form10-k.htm
 
 




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Fiscal Year Ended December 31, 2008
 
[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from ________________ to ________________.
 
Commission file number 000-27239
 
TAPIMMUNE INC.
(Exact name of registrant as specified in its charter)
 
Nevada
88-0277072
(State or other jurisdiction of incorporation of organization)
(I.R.S. Employer Identification No.)

Unit 2, 3590 West 41st Avenue, Vancouver,
British Columbia, Canada
V6N 3E6
(Address of Principal Executive Offices)
(Zip Code)
 
(604) 264-8274
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:  None
 
Securities registered pursuant to Section 12(g) of the Act:
 
Common Stock, Par Value $0.001
(Title of class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes [  ]  No [X]
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act.
 
Yes [  ]  No [X]
 
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [X]  No [  ]
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
 
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer r                                                                                                           Accelerated filer r
 
Non-accelerated filer  (do not check if a smaller reporting company)r                            Smaller reporting company x
 
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes [  ]  No [X]
 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the price at which the registrant’s common equity was last sold, as of June 30, 2008 (the last day of the registrant’s most recently completed second fiscal quarter) was approximately $6,177,000.
 
The registrant had 24,149,827 shares of common stock outstanding as of May 7, 2009.
 

 
 

 

 
FORWARD LOOKING STATEMENTS
 
This annual report contains forward-looking statements that involve risks and uncertainties.  Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology.  In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties outlined in this annual report under “Risk Factors”.  These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this annual report.  Forward-looking statements in this annual report include, among others, statements regarding:
 
·  
our capital needs;
 
·  
business plans; and
 
·  
expectations.
 
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.  Some of the risks and assumptions include:
 
·  
our need for additional financing;
 
·  
our limited operating history;
 
·  
our history of operating losses;
 
·  
our lack of insurance coverage;
 
·  
the competitive environment in which we operate;
 
·  
changes in governmental regulation and administrative practices;
 
·  
our dependence on key personnel;
 
·  
conflicts of interest of our directors and officers;
 
·  
our ability to fully implement our business plan;
 
·  
our ability to effectively manage our growth; and
 
·  
other regulatory, legislative and judicial developments.
 
We advise the reader that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf.  Important factors that you should also consider, include, but are not limited to, the factors discussed under “Risk Factors” in this annual report.
 
The forward-looking statements in this annual report are made as of the date of this annual report and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.
 
AVAILABLE INFORMATION
 
TapImmune Inc. files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”).  You may read and copy documents referred to in this Annual Report on Form 10-K that have been filed with the SEC at the SEC’s Public Reference Room, 450 Fifth Street, N.W., Washington, D.C.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  You can also obtain copies of our SEC filings by going to the SEC’s website at http://www.sec.gov.
 
REFERENCES
 
As used in this annual report: (i) the terms “we”, “us”, “our”, “TapImmune” and the “Company” mean TapImmune Inc.; (ii) “SEC” refers to the Securities and Exchange Commission; (iii) “Securities Act” refers to the United States Securities Act of 1933, as amended; (iv) “Exchange Act” refers to the United States Securities Exchange Act of 1934, as amended; and (v) all dollar amounts refer to United States dollars unless otherwise indicated.
 


 
1

 

 
TABLE OF CONTENTS

 
ITEM 1.
BUSINESS
3
ITEM 1A.
RISK FACTORS
10
ITEM 1B.
UNRESOLVED STAFF COMMENTS
12
ITEM 2.
PROPERTIES
12
ITEM 3.
LEGAL PROCEEDINGS
12
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
12
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
13
ITEM 6.
SELECTED FINANCIAL DATA
14
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
15
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
18
ITEM 8.
FINANCIAL STATEMENTS
19
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
46
ITEM 9A.
CONTROLS AND PROCEDURES
46
ITEM 9B.
OTHER INFORMATION
47
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
47
ITEM 11.
EXECUTIVE COMPENSATION
50
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
52
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
54
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
55
ITEM 15.
EXHIBITS
56


 
2

 

PART I
 
ITEM 1.                      BUSINESS
 
Company Overview
We are a biotechnology company whose strategic vision is to develop and market products specializing in the application of the latest discoveries in cellular and molecular immunology and cancer biology to the development of proprietary therapeutics aimed at the treatment and eradication of cancer and prevention of infectious diseases.  Our technologies are based on an understanding of the function of a protein pump known as “TAP”, which is located within cells and which is essential to the processing of foreign (microbial) or autologous antigens, and subsequent presentation to the immune system for eradication of the cancer or infected cell.  We currently have none of our product candidates on the market and are focusing on the development and testing of our product candidates.
 
The current standard therapies for cancer treatment include surgery, radiation therapy and chemotherapy.  However, we believe that these treatments are not precise in targeting only cancerous cells and often fail to remove or destroy all of the cancer.  The remaining cancer cells may then grow into new tumors, which can be resistant to further chemotherapy or radiation, which may result in death.  In the United States, the American Cancer Society estimates more than 600,000 deaths from cancer annually, second only to cardiovascular deaths and the ACS estimates over 1.4 million new diagnosis will be made this year
 
Company History
We currently trade on the OTC Bulletin Board under the symbol “TPIM”.
 
We were incorporated under the laws of the State of Nevada in 1991 under the name “Ward’s Futura Automotive Ltd”.  We changed our name a number of times since 1991 and, in July 2002, we completed the acquisition of GeneMax Pharmaceuticals Inc. (“GeneMax Pharmaceuticals”), a Delaware corporation, in a reverse merger and changed our name to “GeneMax Corp”.  As a result of this transaction the former stockholders of GeneMax Pharmaceuticals then owned 75% of the total issued and outstanding shares of GeneMax Corp.  GeneMax Pharmaceuticals is now a wholly owned subsidiary of TapImmune, and GeneMax Pharmaceuticals Canada Inc. (“GPCanada”), a British Columbia corporation, is a wholly owned subsidiary of GeneMax Pharmaceuticals.  On June 28, 2007, we approved a name change to TapImmune Inc.
 
The Immunotherapy Industry for Cancer
Management believes that there is a critical need for more effective cancer therapies.  Management further believes that the global market for effective cancer treatments is large, and that immunotherapies representing potential treatments for metastatic cancer are an unmet need in the area of oncology.
 
The human immune system appears to have the potential to clear cancers from the body, based on clinical observations that some tumors spontaneously regress when the immune system is activated.  Most cancers are not very “immunogenic”, however, meaning that the cancers are not able to induce an immune response because they no longer express sufficient levels of key proteins on their cell surface, known as Major Histocompatability Class I or MHC Class I proteins.  In healthy cells, these proteins provide the information to the immune system that defines whether the cell is healthy or, in the case of cancer or viral infection, abnormal.  If the MHC Class I proteins signal that the cells are abnormal, then the immune system’s T-cells are activated to attack and kill the infected or malignant cell.
 
In many solid cancer tumors, the TAP protein system does not function and, therefore, the immune system is not stimulated to attack the cancer.  Management believes that although a number of cancer therapies have been developed that stimulate the immune system, these approaches have often proven ineffective because the cancers remain invisible to the immune system due to this apparent lack of or low expression of the TAP protein.
 
By restoring TAP expression to TAP-deficient cells, the MHC Class I protein peptide complexes could signal the immune system to attack the cancer.  The strategic vision of TapImmune is to be a product-driven biotechnology company, focusing primarily on use of its patented TAP technology to restore the TAP function within cancerous cells, thus making them immunogenic, or more “visible” to cancer fighting immune cells.  As part of its overall strategy, and with additional funding, the Company also intends to pursue the development of prophylactic vaccines against infectious microbes.  The company intends to develop the TAP technology for use as a therapeutic cancer vaccine that management believes will restore the normal immune recognition.  Management further believes that this cancer vaccine strategy is the only therapeutic approach that addresses this problem of “non-immunogenicity” of cancer.  Management believes that this therapy may have a strong competitive advantage over other cancer therapies, since restoring the TAP protein will direct the immune system to specifically target the cancerous cells without damaging healthy tissue.
 
TapImmune’s Target Market and Strategy
With the required funding in place, we will pursue product development in oncology.  With additional funding and the possible collaboration of other vaccine companies we will also pursue product development in our adjuvant for prophylactic vaccines.  The initial development process is the same for both therapeutic and prophylactic vaccines, so some parallel development will take place.  Cancer encompasses a large number of diseases that affect many different parts of the human body.  The diversity of cancer types and their overall prevalence create a large need for new and improved treatments.  Management believes that there is a significant market opportunity for a cancer treatment that utilizes the highly specific defense mechanisms of the immune system to attack cancers.  Based upon recent market reports, management believes that the market for cancer vaccines could be approximately $6 billion by 2010, with a compounded annual growth rate of 104%.  Our goal is to have the FDA approve our cancer vaccine within the next few years so that we can secure a portion of this market.
 
Management also believes that our prophylactic vaccine adjuvant will improve the creation of new vaccines and enhance the efficacy of current vaccines.  It will be a key business development strategy to pursue partnerships and joint research and development ventures with vaccine manufacturers and pharmaceutical companies to bring new and improved vaccines to market.  The market for prophylactic vaccines is around $6 Billion and is expected to reach $11 Billion in 2010 (Frost & Sullivan).  Management believes that our adjuvant will increase the potency of many of the currently available vaccines and lead to the creation of better, more effective new vaccines, thereby allowing us to participate in this large market through novel new products and in combination with existing vaccines.
 
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Research and Development Efforts
We direct our research and development efforts towards the development of immunotherapeutic and prophylactic vaccine products for the treatment of cancer and protection against pathogenic microbes respectively, using our proprietary TAP technology.  We have focused our efforts initially on the development of a therapeutic vaccine for applications in cancer treatment while demonstrating the breadth of the TAP technology for the development of prophylactic vaccines and its ability to complement currently approved and emerging products in both cancer therapeutics and prophylactic vaccines against microbes.  This approach allows us to pursue our own internal product development while positioning us to enter into multiple partnerships and licensing agreements.  We previously produced, and still plan to produce in the future, our TAP vaccines by inserting the TAP gene material into a proprietary, modified adeno virus licensed from Crucell Holland B.V. (“Crucell”) or a generic HEK293 adenovirus, and it will and  has been used as the prototype vaccine product for performing in-vitro immunological and animal preclinical studies.  We have an opportunity to take advantage of our potential partners’ capabilities while reducing our overhead costs.  Our relationship with the University of British Columbia (“UBC”) allowed us to conduct contract research and development by employing highly skilled scientists at UBC.  The research and development team performed the basic research on the biological function of TAP and related licensed technology as well as preclinical animal studies in cancer and infectious diseases.  Moving into the development phase, we will initiate our contract with SAFC Pharma (Sigma Aldrich), for the production of clinical grade vaccine product to be used in preclinical and clinical studies that require production facilities with Good Manufacturing Practices (“GMP”) and Good Laboratory Practices (“GLP”) certification.
 
