10-Q 1 mrkr-20230930x10q.htm 10-Q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

   Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2023

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

Commission File Number: 001-37939

Graphic

MARKER THERAPEUTICS, INC.

(Name of registrant in its charter)

DELAWARE

    

45-4497941

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

9350 Kirby Drive, Suite 300
Houston, Texas

    

77054

(Address of principal executive offices)

(Zip Code)

(713) 400-6400

    

(Issuer’s telephone number)

4551 Kennedy Commerce Drive, Houston, Texas, 77032

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock, par value $0.001 per share

MRKR

The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

As of November 7, 2023, the Company had 8,889,020 shares of common stock issued and outstanding.

Page

PART I – FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets As of September 30, 2023 and December 31, 2022

1

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022

2

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022

3

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

4

Notes to Condensed Consolidated Financial Statements

5

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

26

Item 4.

Controls and Procedures.

26

PART II – OTHER INFORMATION

26

Item 1.

Legal Proceedings.

26

Item 1A.

Risk Factors.

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

28

Item 3.

Defaults Upon Senior Securities.

28

Item 4.

Mine Safety Disclosure.

28

Item 5.

Other Information.

28

Item 6.

Exhibits.

29

Signatures

31

PART I.      FINANCIAL INFORMATION

Item 1.        Financial Statements

MARKER THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

    

September 30, 

    

December 31, 

 

2023

2022

ASSETS

Current assets:

Cash and cash equivalents

$

17,473,899

$

11,782,172

Prepaid expenses and deposits

1,929,355

1,849,239

Other receivables

83,313

2,402,004

Current assets of discontinued operations

585,840

Total current assets

 

19,486,567

 

16,619,255

Non-current assets of discontinued operations

17,802,929

Total assets

$

19,486,567

$

34,422,184

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable and accrued liabilities

$

2,304,019

$

2,521,193

Related party payable

367,915

Deferred revenue

107,530

Current liabilities of discontinued operations

5,260,616

Total current liabilities

2,779,464

7,781,809

Non-current liabilities of discontinued operations

7,039,338

Total liabilities

 

2,779,464

 

14,821,147

Stockholders’ equity:

 

 

Preferred stock, $0.001 par value, 5 million shares authorized, 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Common stock, $0.001 par value, 30 million shares authorized, 8.8 million and 8.4 million shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively (see Note 10)

8,888

8,406

Additional paid-in capital

 

450,181,012

 

447,641,680

Accumulated deficit

 

(433,482,797)

 

(428,049,049)

Total stockholders’ equity

 

16,707,103

 

19,601,037

Total liabilities and stockholders’ equity

$

19,486,567

$

34,422,184

On January 26, 2023, the Company effected a one-for-ten (1-for-10) reverse stock split of its common stock and a corresponding reduction in the total number of authorized shares of its common stock from 300,000,000 to 30,000,000. All historical share and per share amounts reflected in this report have been adjusted to reflect the reverse stock split.

See accompanying notes to these unaudited condensed consolidated financial statements.

1

MARKER THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

    

For the Three Months Ended

For the Nine Months Ended

September 30, 

September 30,

    

2023

    

2022

    

2023

    

2022

Revenues:

Grant income

$

257,606

$

999,571

$

2,254,601

$

2,754,401

Total revenues

 

257,606

 

999,571

2,254,601

2,754,401

Operating expenses:

Research and development

2,044,980

3,591,897

7,799,472

9,786,138

General and administrative

 

1,412,672

 

3,234,133

6,098,716

9,720,598

Total operating expenses

 

3,457,652

 

6,826,030

13,898,188

19,506,736

Loss from operations

 

(3,200,046)

 

(5,826,459)

(11,643,587)

(16,752,335)

Other income (expenses):

 

 

Arbitration settlement

(118,880)

Interest income

 

218,085

 

99,750

337,819

138,653

Loss from continuing operations

(2,981,961)

(5,726,709)

(11,305,768)

(16,732,562)

Discontinued operations:

Loss from discontinued operations, net of tax

(1,192,874)

(2,922,406)

(9,341,717)

Gain on disposal of discontinued operations

 

 

8,794,426

Income (loss) from discontinued operations

(1,192,874)

