Marker Therapeutics, Inc. - Quarter Report: 2014 March (Form 10-Q)

form10-q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

S Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2014

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

Commission File Number: 000-27239

TAPIMMUNE INC.

(Name of registrant in its charter)

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

1551 Eastlake Avenue East, Suite 100 Seattle, Washington		98102
(Address of principal executive offices)		(Zip Code)

(206) 504 7278
(Issuer's telephone number)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes S No £

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

£ Large accelerated filer £ Accelerated filer

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

if smaller reporting company)

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

Yes £ No S

As of May 1, 2014, the Company had 16,132,258 shares of common stock issued and outstanding.

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

Description	Page

Consolidated Balance Sheets as of March 31, 2014 (Unaudited) and December 31, 2013	2

Interim Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2013 and for the Period from July 27, 1999 (Date of Inception) to March 31, 2014 (Unaudited)	3

Interim Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013 and for the Period from July 27, 1999 (Date of Inception) to March 31, 2014 (Unaudited)	4

Notes to the Interim Consolidated Financial Statements (Unaudited)	5

TAPIMMUNE INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

	March 31, 2014			December 31, 2013
	(Unaudited)
ASSETS
Current Assets
Cash	$	93,635		$	48,589
Prepaid expenses and deposits		15,004			15,004
Deferred financing costs (Note 5)		747			13,439

	$	109,386		$	77,032

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued liabilities (Note 12)	$	3,865,447		$	3,778,401
Research agreement obligations (Note 3)		492,365			492,365
Derivative liability – conversion option (Note 4)		51,800			582,300
Derivative liability – warrants (Note 4)		603,893			140,504
Convertible notes payable (Note 5)		434,533			3,161,977
Loans payable (Note 6)		18,000			42,200
Promissory notes (Note 7)		67,942			277,942
Due to related parties (Note 8)		81,000			369,346
		5,614,980			8,845,035

Stockholders’ Deficit
Capital stock (Note 9)
Common stock, $0.001 par value, 500,000,000 shares authorized
15,846,182 shares issued and outstanding (2013 – 1,465,711)		159,052			144,672
Additional paid-in capital		78,895,302			46,287,544
Shares to be issued		633,500			284,750
Deficit accumulated during the development stage		(85,133,865	)		(55,426,635	)
Accumulated other comprehensive loss		(59,583	)		(58,334	)
		(5,505,594	)		(8,768,003	)

	$	109,386		$	77,032

COMMITMENTS AND CONTINGENCIES (Notes 1, 3, 5 and 11)

SUBSEQUENT EVENTS (Note 13)

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

TAPIMMUNE INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	Three Months Ended March 31, 2014			Three Months Ended March 31, 2013			Period from July 27, 1999 (inception) to December 31, 2014

EXPENSES
Consulting	$	35,020		$	30,000		$	2,441,587
Consulting - stock-based (Note 9)		686,250			67,812			8,809,726
Depreciation		-			-			213,227
General and administrative		194,338			207,318			4,699,885
Interest and financing charges		35,269			334,888			7,256,918
Management fees (Note 8)		58,500			58,500			3,396,803
Management fees - stock-based (Note 8)		3,750			15,563			4,499,737
Professional fees		186,240			266,630			6,447,677
Research and development (Note 8)		22,500			134,380			7,652,729
Research and development - stock-based		-			-			612,000

LOSS BEFORE OTHER ITEMS		(1,221,867	)		(1,115,091	)		(46,030,289	)

OTHER ITEMS
Foreign exchange (loss) gain		-			12,533			51,583
Changes in fair value of derivative liabilities (Note 4)		(338,297	)		1,097,168			5,512,352
Accretion of discount on convertible notes (Note 5)		(483,636	)		-			(1,594,467	)
Loss on debt financing (Note 5)		-			-			(1,373,263	)
Loss on settlement of debt (Notes 5 and 9)		(27,663,430	)		(436,042	)		(41,914,276	)
Loss on lawsuit		-			-			(103,950	)
Gain on extinguishment of derivative liabilities - warrants		-			-			290,500
Interest income		-			-			33,344
Loss on disposal of assets		-			-			(5,399	)
NET LOSS		(29,707,230	)	$	(441,432	)		(85,133,865	)
Other comprehensive income (loss)
Foreign exchange translation adjustment		(1,249	)		(1,442	)		(59,583	)
TOTAL COMPREHENSIVE LOSS	$	(29,708,479	)	$	(442,874	)	$	(85,193,448	)


BASIC AND DILUTED NET LOSS PER SHARE	$	(4.29	)	$	(0.55	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED		6,929,988			806,947

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

TAPIMMUNE INC.

(A Development Stage Company)

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months Ended March 31, 2014			Three Months Ended March 31, 2013			Period from July 27, 1999 (inception) to December 31, 2014

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(29,707,230	)	$	(441,432	)	$	(85,133,865	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation		-			-			213,228
Non-cash loss on debt financing		-			-			1,373,263
Changes in fair value of derivative liabilities		338,297			(1,097,168	)		(5,512,352	)
Loss on settlement of debt		27,663,430			436,042			41,914,276
Gain on extinguishment of derivative liabilities - warrants		-			-			(290,500	)
Loss on disposal of assets		-			-			5,399
Non-cash interest and finance charges		483,636			-			7,062,966
Stock based compensation		690,000			83,375			13,937,713
Changes in operating assets and liabilities:
Due from government agency		-			-			(1,055	)
Prepaid expenses and deposits		-			(103,950	)		(39,004	)
Deferred financing costs		-			10,585			11,810
Accounts payable and accrued liabilities		158,413			630,558			8,236,571
Research agreement obligations		-			27,536			710,496
NET CASH USED IN OPERATING ACTIVITIES		(373,454	)		(454,454	)		(17,511,054	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares, net		418,000			235,951			11,278,575
Convertible notes, net		-			-			2,851,906
Proceeds from loans payable		500			-			460,700
Notes and loans payable		-			-			919,845
Advances from related parties		-			80,500			1,768,916
Repayment of convertible notes		-			108,600			(20,000	)
Stock subscriptions		-			-			140,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		418,500			425,051			17,399,942

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment		-			-			(218,626	)
Cash acquired on reverse acquisition		-			-			423,373
NET CASH PROVIDED FROM INVESTING ACTIVITIES		-			-			204,747

INCREASE (DECREASE) IN CASH		45,046			(29,403	)		93,635
CASH, BEGINNING OF YEAR		48,589			33,839			-

CASH, END OF YEAR	$	93,635		$	4,436		$	93,635

Supplemental cash flow information and non-cash investing and financing activities: (Note 10)

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

TAPIMMUNE INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(Unaudited)

NOTE 1:NATURE OF OPERATIONS

TapImmune Inc. (the “Company”), a Nevada corporation incorporated in 1992, is a clinical-stage immunotherapy specializing in the development of innovative peptide and gene-based immunotherapeutics and vaccines for the treatment of oncology and infectious disease. Unlike other vaccine technologies that narrowly address the initiation of an immune response, TapImmune's ("Prime" and "Boost") approach broadly stimulates the cellular immune system by enhancing the function of killer T-cells and T-helper cells and by restoring antigen presentation in tumor cells allowing their recognition and killing by the immune system.

A Phase I study at the Mayo Clinic is currently evaluating the safety and immune responses of a set of proprietary HER2/neu antigens that will be part of the "Prime" for a HER2/neu breast cancer vaccine.

A second Phase 1 trial is underway at the Mayo in Ovarian and breast cancer (Folate Alpha). Folate receptor alpha is expressed in nearly 50% of breast cancers and in addition, over 95% of ovarian cancers, for which the only treatment options are surgery and chemotherapy, leaving a very important and urgent clinical need for a new therapeutic. Time to recurrence is relatively short for this type of cancer and survival prognosis is extremely poor after recurrence. In the USA alone, there are approximately 30,000 ovarian cancer patients newly diagnosed every year. These Folate Receptor Antigens are applicable to Ovarian and Triple Negative Breast Cancer. Both of these diseases have few treatment options if any beyond surgery and chemotherapy and therefore the Company is hopeful that it might be an ideal candidate for orphan drug status in these indications.

Phase 2 advancement will be assessed in late 2014. TapImmune has a exclusive option to license this set of peptides after successful phase 1 trials.

In addition, enhancing the visibility of cancer or infected cells to a patient’s immune system is a critical aspect of an effective vaccine. In this regard, TapImmune’s PolyStart nucleic acid-based technology provides a four-fold increase in target cell specific naturally processed antigenic epitopes on a cells surface. This increased cell surface presentation corresponding increases activated Helper and/or long-lived Killer T-cell populations that then effectively seek out and work to destroy a patient’s cancer cells.

The Company is also exploiting the emerging field of vaccinomics for the development of vaccines applicable to a broad patient population. TapImmune's immunotherapy technologies are also aimed at the prevention of emerging viral pathogens for pandemics and biodefense.

These consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As at March 31, 2014, the Company had a working capital deficiency of $5,505,594 and has incurred significant losses since inception in the development of its business. Further losses are anticipated in the development stage raising substantial doubt as to the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on raising additional capital to fund clinical trials, ongoing research and development, maintenance and protection of patents, and ultimately on generating future profitable operations. Planned expenditures relating to current and future clinical trials of the Company’s immunotherapy vaccine will require significant additional funding. The Company is dependent on future financings to fund ongoing research and development as well as working capital requirements. The Company’s future capital requirements will depend on many factors including the rate and extent of scientific progress in its research and development programs, the timing, cost and scope involved in clinical trials, obtaining regulatory approvals, pursuing further patent protections and the timing and costs of commercialization activities.

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

Additional funding was raised through equity and debt placements in 2013 and 2014, and in early 2014 the Company has completed significant restructuring of outstanding debt and equity instruments into equity. Additional capital is required to expand programs including pre-clinical work and to progress clinical trials for the lead vaccine candidates. Strategic partnerships will be needed to continue the product development portfolio and fund development costs. These measures, if successful, may contribute to reduce the risk of going concern uncertainties for the Company over the next twelve months.

There is no certainty that the Company will be able to arrange sufficient funding to satisfy current debt obligations or to continue development of products to marketability.

NOTE 2:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

In the opinion of management, the accompanying balance sheets and related interim statements of operations and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. Significant areas requiring management’s estimates and assumptions include deferred taxes and related tax balances and disclosures, determining the fair value of stock-based compensation and stock based transactions, the fair value of the components of the convertible notes payable, foreign exchange gains and losses, allocation of costs to research and development and accrued liabilities. Matters impacting the company’s ability to continue as a going concern and contingencies also involve the use of estimates and assumptions.

Interim results are not necessarily indicative of results for a full year. The information included in this quarterly report on Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K/A filed on April 17, 2014, with the U.S. Securities and Exchange Commission.

NOTE 3:RESEARCH AGREEMENTS

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

Effective August 7, 2003, Crucell and the Company’s subsidiary GPI entered into a five-year research license and option agreement. In addition, retroactively effective August 7, 2008, the Company negotiated an amended license agreement for the use of Crucell’s adenovirus technology. The Company was required to make annual license payments on the anniversary of the effective date for the three year term equal to €75,000 per annum for three years through December 2011. As at March 31, 2014, the Company accrued $492,365 (€378,384) under the amended agreement, inclusive of interest on outstanding amounts.

The Company has not made use of the Crucell technology in its current work and has not asked for nor received any work product. Management intends to settle the outstanding amounts with Crucell in 2014 and formally terminate the research license.

Mayo Clinic –License Option Agreement

For details regarding the license option agreement with Mayo Clinic, please refer to Note 11.

