clinical trial of MT-401. The CPRIT award is intended to support the adjuvant arm of the Company’s Phase 2 clinical trial evaluating MT-401 when given as an adjuvant therapy to patients with acute myeloid leukemia following a hematopoietic stem cell transplant. The primary objectives of the adjuvant arm of the trial are to evaluate relapse-free survival after MT-401 treatment when compared with a randomized control group. Through
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the date of this filing, the Company has received $ 4.8 million of funds from the CPRIT grant. The Company recorded $ 3.4 million of grant income related to the CPRIT grant as revenue for the year ended December 31, 2022.
On April 21, 2022, the Company entered into a binding services agreement (the “Services Agreement”), dated April 12, 2022 (see Note 9), with Wilson Wolf Manufacturing Corporation (“Wilson Wolf”). Mr. John Wilson is a member of the Company’s board of directors and is serving as the CEO of Wilson Wolf, therefore Wilson Wolf is a related party. Pursuant to the Services Agreement, Wilson Wolf made a cash payment to the Company in the amount of $ 8.0 million. For the year ending December 31, 2022, the Company recognized $ 5.5 million of revenue pursuant to this agreement and at December 31, 2022, the Company recorded $ 2.5 million of related party deferred revenue on its consolidated balance sheet.
On September 13, 2022, the Company received notice from the U.S. Food and Drug Administration (the “FDA”) that it had awarded the Company a $ 2.0 million grant from the FDA’s Orphan Products Grant program to support the Company’s Phase 2 clinical trial of MT-401 for the treatment of post-transplant AML. The Company recorded $ 0.1 million of grant income related to the FDA grant as revenue for the year ended December 31, 2022 and at December 31, 2022, the Company recorded $ 0.1 million of grant income receivable. On March 13, 2023, the Company received $ 0.1 million of funds from the FDA grant.
On December 12, 2022, the Company entered into a purchase agreement, or the Purchase Agreement, with Lincoln Park Capital Fund, LLC, or Lincoln Park, which provides that, upon the terms and subject to the conditions of the agreement, the Company has the right, but not the obligation, to sell to Lincoln Park up to $ 25,000,000 of shares of its common stock, or the Purchase Shares, from time to time over a 24-month term. For the year ended December 31, 2022, the Company did not sell any shares of its common stock under the Purchase Agreement. In January 2023, Lincoln Park was issued 180,410 shares of stock as a commitment fee at a value of $ 0.5 million.
The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its business plan, the Company will need to complete certain research and development activities and clinical trials. Further, the Company’s product candidates will require regulatory approval prior to commercialization. These activities will span many years and require substantial expenditures to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company. The Company plans to meet its capital requirements primarily through issuances of debt and equity securities and, in the longer term, revenue from sales of its product candidates, if approved.
Based on the Company’s clinical and research and development plans and its timing expectations related to the progress of its programs, the Company expects that its cash and cash equivalents as of December 31, 2022 will enable the Company to fund its operating expenses and capital expenditure requirements into the third quarter of 2023, as such these factors raise substantial doubt regarding the Company’s ability to continue as a going concern. In an effort to further preserve the Company’s working capital, the Company’s employees took a portion of their 2022 earned bonus in the form of equity in lieu of cash.
The Company has based this estimate on assumptions that may prove to be wrong, and the Company could utilize its available capital resources sooner than it currently expects. Furthermore, the Company’s operating plan may change, and it may need additional funds sooner than planned in order to meet operational needs and capital requirements for product development and commercialization. Because of the numerous risks and uncertainties associated with the development and commercialization of the Company’s product candidates and the extent to which the Company may enter into additional collaborations with third parties to participate in their development and commercialization, the Company is unable to estimate the amounts of increased capital outlays and operating expenditures associated with its current and anticipated clinical trials. The Company’s future funding requirements will depend on many factors, as it:
● initiates or continues clinical trials of its product candidates;
● continues the research and development of its product candidates and seeks to discover additional product candidates;
● seeks regulatory approvals for any product candidates that successfully complete clinical trials;
● maintains and enforces intellectual property rights;
● establishes sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any product candidates that may receive regulatory approval;
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● evaluates strategic transactions the Company may undertake; and
● enhances operational, financial and information management systems and hires additional personnel, including personnel to support development of product candidates and, if a product candidate is approved, commercialization efforts.
These factors raise substantial doubt regarding the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The accompanying consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In addition to the foregoing, based on the Company’s current assessment, the Company does not expect any material impact on its long-term liquidity due to the COVID-19 pandemic. However, the Company will continue to assess the effect of the pandemic on its operations, including its clinical programs. Further, the COVID-19 pandemic, decades-high inflation and concerns about an economic recession in the United States or other major markets has resulted in, among other things, volatility in the capital markets that may have the effect of reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction due to these factors could materially affect the Company’s business and the value of its common stock.
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Any reference in these footnotes to applicable guidance is meant to refer to the authoritative U.S. generally accepted accounting principles (“GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Principles of Consolidation
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Marker Cell Therapy, Inc. and GeneMax Pharmaceuticals Inc. – a dormant subsidiary that wholly owns GeneMax Pharmaceuticals Canada, Inc. All significant intercompany balances and transactions are eliminated upon consolidation.
Use of Estimates
Preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ materially from those estimates. Significant areas requiring management’s estimates and assumptions include measurement of fair value and projections used in impairment testing, valuation allowance on deferred tax assets, determining the fair value of stock-based compensation and stock-based transactions, the fair value of the components of the warrant liabilities and accrued liabilities.