5,872,020

(9,341,717)

Net loss

$

(2,981,961)

$

(6,919,583)

$

(5,433,748)

$

(26,074,279)

Net earnings (loss) per share:

Loss from continuing operations, basic and diluted

$

(0.34)

$

(0.69)

$

(1.29)

$

(2.01)

Income (loss) from discontinued operations, basic

$

$

(0.14)

$

0.67

$

(1.12)

Income (loss) from discontinued operations, diluted

$

$

(0.14)

$

0.66

$

(1.12)

Net loss per share

$

(0.34)

$

(0.83)

$

(0.62)

$

(3.13)

Weighted average number of common shares outstanding:

Basic

8,825,881

8,359,920

8,782,340

8,343,477

Diluted

8,825,881

8,359,920

8,834,512

8,343,477

On January 26, 2023, the Company effected a one-for-ten (1-for-10) reverse stock split of its common stock. All historical share and per share amounts reflected in this report have been adjusted to reflect the reverse stock split.

See accompanying notes to these unaudited condensed consolidated financial statements.

2

MARKER THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

For the Three Months Ended September 30, 2023

    

    

    

    

Total

Common Stock

Additional Paid-

Accumulated

Stockholders’

Shares

    

Par value

in Capital

Deficit

Equity

Balance at July 1, 2023

 

8,799,173

$

8,799

$

449,526,789

$

(430,500,836)

$

19,034,752

Issuance of common stock from exercise of stock options

24,774

24

84,580

84,604

Shares purchased pursuant to ATM agreeement

65,073

65

394,602

394,667

Stock-based compensation

 

 

 

175,041

 

 

175,041

Net loss

(2,981,961)

(2,981,961)

Balance at September 30, 2023

 

8,889,020

8,888

450,181,012

(433,482,797)

16,707,103

For the Nine Months Ended September 30, 2023

    

Total

Common Stock

Additional Paid-

Accumulated

Stockholders’

    

Shares

    

Par value

    

in Capital

    

Deficit

    

Equity

Balance at January 1, 2023

 

8,405,771

$

8,406

$

447,641,680

$

(428,049,049)

$

19,601,037

Shares purchased pursuant to ATM and Lincoln Park agreeements

277,834

277

1,014,363

1,014,640

Issuance of common stock as commitment fee for future financing

180,410

180

(180)

Issuance of common stock from exercise of stock options

25,118

25

85,317

85,342

Stock-based compensation

 

 

1,439,832

 

 

1,439,832

Net loss

 

 

 

 

(5,433,748)

 

(5,433,748)

Fractional shares adjustment due to reverse split

(113)

Balance at September 30, 2023

 

8,889,020

8,888

450,181,012

(433,482,797)

16,707,103

For the Three Months Ended September 30, 2022

Total

Common Stock

Additional Paid-

Accumulated

Stockholders’

    

Shares

    

Par value

    

in Capital

    

Deficit

    

Equity

Balance at July 1, 2022

8,359,919

$

8,360

$

445,290,964

$

(417,273,051)

$

28,026,273

Stock-based compensation

1,495,032

1,495,032

Net loss

(6,919,583)

(6,919,583)

Balance at September 30, 2022

8,359,919

$

8,360

$

446,785,996

$

(424,192,634)

$

22,601,722

For the Nine Months Ended September 30, 2022

Total

Common Stock

Additional Paid-

Accumulated

Stockholders’

    

Shares

    

Par value

    

in Capital

    

Deficit

    

Equity

Balance at January 1, 2022

8,307,868

$

8,308

$

442,095,642

$

(398,118,355)

$

43,985,595

Issuance common shares for cash, net

14,800

15

63,558

63,573

Stock-based compensation

37,251

37

4,626,796

4,626,833

Net loss

(26,074,279)

(26,074,279)

Balance at September 30, 2022

8,359,919

$

8,360

$

446,785,996

$

(424,192,634)

$

22,601,722

On January 26, 2023, the Company effected a one-for-ten (1-for-10) reverse stock split of its common stock. All historical share and per share amounts reflected in this report have been adjusted to reflect the reverse stock split.

See accompanying notes to these unaudited condensed consolidated financial statements.