Products and Technology in Development
 
TAP Cancer Vaccine
We previously developed our TAP Cancer Vaccine at the UBC Biomedical Research Centre under an agreement we refer to in this Annual Report as our “Collaborative Research Agreement”.  This therapeutic cancer vaccine candidate, to be tested in preclinical toxicology studies, will, if successfully developed, include the patented use of the TAP-1 gene to restore the TAP protein, with the objective being to develop the TAP technology as a therapeutic cancer vaccine that will restore the normal immune recognition of cancer cells.  The TAP Cancer Vaccine will be targeted at those cancers that are deficient in the TAP protein, which include breast cancer, prostate cancer, lung cancer, liver cancer, melanoma, renal cancer and colorectal cancer.
 
Management believes that the TAP Cancer Vaccine will deliver the genetic information required for the production of the TAP protein in the target cancer cell.  This will trigger the cancer cell’s ability to effectively identify itself to the body’s immune system by transporting the cancer antigen peptides to the cell surface using the individual’s specific MHC Class I proteins.  As a result, we believe that the immune response could be targeted to the entire repertoire of cancer antigen peptides produced by the cancer cell, rather than just to a single cancer antigen, as delivered by current cancer vaccines.  The TAP Cancer Vaccine could allow the immune response to respond to the cancer even if the TAP protein and genetic information were only delivered to a small portion of the cancer cells.  In addition, the TAP Cancer Vaccine would generate an immune response to any TAP-deficient cancer, regardless of the patient’s individual genetic variability either in the MHC Class I proteins or in the cancer-specific proteins and resultant peptides.
 
In general, a “cancer vaccine” is a therapy whose goal is to stimulate the immune system to attack tumors.  Management believes that most current cancer vaccines contain either cancer-specific proteins that directly activate the immune system or contain genetic information, such as DNA, that encodes these cancer-specific proteins.  Management believes that there are a number of key conditions that must be met before a cancer vaccine can be effective in generating a therapeutic immune response: (i) the cancer antigen peptide delivered by the vaccine has to be recognized by the immune system as “abnormal” or “foreign” in order to generate a strong and specific T-cell response; (ii) the same cancer antigen peptide has to be displayed on the surface of the cancer cells in association with the MHC Class I proteins; and (iii) these cancer antigen peptides then have to be sufficiently different from normal proteins in order to generate a strong anti-tumor response.
 
If these conditions are all met, then management believes that such cancer vaccines should generate a sufficiently strong immune response to kill the cancer cells.  However, the identification of suitable cancer-specific antigen proteins to use in these therapeutic vaccines has proven extremely complex.  In addition, the MHC Class I proteins are highly variable, with over 100 different types in humans and, as a result, any one-cancer antigen peptide will not produce an immune response for all individuals.  Cancers are “genetically unstable” and their proteins are highly variable, so that the selected cancer antigen protein may result in the immune system only attacking a small subset of the cancerous cells.
 
Laboratory Testing of the TAP Cancer Vaccine
Management believes that the key milestone of efficacy in animal models of cancer has been attained and that other scientific research teams have validated the experimental data from these animal studies.  The proof of principle for the TAP technology as a cancer vaccine was established in research conducted during the last ten years at UBC.  The initial studies were conducted using a small-cell lung cancer cell line that was derived from an aggressive, metastatic cancer.  These cells have multiple defects in the “antigen presentation pathway” in that they are not detected by the immune system.  When the TAP protein was introduced into these cells, antigen presentation was restored.  In addition, a series of animal studies have demonstrated the ability of TAP to restore an immune response.  This study was published in Nature Biotechnology (Vol. 18, pp. 515-520, May 2000).  Management believes that the TAP technology has been further validated in melanoma, where animal studies similar to the small-cell lung cancer studies described above were performed and similar results were achieved.
 
Pre-Clinical Testing
We have completed small animal pre-clinical animal testing of our TAP Cancer Vaccine to the extent that is required as a prerequisite for further preclinical toxicology analysis and Investigational New Drug (or “IND”) application to the FDA.  The pre-clinical testing of the TAP Cancer Vaccine to date included the evaluation of several strains of vaccinia and adenovirus vectors to assess their respective ability to deliver the correct genetic information allowing expression of the TAP protein in tumors, the selection and licensing (now dormant until funding is restored) of the vector from Crucell and the identification and entering into an agreement, that we refer to in this Annual Report as our “Production Services Agreement”, with SAFC Pharma, a GMP manufacturer, for subsequent production of the TAP Cancer Vaccine.  We have to complete the performance of toxicology studies using the TAP Cancer Vaccine on at least two animal species to confirm its non-toxicity.  In addition, we must complete initial vaccine production, and develop internal and external clinical trials, support personnel and infrastructure before commencing clinical trials.
 
Once the formal pre-clinical testing is completed, we intend to compile and summarize the data and submit it to the United States Federal Drug Administration (or “FDA”) and/or the Canadian Health Canada (or “HC”), and/or other national regulatory agencies, in the form of an investigational new drug application.  We anticipate that these applications would include data on vaccine production, animal studies and toxicology studies, as well as proposed protocols for the Phase I human clinical trials, described below.
 
Phase I Human Clinical Trials
Management believes that, subject to the completion of remaining pre-clinical work and financing, estimated at approximately $5,000,000, the Phase I human clinical trials could commence in the second half of 2010 or early 2011 depending how quickly funding is in place.  The Phase I human clinical trials will be designed to provide data on the safety of the TAP Cancer Vaccine when used in humans.  We may conduct the Phase I human clinical trials at the British Columbia Cancer Agency in Vancouver, British Columbia, or other locations to be evaluated.  These trials will be conducted in respect of certain carcinomas.  We have presented information on the TAP Cancer Vaccine to members of the Department of Advanced Therapeutics of the British Columbia Cancer Agency, with the intent of obtaining their assistance in the design and execution of the clinical study.
 
 
4

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

 
Infectious Disease Application for “TAP” Adjuvant
 
Beyond the TAP cancer vaccine, TapImmune plans to develop or license out our technology for the creation of enhanced viral vaccines, such as for smallpox and others, based on our findings that TAP can augment immune responses.  We have presented data showing that increasing TAP expression in TAP-competent antigen presenting cells (APCs) and/or virus infected cells increases the antigenic peptide associated with MHC class I expression on the cell surface, and leads to increased specific T cell-mediated immune responses. We believe this technology can add great value to the creation of new vaccines and enhance those that already exist.
 

 
Future Products and Technology
 
Peptide Transfer Assay
Depending on resources and funding, we may also develop potential products that may stimulate or interrupt the chain of events involved in certain immune system-related diseases.  One such potential product, referred to in this Annual Report as the “Peptide Transfer Assay”, would be used to identify compounds effective in the treatment of cancer, infectious diseases, autoimmune diseases and transplant rejection.  Autoimmune diseases include, but are not limited to, psoriasis, rheumatoid arthritis, multiple sclerosis, myasthenia gravis and diabetes.  T cells and antibodies in the body’s immune system normally identify and destroy foreign substances and cancerous cells.  Autoimmune diseases are generally caused by the abnormal destruction of healthy body tissues when T cells and antibodies react against normal tissue.
 
The Peptide Transfer Assay is ready for development for high-throughput screening and partnering.  High-throughput screening is the use of robotics and automated industrial processes used to speed up the drug discovery process, testing large number of compounds against certain targets.  Additional funding will be required to exploit this opportunity, however, the technology has been licensed and will continue to be protected by us. This technology is not currently a focus for development.
 
Screen for Regulators of Antigenicity
We recently acquired via our agreement with UBC a drug discovery technology that can be used to identify small molecule regulators of the immune response.  We refer to this technology in this Annual Report as the Screen for Regulators of Antigenicity Technology.  Management believes that the Screen for Regulators of Antigenicity Technology can be used to screen and select new drugs that regulate immune responses, and that it has relevance to both cancers and viral diseases and in modulating transplant rejection and autoimmune diseases.  This technology is of interest but will only be developed after successful development of the cancer and prophylactic vaccines.
 
 
5

 
Strategic Relationships
 
UBC
 
Collaborative Research Agreement
In September of 2000, through our wholly owned subsidiaries, GeneMax Pharmaceuticals and GeneMax Canada, entered into a Collaborative Research Agreement with UBC to carry out further development of the TAP technologies as a cancer vaccine and other commercial products, and to provide GeneMax Pharmaceuticals with the option to acquire the rights to commercialize any additional technologies developed under the agreement.  Pursuant to the Collaborative Research Agreement UBC retained all rights and title to all inventions, improvements and discoveries that are conceived by employees of UBC during the term of the Collaborative Research Agreement; however, UBC therein granted us an option to obtain a royalty-bearing license to use such inventions, improvements and discoveries that were not covered under the existing license agreement and included improvements and enhancements of the licensed technologies.
 
The Collaborative Research Agreement, as amended, provided for payments to UBC in the aggregate of $2,973,049 (CDN).  In addition, we reimbursed UBC a total of $55,812 (CDN) of patent expenditures in connection with technologies licensed to us.
 
The parties to the Collaborative Research Agreement had agreed to the principal terms of a renegotiated agreement which would provide for an estimated annual budget of $295,000 (CDN) (in quarterly installments of $73,750 (CDN)) to allow for funding for one Ph.D. scientist and two support technicians.  In addition, UBC continued to provide us with access to university laboratories and equipment at UBC.
 
License Agreement
In March of 2000, we entered into a license agreement with UBC and Dr. Wilfred A. Jefferies, then our Chief Scientific Officer and a director, which is referred to in this Annual Report as the License Agreement, providing us with an exclusive world-wide license to use certain technology developed by UBC and Dr. Jefferies.  The License Agreement allowed us to use the technology associated with the patents entitled “Method for Enhancing Expression of MHC-Class 1 Molecules Bearing Endogenous Peptides” and “Method of Identifying MHC-Class 1 restricted Antigens Endogenously Processed by a Cellular Secretory Pathway” and to manufacture, distribute, market, sell, lease and license or sub-license products derived or developed from the above licensed technologies until the later of March 6, 2015 or the expiration of the last patent obtained under the License Agreement, including the expiration of patents obtained from modifications to existing patents.  As consideration for entering into the License Agreement we paid an initial license fee of $113,627 (CDN) and issued 500,000 GeneMax Pharmaceutical shares to the University of British Columbia; which were subsequently exchanged for 200,000 shares of our restricted common stock.
 