Cash, Cash Equivalents, Restricted Cash and Credit Risk
The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash, cash equivalents and restricted cash at December 31, 2022 consisted of cash and certificates of deposit in institutions in the United States. Balances at certain institutions have exceeded Federal Deposit Insurance Corporation insured limits and U.S. government agency securities.
The Company maintains cash in accounts which are in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured limits of $ 250,000 . As of December 31, 2022, approximately $ 1.8 million in cash was uninsured based upon the FDIC insurance coverage limits.
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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows.
December 31,
December 31,
2022
2021
Cash and cash equivalents
$
11,782,172
$
42,351,145
Restricted cash
$
—
$
1,146,186
Total cash, cash equivalents and restricted cash shown in statements of cash flows
$
11,782,172
$
43,497,331
Cash received from grants in advance of incurring qualifying costs are recorded as restricted cash until they are earned and recorded to grant income.
Property and Equipment
Leasehold improvements, furniture, equipment and software are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Leasehold improvements are amortized over the shorter of the estimated useful life or the remaining lease term.
Property and equipment - Construction in Progress
In June 2020, the Company entered into a lease for a manufacturing facility in Houston, Texas. In connection with the manufacturing facility, the Company has incurred costs pursuant to an agreement with a vendor to design, engineer, build and install modular cleanrooms in a manufacturing facility. The facility’s construction was completed during December 2020, and a certificate of occupancy was delivered to the Company in January 2021, and as such was placed into service in January 2021. All costs associated with the buildout were recorded as either manufacturing equipment and/or leasehold improvements and amortized over the estimated useful life of the asset and/or leasehold lease.
During the third and fourth quarters of 2021, and in connection with the Company’s manufacturing facility in Houston, Texas, the Company incurred $ 2.2 million of costs pursuant to an agreement with a vendor to build and eventually install a second modular cleanroom. Such costs were recorded in fixed assets – construction in progress on the balance sheet as of December 31, 2021. The Company incurred another $ 1.9 million in related costs in 2022. Upon completion and installation of the second modular cleanroom in 2022, all costs associated with the buildout were recorded as manufacturing equipment and leasehold improvements and are being amortized over the estimated useful life.
Impairment Testing of Long-Lived Assets and Right-Of-Use Assets
Management reviews long-lived assets (including property and equipment) and right-of-use assets for assets under operating leases for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Recoverability of assets is determined by first grouping the long-lived assets at the lowest level for which there are identifiable cash flows, and then comparing the carrying value of each asset group to its forecasted undiscounted cash flows. If the evaluation of the forecasted cash flows indicates that the carrying value of the assets is not recoverable, an impairment charge is recognized for the amount in excess of the carrying amount over its fair value. The Company performed a test for recoverability related to its manufacturing facility in Houston, Texas at December 31, 2022 and concluded that the carrying value of its long-lived assets was recoverable.
Patents and Patent Application Costs
Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are, therefore, expensed as incurred.
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Stock-Based Compensation
The Company incurs stock-based compensation expense related to the issuance of common stock and stock options. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility and expected option life:
Expected Term — The expected life of stock options was estimated using the “simplified method,” as the Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock options grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant.
Expected Volatility — The Company computes stock price volatility over expected terms based on its historical common stock trading prices.
Risk-Free Interest Rate — The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero-coupon issues with an equivalent remaining term.
Expected Dividend — The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models. The Company amortizes the fair value of the awards expected to vest on a straight-line basis over the requisite service period of the awards. The Company recognizes fair value of stock options granted to nonemployees as stock-based compensation expense over the period in which the related services are received as if the Company had paid cash for those services. Forfeitures are accounted for as incurred.
Research and Development Costs
Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for research and development employees and consultants, facilities expenses, overhead expenses, cost of laboratory supplies, manufacturing expenses, fees paid to third parties and other outside expenses.
Research and development costs are expensed as incurred. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. The Company accrues for costs incurred as the services are being provided by monitoring the status of the clinical trial or project and the invoices received from its external service providers. The Company estimates depend on the timeliness and accuracy of the data provided by the vendors regarding the status of each project and total project spending. The Company adjusts its accrual as actual costs become known. Where contingent milestone payments are due to third parties under research and development arrangements, the milestone payment obligations are expensed when the milestone events are achieved.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax balances. Potential deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on potential deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the date of allowances against deferred tax assets.
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Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of December 31, 2022 and 2021, no liability for unrecognized tax benefits was required to be reported. The guidance also discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the years ended December 31, 2022 and 2021.
Grant Income
Grant Income represents funding under cost reimbursement programs from government agencies and non-profit foundations for qualified research and development activities performed by the Company. In applying the provisions of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company determined that grants and awards are out of the scope of ASC 606 because the funding entities do not meet the definition of a “customer”, as defined by ASC 606, as there is not considered to be a transfer of control of goods or services. With respect to each grant or award, the Company determines if it has a collaboration in accordance with ASC Topic 808, Collaborative Arrangements (“ASC 808”). To the extent the grant or award is within the scope of ASC 808, the Company recognizes the award upon achievement of certain milestones as credits to research and development expenses. For grant and awards outside the scope of ASC 808, the Company applies ASC 606 by analogy, and revenue is recognized when the Company incurs expenses related to the grants for the amount the Company is entitled to under the provisions of the contract.
In August 2021, the Company received notice of a Product Development Research award totaling approximately $ 13.1 million from CPRIT to support its Phase 2 clinical trial of MT-401.