3

MARKER THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the Nine Months Ended

September 30,

    

2023

    

2022

Cash Flows from Operating Activities:

Net loss

$

(5,433,748)

$

(26,074,279)

Less: gain (loss) from discontinued operations, net of tax

5,872,020

(9,341,717)

Net loss from continuing operations

(11,305,768)

(16,732,562)

Reconciliation of net loss to net cash used in operating activities:

 

 

Stock-based compensation

714,899

2,921,765

Gain on lease termination

(278,681)

Changes in operating assets and liabilities:

 

 

Prepaid expenses and deposits

 

(80,116)

 

(204,222)

Other receivables

 

2,318,691

 

(1,680,782)

Accounts payable and accrued expenses

 

208,348

 

(289,148)

Deferred revenue

107,530

(1,146,186)

Net cash used in operating activities - continuing operations

(8,036,416)

(17,409,816)

Net cash used in operating activities - discontinued operations

(6,035,961)

(3,256,915)

Net cash used in operating activities

 

(14,072,377)

 

(20,666,731)

Cash Flows from Investing Activities:

 

 

Net cash provided by (used in) investing activities - discontinued operations

18,664,122

(4,817,794)

Net cash provided by (used in) investing activities

18,664,122

(4,817,794)

Cash Flows from Financing Activities:

 

 

Proceeds from issuance of common stock, net

 

1,014,640

 

63,573

Proceeds from stock options exercise

85,342

Net cash provided by financing activities

 

1,099,982

 

63,573

Net increase (decrease) in cash, cash equivalents and restricted cash

 

5,691,727

 

(25,420,952)

Cash, cash equivalents and restricted cash at beginning of the period

 

11,782,172

 

43,497,331

Cash, cash equivalents and restricted cash at end of the period

$

17,473,899

$

18,076,379

See accompanying notes to these unaudited condensed consolidated financial statements.

4

MARKER THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

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 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 licensed the underlying technology for multiTAA-specific T cell therapy from Baylor College of Medicine (“BCM”) in March 2018. BCM had utilized the therapy in seven exploratory clinical trials.

The Company is advancing three product candidates as part of its multiTAA-specific T cell program for:

1.autologous treatment of lymphoma, and selected solid tumors,
2.allogeneic T cells for the treatment of acute myeloid leukemia (“AML”), and
3.off-the-shelf products in various indications

The current clinical development programs are:

MT-401 for the treatment of post-transplant AML,
MT-401-OTS for the treatment of AML,
MT-601 for the treatment of lymphoma, and
MT-601 for the treatment of pancreatic cancer (1).

The Company is currently undertaking a strategic review of its clinical development programs, including with respect to clinical trial initiation and readout guidance.

Purchase Agreement with Cell Ready

On June 26, 2023, the Company completed the previously announced transaction with Cell Ready, LLC (“Cell Ready”) pursuant to a Purchase Agreement (the “Cell Ready Purchase Agreement), dated May 1, 2023, by and between the Company and Cell Ready. Mr. John Wilson is a member of the Company’s board of directors and is serving as the CEO of Cell Ready, therefore Cell Ready is a related party. Pursuant to the Cell Ready Purchase Agreement, effective as of the Closing Date, the Company (i) assigned to Cell Ready the leases for the Company’s two manufacturing facilities in Houston, Texas (the “Manufacturing Facilities”), (ii) sold to Cell Ready all of the equipment and leasehold improvements at the Manufacturing Facilities and (iii) assigned to Cell Ready its rights, title and interest in the Company’s Master Services Agreement for Product Supply (the “MSA”), dated April 7, 2023, by and between the Company, Cell Ready and Indapta Therapeutics, Inc., as well as its rights, title and interest in any contracts related to the equipment and Manufacturing Facilities (collectively, the “Purchased Assets”). Cell Ready acquired the Purchased Assets for total consideration of $19.0 million. In connection with the purchase of the Manufacturing Facilities, Cell Ready also extended offers of employment to approximately 50 of the Company’s former employees in its manufacturing, development, quality, and regulatory affairs functions.

(1) Clinical advancement will be pending additional financial support from non-dilutive grant activities.