On February 16, 2004, UBC granted us an exclusive, worldwide license to use a novel assay technology to screen and select new drugs that regulate immune responses.  As consideration for entering into this license, which we refer to in this Annual Report as the “Immune Response License”, we issued UBC 4,000 shares of our common stock and were required to pay UBC an annual maintenance fee of $500 (CDN).  The term for the Immune Response License was the longer of either 20 years or the expiration of the last patent licensed under the Immune Response License, including the expiration of patents obtained from modifications to existing patents.
 
Option and Settlement Agreements
On January 24, 2006, and in accordance with the terms and conditions of a certain Option and Settlement Agreement (the “Option and Settlement Agreement”), dated for reference January 23, 2006, as entered among each of us, UBC, Dr. Jefferies and each of our predecessor and subsidiary companies, GeneMax Pharmaceuticals and GPCanada, the parties thereto reached a definitive agreement pursuant to which all existing financial claims by UBC (collectively, the “UBC Financial Claims”) as against us under each of those certain “License Agreement” among us, UBC and Dr. Jefferies dated March 6, 2000, as amended February 28, 2003 (“License Agreement #1”), and “License Agreement” between us and UBC dated February 16, 2004 (“License Agreement #2” and, collectively, the “License Agreements”), and under that certain “Collaborative Research Agreement” between UBC and GPCanada dated May 6, 2005 (the “CRA”), are satisfied (the “Settlement”) in consideration of UBC providing us with the consequent right to acquire, outright, by way of assignment (the “Option to Purchase”), all of UBC’s right title and interest in the technologies licensed to us under the terms of the License Agreements, including the “Technology” as that term is defined in the License Agreements, and all “Improvements” made prior to the date of execution of the Option and Settlement Agreement in furtherance of the same (collectively, the “Technology” thereunder).
 
6

 
In accordance with the terms and conditions of the Option and Settlement Agreement, and in order to keep the right and Option to Purchase the Technology granted to us by UBC in good standing and in force and effect; and in order to maintain the Settlement of all UBC Financial Claims consequent therein; we were obligated to provide cash payment (“Purchase Price Payment”) and to maintain the current status of UBC’s existing patent and patent pending applications respecting the Technology (the “Purchase Price Patent Obligations”; and the Purchase Price Payments and the Purchase Price Patent Obligations being, collectively, the “Purchase Price”) to the order and direction of UBC in the aggregate amount of $556,533 (CDN) (which also equate to the present UBC Financial Claims) prior to December 31, 2006 (the end of the “Option Period”), and in due complete satisfaction of the settlement of the UBC Financial Claims.
 
The Option and Settlement Agreement replaced our previously disclosed (by way of Current Report on Form 8-K dated December 23, 2005) “Letter of Intent” as previously entered into between us and UBC.
 
On December 18, 2006, we negotiated an extension with UBC of the January 24, 2006 Option and Settlement Agreement.  Under the terms of the extension we were obligated to pay UBC $216,533 (CDN) as follows:
 
(a)  
$72,177 (CDN) on or before December 31, 2006; (paid);
 
(b)  
$72,178 (CDN) plus interest of $3,362 (CDN) on or before March 20, 2007; (paid); and
 
(c)  
$72,178 (CDN) plus interest of $1,423 (CDN) on or before May 31, 2007 (paid).
 
As of May 31, 2007 we completed our obligation with UBC, and the technology assignment and transfer was completed in the 2007 fiscal year.
 
Crucell
On August 7, 2003, we entered into an agreement with Crucell, which we refer to in this Annual Report as the “Research License and Option Agreement”.  Pursuant to that agreement, Crucell granted us a non-exclusive, worldwide license for Crucell’s adenovirus technology and an option for a non-exclusive, worldwide commercial license to manufacture, use, offer for sale, sell and import products using the licensed technology in the therapy of human subjects by administering a modified and proprietary adeno virus vector (used to package our TAP gene technology and deliver it to the target cancer cell in the patient) including, but not limited to, therapeutic gene sequence(s).
 
The Research License and Option Agreement provided for bi-annual license maintenance fees of 50,000 Euros, exclusive of applicable taxes, during the first two years of the agreement, and an annual license maintenance fees of 75,000 Euros, exclusive of applicable taxes, starting on the third anniversary until the expiration of the agreement on August 7, 2008.  Total obligations under this agreement were 450,000 Euros.
 
To December 31, 2005, we had made payments required totaling $115,490 (€100,000) to Crucell pursuant to the terms of the Research License and Option Agreement.  Pursuant to the terms of the Research License and Option Agreement, a further $60,864 (€ 50,000) was due and payable on February7, 2004 and a further $60,103 (€ 50,000) was due and payable on August 7, 2004 leaving $120,967 owing as of December31, 2004 under the terms of the agreement.  Pursuant to the Research License and Option Agreement, if a party defaults in the performance of or fails to be in compliance with any material condition of this agreement, the Research License and Option Agreement may be terminated if the default or noncompliance is not remedied or steps initiated to remedy three months after receipt in writing to the defaulting party.  Effective June 6, 2005, Crucell gave us notice of default whereby we had three months to remedy the default.  On November 16, 2005, Crucell provided notice of Termination by Default due to our failure to remedy the default within the required three month period.
 
In May of 2006, we negotiated a reinstatement of the original Research and License Option Agreement with Crucell and paid Crucell on April 20, 2006 €123,590 (US$151,521) in connection with the reinstatement.  Under the revised terms of the agreement, we agreed to pay Crucell 12 monthly payments of €10,300 starting May 2006 (paid to October 31, 2006 as of December 31, 2008) and a €75,000 annual license fee (not paid as of December 31, 2008) in order to keep the reinstated agreement in good standing.  In January, 2008 we paid $40,000 to the outstanding balance of €184,484, and are currently working with Crucell to maintain our license and relationship as well as reaching a new payment schedule for the outstanding fees. At the date of our annual report, Crucell has indicated that there is an outstanding balance of €172,801 owing to them. Over the last few months we have had discussions resulting in an informal commitment to hold our license in a dormant state until we are able to meet some of the payment requirements and are funded to continue with our development program.
 
SAFC Pharma (Molecular Medicine)
On March 18, 2003, we entered into a production service agreement; referred to in this Annual Report as the “PSA”, with Molecular Medicine of the United States.  The PSA provides for the performance of certain production services by Molecular Medicine relating to the adenoviral vector product containing our TAP gene technology.  The product is required to conduct pre-clinical toxicology studies and subsequent human clinical trials.
 
We were in breach of our PSA in respect of payments due for Phase I of the project.  The parties have agreed that advance payments that had been made for subsequent phases could be allocated to the Phase I deficiency so that all payments that were due under the PSA have now been paid in full and we have a $78,000 surplus which can be applied towards subsequent phases of the project.
 
7

 
In August 2005, we postponed production of our clinical grade TAP adeno based vaccine for pre-clinical toxicology analysis with Molecular Medicine due to technical difficulties related to the yields of vaccine.  We have developed a second option and are preparing to initiate viral construction on the best and most suitable cell line.  Despite the technical difficulties we anticipate production of a clinical grade TAP based vaccine to be produced utilizing the adeno vector from Crucell or an in-house vector supplied by SAFC to allow us to meet our milestones for commencing toxicology analysis by the end of 2010.
 
National Institute of Allergy and Infectious Diseases
On October 21, 2003, we entered into an agreement, which we refer to in this Annual Report as the “Biological Materials Transfer Agreement”, with the National Institute of Allergy and Infectious Diseases (or “NIAID”), a division of the Public Health Service (or “PHS”).  The Biological Materials Transfer Agreement provides for the license of NIAID’s Modified Vaccinia Ankara virus for use in our research and product development.  The licensed technology and virus material will be used with the goal of developing a vaccine platform capable of generating superior protective immune responses against smallpox.  Pursuant to the Biological Materials Transfer Agreement we pay a non-refundable annual royalty of $2,500 per year.  The Biological Materials Transfer Agreement expired on November 5, 2008.  The Company will renegotiate with PHS once funding is in place.
 
Other Technology
On February 16, 2004, we added to our technology portfolio by expanding the License Agreement (now assigned under the purchase agreement) with UBC to include a technological method that identifies agonists or antagonists antigen presentation to the immune system by normal and cancerous cells.  Management believes that this technology can be used to screen and select new drugs that regulate immune responses.
 
Intellectual Property, Patents and Trademarks
Patents and other proprietary rights are vital to our business operations.  We protect our technology through various United States and foreign patent filings, and maintain trade secrets that we own.  Our policy is to seek appropriate patent protection both in the United States and abroad for its proprietary technologies and products.  We require each of our employees, consultants and advisors to execute a confidentiality agreement upon the commencement of any employment, consulting or advisory relationship with us.  Each agreement provides that all confidential information developed or made known to the individual during the course of the relationship will be kept confidential and not be disclosed to third parties except in specified circumstances. In the case of employees, the agreements provide that all inventions conceived of by an employee shall be our exclusive property.
 
Patent applications in the United States are maintained in secrecy until patents are issued.  There can be no assurance that our patents, and any patents that may be issued to us in the future, will afford protection against competitors with similar technology. In addition, no assurances can be given that the patents issued to us will not be infringed upon or designed around by others or that others will not obtain patents that we would need to license or design around. If the courts uphold existing or future patents containing broad claims over technology used by us, the holders of such patents could require us to obtain licenses to use such technology.
 
Pursuant to the acquisition agreement with UBC, we acquired the  portfolio of intellectual property as follows:
 
Method of Enhancing Expression of MHC Class I Molecules Bearing Endogenous Peptides
On March 26, 2002, the United States Patent and Trademark Office issued US Patent No. 6,361,770 to UBC for the use of TAP-1 as an immunotherapy against all cancers.  The patent is titled “Method of Enhancing Expression of MHC Class I Molecules Bearing Endogenous Peptides” and provides comprehensive protection and coverage to both in vivo and ex vivo applications of TAP-1 as a therapeutic against all cancers with a variety of delivery mechanisms.  The inventors were Dr. Jefferies, Dr. Reinhard Gabathuler, Dr. Gerassinmoes Kolaitis and Dr. Gregor S.D. Reid, who collectively assigned the patent to UBC under an assignment agreement.  The patent expires March 23, 2014.  We have pending applications for patent protection for this patent in Europe and in Japan.
 
Method of Enhancing an Immune Response
U.S. patent No. 7,378,087, issued May 27 2008.  The patent claims relate to methods for enhancing the immune response to tumor cells by introducing the TAP molecule into the infected cells.  Patent applications are pending on other aspects of the Company’s technology.  The inventors were Jefferies, Wilfred A.; Zhang, Qian-Jin; Chen, Susan Shu-Ping; Alimonti, Judie B., who collectively assigned the patent to UBC under an assignment agreement.
 