In accordance with ASC 730-20-25-8, to the extent the financial risk associated with the research and development has been transferred to CPRIT, because repayment of the grant depends solely on the results of research and development having future economic benefit, the Company accounts for this obligation as a contract to perform research and development for others.
Restricted cash received from grants in advance of incurring qualifying costs is recorded as deferred revenue and recognized as revenue when qualifying costs are incurred. Qualifying grant income earned in advance of cash received from grants is recognized as revenue and recorded as other receivable. During the fourth quarter of 2021, the Company received $ 2.4 million advancement of funds in relation to the CPRIT grant. The Company recorded $ 3.4 million of grant income related to the CPRIT grant as revenue for the year ended December 31, 2022. At December 31, 2022, the Company recorded $ 2.3 million of grant income receivable, which represented grant income earned in advance of the next tranche of funds to be received from CPRIT. In January 2023, the Company received $ 2.4 million from CPRIT.
On September 13, 2022, the Company received notice from the FDA that it had awarded the Company a $ 2.0 million grant from the FDA’s Orphan Products Grant program to support the Company’s Phase 2 clinical trial of MT-401 for the treatment of post-transplant AML. The Company recorded $ 0.1 million of grant income related to the FDA grant as revenue for the year ended December 31, 2022 and at December 31, 2022, the Company recorded $ 0.1 million of grant income receivable. On March 13, 2023, the Company received $ 0.1 million of funds from the FDA grant.
Loss per Common Share
Basic loss per share includes only the weighted average common shares outstanding, without consideration of potentially dilutive securities. Diluted loss per share includes the weighted average common shares outstanding and any potentially dilutive common stock equivalent shares in the calculation.
New Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.
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NOTE 4: NET LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
The following table sets forth the computation of net loss per share for the years ended December 31, 2022 and 2021, respectively:
For the Years Ended
December 31,
2022
2021
Numerator:
Net loss
$
( 29,930,694 )
$
( 41,878,871 )
Denominator:
Weighted average common shares outstanding
8,351,003
7,650,567
Net loss per share:
Basic and diluted
$
( 3.58 )
$
( 5.47 )
The following securities, rounded to the thousand, were not included in the diluted net loss per share calculation because their effect was anti-dilutive for the periods presented:
For the Years Ended
December 31,
2022
2021
Common stock options
886,000
768,600
Common stock purchase warrants
1,848,000
1,983,000
Potentially dilutive securities
2,734,000
2,751,600
NOTE 5: OTHER RECEIVABLE
Qualifying grant income earned in advance of cash received from grants is recognized as revenue and recorded as other receivable. The Company recorded $ 3.4 million of grant income related to the CPRIT grant as revenue for the year ended December 31, 2022. At December 31, 2022, the Company recorded $ 2.3 million of grant income receivable, which represented grant income earned in advance of the next tranche of funds to be received from CPRIT. The Company received $ 2.4 million of funds from CPRIT in January 2023. The Company recorded $ 0.1 million of grant income related to the FDA grant as revenue for the year ended December 31, 2022. Additionally, at December 31, 2022, the Company recorded $ 0.1 million of grant income receivable, which represented grant income earned in advance of funds to be received from the FDA. The Company received $ 0.1 million of funds from the FDA in January 2023.
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NOTE 6: PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31, 2022 and 2021, respectively:
December 31,
December 31,
Estimated Useful Lives
2022
2021
Lab and manufacturing equipment
5 Years
$
11,824,000
$
7,851,000
Computers, equipment and software
3 - 5 Years
899,000
1,020,000
Office furniture
5 Years
924,000
793,000
Leasehold improvements
Lesser of lease term or estimated useful life
3,950,000
3,173,000
Total
17,597,000
12,837,000
Less: accumulated depreciation
( 5,274,000 )
( 2,740,000 )
Construction in progress
—
2,226,000
Total fixed assets, net
$
12,323,000
$
12,323,000
Depreciation expense for the years ended December 31, 2022 and 2021 was approximately $ 2.8 million and $ 2.1 million, respectively.
In June 2020, the Company entered into a lease for a manufacturing facility in Houston, Texas. The Company incurred costs pursuant to an agreement with a vendor to design, engineer, build and eventually install modular cleanrooms in the manufacturing facility. $ 6.8 million was recorded in fixed assets – construction in progress on the balance sheet as of December 31, 2020. The completion of the facility’s construction occurred during December 2020 and the Company received its certificate of occupancy in January 2021, and as such was placed into service in January 2021. During January 2021, all costs associated with the buildout were recorded as either manufacturing equipment and/or leasehold improvements and amortized over the estimated useful life of the asset and/or leasehold lease.
During the year ended December 31, 2021, and in connection with the opening of the Company’s manufacturing facility in Houston, Texas, the Company incurred $ 2.2 million of costs pursuant to an agreement with a vendor to build and eventually install a second modular cleanroom. Such costs were recorded in fixed assets – construction in progress on the balance sheet as of December 31, 2021. The Company incurred another $ 1.9 million in related costs in 2022. Upon completion and installation of the second modular cleanroom during the year ended December 31, 2022, all costs associated with the buildout were recorded as manufacturing equipment and leasehold improvements and amortized over the estimated useful life.
NOTE 7: LEASES
The Company leases manufacturing, research and administrative facilities under operating leases. The Company evaluates its contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Currently, all of the Company’s leases are classified as operating leases. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. The lease terms may include options to extend when it is reasonably certain that the Company will exercise that option. The Company did not consider that option in calculating right-of-use assets and lease liability as the Company is not reasonably certain it will extend the contract beyond the current terms.