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The Purchased Assets constituted a significant disposition. Based upon the magnitude of the disposition and because the Company is exiting certain manufacturing operations, the disposition represents a significant strategic shift that will have a material effect on the Company’s operations and financial results. Accordingly, the assets sold meet the definition of a discontinued operation, as defined by Accounting Standards Codification (“ASC”) 205-20 – Discontinued Operations, and prior comparative periods have been retroactively adjusted to reflect the current presentation.

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 condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

Organizational Changes

In May 2023 and June 2023, the Company implemented changes to its organizational structure as part of an operational cost reduction plan and reorganization plan due to the transaction with Cell Ready. In connection with these changes, the Company reduced headcount, including the separation of its former Chief Executive Officer, Peter Hoang, in May 2023 and its former Chief Accounting Officer, Michael Loiacono, in June 2023. During the second quarter of 2023, the Company recorded $0.9 million of severance and termination-related costs. The payments of these costs were completed in July of 2023.

Effective May 1, 2023, the Company’s board of directors appointed Dr. Vera as the Company’s Chief Executive Officer.

Effective June 30, 2023, the board of directors appointed Eliot M. Lurier as the Company’s Interim Chief Financial Officer. Mr. Lurier provides consulting services to the Company pursuant to a consulting agreement between the Company and Danforth Advisors, LLC and receives no compensation directly from the Company.

NOTE 2: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results (see Note 6 for information on discontinued operations).

The results for the unaudited condensed consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2023, or for any future interim period. The condensed consolidated balance sheet at December 31, 2022 has been derived from audited financial statements, however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2022 and notes thereto included in the Company’s annual report on Form 10-K filed on March 22, 2023.

NOTE 3: LIQUIDITY AND FINANCIAL CONDITION

As of September 30, 2023, the Company had cash and cash equivalents of approximately $17.5 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;

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and develop strategic alliances and collaborations. From inception, the Company has been funded by a combination of equity and debt financing.

In August 2021, the Company entered a Controlled Equity OfferingSM 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. The shelf registration statement on Form S-3 includes a prospectus supplement covering the offering up to 9.87 million of shares of common stock over the 12 months ending March 22, 2024 pursuant to General Instruction I.B.6 of Form S-3, which limits the amounts that the Company 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 nine months ended September 30, 2023, the Company sold 265,334 shares of its common stock under the ATM Agreement for proceeds of $1.0 million (see Note 10).

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 its lead multiTAA-specific T cell product 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. To date, the Company has received $6.9 million of funds from the CPRIT grant. The Company recorded $0.2 million and $2.0 million of grant income related to the CPRIT grant as revenue for the three and nine months ended September 30, 2023, respectively.

In September 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 $0.0 million and $0.2 million of grant income related to the FDA grant as revenue for the three and nine months ended September 30, 2023, respectively.

In December 2022, the Company entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“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 (“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 Purchase Agreement. During the nine months ended September 30, 2023, The Company sold 12,500 shares of its common stock under the Lincoln Park agreement for proceeds of $33,000 (See Note 10).

As described in Note 1, on June 26, 2023, the Company completed the previously announced transaction with Cell Ready pursuant to the Cell Ready Purchase Agreement. Pursuant to the Cell Ready Purchase Agreement, effective as of the Closing Date, the Company (i) assigned to Cell Ready the leases for the Manufacturing Facilities, (ii) sold to Cell Ready all of the equipment and leasehold improvements at the Manufacturing Facilities and (iii) assigned to Cell Ready its rights, title and interest in the Company’s MSA, dated April 7, 2023, by and between the Company, Cell Ready and Indapta Therapeutics, Inc., as well as its rights, title and interest in any contracts related to the equipment and Manufacturing Facilities (collectively, the “Purchased Assets”). Following the Closing Date, the Company and Cell Ready have agreed to enter a long-term contract pursuant to which Cell Ready will perform a wide variety of services for the Company, including research and development, manufacturing, and regulatory activity in support of the Company’s clinical trials. The terms of the agreement were not yet finalized by September 30, 2023 and, therefore, the parties have not executed such an agreement. Cell Ready acquired the Purchased Assets for total consideration of $19.0 million. In connection with the purchase of the Manufacturing Facilities, Cell Ready also extended offers of employment to approximately 50 of the Company’s former employees in its manufacturing, development, quality, and regulatory affairs functions.