Method of Identifying MHC Class I Restricted Antigens Endogenously Processed by a Secretory Pathway
On August 11, 1998, the U.S. Patent and Trademark Office issued US Patent No. 5,792,604 to UBC, being a patent for the use of bioengineered cell lines to measure the output of the MHC Class I restricted antigen presentation pathway as a way to screen for immunomodulating drugs.  The patent is titled “Method of Identifying MHC Class I Restricted Antigens Endogenously Processed by a Secretory Pathway.”  This patent covers the assay which can identify compounds capable of modulating the immune system.  The inventors were Dr. Jefferies, Dr. Gabathuler, Dr. Kolaitis and Dr. Reid, who collectively assigned the patent to UBC under an assignment agreement.  The patent expires on March 12, 2016.  We have been granted patent protection for this patent in Finland, France, Germany, Italy, Sweden Switzerland and the United Kingdom, and have applied for patent protection in Canada and Japan.
 
TAP Vaccines and other filings
Patent applications have been filed by TapImmune and UBC in respect of our technologies and those currently under assignment.  In December 2006, January, November and December 2007, we made additional filings as continuations or new filings with regard to the same technologies as well as their applications in infectious diseases.  We also filed for a continuation and had reinstated a previously ‘unintentionally abandoned’ patent.  A clerical error at our previous patent counsel caused a filing date to be erroneously missed.  That patent is now issued.  We intend to continue to work with UBC to file additional patent applications with respect to any novel aspects of our technology to further protect our intellectual property portfolio.
 
8

 
Competition
The oncology industry is characterized by rapidly evolving technology and intense competition.  Many companies of all sizes, including a number of large pharmaceutical companies as well as several specialized biotechnology companies, are developing various immunotherapies and drugs to treat cancer.  There may be products on the market that will compete directly with the products that we are seeking to develop.  In addition, colleges, universities, governmental agencies and other public and private research institutions will continue to conduct research and are becoming more active in seeking patent protection and licensing arrangements to collect license fees and royalties in exchange for license rights to technologies that they have developed, some of which may directly compete with our technologies and products.  These companies and institutions may also compete with us in recruiting qualified scientific personnel.  Many of our potential competitors have substantially greater financial, research and development, human and other resources than us.  Furthermore, large pharmaceutical companies may have significantly more experience than we do in pre-clinical testing, human clinical trials and regulatory approval procedures.  Such competitors may develop safer and more effective products, obtain patent protection or intellectual property rights that limit our ability to commercialize products, or commercialize products earlier than we do.
 
Management expects technology developments in the oncology industry to continue to occur at a rapid pace.  Commercial developments by any competitors may render some or all of our potential products obsolete or non-competitive, which could materially harm the Company’s business and financial condition.
 
Management believes that the following companies, which are developing various types of similar immunotherapies and therapeutic cancer vaccines to treat cancer, could be our major competitors: CellGenSys Inc., Dendreon Corp., Genzyme Molecular Oncology, and Transgene S.A.
 
Government Regulation
 
United States
The design, research, development, testing, manufacturing, labeling, promotion, marketing, advertising and distribution of drug products are extensively regulated by the FDA in the United States and similar regulatory bodies in other countries.  The regulatory process is similar for a new drug application, or NDA.  The steps ordinarily required before a new drug may be marketed in the United States, which are similar to steps required in most other countries, include: (i) pre-clinical laboratory tests, pre-clinical studies in animals, formulation studies and the submission to the FDA of an initial NDA; (ii) adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication; (iii) the submission of the NDA to the FDA; and (iv) review by an FDA advisory committee and approval by the FDA.
 
Pre-clinical tests include laboratory evaluation of product chemistry, preparation of consistent test batches of product to what is known as GLP, toxicology studies, animal pre-clinical efficacy studies and manufacturing pursuant to what is known as GMP.  The results of pre-clinical testing are submitted to the FDA as part of an initial NDA.  After the filing of each initial NDA, and assuming all pre-clinical results have been approved, a thirty-day waiting period is required prior to the commencement of clinical testing in humans.  At any time during this thirty-day period or at any time thereafter, the FDA may halt proposed or ongoing clinical trials until the FDA authorizes trials under specified terms.  The initial NDA process may be extremely costly and substantially delay development of products.  Moreover, positive results of pre-clinical tests will not necessarily indicate positive results in subsequent clinical trials.
 
After successful completion of the required clinical trials, a NDA is generally submitted.  The NDA is usually reviewed by an outside committee consisting of physicians, scientists, and at least one consumer representative.  The advisory committee reviews, evaluates and recommends whether the application should be approved, but the FDA is not bound by the recommendation of an advisory committee.  The FDA may request additional information before accepting a NDA for filing, in which case the application must be resubmitted with the additional information.  Once the submission has been accepted for filing, the FDA or the advisory committee reviews the application and responds to the applicant.  The review process is often extended by FDA requests for additional information or clarification.  The FDA cites 24 months as the median time for NDA review.
 
If the FDA evaluations of the NDA and the manufacturing facilities are favorable, the FDA may issue an approval letter.  An approval letter will usually contain a number of conditions that must be met in order to secure final approval of the NDA and authorization of commercial marketing of the drug for certain indications.  The FDA may also refuse to approve the NDA or issue a not approval letter, outlining the deficiencies in the submission and often requiring either additional testing or information or withdrawal of the submission.
 
The manufacturers of approved products and their manufacturing facilities are subject to continual review and periodic inspections.  We intend to enter into a contract with SAFC Pharma for commercial scale manufacturing of the TAP Cancer Vaccine, therefore our ability to control compliance with FDA manufacturing requirements will be limited.
 
Approved drugs are subject to ongoing compliance requirements and identification of certain side effects after any of the drug products are on the market.  This could result in issuance of warning letters, subsequent withdrawal of approval, reformulation of the drug product, and additional pre-clinical studies or clinical trials.
 
Canada
In Canada, the Therapeutic Products Directorate and the Biologics and Genetic Therapies Directorate of HC ensure that clinical trials are properly designed and undertaken and that subjects are not exposed to undue risk.  Regulations define specific Investigational New Drug Submission (or IND) application requirements, which must be complied with before a new drug can be distributed for trial purposes.  The Directorates currently review the safety, efficacy and quality data submitted by the sponsor and approve the distribution of the drug to the investigator.  The sponsor of the trial is required to maintain accurate records, report adverse drug reactions, and ensure that the investigator adheres to the approved protocol.  Trials in humans should be conducted according to generally accepted principles of good clinical practice.  Management believes that these standards provide assurance that the data and reported results are credible and accurate, and that the rights, integrity, and privacy of clinical trial subjects are protected.
 
Sponsors wishing to conduct clinical trials in Phases I to III of development must apply under a 30-day default system.  Applications must contain the information described in the regulations, including: a clinical trial attestation; a protocol; statements to be contained in each informed consent form, that set out the risks posed to the health of clinical trial subjects as a result of their participation in the clinical trial; an investigator’s brochure; applicable information on excipients (delivery vehicles); and chemistry and manufacturing information.
 
The sponsor can proceed with the clinical trial if the Directorates have not objected to the sale or importation of the drug within 30 days after the date of receipt of the clinical trial application and Research Ethics Board approval for the conduct of the trial at the site has been obtained.  Additional information is available on Health Canada’s website - www.hc-sc.gc.ca.
 
Other Jurisdictions
Outside the United States and Canada, the Company’s ability to market drug products is contingent upon receiving marketing authorization from the appropriate regulatory authorities.  Management believes that the foreign regulatory approval process includes all of the complexities associated with FDA approval described above.  The requirements governing the conduct of clinical trials and marketing authorization vary widely from country to country.  At present, foreign marketing authorizations are applied for at a national level, although within the European Union procedures are available to companies wishing to market a product in more than one member country.
 
Product Liability and Insurance
Once we commence the sale of our products into the market, we will face the risk of product liability claims.  Because we are not yet selling our products, we have not experienced any product liability claims to date and we do not yet maintain product liability insurance.  Management intends to maintain product liability insurance consistent with industry standards upon commencement of the marketing and distribution of the TAP Cancer Vaccine.  There can be no assurance that product liability claims will not exceed such insurance coverage limits, which could have a materially adverse effect on our business, financial condition or results of operations, or that such insurance will continue to be available on commercially reasonable terms, if at all.
 
Employees
Mr. Denis Corin is our President, Chief Executive Officer and Principal Executive Officer, Mr. Patrick McGowan is our Secretary, Treasurer, Chief Financial Officer and Principal Accounting Officer.  These individuals are primarily responsible for all our day-to-day operations.  Other services are provided by outsourcing and consultant service agreements.  As of December 31, 2008, we did not have any employees.
 
 
9

 
ITEM 1A.                      RISK FACTORS
 
An investment in our common stock involves a number of very significant risks.  You should carefully consider the following risks and uncertainties in addition to other information in this annual report in evaluating our company and its business before purchasing shares of our common stock.  Our business, operating results and financial condition could be seriously harmed due to any of the following risks.  The risks described below may not be all of the risks facing our company.  Additional risks not presently known to us or that we currently consider immaterial may also impair our business operations.  You could lose all or part of your investment due to any of these risks.
 
Risks Related to Our Company
 
We have a history of operating losses.
We continue to incur losses and will require additional financing to continue our operations.  We have incurred operating losses and negative cash flow from operations for most of our history.  Losses incurred since our inception have aggregated $20,812,106, and there can be no assurance that we will be able to generate positive cash flows to fund our operations in the future or to pursue our strategic objectives.  We believe that we will have sufficient cash to satisfy our needs for at least the next four to six months.  We will need to raise additional capital, most likely via the sale of equity securities, to fund our operations.  There can be no assurance that we will be able to obtain such financing on terms satisfactory to us, if at all.  Any additional equity financing may be dilutive to existing stockholders, and debt financing, if available, may include restrictive covenants.  If adequate funds are not available, we might be required to limit our research and development activities or our selling, marketing and administrative activities any of which could have a material adverse effect on the future of the business.
 
Further, we do not have any products that generate revenue and expect our operating losses to increase significantly as we commence clinical trials.  We do not expect to earn significant revenue for several years, and may never do so.  Continued operating losses and the failure to satisfy our financial obligations will have a material adverse effect upon our financial condition and the future of our business.
 
The independent auditor’s report accompanying our December 31, 2008 consolidated financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
The consolidated financial statements have been prepared “assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.  Our ability to continue as a going concern is dependent on raising additional capital to fund ongoing research and development, successful renegotiations and continued support from our creditors and ultimately on generating future profitable operations.  There can be no assurance that we will be able to raise sufficient additional capital or eventually achieve positive cash flow from operations to address all of our cash flow needs.  If we were not able to find alternative sources of cash or generate positive cash flow from operations, our business and financial condition would be materially and adversely affected.
 