NOTE 4:DERIVATIVE WARRANT LIABILITY AND FAIR VALUE

The Company has evaluated the application ASC 480-10 Distinguishing liabilities from equity, ASC 815-40 Contracts in an Entity’s Own Equity and ASC 718-10 Compensation – Stock Compensation to the issued and outstanding warrants to purchase common stock that were issued with the convertible notes, private placements, consulting agreements, and various debt settlements during 2009 through 2012. Based on the guidance, management concluded these instruments are required to be accounted for as derivatives either due to a ratchet down protection feature available on the exercise price (Note 5) or a holder’s right to put the warrants back to the Company for cash under certain conditions or a conversion option feature with conversion into variable number of shares. Under ASC 815-40-25, the Company records the fair value of these warrants and conversion options (derivatives) on its balance sheet, at fair value, with changes in the values reflected in the statements of operations as “Changes in fair value of derivative liabilities”. The fair value of the share purchase warrants are recorded on the balance sheet under ‘Derivative liability – warrants’ and the fair value of the conversion options are recorded on the balance sheet under ‘Derivative liability – conversion option’.

ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820-10 describes three levels of inputs that may be used to measure fair value: Level 1 – Quoted prices in active markets for identical assets or liabilities; Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. The Company’s Level 3 liabilities consist of the derivative liabilities associated with the warrants and conversion options issued with the convertible notes during the year ended December 31, 2013. At March 31, 2014, all of the Company’s derivative liabilities were categorized as Level 3 fair value liabilities. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Level 3 Valuation Techniques

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

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

	March 31, 2013				March 31, 2014
	Expected Life (Years)	Risk free Rate	Dividend yield	Volatility	Expected Life (Years)	Risk free Rate	Dividend yield	Volatility
Share purchase warrants	0.01 to 3.53	0.04% to 0.36%	0.00%	199%	0.60 to 4.00	0.07% to 1.40%	0.00%	156.6%

	March 31, 2013				March 31, 2014
	Expected Life (Years)	Risk free Rate	Dividend yield	Volatility	Expected Life (Years)	Risk free Rate	Dividend yield	Volatility
Conversion option	0.049 to 0.64	0.04% to 0.17%	0.00%	108.00% to 123.76%	0.05 to 0.24	0.03% to 0.05%	0.00%	199%

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

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

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

	As of March 31, 2014
			Fair Value Measurements Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Derivative liability - warrants	$	603,893		-		-	$	603,893	$	603,893
Derivative liability – conversion option		51,800		-		-		51,800		51,800
Total	$	655,693		-		-	$	655,693	$	655,693

	As of December 31, 2013
			Fair Value Measurements
	Carrying Value		Level 1		Level 2		Level 3		Total
Derivative liability - warrants	$	140,504		-		-	$	140,504	$	140,504
Derivative liability – conversion option		582,300		-		-		582,300		582,300
Total	$	722,804		-		-	$	722,804	$	722,804

The table below provides a summary of the changes in fair value, including net transfers, in and/or out, of financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2014 and the year ended December 31, 2013:

	Fair Value Measurements Using Level 3 Inputs
	Derivative liability - warrants			Derivative liability – conversion option			Total
Balance, December 31, 2012		977,086			867,575			1,844,661
Additions during the year		206,000			810,500			1,016,500
Total unrealized (gains) or losses included in net loss		(1,042,582	)		(1,095,775	)		(2,138,357	)
Transfers in and/or out of Level 3		-			-			-
Balance, December 31, 2013		140,504			582,300			722,804
Additions during the year		303,000			-			303,000
Total unrealized (gains) or losses included in net loss		160,389			(530,500	)		(370,111	)
Transfers in and/or out of Level 3		-			-			-
Balance, March 31, 2014	$	603,893		$	51,800		$	655,693

The fair value of the warrants is determined using a Binomial option pricing model. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of common stock, the historical volatility of the stock price, risk-free rates based on U.S. Treasury security yields, the expected term of the warrants and dividend yield. Changes in these assumptions can materially affect the fair value estimate. The Company could ultimately incur amounts to settle the warrant at a cash settlement value that is significantly different than the carrying value of the liability on the financial statements. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability. Changes in the fair value of the common stock warrants liability are recognized as a component of other income (expense) in the statement of operations.

The net cash settlement value at the time of any future Fundamental Transaction will depend upon the value of the following inputs at that time: the consideration value per share of the Company’s common stock, the volatility of the Company’s common stock, the remaining term of the warrant from announcement date, the risk-free interest rate based on U.S. Treasury security yields, and the Company’s dividend yield. The warrant requires use of a volatility assumption equal to the greater of 100% and the 100-day volatility function determined as of the trading day immediately following announcement of a Fundamental Transaction. The fair value of the warrants is determined using the American Binomial Option Pricing Model.

NOTE 5: CONVERTIBLE NOTES PAYABLE

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

	Face Value		Principal Repayment/ Settlement/Re-issued		Unamortized Note Discount		Balance at March 31, 2014

February 2011 Secured Convertible Notes
Senior Secured Notes, due February 24, 2014	$	980,830	$	980,830	$	-	$	-

April 2011 Secured Convertible Notes
Senior Secured Notes, due April 4, 2014		215,000		215,000		-		-

June 2011 Secured Convertible Note
Senior Secured Notes, due June 6, 2014		30,000		30,000		-		-

August 12, 2012 Convertible Note
Note became due November 12, 2012		27,500		27,500		-		-

August 20, 2012 Convertible Note
Note due August 20, 2013		20,000		20,000		-		-

October 2012 Convertible Note
Note due October 15, 2013		340,000		-		-		340,000

November 20, 2012 Convertible Note
Note due November 20, 2013		10,748		3,675		-		7,073

December 18, 2012 Convertible Note
Note due December 14, 2013		50,000		50,000		-		-

January 5, 2013 Convertible Notes		452,729		452,729		-		-

February 27, 2013 Convertible Note
Note due February 27, 2014		58,500		-		-		58,500


April / May / November, 2013 Convertible Notes		150,101		150,101		-		-

April 18, 2013 Convertible Note
Note due December 18, 2013		31,688		31,688		-		-

May 2, 2013 Convertible Notes		50,000		50,000		-		-

May 14, 2013 Convertible Note
Note due May 14, 2014		126,000		126,000		-		-

June 27, 2013 Convertible Note
Note due June 27, 2014		37,620		-		8,660		28,960

June 19, 2013 Convertible Note
Note due June 19, 2014		32,000		32,000		-		-

July 12, 2013 Convertible Note
Note due July 12, 2014		125,000		125,000		-		-

October, 2013 Convertible Notes
Notes due in April, 2014		55,000		55,000		-		-

November, 2013 Convertible Notes
Notes due in May, 2014		80,000		80,000		-		-

December, 2013 Convertible Notes I
Notes due May, 2014		250,000		250,000		-		-

December, 2013 Convertible Notes II
Notes due May, 2014		536,400		536,400		-		-

Total	$	3,659,116	$	3,215,923	$	8,660	$	434,533

The following is a summary of debt instrument transactions for the year ended December 31, 2013:

	Face Value		Principal Repayment/ Settlement/Re-issued		Unamortized Note Discount		Balance at December 31, 2013

February 2011 Secured Convertible Notes
Senior Secured Notes, due February 24, 2014	$	1,184,694	$	203,836	$	20,083	$	960,775

April 2011 Secured Convertible Notes
Senior Secured Notes, due April 4, 2014		215,000		-		8,835		206,165

June 2011 Secured Convertible Note
Senior Secured Notes, due June 6, 2014		30,000		-		1,189		28,811

August 8, 2012 Convertible Note
Note due August 8, 2013		111,430		111,430		-		-

August 12, 2012 Convertible Note
Note became due November 12, 2012		27,500		-		-		27,500

August 20, 2012 Convertible Note
Note due August 20, 2013		20,000		-		-		20,000
September 18, 2012 Convertible Note
Note due October 1, 2013		82,500		82,500		-		-

October 2012 Convertible Note
Note due October 15, 2013		340,000		-		-		340,000

October 9, 2012 Convertible Notes		100,000		100,000		-		-
Note due April 30, 2013

November 1, 2012 Convertible Note
Note due April 30, 2013		31,471		31,471		-		-

November 20, 2012 Convertible Note
Note due November 20, 2013		55,710		44,962		-		10,748

December 14, 2012 Convertible Note
Note due April 18, 2013		189,210		189,210		-		-

December 18, 2012 Convertible Note
Note due December 14, 2013		50,000		-		-		50,000

January 5, 2013 Convertible Notes		567,729		115,000		-		452,729

January 31, 2013 Convertible Notes		24,135		-		-		24,135


February 27, 2013 Convertible Note
Note due February 27, 2014		58,500		-		8,819		49,681

April 2, 2013 Convertible Notes		80,967		-		-		80,967

April 18, 2013 Convertible Note
Note due December 18, 2013		60,000		28,312		-		31,688

May 2, 2013 Convertible Notes		50,000		-		-		50,000

May 5, 2013 Convertible Notes		45,000		-		-		45,000

May 14, 2013 Convertible Note
Note due May 14, 2014		126,000		-		46,258		79,742

June 27, 2013 Convertible Note
Note due June 27, 2014		37,620		-		17,515		20,105

June 19, 2013 Convertible Note
Note due June 19, 2014		115,000		83,000		8,217		23,783

July 12, 2013 Convertible Note
Note due July 12, 2014		125,000		28,200		57,200		39,600

October, 2013 Convertible Notes
Notes due in April, 2014		94,444		-		56,044		38,400

November, 2013 Convertible Notes
Notes due in May, 2014		80,000		-		52,996		27,004

December, 2013 Convertible Notes I
Notes due May, 2014		277,222		-		258,478		18,744

December, 2013 Convertible Notes II
Notes due May, 2014		536,400		-		-		536,400

Total	$	4,715,532	$	1,017,921	$	535,634	$	3,161,977

February 2011 Secured Convertible Notes

During the period ended March 31, 2014, the investors converted the principal amount of $980,858 and accrued interest of the February 2011 Notes into 1,593,850 common shares (Note 9).

April 2011 Secured Convertible Notes

During the period ended March 31, 2014, the investors converted the principal amount of $215,000 and accrued interest of the April 2011 Notes into 349,375 common shares (Note 9).

June 2011 Secured Convertible Note

During the period ended March 31, 2014, the investor converted the principal amount of $30,000 and accrued interest of the June 2011 Note into 48,750 common shares (Note 9).

August 8, 2012 Convertible Note

During the year ended December 31, 2013, the investor converted the principal amount of $111,430 and accrued interest of the August 8, 2012 Note into 20,500 common shares.

August 12, 2012 Convertible Note

During the period ended March 31, 2014, the investor converted the principal amount of $27,500 and accrued interest of the August 12, 2012 Note into 37,500 common shares (Note 9).

August 20, 2012 Convertible Note

During the period ended March 31, 2014, the investor converted the principal amount of $20,000 and accrued interest of the August 20, 2012 Note into 30,000 common shares (Note 9).

September 18, 2012 Convertible Note

During the year ended December 31, 2013, the investor converted the principal amount and accrued interest of $81,360 into 29,444 common shares. Of the balance of $24,990 remaining, the Company repaid $20,000 in full settlement and recognized $4,990 as gain on settlement of debt.

October 2012 Convertible Note

On October 15, 2012, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the “October 2012 Note”) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $340,000. The October 2012 Note carries an interest rate of 18% upon default, which is being accrued.