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, will require substantial expenditures to complete, and may ultimately be unsuccessful. Any delays in completing these activities could

7

adversely impact the Company. The Company plans to meet its capital requirements primarily through the issuance 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 September 30, 2023, will enable the Company to fund its operating expenses and capital expenditure requirements into the second half of 2025. Prior to the Cell Ready transaction, there was substantial doubt regarding the Company’s ability to continue as a going concern, which was alleviated by the proceeds from the transaction.

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 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;
enters into contract manufacturing arrangements with Cell Ready or other contract manufacturing organizations for clinical manufacturing supply;
establishes sales, marketing and distribution infrastructure and establishes third-party manufacturing capabilities to commercialize any product candidates that may receive regulatory approval;
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.

The Company does not have sufficient sources of revenue to provide incoming cash flows to sustain its future operations. As outlined above, its ability to pursue its long-term planned business activities is dependent upon its successful efforts to raise additional capital and grant income.

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 4: SIGNIFICANT ACCOUNTING POLICIES

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 (see Note 6 for information on discontinued operations).

Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results may differ from those estimates.

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Management considers many factors in selecting appropriate financial accounting policies, controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: research and development expense, stock-based compensation expense, and income taxes.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity date of three months or less, when acquired, to be cash equivalents.

Cash Concentration Risk

The Federal Deposit Insurance Corporation (the “FDIC”) insurance limits are $250,000 per depositor per insured bank. The Company had cash balances of $17.2 million and $11.5 million uninsured by the FDIC as of September 30, 2023 and December 31, 2022, respectively.

Discontinued Operations

The Purchased Assets sold to Cell Ready pursuant to the Cell Ready Purchase Agreement constituted a significant disposition and as such, the Company concluded that the disposition of its Purchased Assets represented a strategic shift that had a major effect on its operations and financial results. Therefore, the Purchased Assets, related party revenue, service revenue and related expenses are classified as discontinued operations for all periods presented herein. See Note 6 for further information.

New Accounting Standards

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“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 consolidated financial position or results of operations upon adoption.

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 22, 2023.

NOTE 5: NET LOSS PER SHARE

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.

9

The following table sets forth the computation of net loss per share for the three and nine months ended September 30, 2023 and 2022, respectively:

    

For the Three Months Ended

 

For the Nine Months Ended

September 30, 

 

September 30, 

    

2023

    

2022

     

2023

    

2022

Numerator:

Loss from continuing operations

$

(2,981,961)

$

(5,726,709)

$

(11,305,768)

$

(16,732,562)

Income (loss) from discontinued operations

$

$

(1,192,874)

$

5,872,020

$

(9,341,717)

Net loss

$

(2,981,961)

$

(6,919,583)

$

(5,433,748)

$

(26,074,279)

Denominator:

 

 

 

 

Weighted average common shares outstanding, basic

 

8,825,881

 

8,359,920

 

8,782,340

 

8,343,477

Weighted average common shares outstanding, diluted

 

8,825,881

 

8,359,920

 

8,834,512

 

8,343,477

Net earnings (loss) per share:

 

 

 

 

Loss from continuing operations, basic and diluted

$

(0.34)

$

(0.69)

$

(1.29)

$

(2.01)

Income (loss) from discontinued operations, basic

$

$

(0.14)

$

0.67

$

(1.12)

Income (loss) from discontinued operations, diluted

$

$

(0.14)

$

0.66

$

(1.12)

Net loss per share

$

(0.34)

$

(0.83)

$

(0.62)

$

(3.13)

The following securities, rounded to the nearest thousand, were not included in the diluted net loss per share calculation because their effect was anti-dilutive for the periods presented:

For the Three Months Ended

For the Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

Common stock options

800,000

 

996,000

 

748,000

 

996,000

Common stock purchase warrants

1,848,000

 

1,848,000

 

1,848,000

 

1,848,000

Potentially dilutive securities

2,648,000

 

2,844,000

 

2,596,000

 

2,844,000

NOTE 6: DISCONTINUED OPERATIONS

As discussed in Note 1, on June 26, 2023, the Company completed the previously announced transaction with Cell Ready for cash consideration of $19.0 million, resulting in derecognition of the Purchased Assets and a gain on sale of approximately $8.8 million.