We depend upon collaborative relationships and third parties for product development and commercialization and are in breach of many of the agreements with these parties.
We have historically entered into research and development agreements with collaborative partners. Pursuant to these agreements, our collaborative partners provide us with the intellectual property and options for the license of the intellectual property necessary to develop and commercialize our product candidates.  We will continue to rely on future collaborative partners for the development of products and technologies.  There can be no assurance that we will be able to negotiate such collaborative arrangements on acceptable terms, if at all, or that current or future collaborative arrangements will be successful.  To the extent that we are not able to establish such arrangements, we could be forced to undertake such activities at our own expense.  The amount and timing of resources that any of these partners devotes to these activities will generally be based on progress by us in our product development efforts.  Some of our collaborative arrangements may be terminated by the partner upon prior notice without cause and there can be no assurance that any of these partners will perform its contractual obligations or that it will not terminate its agreement.
 
Preclinical testing and future clinical trials may take longer than anticipated, and we may be unable to complete them at all.
While management believes that the Phase I human clinical trials of the TAP Cancer Vaccine in oncology will commence in fiscal year 2010 there can be no assurances that they will occur on this time frame, if at all.  We may not commence or complete the pivotal clinical trials of the TAP Cancer Vaccine or commence or complete clinical trials involving any other product candidates or may not conduct them successfully.  Further, our development costs will increase if we experience any future delays in the preclinical trials or clinical trials for the TAP Cancer Vaccine or other potential products or if we are required to perform additional or larger clinical trials than currently planned.  Any substantial delay of or the failure to complete the clinical trials would have a material adverse effect upon our business.
 
If testing of a particular product candidate does not yield successful results, then we will be unable to commercialize that product.  We must demonstrate the safety and efficacy of the TAP Cancer Vaccine and its other potential products in humans through extensive preclinical and clinical testing.  We may experience numerous unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of our product candidates.  Further, clinical testing is very expensive, the process takes many years, and the outcome is uncertain.  Unsuccessful results from preclinical and clinical testing will have a material adverse effect on our business.
 
Our products and activities are subject to regulation by various governments and government agencies.
The testing of our products is subject to regulation by numerous governmental authorities, principally the FDA and certain foreign regulatory agencies.  Pursuant to the Federal Food, Drug, and Cosmetic Act, and the regulations promulgated there under, the FDA regulates the preclinical and clinical testing, development, and commercialization of our potential products.  Noncompliance with applicable requirements can result in, among other consequences, fines, injunctions, civil penalties, recall or seizure of products, repair, replacement or refund of the cost of products, total or partial suspension of production, failure of the government to grant pre-market clearance or pre-market approval for devices, withdrawal of marketing clearances or approvals, and criminal prosecution.
 
Government regulation imposes significant costs and restrictions on the development and commercialization of our products and services.  Our success will depend on our ability to satisfy regulatory requirements.  We may not receive required regulatory approvals on a timely basis, if at all.  Government agencies heavily regulate the production and sale of healthcare products and the provision of healthcare services.  In particular, the FDA and comparable agencies in foreign countries must approve human therapeutic and diagnostic products before they are marketed, as well as the facilities in which they are made.  This approval process can involve lengthy and detailed laboratory and clinical testing, sampling activities and other costly and time-consuming procedures.  Our failure to comply with applicable regulatory approval requirements may lead regulatory authorities to take action against us, which may delay or cease the development and commercialization of our product candidates.
 
Therapies that have received regulatory approval for commercial sale may continue to face regulatory difficulties.  The FDA and comparable foreign regulatory agencies, may require post-marketing clinical trials or patient outcome studies.  In addition, regulatory agencies subject a marketed therapy, its manufacturer and the manufacturer’s facilities to continual review and periodic inspections.  The discovery of previously unknown problems with a therapy, the therapy’s manufacturer or the facility used to produce the therapy could prompt a regulatory authority to impose restrictions on the therapy, manufacturer or facility, including withdrawal of the therapy from the market.
 
10

 
Competition in the human medical diagnostics industry is, and is expected to remain, significant, and we may never obtain market acceptance of our product candidates.
Competition in the cancer therapeutics field is intense and is accentuated by the rapid pace of technological development.  Our competitors range from development stage diagnostics companies to major domestic and international pharmaceutical companies.  Many of these companies have financial, technical, marketing, sales, manufacturing, distribution and other resources significantly greater than ours.  In addition, many of these companies have name recognition, established positions in the market and long standing relationships with customers and distributors.  Moreover, the industry has recently experienced a period of consolidation, during which many of the large domestic and international pharmaceutical companies have been acquiring mid-sized diagnostics companies, further increasing the concentration of resources.  Our future success will depend on our ability to effectively develop and market our product candidates against those of our competitors.  If our product candidates receive marketing approval, but cannot compete effectively in the marketplace, our business and financial position would suffer greatly.  There can be no assurance that technologies will not be introduced that could be directly competitive with or superior to our technologies.
 
Market acceptance of the TAP Cancer Vaccine and our other product candidates is uncertain.  Even if the TAP Cancer Vaccine and other potential products are approved and sold, physicians may not ultimately use them or may use them only in applications more restricted than we expect.  Physicians will only prescribe a product if they determine, based on experience, clinical data, side effect profiles and other factors, that it is beneficial and preferable to other products and treatments then in use.  Many other factors influence the adoption of new products, including marketing and distribution restrictions, course of treatment, adverse publicity, product pricing, the views of thought leaders in the medical community, and reimbursement by third-party payers.  Failure to obtain market acceptance of our product candidates will have a material adverse effect upon our business.
 
We depend on key employees.
Due to the specialized nature of our business, our success will be highly dependent upon our ability to attract and retain qualified scientific and executive personnel.  Our success depends to a significant extent upon our key management, including Denis Corin, our President and Chief Executive Officer,  and Patrick McGowan, our Chief Financial Officer.  There can be no assurance that we will be successful in attracting and retaining the personnel we require to develop and market our product candidates and to conduct our operations successfully.  Failure to retain Mr. Corin or Mr. McGowan would have a material adverse effect upon our business.
 
Our success depends, in part, on our ability to obtain patents and license patent rights, to maintain trade secret protection and to operate without infringing on the proprietary rights of others.
Our success depends in part on our ability to obtain and maintain patent protection for the technology underlying our product candidates, both in the United States and in other countries.  We cannot assure you that any of our current or future patent applications will result in issued patents, or that any patents issued to us or licensed by us will not be challenged, invalidated or held unenforceable.  Further, we cannot guarantee that any patents issued to us will provide us with a significant competitive advantage.  If we fail to successfully enforce our proprietary technology or otherwise maintain the proprietary nature of our intellectual property with respect to our significant current and proposed products, it would have a material adverse effect upon our business.  We could incur substantial costs in defending the Company or our licensees in litigation brought by others who claim that we are infringing on their intellectual property rights.  The potential for reduced sales and increased legal expenses would have a negative impact on our cash flow and thus our overall business could be adversely affected.
 
The testing, manufacturing and marketing of therapeutic medical technology entails an inherent risk of product liability claims.
To date, we have experienced no product liability claims, but any such claims arising in the future could have a material adverse effect on our business, financial condition and results of operations.  Potential product liability claims may exceed the amount of our insurance coverage or may be excluded from coverage under the terms of our policy or limited by other claims under our umbrella insurance policy.  Additionally, there can be no assurance that our existing insurance can be renewed by us at a cost and level of coverage comparable to that presently in effect, if at all.  In the event that we are held liable for a claim against which we are not insured or for damages exceeding the limits of our insurance coverage, such claim could have a material adverse effect on our cash flow and thus potentially have a materially adverse effect on our business, financial condition and results of operations.
 
There has, to date, been no active public market for our common stock, and there can be no assurance that an active public market will develop or be sustained.
Our common stock has been traded on the OTCBB since prior to the acquisition of GeneMax Pharmaceuticals.  Both before and since the acquisition trading in our common stock has been sporadic with insignificant volume.  Moreover, the over-the-counter markets for securities of very small companies historically have experienced extreme price and volume fluctuations.  These broad market fluctuations and other factors, such as new product developments, trends in our industry, the investment markets, economic conditions generally, and quarterly variation in our results of operations, may adversely affect the market price of our common stock.  In addition, our common stock is subject to rules adopted by the SEC regulating broker-dealer practices in connection with transactions in “penny stocks.”  Such rules require the delivery prior to any penny stock transaction of a disclosure schedule explaining the penny stock market and all associated risks and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors, which are generally defined as institutions or an investor with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with the spouse.  For these types of transactions the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale.  The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in securities subject to the penny stock rules.  We do not intend to pay any cash dividends on our common stock in the foreseeable future.  Significant fluctuations in out stock price may have a material adverse effect upon our shareholders.
 
We are controlled by management.
As of the date of this Annual Report our officers and directors owned of record approximately 868,896 or 3.6% of the outstanding shares of common stock.  If they exercise all of the warrants and vested options that they currently hold, they would own 3,372,896 shares of our common stock or 13.6% of the outstanding shares of common stock.  Due to their stock ownership, the officers and directors may be in a position to elect the Board of Directors and to control our business and affairs, including certain significant corporate actions such as acquisitions, the sale or purchase of assets and the issuance and sale of the Company’s securities.  The interest of our officers and directors may differ from the interests of other shareholders.
 
As of the date of this Annual Report we had reserved 6,400,000 shares of common stock for issuance upon exercise of options which have been or may be granted pursuant to our stock option plans, of which options to purchase 6,320,000 shares are outstanding.  Additionally, as of the date of this Annual Report there were 11,917,667 warrants outstanding to purchase our common stock and a commitment to issue 5,527,000 additional warrants.  Sales of common stock underlying these stock options and warrants would have a significant dilutive effect upon our current shareholders and may adversely affect the price of the common stock.
 
 
11

 
ITEM 1B.                      UNRESOLVED STAFF COMMENTS
 
None.
 
ITEM 2.                      PROPERTIES
 
We do not own any real estate or other properties.  Our registered office is located at Unit 2, 3590 West 41st Avenue, Vancouver, British Columbia Canada, V6N 3E6.  On March 1, 2007, the Company entered into a five year lease agreement for lab facilities in Vancouver, British Columbia, Canada.  The agreement requires monthly payments of $2,671 (CDN) plus a share of operating costs during the first two years of the term, and monthly payments of $2,820 (CDN) plus a share of operating costs for the final three years.
 
ITEM 3.                      LEGAL PROCEEDINGS
 
Management is not aware of any legal proceedings contemplated by any government authority or any other party involving the Company.  As of the date of this Annual Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceeding.  Management is not aware of any other legal proceedings pending or threatened against the Company.
 