October 9, 2012 Convertible Note

On October 9, 2012, the Company converted accounts payable of $100,000 into convertible notes (the “October 9, 2012 Note”). The note has no terms of repayment and no interest charges. Only under certain events of default the note will incur an interest rate of 20% per year.

During the year ended December 31, 2013, the note was amended and assigned to a third party with price adjustment features ratified by the Company. The third party converted the note into 53,690 common shares of the Company.

November 20, 2012 Convertible Note

During the year ended December 31, 2013, the investor converted $30,212 of the November 20, 2012 Note and accrued interest into 36,000 common shares.

During the period ended March 31, 2014, the investor converted $3,675 of the November 20, 2012 Note and accrued interest into 7,000 common shares (Note 9).

December 14, 2012 Convertible Note

During the year ended December 31, 2013, the investor converted the remaining balance of the note and accrued interest of $189,210 on the December 14, 2012 Note into 31,763 common shares.

December 18, 2012 Convertible Note

During the period ended March 31, 2014, the investor converted the December 18, 2012 Note and accrued interest into 68,750 common shares (Note 9).

January 5, 2013 Convertible Notes

On January 5, 2013, the Company exchanged amounts due to a consultant and related parties into convertible notes (the “January 5, 2013 Notes”) with no terms of repayment and no interest charges in the aggregate principal amount of $567,729, of which, $330,000 is due to related parties.

In July, 2013, the consultant assigned $115,000 of the convertible note to a third party with amendments to adjustment of conversion price ratified by the Company.

During the period ended March 31, 2014, the investors converted the balance of the January 5, 2013 Notes and accrued interest into 543,636 common shares (Note 9).

January 31, 2013 Convertible Note

On January 31, 2013, the Company converted accounts payable of $24,134 into a convertible note (the “January 31, 2013 Note”) with a maturity date of sixteen months. The note has no terms of repayment and no interest charges. The conversion of the note occurs under the following conditions:

On the date that Company files a certificate of designation creating a class of Series A convertible preferred stock (“Series A Convertible Preferred Stock”) (i) with voting rights per share equal to one thousand (1,000) shares of common stock at the rate of five shares of common stock (on a post-reverse stock split basis) for each share of Series A Convertible Preferred Stock and (ii) that are automatically convertible into common shares upon the occurrence of a 100:1 reverse stock split, the Company may convert the January 31, 2013 Note into shares of Series A Convertible Preferred Stock at a conversion price of four dollars ($4) per share of Series A Convertible Preferred Stock. If the Series A Convertible Preferred Stock is duly authorized and outstanding, on the date that the Company enacts a 100:1 reverse stock split, the January 31, 2013 Note will automatically convert into shares of Series A Convertible Preferred Stock at a conversion price of four dollars ($4) per share of Series A Convertible Preferred Stock.

During the period ended March 31, 2014, the investors converted the January 31, 2013 Note and accrued interest into 40,551 common shares (Note 9).

February 27, 2013 Convertible Note

On February 27, 2013, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the “February 27, 2013 Note”) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $58,500. Consideration under the notes consisted of $46,000 in cash proceeds after $4,000 payment of finders’ fee and an original issue discount of $8,500. The Company accrued a one-time interest of 5% as per the agreement.

The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $44,700 and recognized as a derivative liability and the debt was recorded at $5,300. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.17%, dividend yield of 0% and volatility of 123.76%. The debt discount is being accreted over the one year term of the February 27, 2013 Note using the effective interest rate method.

April / May / November, 2013 Convertible Note

The Company exchanged accounts payable into convertible notes in the aggregate principal amount of $150.101. The note holder has the option to convert a portion or all of the outstanding balance of the note into shares of the Company’s common stock at a conversion rate of $7.00 per share. The note will incur an interest rate of 8% per year unless the Company defaults under certain conditions, in which case, the note will incur an interest rate of 20% per year.

During the period ended March 31, 2014, the investor converted the notes and accrued interest into 210,233 common shares (Note 9).

April 18, 2013 Convertible Note

On April 18, 2013, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the “April 18, 2013 Note”) with a maturity date of eight months after the issuance thereof in the aggregate principal amount of $60,000. Consideration under the notes consisted of $50,000 in cash proceeds after $5,000 payment of transaction costs and an original issue discount of $5,000. The April 18, 2013 Note carries an interest rate of 8% per year unless the note is in default under certain conditions, in which case, the interest rate would be 18% per year.

The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $27,800 and recognized as a derivative liability and the debt was recorded at $27,200. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of eight months, risk free rate of 0.10%, dividend yield of 0% and volatility of 115.82%. The debt discount is being accreted over the eight month term of the April 18, 2013 Note using the effective interest rate method.

During the year ended December 31, 2013, the investor converted $31,733, part of the principal and accrued interest on the April 18, 2013 Note, into common shares.

During the period ended March 31, 2014, the investor converted the balance of $31,688 and accrued interest into 46,443 common shares (Note 9).

May 2, 2013 Convertible Notes

On May 2, 2013, the Company issued convertible notes (the “May 2, 2013 Note”) in the aggregate principal amount of $50,000. The note matures on May 31, 2014 and would only start to accrue interest of 10% per year after February 15, 2014. The note is automatically convertible into Series B convertible preferred shares (‘Series B Preferred Shares”) when the Company enacts a 100:1 reverse stock split, where each of the Series B Preferred Shares are convertible at the rate of seven shares of common stock.

During the period ended March 31, 2014, the investor converted the May 2, 2013 Note into 350,000 common shares (Note 9).

May 14, 2013 Convertible Note

On May 14, 2013, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the “May 14, 2013 Note”) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $126,000. The Company also issued 20,000 warrants to the note holder, exercisable at $6.00 per share with a four year term. Consideration under the notes consisted of $110,000 in cash proceeds after $5,000 payment of finders’ fee and an original issue discount of $11,000.

The May 14, 2013 Note carries an interest rate of 8% per year unless the note is in default, in which case, the note will incur an interest rate of 18% per year.

The Company has allocated the net proceeds to the conversion option and warrants based on the calculated fair values. The fair value of the conversion option was recorded at $62,678,000 and fair value of the warrants was recorded as $52,322 recognized as a derivative liabilities and the debt was recorded at $nil. The fair value of the conversion option was calculated using the Black Scholes option pricing model under the following assumptions: estimated life of four years, risk free rate of 0.4%, dividend yield of 0% and volatility of 161%. The debt discount is being accreted over the one year term of the May 14, 2013 Note using the effective interest rate method.

During the period ended March 31, 2014, the investor converted the May 14, 2013 Note and accrued interest into 157,500 common shares (Note 9).

June 27, 2013 Convertible Note

On June 27, 2013, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the “June 27, 2013 Note”) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $37,620. Consideration under the notes consisted of $30,000 in cash proceeds after $3,000 payment of finder’s fee and an original issue discount of $4,620. The Company accrued a one-time interest of 5% as per the agreement.

The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $30,200 and recognized as a derivative liability and the debt was recorded at $2,800. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.15%, dividend yield of 0% and volatility of 156.41%. The debt discount is being accreted over the one year term of the June 27, 2013 Note using the effective interest rate method.

June 19, 2013 Convertible Note

In June, 2013, a consultant assigned $115,000 of its convertible note to a third party with amendments ratified by the Company (the “June 19, 2013 Note”) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $115,000.

The June 19, 2013 Note carries an interest rate of 10% per year unless the note is in default under certain conditions, in which case, the interest rate would be 20% per year.

The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $31,600 and recognized as a derivative liability and the debt was recorded at $83,400. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.15%, dividend yield of 0% and volatility of 156.46%. The debt discount is being accreted over the one year term of the June 19, 2013 Note using the effective interest rate method.

During the year ended December 31, 2013, the third party converted the principal amount of $83,000 and accrued interest of the June 19, 2013 Note into 108,188 common shares.

During the period ended March 31, 2014, the third party converted balance of $32,000 and accrued interest into 40,000 common shares (Note 9).

July 12, 2013 Convertible Note

In July, 2013, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the “July 12, 2013 Note”) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $125,000. The Company also issued 41,667 warrants to the note holder, exercisable at $3.00 per share with a five year term. Consideration under the notes consisted of $110,000 in cash proceeds after $15,000 payment of finders’ fee and an original issue discount of $11,000.

The July 12, 2013 Note carries an interest rate of 8% per year unless the note is in default, in which case, the note will incur an interest rate of 18% per year.

The Company has allocated the net proceeds to the conversion option and warrants based on the calculated fair values. The fair value of the conversion option was recorded at $59,615 and fair value of the warrants was recorded as $54.385 recognized as a derivative liabilities and the debt was recorded at $nil. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of five year, risk free rate of 1.4%, dividend yield of 0% and volatility of 199%. The debt discount is being accreted over the one year term of the July 12, 2013 Note using the effective interest rate method.

During the period ended March 31, 2014, the investor converted the July 12, 2013 Note and accrued interest into 156,250 common shares (Note 9).

October, 2013 Convertible Notes

In October, 2013, the Company entered into securities purchase agreements with accredited investors to place Convertible Notes (the “October, 2013 Notes”) with a maturity date of six months after the issuance thereof in the aggregate principal amount of $55,000.

The October, 2013 Notes carry no interest charges unless the note is in default, in which case, the note will incur an interest rate of 20% per year.

The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The full value was recorded as the fair value of the conversion option and the debt was recorded at $nil. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of six months, risk free rate of 0.10%, dividend yield of 0% and volatility of 199%. The debt discount is being accreted over the six month term of the October, 2013 Notes using the effective interest rate method.

During the period ended March 31, 2014, the investors converted the October, 2013 Note into 385,000 common shares (Note 9).

November, 2013 Convertible Notes

In November, 2013, the Company entered into securities purchase agreements with accredited investors to place Convertible Notes (the “November, 2013 Notes”) with a maturity date of six months after the issuance thereof in the aggregate principal amount of $80,000. Consideration under the notes consisted of $77,000 in cash proceeds and an original issue discount of $3,000.

The November, 2013 Notes carry no interest charges other than an original issue discount unless the note is in default, in which case, the note will incur an interest rate of 20% per year.

The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The full value was recorded as the fair value of the conversion option and the debt was recorded at $nil. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of six months, risk free rates of 0.10% and 0.04%, dividend yield of 0% and volatility of 199%. The debt discount is being accreted over the six month term of the November, 2013 Notes using the effective interest rate method.

During the period ended March 31, 2014, the investors converted the November, 2013 Notes into 560,000 common shares (Note 9).

December, 2013 Convertible Notes I

In December, 2013, the Company entered into securities purchase agreements with accredited investors to place Convertible Notes (the “December, 2013 Notes I”) with a maturity date of six months after the issuance thereof in the aggregate principal amount of $250,000. The December, 2013 Notes I carry no interest charges unless the note is in default, in which case, the note will incur an interest rate of 20% per year.

The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The full value was recorded as the fair value of the conversion option and the debt was recorded at $nil. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of six months, risk free rates of 0.10% , dividend yield of 0% and volatility of 199%. The debt discount is being accreted over the six month term of the December, 2013 Notes I using the effective interest rate method.

During the period ended March 31, 2014, the investors converted the December, 2013 Notes I into 1,750,000 common shares (Note 9).