Topic ASC 842 requires the Company to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. Right-of-use assets are recorded in non-current assets on the Company’s consolidated balance sheets. Current and non-current lease liabilities are recorded within current liabilities and non-current liabilities, respectively, on its consolidated balance sheets. Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease.
As of September 15, 2022, the Company and its landlord agreed to terminate the Company’s office lease at 3200 Southwest Freeway, Suite 2500, Houston, Texas. As such the Company reduced its operating lease liabilities by $ 3.7 million and reduced its right-of-use
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assets by $ 3.5 million. A gain on lease termination was recorded in general and administrative expenses during the year ended December 31, 2022.
As of December 31, 2022, the Company had total operating lease liabilities of approximately $ 7.6 million and right-of-use assets of approximately $ 5.5 million, which were included in the consolidated balance sheet. As of December 31, 2021, the Company had total operating lease liabilities of approximately $ 11.9 million and right-of-use assets of approximately $ 9.8 million, which were included in the consolidated balance sheet.
Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right-of-use assets as the Company is not reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not act as a lessor or have any leases classified as financing leases.
The following summarizes quantitative information about the Company’s operating leases:
For the Years Ended
December 31,
2022
2021
Operating lease expense summary:
Operating lease expense
$
1,483,000
1,702,000
Short-term lease expense
48,000
—
Variable lease expense
648,000
606,000
Total
$
2,179,000
$
2,308,000
For the Years Ended
December 31,
2022
2021
Other information:
Operating cash flows - operating leases
$
1,106,000
$
1,077,000
The weighted-average remaining lease term as of December 31, 2022 and December 31, 2021 was approximately 7.5 years and 8.4 years, respectively. The weighted-average discount rate used to determine the operating lease liability as of December 31, 2022 and December 31, 2021 was approximately 5.5 % and 5.7 %, respectively.
Maturities of the Company’s operating leases, excluding short-term leases, are as follows:
Year ending December 31, 2023
983,000
Year ending December 31, 2024
1,254,000
Year ending December 31, 2025
1,290,000
Year ending December 31, 2026
1,177,000
Year ending December 31, 2027
1,163,000
Thereafter
3,590,000
Total
9,457,000
Less present value discount
( 1,840,000 )
Operating lease liabilities included in the Condensed Consolidated Balance Sheet at December 31, 2022
$
7,617,000
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NOTE 8: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following as of December 31, 2022 and 2021, respectively:
December 31,
December 31,
2022
2021
Accounts payable
$
1,612,000
$
5,144,000
Compensation and benefits
1,779,000
2,055,000
Process development expenses
342,000
385,000
Professional fees
558,000
644,000
Technology license fees
—
250,000
Arbitration settlement fees
114,000
2,407,000
Other
300,000
250,000
Total accounts payable and accrued liabilities
$
4,705,000
$
11,135,000
In August 2022, the Company implemented changes to the Company’s organizational structure as part of an operational cost reduction plan to conserve the Company’s available capital. In connection with these changes, the Company reduced headcount in its general and administrative function by approximately 23.5 %, including the separation of the Company’s Chief Financial Officer. For the year ended December 31, 2022, the Company recorded $ 0.3 million of accrued compensation and benefits for severance expenses related to the operational cost reduction plan.
NOTE 9: RELATED PARTY DEFERRED REVENUE
On April 21, 2022, the Company entered into the Services Agreement, dated April 12, 2022, with Wilson Wolf. Mr. John Wilson is a member of the Company’s board of directors and is serving as the CEO of Wilson Wolf. Wilson Wolf is in the business of creating products and services intended to simplify and expedite the transition of cell therapies and gene-modified cell therapies to mainstream society (the “Wilson Wolf Mission”). Pursuant to the Services Agreement, Wilson Wolf made a cash payment to the Company in the amount of $ 8.0 million, as consideration for certain training and research services allocated as follows:
● $ 2.0 million for non-exclusive training of Wilson Wolf to make, use, and sell the Company’s cell culture non-proprietary media formulation that has been cleared in an FDA investigational new drug application;
● $ 1.0 million for non-exclusive training of Wilson Wolf to replicate the Company’s quality management system inclusive of all underlying documents related thereto, none of which shall include unique information specific to the manufacture of the Company’s multiTAA product candidates such as direct peptide stimulation;
● $ 2.0 million for non-exclusive training of Wilson Wolf to be able to replicate the Company’s cGMP-compliant, linearly scalable, G-Rex based T-cell manufacturing process which Wilson Wolf shall use as it sees fit in pursuit of the Wilson Wolf Mission; and
● $ 3.0 million for the Company to train Wilson Wolf on its expertise in the optimization of T-cell therapy manufacturing processes using G-Rex and to conduct CAR T and TCR G-Rex Optimization Work under the direction of Wilson Wolf (the “Work Direction”), whereunder all intellectual property provided by Wilson Wolf or created or derived by the Company will be solely owned by Wilson Wolf, and whereby the Company will make good faith efforts to complete the conduct of such work as soon as practicable within 18 months from the date of the agreement. Wilson Wolf has agreed to pay the Company an additional $ 1.0 million if the Work Direction is completed within one year from the onset of the Agreement.