ITEM 4.                      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
We delivered proxy statements on schedule 14A as filed with the SEC on December 31, 2008 for a special meeting of shareholders.  As described in our current report filed with the SEC on February 6, 2009, our shareholders approved at a special meeting of shareholders held on January 22, 2009, an amendment to our articles of incorporation to increase our authorized shares of common stock from 80,000,000 to 500,000,000.

 
12

 

 
PART II
 
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Information
Our common stock is traded on the Over The Counter Bulletin Board (“OTCBB”) under the symbol “TPIM.OB” and on the Frankfurt and Berlin Stock Exchanges under the symbol “GX1.”  The listing on the Berlin Stock Exchange was done without the Company’s knowledge and consent.  The company has attempted to have the Berlin Stock Exchange listing terminated, however, it has not been able to do so.
 
The market for our common stock is limited, volatile and sporadic.  The following table sets forth, for the periods indicated, the high and low bid prices of our common stock as reported on the OTCBB.  The following quotations reflect inter-dealer prices, without retail mark-up, markdown, or commissions, and may not reflect actual transactions.
 
 
High Bid
Low Bid
Fiscal Year 2008
   
   December 31, 2008
$0.09
$0.02
   September 30, 2008
$0.31
$0.04
   June 30, 2008
$0.43
$0.10
   March 31, 2008
$0.36
$0.09
     
Fiscal Year 2007
   
   December 31, 2007
$0.17
$0.14
   September 30, 2007
$0.45
$0.30
   June 30, 2007
$0.39
$0.39
   March 31, 2007
$0.35
$0.28
 
The last reported sales price for our shares on the OTCBB as of May 8, 2009 was $0.04 per share.  As of May 7, 2009, we had approximately 107 shareholders of record.
 
On June 28, 2007, we completed a reverse stock split thereby issuing 1 new share for each 2.5 outstanding shares of our common stock.  Accordingly, our authorized share capital was decreased from 200,000,000 common shares to 80,000,000 common shares.  On January 22, 2009, in a special meeting of shareholders our authorized share capital was increased from 80,000,000 to 500,000,000.
 
Dividend Policy
No dividends have been declared or paid on our common stock.  We have incurred recurring losses and do not currently intend to pay any cash dividends in the foreseeable future.
 
Securities Authorized For Issuance Under Compensation Plans
The following table sets forth information as of December 31, 2008:
 
Equity Compensation Plan Information
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
Weighted average exercise price of outstanding options, warrants and rights
(b)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
(a) Equity compensation plans approved by security holders
Nil
Nil
Nil
(b) Equity compensation plans not approved by security holders
6,320,000
$0.25
80,000
 
6,320,000
$0.25
80,000
 
 
13

 
2007 Stock Incentive Plan
On June 8, 2007, our Board of Directors approved the adoption of a stock option plan (the “2007 Plan”) allowing for the granting of up to 6,400,000 options to our directors, officers, employees and consultants.  Options granted under the Plan shall be at prices and for terms as determined by our Board of Directors, and may have vesting requirements as determined by our Board of Directors.
 
The foregoing summary of the 2007 Stock Incentive Plan is not complete and is qualified in its entirety by reference to the 2007 Stock Incentive Plan, a copy of which has been filed with the SEC.
 
As of the date of this annual report, there are an aggregate of 6,320,000 stock options granted and outstanding.
 
Warrants
As of the date of this annual report, there are an aggregate of 11,917,667 common stock purchase warrants issued and outstanding and 5,527,000 common stock purchase warrants committed to be issued.
 
Recent Sales of Unregistered Securities
Previously disclosed in filings with the SEC.
 
ITEM 6.                      SELECTED FINANCIAL DATA
 
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
 
 
14

 
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion of our financial condition, changes in financial condition, plan of operations and results of operations should be read in conjunction with (i) our audited consolidated financial statements as at December 31, 2008 and for the period from inception (July 27, 1999) to December 31, 2008 and (ii) the section entitled “Business”, included in this annual report.  The discussion contains forward-looking statements that involve risks, uncertainties and assumptions.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this annual report.
 
Plan of Operations
 
Management believes that an estimated $5,000,000 in conjunction with a significant debt reduction through creditor negotiation and /or equity for debt settlement is required over the next two years for expenses associated with the balance of pre-clinical development and completion of toxicology trials for the TAP Cancer Vaccine and prophylactic vaccine adjuvant and for various operating expenses.  We are encouraged by recent success stories in the small cap biotech arena where larger biotech and pharmaceutical companies have taken significant positions in, or invested in joint development projects with, smaller companies like ours.  While the capital markets are currently very challenging, we are hopeful that our early success and very promising technology will enable us to raise the required funding to proceed.
 
2008 was a very challenging year in the capital markets. We were not able to secure significant funding after the smaller bridge funding we completed in December 2007. We were able to continue important patent work resulting in the granting of a significant patent mid way through 2008. We were also able to complete initial testing of the research vaccine stocks we had. With that data in hand, we were able to set out a clear pre-clinical vaccine construction and manufacturing plan and timeline with the right FDA accredited partners. Unfortunately, as the markets continued to deteriorate we were not able to secure the funding required to enter into those contracts. As all of the relationships are in place and contracts have been planned, once funding is secured, this work could begin fairly quickly.
 
Over the past several years and 2008 being no exception, the Company has obtained financing from related and unrelated parties under challenging conditions. The company has been successful to date in raising sufficient funding to sustain operations by renegotiating or replacing debt instruments and by extending terms and conditions when default has occurred. These forms of financing are costly from a market risk perspective and from a legal and operation expense perspective. As a consequence of debt restructuring there has been substantial dilution and potential dilution to shareholders through stock based payments and commitments required to continue or renew debt arrangements. As an example, during 2008 some of promissory notes had expired (some well over a year beyond their initial term) and a call on them would have caused the Company severe distress and even bankruptcy, as consideration for the extension and continued support additional warrants were issued at a discount to the lowest bid price at the time. The note holders had all expected the short term loans to be repaid and could have asked for collateral security. All the note holders indicated that the outstanding debt was a significant burden on their own businesses during a very challenging capital market and now carried significant risk. These loans were crucial to the Company in order to keep it afloat and to make payments that would ultimately have left company with no assets had they not been entered into.
 
Management has been working with a consulting firm over the past few months to determine a workable solution for the Company going forward.  As the Company’s growth has been limited by a significant debt burden, a consulting firm has been engaged to negotiate with various creditors in an effort to restructure certain debt, including the notes mentioned above, and payables thereby placing the Company on a stronger foundation for a subsequent fundraising.  Management is confident that a workable solution can be achieved.
 
Fund raising is required to initiate our preclinical manufacturing contracts.  The short term requirement is roughly $1,000,000 with a further $1.5M to $2M required for the next 12 months to get us to a point where we can initiate a Phase 1 study (a single phase 1 study will cost approximately $1M).  Outside of internal development and contracted manufacturing, management has been actively seeking partnerships and joint venture opportunities with suitable companies.
 
We have not generated any cash flows to fund our operations and activities due primarily to the nature of lengthy product development cycles that are normal to the biotech industry.  Therefore, we must raise additional funds in the future to continue operations.  We intend to finance our operating expenses with further issuances of common stock.  We believe that anticipated future private placements of equity capital, if successful, may be adequate to fund our operations over the next 24 months.  Thereafter, we expect we will need to raise additional capital to meet long-term operating requirements.  Our future success and viability are dependent on our ability to raise additional capital through further private offerings of our stock or loans from private investors.  Additional financing may not be available upon acceptable terms, or at all.  If adequate funds are not available or not available on acceptable terms, we may not be able to conduct our proposed business operations successfully, which could significantly and materially restrict or delay our overall business operations.
 
15

 
Results of Operations
The following sets table sets out our consolidated losses for the periods indicated:
 
   
Year Ended
December 31, 2008
   
Year Ended
December 31, 2007
   
For the Period
from Inception
(July 27, 1999) to
December 31, 2008
 
Expenses
                 
Consulting
  $ 233,283     $ 171,854     $ 1,218,867  
Consulting, stock-based
    151,500       309,500       3,285,775  
Depreciation
    7,482       5,970       209,486  
Gain on Settlement of Debt
    -       -       (173,010 )
General and Administrative
    115,693       132,587       2,323,310  
Interest and Finance Charges
    778,179       1,380,075       2,721,669  
Management Fees
    353,162       286,632       1,934,235  
Management Fees, stock based
    172,668       654,722       827,390  
Professional Fees
    284,288       524,502       2,641,222  
Research and Development
    182,343       425,569       5,324,351  
Research and Development,
   stock-based
    -       -       612,000  
      2,278,598       3,891,411       20,925,295  
Loss Before Other Items
    (2,278,598 )     (3,891,411 )     (20,925,295 )
Other Items
                       
Foreign exchange gain
    82,659       -       82,659  
Interest Income
    -       -       30,530  
Net Loss
  $ (2,195,939 )   $ (3,891,411 )   $ (20,812,106 )
 

 
Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007
We are a development stage company.  We recorded a net loss of $2,195,939 during the year ended December 31, 2008, compared to $3,891,411 for the year ended December 31, 2007.
 
 
16

 
Operating Expenses
Operating expenses incurred during the fiscal year ended December 31, 2008 were $2,278,598 compared to $3,891,411 in the prior year.  Significant changes and expenditures are outlined as follows:
 
·  
Consulting fees were $233,283 during the fiscal year ended December 31, 2008 compared to $171,854 during the prior fiscal year.  The increase was due primarily to new agreements in the current year for investor relations and marketing services.
 
·  
Stock-based consulting fees were $151,500 in the year ended December 31, 2008 compared to $309,500 in the prior year.  The current and prior year charges result from the fair valuation of shares issued to consultants and options granted to or earned by consultants during such periods.
 
·  
Depreciation was $7,482 in the year ended December 31, 2008 compared to $5,970 in the prior year, with the increase resulting from full depreciation in the current year on furniture and equipment purchased in the prior fiscal year.
 
·  
General and administrative expenses were $115,693 in the year ended December 31, 2008 compared to $132,587 in the prior year, with the decrease resulting primarily from a reduction in operations in the current year due to resource restrictions.
 