December, 2013 Convertible Notes II

In December, 2013, the Company entered into securities purchase agreements with accredited investors to place Convertible Notes (the “December, 2013 Notes II”) with a maturity date of six months after the issuance thereof in the aggregate principal amount of $536,400. Consideration under the notes consisted of $141,000 of conversion of accounts payable, $267,950 of cash proceeds, of which $100,000 were received during the year ended December 31, 2012 as subscription proceeds and $27,450 of interest costs. The conversion of the notes occurs under the following conditions:

On the date that Company files a certificate of designation creating a class of Series B Convertible Preferred Stock (i) with voting rights per share equal to one thousand (1,000) shares of common stock and (ii) that are automatically convertible into common shares upon the occurrence of a 100:1 reverse stock split at the rate of seven shares of common stock (on a post-reverse stock split basis) for each share of Series B Convertible Preferred Stock, the Company may convert the December, 2013 Convertible Notes II into shares of Series B Convertible Preferred Stock at a conversion price of one dollar per share of Series B Convertible Preferred Stock. If the Series B Convertible Preferred Stock is duly authorized and outstanding, on the date that the Company enacts a 100:1 reverse stock split, the December, 2013 Convertible Notes II will automatically convert into seven (7) shares of Series B Convertible Preferred Stock at a conversion price of one dollar per share of Series B Convertible Preferred Stock.

Any amount of the December, 2013 Notes II that are outstanding on February 15, 2014 will carry an interest rate of 10% per year.

During the period ended March 31, 2014, the investors converted the December, 2013 Notes II into 1,093,900 common shares (Note 9).

For the period ended March 31, 2014, the Company recorded accretion of debt discount of $483,638 for the convertible notes.

NOTE 6:LOANS PAYABLE

As at March 31, 2014, there were unsecured loan advances in the amount of $18,000 (December 31, 2013 - $42,200) which are due on demand. Certain of the loans bears interest of 10% per annum. During the period ended March 31, 2014, an investor converted $7,000 of the loan into 11,375 common shares of the Company and a related party converted $2,700 of the loan into common shares of the Company as part of his total debt settlement.

NOTE 7:PROMISSORY NOTE

The Company has outstanding promissory notes in the amount of $67,942, of which $38,000 of promissory notes are from an officer and a director of the Company (Note 8). The promissory notes bear no interest charges and have no fixed repayment terms.

During the year ended December 31, 2013, the Company converted $210,000 of accounts payable into a promissory note. During the period ended March 31, 2014, the note holder converted outstanding principal and accrued interest into 1,400,000 post reverse stock split common shares. The fair value of the shares was determined to be $3,150,000 and the Company recorded a loss on settlement of debt of $2,912,034.

NOTE 8:RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2014, the Company entered into transactions with certain officers and directors of the Company as follows:

(a)	incurred $58,500 (March 31, 2013 - $88,500) in management fees and $22,500 (March 31, 2013 - $33,000) in research and development services paid or accrued to officers and directors during the period;

(b)	recorded $3,750 (March 31, 2013 - $25,643) in stock based compensation for the fair value of options granted to management and consultants that were granted and or vested during the period;

(c)	converted $721,045 (March 31, 2013 - $nil) of debt due to related parties during the period, which were settled with shares (Note 9).

(d)	converted $nil (March 31, 2013 - $567,729) of payable into convertible notes to officers, consultant and a director of the Company (Note 5).

All related party transactions (other than stock based compensation) involving provision of services were recorded at the exchange amount, which is the amount established and agreed to by the related parties as representing fair value. The Company accounted for the debt settlement transactions with related parties at management’s estimate of fair value, using amounts similar to arm’s length settlements for debt settled.

At March 31, 2014, the Company had amounts owing to directors and officers of $81,000 (December 31, 2013 - $369,345) in fees and $nil (December 31, 2013 - $370,200) in loans and other advances. All amounts due to related parties are unsecured, non-interest bearing and have no specific terms of repayment.

NOTE 9:CAPITAL STOCK

Share Capital

Prior to March 27, 2007, the authorized capital of the Company consisted of 50,000,000 common shares with $0.001 par value and 5,000,000 non-voting preferred shares with $0.001 par value. On March 27, 2007, the Company’s Articles of Incorporation were amended to increase the authorized shares of common stock from 50,000,000 shares of common stock to 200,000,000 shares. On June 28, 2007, the Company completed a reverse stock split thereby issuing 1 new share for each 2.5 outstanding shares of the Company’s common stock. Accordingly, the Company’s authorized share capital was decreased from 200,000,000 common shares to 80,000,000 common shares. On January 22, 2009 the authorized shares of common stock increased from 80,000,000 shares to 500,000,000 shares. Effective July 10, 2009, the Company executed a further 1 for 10 reverse stock split while simultaneously reducing the authorized shares of common stock to 50,000,000 common shares with a $0.001 par value. Effective February 21, 2010, the Company increased its authorized shares of common stock from 50,000,000 shares to 150,000,000 common shares. The Company maintained its authorized shares of preferred stock at 5,000,000.

On January 6, 2014, the Company designated 1,200,000 series A preferred shares (“Series A Convertible Preferred Stock”). Each share of Series A Convertible Preferred Stock that is outstanding at the time that the Company enacts a 100 to 1 reverse stock split, the Series A Convertible Preferred Stock shall automatically convert into five (5) shares of the Company’s common stock on a post-split basis.

On January 10, 2014, the Company completed a reverse stock split thereby issuing 1 new share for each 100 outstanding shares of the Company’s common stock and amending the Company’s Articles of Incorporation to increase the authorized shares of common stock from 150,000,000 shares of common stock to 500,000,000 shares (Note 15).

On February 18, 2014, the Company’s board of directors approved the creation of a class of up to 1,500,000 preferred stock, par value $0.001, called series B convertible preferred stock (“Series B Convertible Preferred Stock”). The terms of the Series B Convertible Preferred Stock are:

·	rank pari passu to the common stock with respect to rights on liquidation, winding up and dissolution;

·	have no dividend rights except as may be declared by the Board in its sole and absolute discretion;

·	shall have the right to cast one thousand (1,000) votes for each share held of record on all matters submitted to a vote of holders of the Corporation’s common stock; and

shall automatically convert into shares of common stock upon the occurrence of a reverse stock split of the Corporation’s common stock in which every 100 shares of the Corporation’s common stock outstanding at the time that this certificate of designation was filed with the Secretary of State of Nevada is exchanged for one share of the Corporation’s common stock, with each share of Series B Convertible Preferred Stock converting into seven (7) shares of the Corporation’s common stock (such number to be after the 100:1 reverse stock split).

All prior period share transactions included in the Company’s stock transactions and balances have been retroactively restated for the reverse stock split described above.

2014 Share Transactions

During the period ended March 31, 2014, the Company received subscription proceeds of $418,000 for 418,000 shares of Series B Convertible Preferred Stock. In February 2014, the 418,000 shares of Series B Convertible Preferred Stock were converted into 2,926,000 shares of common stock as per the terms described above.

During the period ended March 31, 2014, the Company issued 14,013,241 shares of its common stock with a fair value of $31,527,819 for conversion of convertible debt, accounts payable, loan, promissory note, Series B convertible preferred shares and accrued interest in the amount of $5,378,982. In these conversions, related parties converted $721,045 of notes, accounts payable and loan into 766,444 shares of the Company’s common stock.

During the period ended March 31, 2014, the Company issued 198,443 shares of its common stock with a fair value of $1,013,799 for conversion of convertible debt, settlement of debt, and accrued interest in the amount of $163,225.

During the period ended March 31, 2014, the Company issued 18,787 shares of its common stock with a fair value of $42,271 for legal services.

During the period ended March 31, 2014, the Company issued 150,000 shares of its common stock pursuant to an advisory agreement with a fair value of $337,500.

During the period ended March 31, 2014, the Company agreed to issue 112,500 shares of its common stock pursuant to agreements with a fair value of $348,750. The shares have not yet been issued.

The Company records shares issued for non-cash consideration or on conversion of debt at the fair value. As a result of the above settlements and conversions, the Company recorded a loss on settlement of debt of $27,663,430.

2013 Share Transactions

In January 2013, the Company issued 2,313 shares of its common stock for conversion of one of the two November 1, 2012 Notes (Note 5) at a conversion price of $6.62 per share. In February 2013, the Company issued 2,500 common shares with a fair value of $28,925 to a consultant pursuant to a consulting agreement. In February 2013, the Company issued 18,986 common shares on a cashless conversion of 30,000 warrants at an exercise price of $5.72. In March 2013, the Company issued 100,000 common shares with a fair value of $10,010 to a consultant pursuant to a consulting agreement.

Between January and March, 2013, the Company issued 31,763 shares of its common stock for conversion of December 14, 2012 Note (Note 5) at a conversion price of $6.03 per share.

Between January and May, 2013, the Company issued 19,444 shares of its common stock for partial conversion of September 18, 2012 Note (Note 5) at an average conversion price of $3.60 per share.

Between February and March, 2013, the Company issued 10,500 shares of its common stock for partial conversion of August 8, 2012 Note (Note 5) at an average conversion price of $6.81 per share.

In April 2013, the Company issued 2,815 shares of its common stock for conversion of the balance of the November 1, 2012 Notes (Note 5) at a conversion price of $6.07 per share.

Between April and September, 2013, the Company issued 264,649 shares of its common stock for partial settlement of debt in the amount of $510,572. A further 455,311 shares remain to be issued with respect to this debt. The shares had a fair value of approximately $910,000 at December 31, 2013.

In April, 2013, the Company issued 2,500 shares of its restricted common stock under a settlement agreement with a former director of the Company.

Between May and July, 2013, the Company issued 53,690 shares of its common stock with a fair value of $248,278 for conversion of October 9, 2012 Convertible Notes (Note 5).

Between May and June, 2013, the Company issued 30,000 shares of its common stock with a fair value of $137,200 for conversion of the balances of the August 8, 2012 Note and November 20, 2013 Note (Note 5).

Between July and September 30, 2013, the Company issued 108,188 shares of its common stock with a fair value of $181,606 for conversion of June 19, 2013 Convertible Note (Note 5).

In August, 2013, the Company issued 50,000 shares of its common stock with a fair value of $52,500 for conversion of July 12, 2013 Convertible Note (Note 5).

In August and September 2013, the Company issued 36,000 shares and is obligated to issue additional 20,472 shares of its common stock with a fair value of $52,960 for conversion of November 20, 2012 Convertible Note (Note 5).

In September, 2013, the Company issued 10,000 shares of its common stock with a fair value of $10,500 for partial conversion of September 18, 2012 Note (Note 5).

In November, 2013, the Company issued 12,000 shares of its common stock with a fair value of $13,340 for partial conversion of September 18, 2012 Note (Note 5).

In November, 2013, the Company issued 45,333 shares of its common stock with a fair value of $134,187 for partial conversion of April 18, 2013 Note (Note 5).

In March, 2013, the Company received $242,950 for a private placement, for which it issued 34,707 shares and equal number of warrants. In December 2013, the Company entered into rescission agreements whereby the Company replaced the shares and warrants with December, 2013 Convertible Notes II and the 34,707 shares and warrants were returned to the treasury (Note 5).

As a result of the above settlements and conversions, the Company recorded a loss on settlement of debt of $2,560,045.

Stock Compensation Plan

On October 14, 2009, the Company adopted the 2009 Stock Incentive Plan (the “2009 Plan”) which supersedes and replaces the 2007 Stock Plan. The 2009 Plan allows for the issuance of up to 100,000 common shares. Options granted under the Plan shall be at prices and for terms as determined by the Board of Directors.

The expensed portion of the value of the vesting options during the three months ended March 31, 2014 was $3,750 (March 31, 2013 - $29,894) which was recorded as stock based consulting and management fees. During the period, stock-based consulting and management fees also includes share based compensation.