Pursuant to the Services Agreement, in the event that the Company becomes insolvent, goes out of business, or an event other than force majeure occurs that cannot allow the Agreement to be fulfilled, Wilson Wolf will have right of first offer and right of first refusal for the Company’s manufacturing facility provided it is able and willing to meet whatever financial obligations are required to do so and provided further that such clause will not apply in the event of a merger, reorganization or consolidation of the Company with a third party that results in the outstanding voting securities of the Company immediately prior thereto ceasing to represent, or being converted into or exchanged for voting securities that do not represent, at least fifty percent ( 50 %) of the combined voting power of the voting securities of the surviving entity or the parent corporation of the surviving entity immediately after such merger, reorganization or
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consolidation, or the sale or other transfer of all or substantially all of the Company’s business or assets. The Company agrees to assist as needed to the extent permitted under any applicable law (including bankruptcy or insolvency statutes). Further, prior to the Company undertaking any financing that would encumber any of the Company’s assets necessary for the Company’s performance under this Services Agreement, Wilson Wolf shall have the first right to provide such financing on equal terms to what the Company can obtain elsewhere.
The Company recognizes related party revenue over time in accordance with Accounting Standard Codification, or ASC, 606 Revenue from Contracts with Customers, as each of the training or and research services are provided to Wilson Wolf. Revenue is recognized, using an output method based on progress toward satisfaction of the performance obligations. Additionally, in accordance the spirit of the standard expressed in ASC 606-50-1, the timing of the revenue recognition is expected to be approximately 12 months. For the year ending December 31, 2022, the Company recognized $ 5.5 million of revenue pursuant to the Services Agreement and at December 31, 2022, the Company recorded an $ 2.5 million related party deferred revenue on its consolidated balance sheet.
NOTE 10: STOCKHOLDERS’ EQUITY
Increase in Authorized Shares
During the three months ended June 30, 2022, the Company’s board of directors and stockholders approved a Certificate of Amendment (the “Amendment”) to the Company’s Certificate of Incorporation to increase the authorized shares of common stock of the Company from 15,000,000 shares to 30,000,000 shares. The Company filed the Amendment with the Secretary of State of Delaware on May 25, 2022.
Reverse Stock Split
On January 26, 2023, the Company effected the Reverse Stock Split and a corresponding reduction in the total number of authorized shares of its common stock from 300,000,000 to 30,000,000 . The Reverse Stock Split, which was approved by stockholders at an annual stockholder meeting on May 24, 2023, was consummated pursuant to a Certificate of Amendment filed with the Secretary of State of Delaware on January 26, 2023. The Reverse Stock Split was effective on January 26, 2023. All historical share and per share amounts reflected in this report have been adjusted to reflect the Reverse Stock Split.
Preferred Stock
The Company has authorized up to 5,000,000 shares of preferred stock, $ 0.001 par value per share, for issuance. The preferred stock will have such rights, privileges and restrictions, including voting rights, dividend conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Company’s board of directors upon its issuance. To date, the Company has not issued any preferred shares.
Common Stock
The Company has authorized up to 30,000,000 shares of common stock, $ 0.001 par value per share, for issuance. Significant 2022 and 2021 common stock transactions were as follows:
2022 Common Stock Transactions
Issuance of Restricted Stock Units to Executives
During the year ended December 31, 2022, upon the recommendation of the compensation committee of the Company’s board of directors, and pursuant to the Company’s 2020 Equity Incentive Plan, the Company’s board of directors approved the issuance of a total of 37,252 shares of common stock, valued at a total of approximately $ 180,200 , subject to restricted stock units, which were immediately vested upon grant, to certain executives as performance bonuses for performance during the year ended December 31, 2021.
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Issuance of Stock Pursuant to ATM Agreement
During the year ended December 31, 2022, the Company issued and sold 60,651 shares of its common stock under the ATM Agreement for net proceeds of $ 202,100 .
Stock Purchase Agreement
On December 12, 2022, we entered into a purchase agreement, or the Purchase Agreement, with Lincoln Park Capital Fund, LLC, or Lincoln Park, which provides that, upon the terms and subject to the conditions of the agreement, we have the right, but not the obligation, to sell to Lincoln Park up to $ 25,000,000 of shares of our common stock, or the Purchase Shares, from time to time over a 24-month term , at a variable price with certain market-based terms as defined in the agreement. The purchase agreement does not exhibit any of the characteristics for liability classification under ASC Topic 480, Distinguishing Liabilities from Equity. Instead, the purchase agreement is indexed to the Company’s own stock under ASC Subtopic 815-40, Contracts in Entity's Own Equity, and classified as equity. During the year ended December 31, 2022, we did not sell any shares of our stock under the Purchase Agreement. In January 2023, Lincoln Park was issued 180,410 shares of stock as a commitment fee at a value of $ 0.5 million.
2021 Common Stock Transactions
Exercise of Stock Options
During the year ended December 31, 2021, certain outstanding options were exercised for 146 shares of common stock providing aggregate proceeds to the Company of approximately $ 3,100 .
Board Compensation
During the year ended December 31, 2021, the Company issued an aggregate of 6,329 shares of common stock to its non-employee directors. The fair value of the common stock of approximately $ 0.2 million was recognized as a component of stock-based compensation expense in general and administrative expenses.
Underwritten Public Offering
On March 11, 2021, the Company entered into an underwriting agreement with Piper Sandler & Co., as representative of the several underwriters, to issue and sell 2,857,200 shares of common stock of the Company in an underwritten public offering. The offering price to the public was $ 17.50 per share. In addition, the Company granted the underwriters an option to purchase, for a period of 30 days , up to an additional 428,580 shares of common stock, which such option was partially exercised with respect to 371,086 shares. An aggregate of 3,228,286 shares of the Company’s common stock was issued for net proceeds of $ 52.6 million after offering costs of $ 3.9 million.