·  
Interest and finance charges were $778,179 during the fiscal year ended December 31, 2008 compared to $1,380,075 during the prior fiscal year.  The current year consisted of $113,634 in accrued interest on notes payable, $206,820 representing the fair value of warrants attached to debt issued during the year, a $340,048 non-monetary charge related to the fair value of a beneficial conversion feature and warrants on 2007 convertible debt, and $117,677 representing the fair value of warrants to be issued which relate to outstanding debt.  The prior year consisted of accrued interest, accretion of the discount on the 2006 convertible debt, amortization of the fair value of warrants on the 2006 convertible debt, $1,016,000 in costs classified as interest charges resulting from conversion of the debt, and the fair value of warrants issuable with new promissory notes signed during the current year.  The $1,016,000 non-monetary charge related to the unaccreted fair value of the beneficial conversion feature and warrants on the 2007 convertible debt.  Once the debt was converted, the unaccreted charge was required to be recognized immediately.
 
·  
Management fees were $353,162 in the year ended December 31, 2008 compared to $286,632 in the prior year, with the difference resulting primarily from a change in executive compensation during the second half of the prior year, and additional directors’ fees during the current year.
 
·  
Stock-based management fees were $172,668 in the year ended December 31, 2008 compared to $654,722 in the prior year.  The current and prior year charges result from the fair valuation of options granted to management that were earned during the period.
 
·  
Professional fees were $284,288 in the year ended December 31, 2008 compared to $524,502 in the prior year.  The decrease from the prior year results from a decrease in operations in the current year, and additional work relating to financing arrangements and fees relating to the review of, and reinstatement patent applications incurred in the prior year.
 
·  
Research and development costs during the fiscal year ended December 31, 2007 were $182,343 compared to $425,569 during the prior fiscal year.  The decrease results from research and consulting service agreements in effect during the prior fiscal year.
 
Our net loss for the year ended December 31, 2008 was $2,195,939 or ($0.09) per share, compared to a net loss of $3,891,411 or ($0.19) per share in the prior period.  The weighted average number of shares outstanding was 23,900,839 for the year ended December 31, 2008 compared to 20,815,273 for the prior year.
 
 
17

 
Liquidity and Capital Resources
The following table sets forth our cash and working capital as of December 31, 2008 and 2007:
 
   
December 31, 2008
   
December 31, 2007
 
Cash reserves
  $ 987     $ 167,539  
Working capital (deficit)
  $ (3,032,512 )   $ (1,691,393 )
 
Subject to the availability of additional financing, we intend to spend approximately $3,000,000 over the next twelve months in carrying out our plan of operations.  At December 31, 2008, we had $987 of cash on hand and a working capital deficit of $3,032,512.  As such, our working capital at December 31, 2008 will not be sufficient to enable us to pay our general and administrative expenses, and to pursue our plan of operations over the next twelve months.  We anticipate that we will require additional funding of approximately $3,000,000.  Our management is currently making significant efforts to secure the needed financing, but we have not yet secured any commitments with respect to such financing.  If we are not able to obtain financing in the amounts required or on terms that are acceptable to us, we may be forced to scale back, or abandon, our plan of operations.
 
Various conditions outside of our control may detract from our ability to raise the capital needed to execute our plan of operations, including overall market conditions in the international and local economies.  We recognize that the United States economy has suffered through a period of uncertainty during which the capital markets have been depressed from levels established twelve months ago, and that there is no certainty that these levels will stabilize or reverse.  Any of these factors could have a material impact upon our ability to raise financing and, as a result, upon our short-term or long-term liquidity.
 
Going Concern
We have no sources of revenue to provide incoming cash flows to sustain our future operations.  As outlined above, our ability to pursue our planned business activities is dependent upon our successful efforts to raise additional equity financing.  These factors raise substantial doubt regarding our ability to continue as a going concern.  Our consolidated financial statements have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business.  As at December 31, 2008, we had accumulated losses of $20,812,106 since inception.  Our 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 we be unable to continue as a going concern.
 
Net Cash Used in Operating Activities
Operating activities in the year ended December 31, 2008 used cash of $714,425 compared to $1,248,810 in the year ended December 31, 2007.  Operating activities in the period from inception on July 27, 1999 to December 31, 2008 used cash of $11,445,979.  Operating activities have primarily used cash as a result of the operating and organizational activities such as consulting fees, management fees, professional fees and research and development.
 
Net Cash Used in Investing Activities
In the year ended December 31, 2008 investing activities used cash of $Nil compared to $22,426 in the year ended December 31, 2007.  In the period from inception on July 27, 1999 to December 31, 2008 investing activities provided cash of $204,747.
 
Net Cash Provided by Financing Activities
As we have had no revenues since inception, we have financed our operations primarily through private placements of our stock.  Financing activities in the year ended December 31, 2008 provided cash of $547,873 compared to $1,318,339 in the year ended December 31, 2007.  In the period from inception on July 27, 1999 to December 31, 2008 financing activities provided net cash of $11,242,219 primarily from the sale of our equity securities.
 
Critical Accounting Policies
Our consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis.  The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
 
We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements.  In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.  Actual results could differ from those estimates made by management.
 
See Note 2 of our consolidated financial statements for our year ended December 31, 2008 for a summary of significant accounting policies.
 
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes of financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
 
ITEM 7A.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
 


 
18

 


 
ITEM 8.                      FINANCIAL STATEMENTS














 
TAPIMMUNE INC.
 
(A Development Stage Company)
 
CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2008 AND 2007












 
Report of Independent Registered Public Accounting Firm
 
Consolidated Balance Sheets
 
Consolidated Statements of Operations
 
Consolidated Statement of Stockholders’ Deficit
 
Consolidated Statements of Cash Flows
 
Notes to the Consolidated Financial Statements
 


 
19

 




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors of TapImmune Inc.

We have audited the accompanying consolidated balance sheets of TapImmune Inc. (a development stage company) as of December 31, 2008 and 2007 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years ended December 31, 2008 and 2007 and the period from July 27, 1999 (inception) through December 31, 2008.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, and assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of TapImmune Inc. as of December 31, 2008 and 2007 and the results of its operations and its cash flows for the years ended December 31, 2008 and 2007 and the period from July 27, 1999 (inception) through December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company has not generated revenues since inception, has incurred losses in developing its business, and further losses are anticipated.  The Company requires additional funds to meet its obligations and the costs of its operations.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in this regard are described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

                                                   ;                      /s/ Dale Matheson
                                                   ;                      Carr-Hilton  Labunte LLP
 
DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED ACCOUNTANTS
Vancouver, Canada
March 31, 2009



 
20

 

TAPIMMUNE INC.
(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS


             
   
December 31, 2008
   
December 31, 2007
 
             
CURRENT ASSETS
           
Cash
  $ 987     $ 167,539  
Due from government agency
    33,263       59,634  
Prepaid expenses and deposits
    9,520       35,313  
      43,770       262,486  
                 
FURNITURE AND EQUIPMENT, NET (Note 3)
    9,139       16,621  
    $ 52,909     $ 279,107  
                 
CURRENT LIABILITIES
               
Accounts payable and accrued liabilities
  $ 1,492,586     $ 1,103,263  
Research agreement obligations (Note 4)
    243,598       199,766  
Convertible notes payable (Note 5)
    56,633       66,633  
Notes payable (Note 5)
    763,327       429,952  
Due to related parties (Note 6)
    520,138       154,265  
      3,076,282       1,953,879  
                 
STOCKHOLDERS’ DEFICIT
               
Capital Stock (Note 7)
               
Common stock $0.001 par value: 500,000,000 shares
               
authorized, 24,149,827 (2007 - 23,502,682) shares
               
                issued and outstanding
    24,150       23,503  
Additional paid-in capital
    17,500,559       16,910,218  
Shares and warrants to be issued (Notes 5, 7, and 11)
    323,750       67,400  
Deficit accumulated during the development stage
    (20,812,106 )     (18,616,167 )
Accumulated other comprehensive income (loss)
    (59,726 )     (59,726 )
      (3,023,373 )     (1,674,772 )
    $ 52,909     $ 279,107  

COMMITMENTS AND CONTINGENCIES (Notes 1, 4, 5, 7, 10 and 11)


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

 
21

 

TAPIMMUNE INC.
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS


   
Year Ended
December 31,
2008
   
Year Ended
December 31,
2007
   
Period from
July 27, 1999
(inception) to
December 31,
2008
 
                   
EXPENSES
                 
Consulting
  $ 233,283     $ 171,854     $ 1,218,867  
Consulting, stock-based (Note 7)
    151,500       309,500       3,285,775  
Depreciation
    7,482       5,970       209,486  
Gain on settlement of debt
    -       -       (173,010 )
General and administrative
    115,693       132,587       2,323,310  
Interest and financing charges (Note 5)
    778,179       1,380,075       2,721,669  
Management fees (Note 6)
    353,162       286,632       1,934,235  
Management fees, stock-based (Note 7)
    172,668       654,722       827,390  
Professional fees
    284,288       524,502       2,641,222  
Research and development (Note 6)
    182,343       425,569       5,324,351  
Research and development, stock-based
    -       -       612,000  
      2,278,598       3,891,411       20,925,295  
NET LOSS BEFORE OTHER ITEMS
    (2,278,598 )     (3,891,411 )     (20,925,295 )
OTHER ITEMS
                       
        Foreign exchange gain
    82,659       -       82,659  
Interest income
    -       -       30,530  
NET LOSS
  $ (2,195,939 )   $ (3,891,411 )   $ (20,812,106 )
                         
                         
BASIC AND DILUTED NET LOSS PER SHARE
  $ (0.09 )   $ (0.19 )        
                         
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING,
BASIC AND DILUTED
    23,900,839       20,815,273          


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


 
22

 

TAPIMMUNE INC.
(A Development Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2008


   
Common Stock
   
Additional
   
Obligation
to Issue
   
Deficit
Accumulated
During the
   
Accumulated
Other
       
   
Number of
Shares
   
Amount
   
Paid in
Capital
   
Shares and
Warrants
   
Development
Stage
   
Comprehensive
Loss
   
Total
 
                                           
Issued on incorporation - July 27, 1999
    1     $ -     $ -     $ -     $ -     $ -     $ -  
Issued to founders for:
 - cash
    740,000       740       1,110       -       -       -       1,850  
 - consulting services
    860,000       860       1,290       -       -       -       2,150  
Common stock subscriptions
    -       -       -       177,100       -       -       177,100  
Net loss
    -       -       -       -       (80,733 )     -       (80,733 )
Balance, December 31, 1999
    1,600,001       1,600       2,400       177,100       (80,733 )     -       100,367  
Issued with UBC agreement:
                                                       
 - for consulting services
    1,440,000       1,440       2,160       -       -       -       3,600  
 - for license fees
    200,000       200       300       -       -       -       500  
Issued for cash:
                                                       