Share purchase options

A summary of the Company’s stock options as of March 31, 2014 and changes during the period is presented below:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Life

Balance, December 31, 2012		65,430	$	18.00		6.05
Issued		-		-		-
Cancelled/Forfeited		-		-		-

Balance, December 31, 2013		65,430		18.00		6.05
Issued		-		-		-
Cancelled/Forfeited		-		-		-
Balance, March 31, 2014		65,430	$	18.00		4.80

At March 31, 2014, the intrinsic value of the vested options was equal to $nil (2013 - $nil).

A summary of the status of the Company’s unvested options as of March 31, 2014 is presented below:

	Number of Shares			Weighted Average Grant-Date Fair Value

Unvested, December 31, 2013		1,111		$	18.00
Granted		-			-
Vested		(208	)		18.00
Cancelled		-			-

Unvested, March 31, 2014		903		$	18.00

Share Purchase Warrants

In March, 2014, the Company issued 100,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $4.00 per share for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to a technology option agreement. The fair value of these warrants was determined to be $303,000.

In May, 2013, the Company issued 20,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $6.00 per share for an exercise period of up to four years from the issuance date. The warrants were issued pursuant to a convertible debt with price adjustment features. The residual fair value of these warrants was determined to be $52,322 and recognized as a derivative liability.

In July, 2013, the Company issued 41,667 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $4.00 per share for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to a convertible debt with price adjustment features. The residual fair value of these warrants was determined to be $54,385 and recognized as a derivative liability.

A summary of the Company’s share purchase warrants as of March 31, 2014 and changes during the period is presented below:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Life

Balance, December 31, 2012		169,087		$	39.00		2.19
Issued		67,667			5.84		4.16
Exercised		(30,000	)		25.00		-
Extinguished or expired		(57,302	)		39.72		-
Balance, December 31, 2013		149,452			25.85		2.76
Issued		100,000			4.00		4.97
Exercised		-			-		-
Extinguished or expired		-			-		-
Balance, March 31, 2014		249,452		$	17.09		3.50

NOTE 10:SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES


	Three Months Ended March 31, 2014
		Shares/warrants		Amount
				$
Shares issued for services			18,787		42,271
Shares issued pursuant to an advisory agreement			150,000		337,500
Shares issued pursuant to debt conversion			14,211,684		32,528,757

		Three Months Ended March 31, 2013
		Shares/warrants		Amount
				$
Shares issued pursuant to consulting arrangements			350,000		38,935
Shares issued pursuant to notes conversion			5,476,848		348,845
All the above share transactions have been retroactively restated for the reverse stock split described in Note 9.

See Notes 5 and 9 for additional disclosure on non-cash transactions.

	Period Ended March 31,
	2014		2013

Interest paid in cash	$	-	$	-
Income taxes paid	$	-	$	-

NOTE 11:CONTINGENCIES AND COMMITMENTS

Contingencies:

Consultant Litigation

In May 2012, the Company issued 112,000 post-reverse split shares of common stock to two consultants. The Company contested the validity of the services provided and initially was able to delay the sale of the contested shares. The Company was not successful in recovering the contested shares. A claim for alleged damages of approximately $362,000 plus costs by one of the consultants as a result of the contesting of the issuance of the shares has been filed in the Supreme Court of New York. The claim is for damages on the difference between market price at the time the Company was able to delay the sale of his shares and the market price at the time of the sale of all of his shares. As the result of a judicial decision in New York the consultant received a bond payment of approximately $100,000 that the Company had used to secure a temporary restraining order against the issuance of stock to him. The Company is pursuing this litigation through the American Arbitration Association and the potential loss from this litigation, if any, is presently not yet determinable.

Tax Filings

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

Commitments:

Combined Research and Operating Obligations

Effective May 25, 2010, the Company entered into a research and license Option Agreement with the Mayo Clinic for the development and possible commercial use of a cancer vaccine. Subject to the approval and guidance of the United States Food and Drug Administration (“FDA”) the Mayo Clinic plans to conduct a Phase I human clinical trial (“Phase I Trial”) to test and develop the Company’s technology.

The Company agreed that, during the period of the option and upon approval of FDA to conduct Phase I Trials, it will pay all the costs incurred by the Mayo Clinic, not to exceed a total of $841,000, of which $510,000 has been paid by a third party under the subsequent Sponsored Research Agreement and $330,000 has been accrued in prior years. Management anticipates that Phase 1 Trials will complete by the end of 2014.

Management Services Agreement

In February 2011, the Company approved an employment agreement with Dr. Wilson with an initial term of 2 years, which may be automatically extended for successive one-year terms. This employment agreement provides for annual compensation of $180,000 and the grant of an option to acquire 20,000 shares of the Company’s common stock at $19.00 per share, 50% of which vested on March 16, 2011, while the remainder will vest monthly over a period of two years (417 per month). The options shall be exercisable for at least five years.

Consultant Agreements

In May 2012, the Company entered into a one year consulting services agreement superseding the previous management consulting agreement with a consultant (“Consultant A”) to provide expertise in the areas of finance and corporate development to the Management and Board of TapImmune. The consulting services agreement provides for a consulting fee of $12,000 per month from May 2012 to December 2012 and $10,000 for the following four months. The Company also granted 2,500 options to the consultant, vesting equally over twelve months at an exercise price of $17.00 with a ten year term.

In November 2013, the Company entered into an advisory agreement with Consultant A to provide expertise in the areas of finance, corporate restructuring and corporate development to the Management and Board of TapImmune for a one year term. The advisory agreement provides for an advisory fee of $10,000 per month from November 2013 to May 2014 for six months, extendable for additional six months subject to mutual agreement. The Company will also grant 250,000 shares to the consultant post restructuring of the Company’s debt, of which the Company issued 150,000 common shares during the period ended March 31, 2014 (Note 9).

In February, 2014, the Company entered into a one year media and investor relations service contract with a consultant. The contract provides for the Company to make a $100,000 payment on signing of the contract (paid) and 200,000 shares of restricted common stock, of which 100,000 are to be issued immediately and an additional 100,000 restricted common stock within 10 business days upon the Company’s successful listing on NASDAQ or NYSE MKT exchange.

NOTE 12:ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts Payable and Accrued Liabilities

	March 31, 2014		March 31, 2013
	$

Trade accounts payable		893,658		1,459,469
Accrued liabilities		2,853,258		183,245
Employee payroll and severance		41,791		132,916
Accrued interest		76,741		122,833
		3,865,448		1,898,463

Accrued liabilities includes an amount of $2,625,281which the Company has the right to settle in shares of common stock.

NOTE 13:SUBSEQUENT EVENTS

Subsequent to the period ended March 31, 2014, certain debt holders converted $968,688 of debt into 283,236 shares of common stock of the Company.

In April, 2014, the Company issued 15,000 shares of common stock in exchange for investor relation services.

In May, 2014, the Company issued 25,000 shares of common stock in exchange for legal services.

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

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

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

The following should be read in conjunction with our unaudited consolidated interim financial statements and related notes for the three months ended March 31, 2014 included in this quarterly report, as well as our Annual Report on Form 10-K for the year ended December 31, 2013.

Company Overview

Our Cancer Vaccines

TapImmune is a clinical-stage immunotherapy company specializing in the development of innovative peptide and gene-based immunotherapeutics and vaccines for the treatment of cancer and infectious disease. The Company combines a set of proprietary technologies to improve the ability of the cellular immune system to destroy diseased cells. These are peptide antigen technologies and DNA expression technologies, Polystart™ and TAP.

To enhance shareholder value and taking into account development timelines, the Company plans to focus on advancing its clinical programs including our HER2/neu peptide antigen program and our Folate Alpha breast and ovarian trials into Phase II. In parallel, we plan to complete the preclinical development of our Polystart™ technology and to continue to develop the TAP-based franchise as an integral component of our prime-and-boost vaccine methodology.

Unlike other vaccine technologies that narrowly address the initiation of an immune response, TapImmune's ("Prime" and "Boost") approach broadly stimulates the cellular immune system by enhancing the function of killer T-cells and helper T-cells. Our peptide vaccine technology may be coupled with our recently developed in-house Polystart™™ nucleic acid-based technology designed to enhance T-cell antigen presentation on the surface of appropriate populations of presenting cells. Our Polystart™ technology directs the translation and subsequent endogenous natural processing of antigenic T-cell epitopes contained within a poly-antigen array(s) at four times the level of conventional comparator systems, thereby providing a greater signal/propensity to attract and directly interact with a patient’s T-cells. Accordingly, elevated levels of target specific cell surface presented T-cell antigen(s) are correspondingly expected to more effectively engage, activate and expand antigen specific killer T-cell population(s) that can then seek out and destroy target cells (e.g., cancer cells). Moreover, our versatile Polystart™ technology is designed to express either Class I killer or Class II helper T-cell antigenic epitopes. Our nucleic acid-based systems can also incorporate “TAP” which stands for Transporter associated with Antigen Presentation.

We are currently focusing on the clinical development and testing of our product candidates. In this regard, we have two Phase I studies being conducted at the Mayo Clinic (Rochester, MN) which are designed to evaluate the safety and immune response(s) of a set of proprietary HER2/neu antigens for a HER2/neu breast cancer vaccine and Folate Receptor Alpha for breast and ovarian cancer respectively. TapImmune has the exclusive option to license each of these technologies upon the completion of each Phase I. In addition, we plan to initiate two Phase II studies in Q4 of 2014. The first of which will include a novel Class I antigen in a Phase Ib/II study, providing a vaccine for HER2/neu breast cancer that can stimulate both killer T-cells and helper T-cells. The second Phase II trial is expected to include our folate alpha receptor epitopes and will likely focus on ovarian cancer, which we believe will allow us to proceed with an orphan drug application pending discussion with the FDA.

The Company plans to incorporate the pre-clinical development of Polystart™ as a boost strategy for HER2/neu breast cancer, colorectal cancer, ovarian cancer and triple negative breast cancer.

The current standard therapies for cancer treatment include surgery, radiation therapy and chemotherapy. However, we believe that these treatments are not precise in targeting only cancerous cells and often fail to remove or destroy all of the cancer. The remaining cancer cells may then grow into new tumors, which can be resistant to further chemotherapy or radiation, which may result in death. In the United States, deaths from cancer are second only to cardiovascular deaths. Our candidate breast cancer, colorectal cancer and ovarian cancer immunotherapeutic vaccines are being developed for use in this setting as an adjuvant treatment to prevent recurrent disease.

Management strongly believes that the comprehensive scientific underpinnings of our overall approach, to elicit the production of both helper T- cells and killer T- cells, will provide the Company with highly competitive product candidates for the treatment of HER2/neu positive breast cancer, colorectal cancer, ovarian cancer and triple negative breast cancer.

Our Infectious Disease Program

Regarding our programs for the development of vaccines aimed at viral pandemics/biodefense, we believe that our ongoing collaborations with the Mayo Clinic have progressed well and studies on the immunogenicity of novel smallpox antigens in mice treated with both antigens and TAP expression vectors have been completed. These antigens collectively can protect mice from a lethal dose of vaccinia virus and thus forms the basis for the first peptide-based vaccine for smallpox,. We plan to complete animal efficacy and human safety studies through non-dilutive grant funding in collaboration with Dr. Greg Poland and colleagues at the Mayo Clinic and anticipate that further development will be completed through strategic corporate partnerships. The use of non-dilutive grant funding to progress this area allows the Company to focus the majority of its internal resources on HER2/neu breast, ovarian and triple negative cancers.