NOTE 11: WARRANTS
Share Purchase Warrants
A summary of the Company’s share purchase warrants as of December 31, 2022 and 2021, respectively, and changes during the period is presented below:
Weighted Average
Number of
Weighted Average
Remaining Contractual
Total Intrinsic
Warrants
Exercise Price
Life (in years)
Value
Balance - January 1, 2021
2,083,000
$
47.00
2.60
$
—
Expired or cancelled
( 100,000 )
55.00
—
—
Balance - December 31, 2021
1,983,000
44.20
1.70
$
—
Expired or cancelled
( 135,000 )
39.70
—
—
Balance - December 31, 2022
1,848,000
$
44.51
0.79
$
—
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NOTE 12: STOCK OPTION PLANS
Options to Purchase Shares of Common Stock
On May 19, 2020, the Board adopted the 2020 Equity Incentive Plan ("2020 Plan") which replaced the 2014 Omnibus Stock Option Plan. The 2020 Plan was further amended effective May 2022 to increase the number of shares of common stock authorized for issuance under the plan by 850,000 shares. The 2020 Plan allows for grants of stock options, restricted shares, stock bonuses and other equity-based awards to employees and non-employee directors of the Company. Awards under the 2020 Plan may be at prices and for terms as determined by the Company’s board of directors and may have vesting requirements as determined by the Board, provided that the exercise price for any stock option must be at least equal to the fair market value (as defined in the 2020 Plan) of a share of the stock on the grant date. Once granted, the exercise price of an option may not be reduced without the approval of the Company’s stockholders, other than under certain limited circumstances such as a stock split or take any other action with respect to a stock option that would be treated as a repricing under the rules and regulations of the Nasdaq Stock Exchange.
Options granted under the 2020 Plan have a maximum term of ten years from the date of grant and generally vest over four years .
2022 Equity Incentive Awards
On February 17, 2022, pursuant to the Company’s 2020 Equity Incentive Plan, the compensation committee of the Company’s board of directors approved a total of 125,000 options to purchase the Company’s common stock as equity-based incentive awards to the Company’s executive officers. Each option award was granted with an exercise price of $ 4.60 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on February 17, 2022, with the option award vesting in 48 equal monthly installments over a four-year period, subject to such executive officer’s continued service on the applicable vesting date. Additionally, on February 17, 2022, the compensation committee of the Company’s board of directors approved a total of 39,500 options to purchase the Company’s common stock to non-executive employees of the Company as equity-based incentive awards. Each option award was granted with an exercise price of $ 4.60 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on February 17, 2022, with the option award vesting in 48 equal monthly installments over a four-year period, subject to such employee’s continued service on the applicable vesting date.
The above awards were in addition to 17,500 stock option awards issued during the three months ended March 31, 2022 to new employees upon their commencement of employment with the Company. Each option award was granted with an exercise price of $ 10.00 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on January 3, 2022, with 25 % of the option award vesting in one year and the remaining 75 % vesting in 36 equal monthly installments thereafter over a three-year period, subject to such employee’s continued service on the applicable vesting date.
21,000 stock option awards were issued during the three months ended June 30, 2022 to new employees upon their commencement of employment with the Company. Each option award was granted with an exercise price of $ 4.30 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on April 1, 2022, with 25 % of the option award vesting in one year and the remaining 75 % vesting in 36 equal monthly installments thereafter over a three-year period, subject to such employee’s continued service on the applicable vesting date.
10,000 stock option awards were issued during the three months ended September 30, 2022 to new employees upon their commencement of employment with the Company. Each option award was granted with an exercise price of $ 3.50 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on July 1, 2022, with 25 % of the option award vesting in one year and the remaining 75 % vesting in 36 equal monthly installments thereafter over a three-year period, subject to such employee’s continued service on the applicable vesting date.
Additionally, 7,000 stock option awards were issued during the three months ended December 31, 2022 to new employees upon their commencement of employment with the Company. Each option award was granted with an exercise price of $ 3.73 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on October 3, 2022, with 25 % of the option award vesting in one year and the remaining 75 % vesting in 36 equal monthly installments thereafter over a three-year period, subject to such employee’s continued service on the applicable vesting date.
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Also, pursuant to the Company’s Non-Employee Director Compensation Policy, which had previously been approved by the Company’s board of directors, 40,000 stock option awards were issued during the year ended December 31, 2022 to independent members of the board of directors of the Company. Each option award was granted on May 24, 2022 with an exercise price of $ 3.377 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on May 24, 2022. Each option award will vest in one year subject to the director’s continuance of service through May 24, 2023.
As of December 31, 2022, approximately 989,000 shares of common stock are available to be issued under the 2020 Plan.
Stock Options
A summary of the Company’s stock option activity is as follows for stock options:
Weighted Average
Remaining
Weighted Average
Contractual
Number of Shares
Exercise Price
Total Intrinsic Value
Life (in years)
Outstanding as of January 1, 2021
600,181
$
62.18
$
—
8.3
Granted
191,500
28.97
—
8.9
Exercised
( 146 )
21.20
—
—
Canceled/Expired
( 22,912 )
35.92
—
—
Outstanding as of December 31, 2021
768,623
54.69
—
7.7
Granted
260,000
4.68
—
7.8
Canceled/Expired
( 142,450 )
36.78
—
—
Outstanding as of December 31, 2022
886,173
$
42.90
$
—
7.3
Options vested and exercisable
560,929
$
59.39
$
—
6.6
The Black-Scholes option pricing model is used to estimate the fair value of stock options granted under the Company’s share-based compensation plans. The weighted average assumptions used in calculating the fair values of stock options that were granted during the years ended December 31, 2022 and 2021, respectively, were as follows:
For the Years Ended
December 31,
2022
2021
Exercise price
$
4.70
$
29.00
Expected term (years)
5.9
6.0
Expected stock price volatility
85
%
94
%
Risk-free rate of interest
2
%
1
%
Expected dividend rate
0
%
0
%
The following table sets forth stock-based compensation expenses recorded during the respective periods:
For the Years Ended
December 31,
2022
2021
Stock Compensation expenses:
Research and development
$
2,691,000
$
2,856,000
General and administrative
2,653,000
3,108,000
Total stock compensation expenses
$
5,344,000
$
5,964,000
At December 31, 2022, the total stock-based compensation cost related to unvested awards not yet recognized was $ 3.5 million. The expected weighted average period compensation costs to be recognized was 1.8 years. Future option grants will impact the compensation expense recognized.