 - at $1.50 per share, net of finders’ fees of $95,570
    563,531       564       749,166       (177,100 )     -       -       572,630  
 - at $1.50 per share
    341,600       342       512,058       -       -       -       512,400  
Issued for finders’ fees
    49,857       50       (50 )     -       -       -       -  
Net loss
    -       -       -       -       (935,332 )     -       (935,332 )
Currency translation adjustment
    -       -       -       -       -       (1,937 )     (1,937 )
Balance, December 31, 2000
    4,194,989       4,195       1,266,034       -       (1,016,065 )     (1,937 )     252,228  
Issued for cash:
                                                       
 - at $1.88 per share
    44,133       44       82,706       -       -       -       82,750  
 - at $2.50 per share
    106,000       106       264,894       -       -       -       265,000  
Net loss
    -       -       -       -       (671,986 )     -       (671,986 )
Currency translation adjustment
    -       -       -       -       -       (2,041 )     (2,041 )
Balance, December 31, 2001
    4,345,122       4,345       1,613,635       -       (1,688,051 )     (3,978 )     (74,049 )
Issued for cash:
                                                       
 - at $2.50 per share, net of finders’ fees of $17,000
    75,000       75       170,425       -       -       -       170,500  
Issued on settlement of debt
    72,664       73       136,172       -       -       -       136,245  
GPI balance, July 15, 2002
    4,492,786       4,493       1,920,232       -       (1,688,051 )     (3,978 )     232,696  


 
23

 

TAPIMMUNE INC.
(A Development Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2008


   
Common Stock
   
Additional
   
Obligation
to Issue
   
Deficit
Accumulated
During the
   
Accumulated
Other
       
   
Number of
shares
   
Amount
   
Paid In
Capital
   
Shares and
Warrants
   
Development
Stage
   
Comprehensive
Loss
   
Total
 
                                           
GMC balance, July 15, 2002
    6,128,048       6,128       7,180,164       (85,000 )     (6,607,580 )     -       493,712  
Reverse acquisition recapitalization adjustment
    (4,492,786 )     (4,493 )     (6,603,087 )     -       6,607,580       -       -  
Balance post reverse acquisition
    6,128,048       6,128       2,497,309       (85,000 )     (1,688,051 )     (3,978 )     726,408  
GMC subscription proceeds received
    -       -       -       285,000       -       -       285,000  
Issued for cash:
                                                       
 - at $6.25 per share
    170,160       170       1,063,330       -       -       -       1,063,500  
Exercise of stock options
    40,800       41       50,959       -       -       -       51,000  
Stock-based compensation
    -       -       630,275       -       -       -       630,275  
Net loss
    -       -       -       -       (2,284,709 )     -       (2,284,709 )
Currency translation adjustment
    -       -       -       -       -       (5,645 )     (5,645 )
Balance, December 31, 2002
    6,339,008       6,339       4,241,873       200,000       (3,972,760 )     (9,623 )     465,829  
Exercise of stock options
    927,452       927       1,420,888       -       -       -       1,421,815  
Issued for cash:
                                                       
 - at $12.50 per share
    17,200       17       214,983       (185,000 )       -       -       30,000  
 - at $2.50 per share, net of finders’ fees
    222,140       222       521,593       -       -       -       521,815  
Issued as finders’ fees
    13,414       13       (13 )     -       -       -       -  
Issued for license agreement
    4,000       4       9,996       -       -       -       10,000  
Subscriptions repaid
    -       -       5,000       (15,000 )     -       -       (10,000 )
Stock-based compensation
    -       -       2,733,000       -       -       -       2,733,000  
Net loss
    -       -       -       -       (5,778,905 )     -       (5,778,905 )
Currency translation adjustment
    -       -       -       -       -       (37,299 )     (37,299 )
Balance, December 31, 2003
    7,523,214       7,523       9,147,319       -       (9,751,665 )     (46,922 )     (643,745 )
Issued for cash:
                                                       
 - at $1.75 per share, net of finders’ fees of $50,000
    342,857       343       549,657       -       -       -       550,000  
Issued as finders’ fees
    28,571       29       (29 )     -       -       -       -  
Fair value of warrants issued in connection
   with convertible notes
    -       -       65,000       -       -       -       65,000  


 
24

 


TAPIMMUNE INC.
(A Development Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2008


   
Common Stock
   
Additional
   
Obligation
to Issue
   
Deficit
Accumulated
During the
   
Accumulated
Other
       
   
Number of
shares
   
Amount
   
Paid In
Capital
   
Shares and
Warrants
   
Development
Stage
   
Comprehensive
Loss
   
Total
 
                                           
Exercise of stock options
    142,908       143       204,942       -       -       -       205,085  
Settlement of debt
    4,000       4       9,996       -       -       -       10,000  
Stock-based compensation
    -       -       73,500       -       -       -       73,500  
Net loss
    -       -       -       -       (2,683,105 )     -       (2,683,105 )
Currency translation adjustment
    -       -       -       -       -       (16,865 )     (16,865 )
Balance, December 31, 2004
    8,041,550       8,042       10,050,385       -       (12,434,770 )     (63,787 )     (2,440,130 )
Warrant component of convertible note
    -       -       46,250       -       -       -       46,250  
Issued for cash:
                                                       
 - at $0.38 per share, net of finders’ fees
   of $97,620 and legal fees of $100,561
    3,627,320       3,627       1,158,437       -       -       -       1,162,064  
Net loss
    -       -       -       -       (985,599 )     -       (985,599 )
Currency translation adjustment
    -       -       -       -       -       (2,333 )     (2,333 )
Balance, December 31, 2005
    11,668,870       11,669       11,255,072       -       (13,420,369 )     (66,120 )     (2,219,748 )
Fair value of beneficial feature on
   convertible notes (Note 5)
    -       -       205,579       -       -       -       205,579  
Fair value of warrants issued with
   convertible notes (Note 5)
    -       -       288,921       -       -       -       288,921  
Net loss
    -       -       -       -       (1,304,387 )     -       (1,304,387 )
Currency translation adjustment
    -       -       -       -       -       29,555       29,555  
Balance, December 31, 2006
    11,668,870       11,669       11,749,572       -       (14,724,756 )     (36,565 )     (3,000,080 )
Issued for cash:
                                                       
 - at $0.25 per share
    2,180,000       2,180       542,820       -       -       -       545,000  
Issued on the conversion of notes:
                                                       
 - 2006 convertible notes at $0.25 per share
    1,978,000       1,978       492,522       -       -       -       494,500  
 - 2007 convertible notes at $0.25 per share
    4,064,000       4,064       1,011,936       -       -       -       1,016,000  
Issued on the conversion of accounts payable
   and related party debt at $0.25 per share
    2,911,812       2,912       725,040       -       -       -       727,952  


 
25

 


TAPIMMUNE INC.
(A Development Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2008


   
Common Stock
   
Additional
   
Obligation
to Issue
   
Deficit
Accumulated
During the
   
Accumulated
Other
       
   
Number of
shares
   
Amount
   
Paid In
Capital
   
Shares and
Warrants
   
Development
Stage
   
Comprehensive
Loss
   
Total
 
                                           
Issued for finance charges on the 2007 convertible notes $0.25 per share
    600,000       600       149,400       -       -       -       150,000  
Issued pursuant to service agreements
                                                       
 - at a fair value of $0.36 per share
    100,000       100       35,900       -       -       -       36,000  
Financing charges
    -       -       (167,500 )     -       -       -       (167,500 )
Fair value of beneficial conversion feature on
   the 2007 convertible notes
    -       -       358,906       -       -       -       358,906  
Fair value of warrants issued in connection with the 2007 convertible notes
    -       -       657,095       -       -       -       657,095  
Fair value of warrants issued in connection with the 2007 promissory notes
    -       -       374,104       -       -       -       374,104  
Fair value of warrants issued as finders’ fees for the 2007 promissory notes
    -       -       35,600       -       -       -       35,600  
Re-pricing and extension of warrants
    -       -       40,000       -       -       -       40,000  
Stock based compensation
    -       -       904,822       -       -       -       904,822  
Obligation to issue warrants at fair value pursuant
   to promissory note extension
    -       -       -       44,000       -       -       44,000  
Obligation to issue shares at fair value pursuant to service agreements
    -       -       -       23,400       -       -       23,400  
Net loss
    -       -       -       -       (3,891,411 )     -       (3,891,411 )
Currency translation adjustment
    -       -       -       -       -       (23,161 )     (23,161 )
Balance, December 31, 2007
    23,502,682       23,503       16,910,218       67,400       (18,616,167 )     (59,726 )     (1,674,772 )
Issued for cash
                                                       
 - at $0.25  per share
    140,000       140       34,860       -       -       -       35,000  


 
26

 


TAPIMMUNE INC.
(A Development Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FROM JULY 27, 1999 (INCEPTION) TO DECEMBER 31, 2008


   
Common Stock
   
Additional
   
Obligation
to Issue
   
Deficit
Accumulated
During the
   
Accumulated
Other
       
   
Number of
shares
   
Amount
   
Paid In
Capital
   
Shares and
Warrants
   
Development
Stage
   
Comprehensive
Loss
   
Total
 
                                           
Issued on the exercise of warrants
    207,146       207       24,793       -       -       -       25,000  
Issued pursuant to service agreements
                                                       
 - at a fair value of $0.30 per share
    300,000       300       89,700       -       -       -       90,000  
Fair value of warrants issued in connection
   with the 2008 promissory notes
    -       -       206,820       -       -       -       206,820  
Fair value of warrants to be issued in connection
   with notes payable
    -       -       -       256,350       -       -       256,350  
Stock based compensation
    -       -       234,168       -       -       -       234,168  
Net loss
    -       -       -       -       (2,195,939 )     -       (2,195,939 )
                                                         
Balance, December 31, 2008
    24,149,827     $ 24,150     $ 17,500,559     $ 323,750     $ (20,812,106 )   $ (59,726 )   $ (3,023,373 )


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


 
27

 

TAPIMMUNE INC.
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS


   
Year Ended
December 31,
2008
   
Year Ended
December 31,
2007
   
Period from
July 27, 1999
(inception) to
December 31,
2008
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
 
Net loss
  $ (2,195,939 )   $ (3,891,411 )   $ (20,812,106 )
Adjustments to reconcile net loss to
net cash from operating activities:
                       
Convertible debenture costs
    -       -       51,817  
Depreciation
    7,482       5,971       209,487  
Gain on settlement of debt
    -       -       (173,010 )
Non-cash interest and financing charges
    664,545       1,334,214       2,474,834  
Non-cash consulting and license fees
    90,000       -       106,250  
Stock based compensation
    234,168       964,222       4,635,165  
Changes in operating assets and liabilities:
                       
Due from government agency
    26,371       -       (33,263 )
Prepaid expenses and receivables
    25,793       (61,213 )     (3,520 )
Accounts payable and accrued liabilities
    389,323       350,707       1,854,769  
Research agreement obligations