General

The facilities at 1551 Eastlake Avenue, Seattle continue to meet our expectations and allow us to conduct core research and development studies in collaboration with our world-class collaborators and enable us to manage our cash flow. It has allowed us to generate new intellectual property (IP), adding to our core TAP IP and antigen specific IP from the Mayo Clinic for which we have either licensed outright or have exclusive options to license.

Over the past two quarters, we have, in a challenging financing climate, raised sufficient working capital to fund and progress our operations and significantly restructured our balance sheet and capital structure. We believe that we continue to make good progress with the resources available to us. With the start of clinical programs and our focus on securing non-dilutive financing from a number of sources, management is confident that our current pathway will secure longer term capital to finance and accelerate our activities. The strength of our science and development approaches is becoming more widely appreciated, particularly as our clinical program generates data and as we embrace additional collaborations with leading institutions and corporations.

While the pathway to successful product development takes time and significant resources, we believe that we have put in place the technical and corporate fundamentals for success. The strength of our product pipeline gives us a unique opportunity to make a major contribution to global health care.

Company History

We currently trade on the OTC Bulletin Board under the symbol “TPIV”.

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. (“GP Canada”), 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. Given the massive unmet need in the treatment of metastatic cancer combined with our process for harnessing the body’s own immune system to treat certain cancers, we believe that we are positioned to be a leading contributor to solving this problem.

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. The strategic vision of TapImmune is to stimulate the production of both T-helper cells and T-killer cells through the use of natural processed antigens discovered in patients. In addition, our technologies can improve antigen presentation through the use of PolyStart™ and TAP.

By restoring TAP expression to TAP-deficient cells, the MHC Class I protein peptide complexes could signal the immune system to attack the cancer. A long-term strategic vision of TapImmune is to restore the TAP function within cancerous cells, thus making them immunogenic, or more “visible” to cancer fighting immune cells. Management believes that this cancer vaccine strategy will provide the most commercially viable therapeutic approach that addresses this problem of “non-immunogenicity” of cancer.

In addition to our focus on the cancer vaccines, with adequate funding and with strategic partnerships, we will also pursue the development of prophylactic vaccines against infectious microbes by partnering with other vaccine developers in the infectious disease market.

TapImmune’s Target Market and Strategy

We will focus our product development in oncology, both, alone and with corporate partners and/or collaborators including the Mayo Clinic for HER2/neu positive Breast Cancer, Folate Alpha Ovarian and Breast Cancer and smallpox. 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. The goal of TapImmune management is to have the FDA approve our cancer vaccines within the next few years so that we can secure a portion of this market.

With the required funding in place, we will support our infectious disease partnership, with the Mayo Clinic and will look to non-dilutive financing to fund infectious disease projects.

Management also believes that our Polystart™ expression vector approach will provide a flexible and unique platform for the creation of new vaccines that can rapidly respond to emerging viral threats/bioterrorism in addition to enhancing the efficacy of current vaccines in the treatment of infectious disease. If successful, this platform technology would be a significant advance in vaccine development and it will be a key business development strategy to pursue additional partnerships and joint research and/or development ventures with vaccine manufacturers and pharmaceutical companies to bring new and improved vaccines to market. In addition to a broad range of oncological treatments, this strategy includes the development of vaccines for pandemic diseases and for bioterrorism threats. Management believes that our adjuvant will increase the potency of many of the currently available vaccines and lead to the creation of better, more effective new vaccines, thereby allowing us to participate in this large market through novel new products and in combination with existing vaccines.

Our business strategy in cancer is to take products through Phase II clinical trials and then partner with pharmaceutical marketing organizations ahead of Phase III trials. In the infectious disease/biodefense area our business strategy is to seek joint research and development partnerships on our infectious disease platform with companies seeking to expand their product portfolios.

The global market for infectious disease based vaccines is dominated by five companies—Merck, GlaxoSmithKline, Sanofi Pasteur (the vaccines division of Sanofi SA), Pfizer Inc. and Novartis—with Pfizer, GlaxoSmithKline, Sanofi, and Novartis collectively accounting for approximately 74% of the market (Source: Transparency Market Research’s Global Vaccine Market Analysis and Forecast 2011-2016). This market is estimated at roughly $30 billion worldwide, with the U.S. contributing approximately $20 billion. Importantly, there still exist significant development opportunities in the global vaccine market, as there are more than 300 infectious diseases yet effective prophylactic therapies for only approximately 15% of these (Source: The Life Sciences Report’s “Vaccine Therapies Hold Promise for Investors: Stephen Dunn,” April 12, 2012). Management believes that ultimately our combined technology Platform(s) will have the potential to increase the potency of many of the currently available vaccines and lead to the creation of better, more effective new vaccines, thereby allowing us to participate in this large market through novel new products and in combination with existing vaccines.

Research and Development Efforts

We direct our research and development efforts towards the advancement of immunotherapeutic and prophylactic vaccine products for the treatment of cancer and protection against pathogenic microbes respectively, using our combined proprietary technologies, (1) relevant killer plus helper T-cell peptide antigens, (2) Polystart™ nucleic acid-based expression system(s), and (3) TAP. We have focused our efforts initially on the development of a therapeutic vaccine for applications in cancer treatment, while concomitantly demonstrating the breadth of our combined technology platform for the development of prophylactic vaccines. Our product development efforts are opportunistically designed to consider combinations with 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 have made significant progress in the development of a nucleic acid-based (Co-linear Polystart™) technology which directs the enhanced synthesis of a linear peptide antigen array comprising multiple proprietary T-cell epitopes (CD4 and CD8). In addition, the technology also directs the synthesis of the protein TAP1 associated with the transport of MHC Class I epitopes to the surface of cells. The expression or functioning of this protein is often lowered in tumor cells or virally infected cells and its replacement can enhance antigen presentation. Recent work on this novel expression vector platform has demonstrated that T-cells recognize cell surface presented T-cell peptide epitopes confirming that multiple individual peptides are effectively and functional processed from a linear peptide antigen array and that this leads to peptide specific T-cell killing.

Products and Technology in Development

Clinical

For perspective, the Company notes that 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. For an immunotherapeutic/vaccine in particular, Phase I studies are generally conducted in cancer patients that have previously received one or another current standard of care and include the measurement of cellular immune responses. Phase II usually involves studies in a more focused patient population in order to carefully assess clinical activity of the drug in specific targeted indications, dosage tolerance (i.e., dose escalation) and optimal dosage, while continuing 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

Phase I Human Clinical Trials – HER2/neu+ Breast Cancer – Mayo Clinic

On June 1, 2010, we signed an exclusive licensing option agreement with the Mayo Clinic, Rochester MN for clinical development of a new HER2/neu breast cancer vaccine technology. An IND for Phase I human clinical trial on the HER2/neu cancer vaccine in collaboration with the Mayo Clinic was allowed by the FDA in July, 2011 and the Mayo IRB approved the trial on May 4, 2012. This trial is fully enrolled and closed, and patient dosing has been completed. All patients have received the Company’s vaccine composition, and interim safety analysis on the first six patients is complete and shown to be safe. In addition, each of the first six patients treated, developed specific T-cell immune responses to the antigens in the vaccine composition proving a solid case for advancement to Phase II in 2014. An additional secondary endpoint incorporated into this Phase I Trial will be a two year follow on recording time to disease recurrence in the participating breast cancer patients. The assessment of vaccine safety (primary endpoint) and evaluation of immunogenicity (secondary endpoint) for this trial are currently scheduled for completion at the end of 2014.

As this Phase I Trial progresses, we plan to add a Class I peptide, licensed from the Mayo Clinic (April 16, 2012), to the four Class II peptides in the context of a Phase I(b)/II clinical trial. Management believes that the combination of Class I and Class II HER2/neu antigens, gives us the leading HER2/neu vaccine platform. Therefore a key goal in 2014 is to progress the HER2/neu vaccine into the above mentioned Phase 1(b)/II Clinical Trial. The cost of funding our current Phase I clinical program in HER2/neu breast cancer at the Mayo Clinic is approximately $850,000 and is mostly paid off as of this report.

Phase I Human Clinical Trials – Folate Alpha Breast and Ovarian Cancer – Mayo Clinic

On March 19, 2014, the Company announced the signing of an exclusive option agreement for a set of unique peptide epitopes targeting Folate Receptor Alpha in both breast cancer and ovarian cancer.

Folate receptor alpha is expressed in nearly 50% of breast cancers and in addition, over 95% of ovarian cancers, for which the only treatment options are surgery and chemotherapy, leaving a very important and urgent clinical need for a new therapeutic. Time to recurrence is relatively short for this type of cancer and survival prognosis is extremely poor after recurrence. In the United States alone, there are approximately 30,000 ovarian cancer patients newly diagnosed every year.

A 24 patient Phase I clinical trial is currently underway. The trial is fully enrolled and closed, and Phase II advancement is expected and will be assessed in late 2014.

No serious adverse events have occurred to date and more information and immune response data will be made available over the course the trial. More information can be seen at:

http://clinicaltrials.gov/ct2/show/NCT01606241?term=folate+receptor+alpha&rank=1

Preclinical

Polystart™™

TapImmune is initiating the development of a nucleic acid-based expression system that can be aligned as a prime and boost strategy with our peptide-based vaccine compositions. The nucleic acid-based platform may also represent a second stand-alone vaccine technology. The nucleic acid–based technology is termed “Polystart™. The Company’s Polystart™ technology was invented in-house and is therefore not subject to any licensing fees or downstream royalty payments. The Polystart™ technology composition can be administered in the form of a plasmid DNA or incorporated into a viral delivery system (RNA or DNA). The Polystart™ technology comprises two portions, one supporting high level of expression and the other a T-cell peptide antigen array (“PAA”). The antigens making up the PAA are naturally processed inside a patient’s own cells where they are then presented on the cell surface visible for T-cell recognition, activation and expansion. We have confirmed that the Polystart™/PAA technology works in preclinical studies in context with our smallpox vaccine candidate. However, it is important to understand that this is a platform technology which can be adapted to essentially any T-cell peptide antigen targeted indication, including HER2/neu. The Polystart™ technology combined with our peptide-based technology is an ideal opportunity for developing an effective prime plus boost vaccination methodology. The Company has filed a U.S. Provisional Patent Application around the Polystart™ technology.

We plan to develop or out-license our technologies for the creation of enhanced anti-viral vaccines, such as for smallpox and other viral diseases. In our smallpox collaboration, scientists at the Mayo Clinic will complete small animal studies in respect of a novel set of vaccinia virus peptide antigens within the next few months. The subsequent regulatory pathway for this product is to use the FDA’s “Animal Efficacy Rule” for completion of efficacy studies in primates followed by Phase I clinical studies on vaccine safety. We anticipate that we will complete these studies with a strategic partner involved in the Biodefense space.

We intend to progress our infectious disease programs with non-dilutive grant funding as well. In collaboration with the Vaccine Group at the Mayo Clinic we will continue development of our smallpox vaccine and to expand the use of our TAP platform to emerging pathogens that could be either pandemic or bioterrorist threats.

Strategic Relationships

Mayo Foundation for Medical Education and Research

On May 26, 2010 we signed a Technology Option Agreement with the Mayo Foundation for Medical Education and Research, Rochester, MN, for the evaluation of HER2/neu peptide epitopes as antigens for a breast cancer vaccine. The agreement grants TapImmune an exclusive worldwide option to become the exclusive licensee of the technology after completion of Phase I clinical trials.

Following approval of the IND by the FDA in July, 2011, TapImmune and the Mayo Foundation executed a Sponsored Research Agreement for the clinical trial.

On May 4, 2012, Mayo IRB approval was confirmed and patient dosing started in August 2012. Interim safety analysis on the first five patients was completed successfully allowing continuation of the trial.