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NOTE 13: GRANT INCOME
In August 2021, the Company received notice of a Product Development Research award totaling approximately $ 13.1 million from CPRIT to support the Company’s Phase 2 clinical trial of MT-401. The CPRIT award is intended to support the adjuvant arm of the Company’s Phase 2 clinical trial evaluating MT-401 when given as an adjuvant therapy to patients with acute myeloid leukemia following a hematopoietic stem cell transplant. The primary objectives of the adjuvant arm of the trial are to evaluate relapse-free survival after MT-401 treatment when compared with a randomized control group.
Restricted cash received from grants in advance of incurring qualifying costs is recorded as deferred revenue and recognized as revenue when qualifying costs are incurred. Qualifying grant income earned in advance of cash received from grants is recognized as revenue and recorded as other receivable. The Company recorded $3.4 million and $ 1.2 million of grant income related to the CPRIT grant as revenue for the years ended December 31, 2022 and 2021, respectively. At December 31, 2022, the Company recorded $ 2.3 million of grant income receivable, which represented grant income earned in advance of the next tranche of funds to be received from CPRIT. In January 2023, the Company received $ 2.4 million from CPRIT.
On September 13, 2022, the Company received notice from the FDA that it had awarded the Company a $ 2.0 million grant from the FDA’s Orphan Products Grant program to support the Company’s Phase 2 clinical trial of MT-401 for the treatment of post-transplant AML. The Company recorded $ 0.1 million of grant income related to the FDA grant as revenue for the year ended December 31, 2022 and at December 31, 2022, the Company recorded $ 0.1 million of grant income receivable. On March 13, 2023, the Company received $ 0.1 million of funds from the FDA grant.
NOTE 14: LEGAL PROCEEDINGS
From time to time, the Company may be party to ordinary, routine litigation incidental to their business. Other than below, the Company knows of no material, active or pending legal proceedings against the Company, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of the Company’s directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to the Company’s interest.
An arbitration proceeding was brought against the Company before the Financial Industry Regulatory Authority, Inc. (“FINRA”) by a broker seeking to be paid compensation for two financing transactions that occurred in 2018, a warrant conversion and a private placement brokered by another broker. The broker’s claims were based on a placement agent agreement for a private placement it brokered in 2017, under which it alleged it was entitled to compensation for the 2018 transactions. The FINRA panel found in favor of the broker and awarded the broker $ 2.4 million for compensation, interest and attorney fees. As of December 31, 2021, the Company recorded an accrual of $ 2.4 million in accrued liabilities on its consolidated balance sheet and a $ 2.4 million charge to other expenses. On September 17, 2021, the broker filed a petition to confirm the FINRA arbitration award in the Supreme Court of New York for the County of New York. The Company removed the case to the United States District Court for the Southern District of New York on September 27, 2021. On October 22, 2021, the Company filed a motion in federal court to vacate the award.
On March 9, 2022, the Company was notified that its motion to vacate the award was denied and the broker was awarded an additional $ 0.1 million in interest. Post judgment interest accrued at 1.02 % until the judgment was paid. On March 24, 2022, the Company paid the broker $ 2.5 million, which amount included accrued interest. On January 4, 2023, the Company was notified that the broker was awarded an additional $ 0.1 million in attorneys’ fees, which the Company recorded to other expenses during fiscal year ending December 31, 2022. The Company paid the $ 0.1 million on January 9, 2023.
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NOTE 15: RELATED PARTY TRANSACTIONS
The following table sets forth related party transaction expenses recorded for the years ended December 31, 2022 and 2021, respectively.
For the Years Ended
December 31,
2022
2021
Baylor College of Medicine
$
1,142,000
$
2,851,000
Bio-Techne Corporation
101,000
306,000
Wilson Wolf Manufacturing Corporation
265,000
280,000
Total Research and development
$
1,508,000
$
3,437,000
$8,600 of related party transactions are included in accounts payable and accrued liabilities as of December 31, 2022.
Agreements with The Baylor College of Medicine (“BCM”) .
In November 2018, January 2020 and February 2020, the Company entered in Sponsored Research Agreements with BCM, which provided for the conduct of research for the Company by credentialed personnel at BCM’s Center for Cell and Gene Therapy.
In September 2019, May 2020 and July 2021, the Company entered into Clinical Supply Agreements with BCM, which provided for BCM to provide to the Company multi tumor antigen specific products.
In October 2019, the Company entered in a Workforce Grant Agreement with BCM, which provided for BCM to provide to the Company manpower costs of projects for manufacturing, quality control testing and validation run activities.
In August 2020, the Company entered in a Clinical Trial Agreement with BCM, which provided for BCM to provide to the Company investigator-initiated research studies.
Purchases from Bio-Techne Corporation .