The assets and liabilities classified in discontinued operations as of September 30, 2023 and December 31, 2022 are as follows:

    

September 30, 2023

    

December 31, 2022

Prepaid expenses and other current assets

$

$

585,840

Total current assets of discontinued operations

 

 

585,840

Fixed Assets

 

 

12,323,143

Right of use assets

 

 

5,479,786

Total non-current assets of discontinued operations

 

 

17,802,929

Total assets of discontinued operations

$

$

18,388,769

Accounts payable

$

$

2,183,418

Related party deferred revenue

 

 

2,500,000

Short-term lease liabilities

 

 

577,198

Total current liabilities of discontinued operations

 

 

5,260,616

Long-term lease liabilities

 

 

7,039,338

Total non-current liabilities of discontinued operations

 

 

7,039,338

Total liabilities of discontinued operations

$

$

12,299,954

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The Company reclassified the following operations to discontinued operations for the three and nine months ended September 30, 2023 and 2022, respectively, excluding the gain on disposal:

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

    

2023

    

2022

    

2023

    

2022

Revenues:

Service revenue

$

$

$

816,641

$

Related party service revenue

 

 

2,950,000

 

3,500,000

 

2,950,000

Total revenues

 

 

2,950,000

 

4,316,641

 

2,950,000

Operating expenses:

 

  

 

  

 

  

 

  

Research and development

 

 

3,724,997

 

6,561,957

 

11,112,122

General and administrative

 

 

417,877

 

677,090

 

1,179,595

Total operating expenses

 

 

4,142,874

 

7,239,048

 

12,291,717

Loss from discontinued operations

$

$

(1,192,874)

$

(2,922,406)

$

(9,341,717)

Related Party Service Revenue

In April 2022, the Company entered into a binding services agreement (“Wilson Wolf Agreement”) 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. 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 Wilson Wolf 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.

In March 2023, the Company recognized the final $2.5 million of revenue pursuant to this $8.0 million agreement and, at September 30, 2023, the Company had no related party deferred revenue on its condensed consolidated balance sheet.

Additionally, pursuant to the Wilson Wolf Agreement, Wilson Wolf agreed to pay the Company an additional $1.0 million because the Work Direction was completed within one year from the onset of the Wilson Wolf Agreement, achieving the agreed milestone. As such, the Company recorded an additional $1.0 million of service fee revenue during the three months ended March 31, 2023, which was received in May 2023 and recorded to discontinued operations.

Service Revenue

In April 2023, the Company signed the Indapta Master Services Agreement, pursuant to which the Company provided services to Indapta. Under an executed work order of that agreement, now complete, the Company recognized $0.8 million for the services rendered during the quarter ended June 2023. Effective as of the closing date of the Purchase Agreement with Cell Ready, the rights and obligations to the Indapta Agreement were transferred to Cell Ready, and as such the revenues were recorded to discontinued operations.

NOTE 7: PROPERTY AND EQUIPMENT

Substantially all the previously reported property and equipment was disposed of as part of the Cell Ready transaction (see Note 6).

NOTE 8: LEASES

Substantially all the previously reported leases were disposed of as a result of the Cell Ready transaction (see Note 6).

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NOTE 9: ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND RELATED PARTY PAYABLE

Accounts payable and accrued liabilities consist of the following as of September 30, 2023 and December 31, 2022, respectively:

    

September 30, 

    

December 31, 

2023

2022

Accounts payable

$

1,165,000

$

1,101,000

Compensation and benefits

 

71,000

 

750,000

Professional fees

 

1,119,000

 

518,000

Arbitration settlement fees

 

 

114,000

Other

 

317,000

 

38,000

Total accounts payable, accrued liabilities and related party payable

$

2,672,000

$

2,521,000

$0.4 million of the total above reflects a related-party payable to Cell Ready.

NOTE 10: STOCKHOLDERS’ EQUITY

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, 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 historical share and per share amounts reflected in this report have been adjusted to reflect the Reverse Stock Split.

Common Stock Transactions

Issuance of Stock Pursuant to ATM Agreement

During the nine months ended September 30, 2023, the Company sold 265,334 shares of its common stock under the ATM Agreement for proceeds of $1.0 million.