On July 24, 2010, we signed a Research and Technology License Option Agreement with the Mayo Foundation for Medical Education and Research, Rochester, MN, to evaluate novel smallpox peptide antigens. The Agreement grants TapImmune an exclusive worldwide option to become the exclusive licensee of the smallpox vaccine technology after research studies have been completed under the terms of the agreement. This project is progressing well with identification of several peptide antigens which could form the basis of a new vaccine for potential stockpiling. Its completion in Q4, 2014 will trigger the decision whether to proceed into primate studies.

On April 16, 2012, we announced an Exclusive Agreement with the Mayo Foundation for Education & Research, Rochester, MN, to License a proprietary MHC Class I HER2/neu antigen technology. This antigen was discovered in the laboratory of Dr. Keith Knutson at the Mayo Clinic. In contrast to Class I antigens in clinical testing this novel antigen is naturally produced in the intracellular proteasome and presented to T-cells as the MHC Class I peptide complex. Scientific details of this new work was presented by Andrea Henle of Dr. Knutson’s lab at the Annual Meeting of The American Association of Immunologists held in Boston, MA, May 2012 and by Mark Reddish, Head of Development at TapImmune at the Third Annual Cancer Vaccines and Active Immunity Summit, Boston, June 26, 2012. A peer-reviewed manuscript from the Knutson lab, which describes the science in detail, has been accepted for publication in Journal of Immunology.

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.

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

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.

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

Method of Enhancing an Immune Response

On October 27, 2011 The US Patent and Trademark Office issued Patent 7,994,146 entitled “Method of Enhancing an Immune Response”. The invention relates to a method of enhancing an immune response to an antigen by augmenting the level of TAP (Transporters Associated with Antigen Processing) molecule in a target cell bearing the antigen.

PolyStart Technology (TapImmune Inc.)

U.S. Provisional Application 61/954,588, entitled “Nucleic Acid Molecules Vaccine Compositions and Uses Thereof”, filed March 17, 2014

The Company has multiple patents and patent applications in association with its exclusive licenses and option agreements with Mayo Clinic providing many years of patent protection for its proprietary product candidates.

Infectious Disease (Mayo Collaboration, Poland/Kennedy)

U.S. Patent 7,622,120, entitled “Peptide Originating from Vaccinia Virus, issued Nov 24, 2009.

U.S. Patent Application 13/222,862 entitled “Vaccinia Virus Polypeptides” converted August 31, 2011.

Oncology (Mayo Collaboration, Knutson)

U.S. Patent Application 12/740562, entitled “HLA-DR Binding Peptides and Their Uses” 371 date August 24, 2010 derived from International Application PCT/US2008/081799 filed October 30, 2008.

International Application PCT/US2013/026484 filed February 15, 2013, entitled “Methods and Materials for Generating CD8+ T Cells having the Ability to Recognize Cancer Cells Expressing a HER2/Neu Polypeptide”.

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.

Competition

Management believes that a number of companies, which are developing various types of similar immunotherapies and therapeutic cancer vaccines to treat cancer, could be our major competitors including: Lion Biotechnology, Advaxis, Dendreon Corp., Genzyme Molecular Oncology, Immune Design, Oncothyreon, Celldex, BN Immunotherapeutics, Immunocellular, Galena, Antigen Express,Transgene S.A., and Bavarian Nordic.

Plan of Operations

Management believes that our platform technologies combine to make the most comprehensive vaccines in development today. The comprehensive approach of stimulating both the helper and killer T cell response to cancer antigens is essential in having an effective and long lasting killing effect on tumor and infected cells.

On Jan 10, 2014 the shareholders and the Board of Directors approved a reverse stock split whereby every one hundred (100) shares of common stock held by a Tapimmune stockholder was exchanged for one share of Tapimmune common stock (the “Reverse Stock Split”). The Board of Directors set the close of business on the twentieth day following the mailing of an Information Statement to the shareholders as the date on which to file a “Certificate Pursuant to NRS 78.209” with the Nevada Secretary of State to make the Reverse Stock Split effective. Every one hundred (100) shares of common stock issued and outstanding immediately prior to that effective date was reclassified as and changed into one share of common stock.

The principal effect of the Reverse Stock Split decreased the number of outstanding shares of common stock. At the time of the approval of the Reverse Stock Split by the shareholders on January 10, 2014, we had approximately 145,000,000 common shares outstanding, which number was reduced to approximately 1,450,000 shares as a result of the Reverse Stock Split. The respective relative voting rights and other rights that accompany the common stock were not altered and the common stock continues to have a par value of $0.001 per share.

Reasons for, and the effect of, the Proposed Reverse Stock Split

Management undertook the Reverse Stock Split with three goals in mind: (i) reduce the Company’s debt by creating a capital structure that would be attractive enough to the then debt-holders of the company to entice them to convert into shares of the Company; (ii) position the Company so that upon a successful capital raise it could up-list on a NASDAQ market; (iii) create a capital structure, by increasing the authorized number of shares, which would allow the Company to make acquisitions or raise additional capital or both. On the date of the written consent the company had essentially no shares available for issuance for any purpose as the remaining 5,000,000 (and more) were reserved for issuance to our debtors.

After the Reverse Stock Split, debt settlement conversions and amendment to the articles of incorporation, the common stock outstanding was approximately 15,000,000 shares, providing us with 485,000,000 authorized but unissued shares of common stock to proceed with a capital raise through the sale of common stock.

As a result of the Company’s recent restructure, approximately $5,000,000 of debt and bridge debt has been converted into common shares via of our preferred stock which, in turn, was converted into approximately 11,500,000 of our common shares upon the effectiveness of the Reverse Stock Split and the amendment to the articles of incorporation. While there was no guarantee of success in this effort, these efforts have allowed us to reduce the debt held on our books by approximately $5,000,000 (including recently added bridge funded convertible debt) and allow the prior shareholders to maintain an approximately 9.5% of the outstanding common stock upon the completion of the restructuring.

Debt conversions and stock issuances

In regard to the above explanation and pursuant to our articles of incorporation, we were authorized to issue up to 5,000,000 shares of preferred stock.

We greatly reduced the debt outstanding on our balance sheet by converting debt into shares of preferred stock, which in turn converted into shares of common stock upon the occurrence of the Reverse Stock Split pursuant to applicable certificates of designation. On January 7, 2014, we filed a certificate of designation to create up to 1,250,000 shares of Series A Convertible Preferred Stock. Between January 7, 2014 and February 18, 2014, we converted debt totaling approximately $3,497,570 into 874,393 shares of Series A Convertible Preferred Stock. Upon the occurrence of the Reverse Stock Split on February 18, 2014, the Series A Convertible Preferred Shares converted into approximately 4,371,964 shares of common stock. Also on February 18, 2014, approximately $1,376,946 of outstanding debt converted into 1,376,946 shares of Series B Convertible Preferred Stock, which in turn converted into approximately 8,512,900 shares of common stock. As a result of these issuances, we have approximately 16,170,258 shares of our common stock currently issued and outstanding. These transactions were not registered under the Act in reliance on the exemption from registration in Section 4(2) of the Act, as a transaction not involving any public offering. We issued a press release on February 25, 2014 discussing these and other matters and further details are available in the filed Form 14c and Form 8-Ks describing the corporate actions.

Current State of the Company

The market and investment community have supported and applauded the restructuring effort undertaken. With the support of the creditors and their agreement to convert debt to new equity we have a significantly stronger balance sheet to present to the investor community and we expect to attract the financial backing of some of the most respected names in life science to aid us in executing our product development plans and to provide fuel for our growth. For 2014, we have ambitious plans to advance and deepen our pipeline as we expand operations and explore strategic business development opportunities. Following is a partial summary of the progress we made over the last six months, as well as an overview of our objectives for 2014.

In 2013, our HER2/neu clinical program continued with full recruitment of breast cancer patients, progression through initial safety checkpoint and demonstration of immune responses. We also saw a major advancement in technology development in our own laboratories with “proof of concept” that our new and novel expression vector technology (Polystart™) could provide a much greater signal for T-cells to kill abnormal cells and become a platform technology from which we can build out multiple applications and revenue streams. Additional data and information will be forthcoming as we attempt to further secure the intellectual property around this exciting technology advancement.

During 2013, results from our infectious disease program have opened several business development opportunities we expect to solidify by the end of 2014.

On March 3, 2014 the company announced positive interim data on the Phase I clinical trial in Her2/neu positive breast cancer. The TPIV vaccines address a significant unmet market need. They are applicable to a much larger and broader patient population than current ‘standard of care’ therapies like Herceptin by Roche, which is useful for only 15-20% of the Her2/neu Breast Cancer patient population. Herceptin is not designed to kill tumor cells; it slows tumor growth. It is a very large market as evidenced by Herceptin’s 2013 sales exceeding $6 Billion. By contrast, our vaccine is applicable to over 50% of the Her2neu patient population AND is also not limited to breast cancer as Her2/neu is also target in Colorectal and Ovarian cancer where there are very few therapeutic options.

Our Her2/neu vaccine combination is unique in that it is designed to stimulate killer T Cells and the helper T Cells that are needed to sustain the killer cells for a long lasting vaccine that kills tumor cells. Published data also supports a five-fold increase in killing efficacy compared to the development vaccine Neuvax by Galena.

TPIV100 is completing Phase 1 with Phase lb/ll scheduled to start in Q4 2014.

On March 19th 2014 we announced the licensing of a late stage phase l clinical program in ovarian cancer (Folate Alpha). We are very excited about the opportunity this therapeutic presents. Folate receptor alpha is expressed in nearly 50% of breast cancers and in addition, over 95% of ovarian cancers, for which the only treatment options are surgery and chemotherapy, leaving a very important and urgent clinical need for a new therapeutic. Time to recurrence is relatively short for this type of cancer and survival prognosis is extremely poor after recurrence. In the US alone, there are approximately 30,000 ovarian cancer patients newly diagnosed every year. Importantly, this patient population has very few treatment options and as a result our plan is to present a Phase II advancement plan in late 2014 with an application for Orphan Drug Status. Orphan drug status is allowed by the FDA in cases where the disease affects fewer than 200,000 people in the USA and makes allowances for an accelerated regulatory process and sales of the drug for 7 years without competition.

On March 20, 2014, the Company announced the filing of new intellectual property for Polystart™. This is a unique vaccine platform Antigen Expression Systems that ‘boosts’ the presentation of the desired peptide on the surface of the cell for the Killer T Cells to recognize and kill. This totally novel system creates a four-fold increase in antigen presentation and in current studies in smallpox has shown to be working very well. We own this technology exclusively and believe that it has unlimited application in oncology and infectious diseases not only in our own platforms but can be applied to many others via licensing. Ideal candidates include Provenge, Yervoy and many more.

Infectious Disease and National Preparedness is another very significant market and ideal therapeutic area for the TPIV vaccine conjugate. Along with novel peptides and the Polystart™ expression system the TPIV vaccine platform can address multiple infectious disease s as well as pandemic and biodefense threats. Our current Smallpox vaccine study at Mayo Clinic has already shown significant benefits over the current vaccine stockpile. The last DHHS/BARDA contract for a smallpox vaccine stockpile contract was worth $3 Billion. (http://www.dddmag.com/news/2011/02/siga-track-billion-dollar-smallpox-contract)

Upcoming 2014 milestones include:

·	Additional interim data on immune responses in the Her2/neu trial.

·	Initial interim data on the Folate Alpha trial in breast and ovarian cancer.