The Company is currently utilizing Bio-Techne Corporation and two of its brands for the purchases of reagents, primarily cytokines. Mr. David Eansor is a member of the Company’s board of directors and was serving as the President of the Protein Sciences Segment of Bio-Techne Corporation. Mr. Eansor resigned from Bio-Techne Corporation on March 1, 2022, and as such, two months of transactions in 2022 are included in the table above.
Purchases from Wilson Wolf .
The Company is currently utilizing Wilson Wolf for the purchases of cell culture devices called G-Rexes. Mr. John Wilson is a member of the Company’s board of directors and is serving as the CEO of Wilson Wolf Manufacturing Corporation.
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NOTE 16: INCOME TAXES
The Company has no income tax expense due to operating losses incurred for the years ended December 31, 2022 and 2021.
The effects of temporary differences that give rise to significant portions of the deferred tax assets as of December 31, 2022 and 2021 are as follows:
For the Years Ended
December 31,
2022
2021
Deferred Tax Assets
Net Operating Loss Carryforward
30,072,000
29,087,000
Stock Compensation
5,642,000
5,599,000
Accrued Expenses
—
510,000
License Agreement
—
127,000
Capitalized R&E
4,818,000
—
Research and Development
733,000
733,000
Charitable Contributions
—
8,000
Operating Lease Liability
1,611,000
2,514,000
42,876,000
38,578,000
Less: Valuation Allowance
( 41,413,000 )
( 36,401,000 )
Total Deferred Tax Assets
1,463,000
2,177,000
Deferred Tax Liabilities
Fixed Assets
( 304,000 )
( 94,000 )
Right-of-Use Assets
( 1,159,000 )
( 2,083,000 )
Total Deferred Tax Liabilities
( 1,463,000 )
( 2,177,000 )
Net Deferred Tax Assets/(Liabilities)
—
—
The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established. Based upon the history of losses, management believes that it is more likely than not, that future benefits of deferred tax assets will not be realized and has established a full valuation allowance for the years ended December 31, 2022 and 2021. The Company has research and development tax credit carryforwards of $ 733,000 available to offset future federal income taxes. The research and development tax credit carryforwards begin to expire in 2030.
The Company has approximately $ 135.2 million of federal and $ 38.5 million of state Net Operating Losses (“NOL”s) that may be available to offset future taxable income, if any. The federal net operating loss carryforwards of $ 41.6 million, if not utilized, will expire between 2029 and 2037 . The federal net operating loss carryforwards of $ 93.6 million generated in 2018 and thereafter are subject to an 80 % limitation on taxable income, do not expire and will carry forward indefinitely. The state net operating loss carryforwards of $ 21.9 million, if not utilized, will begin to expire in 2035. The state net operating loss carryforwards of $ 16.6 million generated in 2018 and thereafter are subject to an 80 % limitation on taxable income, do not expire and will carry forward indefinitely.
In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s net operating loss carryforwards may be limited in the event of a change in ownership. A full Section 382 analysis has not been prepared and NOLs could be subject to limitation under Section 382.
Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation (R&E) activities under IRC Section 174. While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E activities in the US must be amortized over a 5-year period if incurred, and R&E expenses incurred outside the US must be amortized over a 15-year period. R&E activities are broader in scope than qualified research activities considered under IRC Section 41 (relating to the research tax credit). For the year ended December 31, 2022, the Company performed an analysis based on available guidance and determined that it will continue to be in a loss position even after the required capitalization and amortization of its R&E expenses. The Company will
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continue to monitor this issue for future developments, but it does not expect R&E capitalization and amortization to require it to pay cash taxes now or in the near future.
The Company’s income tax returns for 2018 to 2021 are still open and subject to audit. In addition, net operating losses arising from prior years are also subject to examination at the time they are utilized in future years.
For the years ended December 31, 2022 and 2021, the expected tax expense (benefit) based on the U. S. federal statutory rate is reconciled with the actual tax provision (benefit) as follows:
For the Years Ended December 31,
2022
2021
Percent of
Percent of
Amount
Pretax Loss
Amount
Pretax Loss
U.S. federal statutory rate
( 6,285,000 )
21.00
%
( 8,795,000 )
21.00
%
State taxes, net of federal benefit
( 44,000 )
0.15
%
( 48,000 )
0.11
%
Tax rate change
10,000
- 0.03
%
( 291,000 )
0.69
%
Permanent Differences
- Other permanent differences
288,000
- 0.96
%
262,000
- 0.63
%
Change in valuation allowance
5,012,000
- 16.75
%
8,769,000
- 20.94
%
Deferred true-up
1,019,000
- 3.40
%
103,000
- 0.25
%
Income tax provision/(benefit)
—
0.00
%
—
0.00
%
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. As of December 31, 2022, and 2021, there were no unrecognized tax benefits. The Company recognizes accrued interest and penalties as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2022 and 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position in the next year.
NOTE 17: SUBSEQUENT EVENTS
On March 13, 2023, Mythili Koneru, Chief Medical Officer of Marker Therapeutics, Inc., notified the Company of her intent to resign as Chief Medical Officer of the Company effective as of April 9, 2023.
On March 14, 2023, the Company signed an agreement with AlloVir, Inc. in which Marker will collaborate with AlloVir to optimize certain aspects of AlloVir’s manufacturing process. Under the terms of this agreement, Marker will conduct a number of process improvement studies and provide AlloVir with the results of its findings. For its work with AlloVir, the Company will receive total compensation in the amount of $ 400,000 , estimated to be fully earned by the end of the third quarter in 2023.
F-25
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.