Stock Purchase Agreement

In December 2022, the Company entered into a purchase agreement (the “Purchase Agreement”) with 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 (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 Purchase 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. In January 2023, Lincoln Park was issued 180,410 shares of stock as a commitment fee at a value of $0.5 million. During the nine months ended September 30, 2023, the Company sold 12,500 shares of its common stock under the Purchase Agreement for proceeds of approximately $33,000.

Exercise of Stock Options

During the nine months ended September 30, 2023, certain outstanding options were exercised for 25,118 shares of common stock, providing aggregate proceeds to the Company of approximately $0.1 million.

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Share Purchase Warrants

A summary of the Company’s share purchase warrants as of September 30, 2023 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, 2023

 

1,848,000

$

44.51

0.79

$

Expired or cancelled

 

Balance - September 30, 2023

1,848,000

$

44.51

0.04

$

All warrants outstanding at September 30, 2023 expired according to their terms on October 16, 2023.

NOTE 11: STOCK-BASED COMPENSATION

Stock Options

2022 Equity Incentive Awards

On February 27, 2023, pursuant to the Company’s 2020 Equity Incentive Plan, the compensation committee of the Company’s board of directors approved a total of 316,855 options to purchase the Company’s common stock as equity-based incentive awards to the Company’s executive officers and management team. Each option award was granted with an exercise price of $2.14 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on February 27, 2023, 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 27, 2023, the compensation committee of the Company’s board of directors approved a total of 87,677 options to purchase the Company’s common stock to non-executive employees and management team of the Company as equity-based incentive awards. Each option award was granted with an exercise price of $2.14 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on February 27, 2023, 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 7,000 stock option awards issued during the three months ended March 31, 2023 to new employees upon their commencement of employment with the Company. Each option award was granted with an exercise price of $2.769 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on January 3, 2023, 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.

On May 10, 2023, the Company’s board of directors approved a one-time share option grant of 100,000 shares of common stock to Dr. Vera for his appointment as the Company’s Chief Executive Officer. The option has a term of ten years and will vest in equal annual installments on May 10, 2024, May 10, 2025, May 10, 2026, and May 10, 2027, subject to Mr. Vera’s continued service to the Company as of the applicable vesting date. Each option award was granted with an exercise price of $1.42 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on May 10, 2023.

On June 6, 2023, pursuant to the Company’s Non-Employee Director Compensation Policy, which had previously been approved by the Company’s board of directors, a total of 32,000 stock option awards were issued to independent members of the board of directors of the Company. Each option award was granted with an exercise price of $1.72 per share, the closing price of the Company’s common stock on the Nasdaq Global Market on June 6, 2023. Each option award will vest in one year subject to the director’s continuance of service through June 6, 2024.

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A summary of the Company’s stock option activity for the three months ended September 30, 2023 is as follows:

    

    

    

Weighted Average

Remaining

Weighted Average 

Contractual

    

Number of Shares

    

Exercise Price

    

Total Intrinsic Value

    

Life (in years)

Outstanding as of January 1, 2023

 

886,173

$

42.90

$

7.3

Granted

 

544,532

1.99

9.5

Exercised

(25,118)

5.85

Canceled/Expired

 

(605,693)

32.67

Outstanding as of September 30, 2023

 

799,894

$

24.01

$

1,019,000

7.9

Options vested and exercisable

 

381,732

$

45.72

$

114,000

6.5

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 nine months ended September 30, 2023 was as follows:

For the Nine Months Ended

    

September 30, 2023

  

Exercise price

$

1.99

Expected term (years)

 

6.0

Expected stock price volatility

 

91

%

Risk-free rate of interest

 

4

%

Expected dividend rate

 

0

%

The following table sets forth stock-based compensation expenses recorded during the respective periods:

    

For the Three Months Ended

 

For the Nine Months Ended

September 30, 

 

September 30, 

    

2023

    

2022

    

2023

    

2022

Stock Compensation expenses:

 

  

 

  

  

 

  

Research and development

$

106,000

$

201,000

$

299,000

$

599,000

General and administrative

 

69,000

 

735,000

 

416,000

 

2,323,000

Stock compensation in continuing operations

175,000

936,000