·	Final data on pre-clinical small animal studies in smallpox at Mayo Clinic and decision on advancement to non-human primates and license deal and partnering opportunities.

·	Uplisting to NASDAQ in 2014

Our new laboratories and offices at 1551 Eastlake Avenue, Seattle, enabled our scientific team to access a wide array of functioning core labs and shared equipment relevant to all aspects of development of our gene-based product candidates. In these labs TapImmune staff discovered and started the development of our Polystart™ nucleic acid-based expression vector technology and have begun to move it towards the clinic. In addition, we now have the capabilities to produce and test a range of proprietary Polystart™ -based expression vectors for both cancer and infectious disease and to expand our external collaborations. Importantly, the development of Polystart™ has allowed us to significantly enhance our intellectual property portfolio.

We continue to leverage considerable resources through our external collaborations. In 2013 we had to downsize our in-house technical team due to resource constraints. We plan to enhance our technical team in 2014 under the leadership of Dr. Bob Florkiewicz. Bob has held academic and biotech positions over a career spanning 25 years, including Scientific Founder of Ciblex Corporation, Bob is also a registered U.S. Patent Agent with previous in-house experience managing the Intellectual Property assets at ID Biomedical Corporation (Bothell, WA). Bob is the inventor of the Company’s Polystart™ technology. Mark Reddish is a member of the Company’s Board of Directors and serves as an Advisor in the area of product Development. Mark is a recognized leader in vaccine technology development with an impressive track record in taking leading immunotherapy products from early research through development, both in the areas of cancer vaccines and biodefense. He was formerly Vice President of Product Development and Principal Investigator, Biodefense at ID Biomedical, Bothell, WA, prior to the acquisition of the company by Glaxo SmithKline for $1.6 billion. At Biomira Inc, (renamed Oncothyreon) he was responsible for preclinical development of their cancer vaccines program.

Our collaborator Dr Keith Knutson joined the Vaccine and Gene Therapy Research Institute of Florida in 2013 as Research Program Director in Oncology and a Full Member of the Institute. He retains an adjunct position at the Mayo Clinic that maintains oversight and analysis of the Phase I clinical trial in HER2/neu breast cancer.

With respect to the broader market, a major driver and positive influence on our activities has been the emergence and general acceptance of the potential of a new generation of immunotherapies that promise to change the standard of care for cancer. The immunotherapy sector has been greatly stimulated by the approval of Provenge® for prostate cancer and Yervoy™ for metastatic melanoma, progression of the areas of checkpoint inhibitors and adoptive T-cell therapy and multiple approaches reaching Phase II and Phase III status.

We believe that through our combination of technologies, we are well positioned to be a leading player in this emerging market. It is important to note that many of the late stage immunotherapies currently in development do not represent competition to our programs, but instead offer synergistic opportunities to partner our Polystart™ and/or TAP expression systems. Thus, the use of naturally processed T-cell antigens discovered using samples derived from cancer patients plus our Polystart™ expression technology to improve antigen presentation to T-cells could not only produce an effective cancer vaccines in its own right but also to enhance the efficacy of other immunotherapy approaches.

On the technology and product pipeline side, management believes that the company is fundamentally strong and poised to be a leading company in a highly attractive, multi-billion dollar and expanding market, a position reinforced by our recruitment of top-class managers, advisors and investors who all share our vision.

Results of Operations

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

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

We are a development stage company. We recorded a net loss of $29,707,000 during the three months ended March 31, 2014 compared to $441,000 for the three months ended March 31, 2013.

Operating Expenses

Operating costs increased to $1,222,000 during the three months ended March 31, 2014 compared to $1,115,000 in the prior period. Significant changes in operating expenses are outlined as follows:

·	Consulting fees increased slightly to $35,000 during the three months ended March 31, 2014 from $30,000 during the prior period, due to a new consulting agreement entered into in November 2013.

·	Consulting fee – stock-based increased to $686,000 during the three months ended March 31, 2014 from $68,000 during the prior period. The higher current period expense is primarily due to increased share based payments based on new agreements, to the consultants, compared to the prior period.

General and administrative expenses decreased to $194,000 in the three months ended March 31, 2014 from $207,000 in the prior period, with the decrease resulting from lower staffing and rental costs at the Company’ Seattle office offset by higher travel investor relations related expense in the current period.

·	Interest and finance charges decreased to $35,000 during the three months ended March 31, 2014 from $335,000 during the prior period. Current and prior period interest charges are primarily interest charges on convertible debt, which was issued in the second half of 2012 and fiscal year 2013.

·	Management fees did not change during the three months ended March 31, 2014 from the prior period due to no changes in management structure.

·	Management fees – stock-based decreased to $4,000 during the three months ended March 31, 2014 from $16,000 during the prior period. The current and prior period expense consists of the fair value of option grants earned during the period.

·	Professional fees decreased to $186,000 during the three months ended March 31, 2014 from $267,000 during the prior period, due to higher legal fees incurred relating to debt restructuring and related matters in the prior period.

·	Research and development decreased to $23,000 during the three months ended March 31, 2014 from $134,000 during the prior period. This was due to lower technology licensing fee accrued for payments due to Mayo clinic and Crucell Holland B.V. in the current period.

Our net loss for the three months ended March 31, 2014 was $29,707,000 or ($4.29) per share, compared to a net loss of $441,000 or ($0.55) per share during the prior period. The weighted average number of shares outstanding was 6,929,988 for the three months ended March 31, 2014 compared to 806,947 for the prior year.

During the quarter ended March 31, 2014, we converted approximately $5,231,950 of debt and all outstanding Preferred B shares into 14,211,684 shares of common stock. As required by US GAAP we recorded the value of these shares at fair value at the time of issuance. As a result of the debt settlements and conversions, the Company recorded a loss on settlement of debt of $27,663,430, which is the difference between the carrying value of the debt settled and the value of the common stock issued at the time of issuance.

Liquidity and Capital Resources

The following table sets forth our cash and working capital as of March 31, 2014 and March 31, 2013:

	March 31, 2014			March 31, 2013

Cash reserves	$	93,635		$	49,000
Working capital (deficit)	$	(5,505,594	)	$	(8,768,003	)

Subject to the availability of additional financing, we intend to spend approximately $7,500,000 over the next twelve months in carrying out our plan of operations. At March 31, 2014, we had $94,000 of cash on hand and a working capital deficit of $5,506,000. As such, our working capital at March 31, 2014 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.

In an effort to address this deficiency, management undertook the Reverse Stock Split with three goals in mind: (i) reduce the company’s debt by creating a capital structure that would be attractive enough to the then debt-holders of the company to entice them to convert into shares of the company; (ii) position the company so that upon a successful capital raise it could up-list on a NASDAQ market; (iii) create a capital structure, by increasing the authorized number of shares, which would allow the company to make acquisitions or raise additional capital or both.

After the Reverse Stock Split and debt settlement conversions in Q1 2014, there are approximately 16,000,000 shares, providing us with 484,000,000 authorized but unissued shares of common stock to proceed with a capital raise through the sale of common stock.

Approximately $5,500,000 of debt and bridge debt has been converted into common shares.

The market and investment community have supported and applauded the restructuring effort undertaken. With the support of the creditors and their agreement to convert debt to new equity we have a significantly stronger balance sheet to present to the investor community and we expect to attract the financial backing of some of the most respected names in life science to aid us in executing our product development plans and to provide fuel for our growth. For 2014, we have ambitious plans to advance and deepen our pipeline as we expand operations, explore strategic business development opportunities and up-list to a NASDAQ Market if we meet the necessary criteria. 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 certain elements of 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, and that there is no certainty that these levels will stabilize or reverse despite the optics of an improving economy. 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 March 31, 2014, we had accumulated losses of $85,134,000 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

Net cash used in operating activities during the three months ended March 31, 2014 was $373,000 compared to $454,000 during the prior period. We had no revenues during the current or prior periods. Operating expenditures, excluding non-cash interest and stock-based charges during the current period primarily consisted of consulting and management fees, office and general expenditures, and professional fees.

Net Cash Used in Investing Activities

Net cash used in investing activities during the three months ended March 31, 2014 was $Nil compared to $Nil during the prior period.

Net Cash Provided by Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2014 was $419,000 compared to $425,000 during the prior period. Current period financing consisted of proceeds from Series B preferred shares and advances from related parties while prior period financing relates to proceeds from convertible notes and advances from related parties.

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, 2013 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 3.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.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.Legal Proceedings

In May 2012, we issued 112,000 shares of our common stock to two consultants. We contested the validity of the issuances of this common stock based on our belief that the consultants did not perform the services agreed to under their respective consulting agreements. While we initially were able to delay the sale of the contested shares, we were not successful in clawing back the contested shares. A claim for perceived damages from Michael Gardner (one of the consultants) suffered as a result of our contesting the issuances under the consulting agreements has been filed in the Supreme Court of New York. He has based his claim for damages on the difference between market price at the time we were able to delay the sale of his shares and the market price at the time of the sale of all of his shares. As the result of a judicial decision in New York he received a bond payment of ($100,000) that the Company had used to secure a temporary restraining order against the issuance of stock to him. The company is pursuing litigation against Gardner through the American Arbitration Association.

The law firm that we used to pursue this action against the consultants had been awarded a judgment against us for $210,255 of legal fees. In the period ended March 31, 2014, we settled the judgement by issuing 1,400,000 shares of our common stock.

Item 1A.Risk Factors

Not required.

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

During the period ended March 31, 2014, we issued 14,031,151 shares of our common stock with a fair value of $31,578,129 for conversion of convertible debt, accounts payable, loan, promissory note, Series B convertible preferred shares and accrued interest in the amount of $5,378,982. In these conversions, related parties converted $721,045 of notes, accounts payable and loan into 766,444 shares of our common stock.

During the period ended March 31, 2014, we issued 199,320 shares of our common stock with a fair value of $992,900 for conversion of convertible debt and accrued interest in the amount of $163,225.

During the period ended March 31, 2014, we issued 150,000 shares of our common stock pursuant to an advisory agreement. The fair value of the shares was determined to be approximately $337,500 as on February 20, 2014.

In April 2014, we issued 15,000 shares of our common stock in exchange for investor relation services.

In April and May 2014, we converted $328,419 of debt into 308,236 shares of our common stock.

The shares mentioned above were issued in reliance on exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, including Rule 506 of Regulation D. These transactions qualified for exemption from registration because among other things, the transactions did not involve a public offering, each investor was an accredited investor, each investor had access to information about our Company and their investment, each investor took the securities for investment and not resale, there was no general solicitation or advertising in connection with the placement and we took appropriate measures to restrict the transfer of the securities.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosure

Not Applicable.

Item 5.Other Information

None.

Item 6.Exhibits

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

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

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

Exhibit 101

101.INS - XBRL Instance Document (1)

101.SCH - XBRL Taxonomy Extension Schema Document (1)

101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document (1)

101.DEF - XBRL Taxonomy Extension Definition Linkbase Document (1)

101.LAB - XBRL Taxonomy Extension Label Linkbase Document (1)

101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document (1)

(1) IN ACCORDANCE WITH THE TEMPORARY HARDSHIP EXEMPTION PROVIDED BY RULE 201 OF REGULATION S-T, THE DATE BY WHICH THE INTERACTIVE DATA FILE IS REQUIRED TO BE SUBMITTED HAS BEEN EXTENDED BY SIX BUSINESS DAYS

SIGNATURES

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

TAPIMMUNE INC.

	/s/ Glynn Wilson
	Glynn Wilson Chairman, Chief Executive Officer, Principal Executive Officer and Chief Financial Officer Date: May 20, 2014.