Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
This report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
We were incorporated in the State of Nevada as a for profit company on June 21, 2012. We initially intended to sell charcoal made from hard wood for BBQs and restaurants but we did not implement our business model. On May 21, 2015, we filed Articles of Merger with the Nevada Secretary of State whereby the Company entered into a statutory merger with its wholly-owned subsidiary, Immage Biotherapeutics Corp. The result of which was that we changed our name to "Immage Biotherapeutics Corp."
On June 4, 2015, we acquired a one hundred percent (100%) interest in a provisional patent application for certain technology known as "MAGE A", which the Company believes will be converted into a full patent once the in vitro and animal studies are completed. This patent was acquired in exchange for the Company issuing a total of 42,943,521 shares of its common stock.
The Company has issued PepVax, Inc. 5 million shares of common stock pursuant to the terms and conditions of the License Agreement, dated June 2, 2016. The shares were issued in October 2016. Pursuant to the License Agreement, PepVax, Inc. granted the Company a worldwide, unrestrictive, perpetual, royalty-free and irrevocable license in a provisional patent, and any resulting patent, for SMART Plasmid DNA TM with respect to the Company's MAGE A immunotherapy only, in exchange for 5 million shares of the Company's common stock. The SMART Plasmid DNA TM based delivery system will be used to deliver any drug developed by the Company into humans. This system is required because the drug cannot be administered directly to humans and it makes the drug safer because the dosage can be smaller using the delivery system.
Our Business
Immage Biotherapeutics is a biotechnology company developing cancer immunotherapy through the rapid and efficient development of cutting edge immunotherapy candidates using bioinformatics and outsourced laboratory resources.
Immage Biotherapeutics is an early-stage biotechnology company developing novel immunotherapy biologics to treat various cancers. Immage Biotherapeutics' co-founder, Dr. Anton Dormer, is a leading expert in peptide design and protein development through computational biology, having developed bioinformatics tools for cancer drug development. Co-founder Mr. Mahesh Narayanan is an experienced entrepreneur in the field of biotechnology, leading the business development strategies for Immage Biotherapeutics.
Immunotherapy, which encompasses vaccines, oncolytic viruses, adjuvants, and adoptive t-cell technologies, management believes, could change the entire landscape of oncology. Immage Biotherapeutics will be addressing three challenges that currently exist with immunotherapy:
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make the existing therapies more effective;
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decrease the time it takes to make cancer therapeutics; and
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reduce the cost of immunotherapy.
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Immage Biotherapeutics is designed to enhance this market with its small core of key employees, strong outsourced partners, and a large library of marketable products.
Management believes that Immage Biotherapeutics has a method that allows for the rapid development of key cancer immunotherapy candidates that could be licensed to the biotechnology and pharmaceutical industry, giving them opportunity to develop in vitro proven treatments, establishing credibility of our rapid development model.
The Company is proceeding to complete development of its lead pre-IND programs and enter Phase I clinical trials with its first therapeutic candidate.
The Company
Immage Biotherapeutics was formed to develop, market, and license its patented immunotherapy candidate for MAGE A (see below). Since the Company will have a small corporate footprint, management anticipates, but cannot guarantee, profitability is expected within three to four years of full operation, which began in September 2015. The cancer immunotherapy is proving to be a significant platform from which to launch additional product lines targeting cancers.
Through anticipated various agreements with companies in the biotechnology and pharmaceutical industries, management believes that Immage Biotherapeutics will be able to accelerate its entry into the immunotherapy development market. The Company will make a point of aggressively protecting its intellectual property, which is the foundation of the Company. With the use of proven bioinformatics tools, and the candidates constructed, Immage Biotherapeutics will be able to enter the immunotherapy market via licensed agreements and research drug development contracts with pharmaceutical companies.
MAGE A (Melanoma Cancer/Testis Antigen)
MAGE-A (melanoma-associated antigen-A) gene was originally thought to be silent proteins in normal adult tissue, but is actually expressed in various tumors. The presence of these antigens on tumor cells has been associated with worse prognosis, such as shorter survival rate in cancer patients.
We have determined that MAGE-A-derived peptides and small proteins elicit a strong in vitro T-cell response against tumor cells. MAGE-A transcripts are more frequently expressed in breast and prostate carcinomas that can be recognized by autologous CTLs on the surface of tumor cells in association with various classical HLA (human leukocyte antigen) molecules. The HLA system is the locus of genes that encode for proteins on the surface of cells that are responsible for regulation of the immune system in humans.
Because the MAGE-A genes are expressed in a variety of malignant tissues and absent in normal tissues other than the placenta and testis, their tumor-associated expression fusion proteins provide potential implications as targets for active immunotherapy. While the actual functions of these proteins are unknown, specific immunotherapies have already been initiated in melanoma patients by other parties.
Intellectual Property
Immage Biotherapeutics has a provisional patent application for its MAGE A candidate which, we believe, will be converted to a full patent once our in vitro and animal studies are complete. The drug is the result of nearly a decade of significant discovery and development work within the industry.
The Company's researchers continue to work on this target, enabling continuity of innovation and promoting rapid progress going forward. Immage Biotherapeutics believes there is a strong possibility that new discoveries made by our scientific team and collaborators will be subject to patent protection. In addition to patent protection, Immage Biotherapeutics replies upon proprietary know-how, trade secret rules and regulations, and continuing technological advances to enhance and maintain its competitive position.
Therapeutic and Immuno-adjuvant Product Development Programs
Immage Biotherapeutics management plans to focus on the development of immunotherapy for breast and prostate cancer. Immage Biotherapeutics will rely on publicly-raised financing, product sales, interest income, and corporate partnerships to fund its operations and capital expenditures.
The Company's business focus will be the following areas:
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Developing a fusion/hybrid antigen cancer vaccine that would not only be HLA free, but also be effective to all the isomers associated with MAGE A, from 1 to 11.
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The identification and development of immunotherapy candidates from our Intellectual Property library for the preparation for human clinical trials using a novel viral vector construct.
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Marketing and Sales Plan
Immage Biotherapeutics management will create licensing and contract research agreements with established pharmaceutical and biotechnology companies, which are looking for novel cancer therapeutics. Immage Biotherapeutics, we contend, will be able to accelerate its entry into the cancer market. Our breast cancer therapeutic will be a first-to-market drug for immunotherapy.
Management and Organization
We contend that Immage Biotherapeutics's management team brings with it the ability to design in vitro trials in coordination with our outsourced partners, monitor the trials, raise necessary funding, and develop new technologies through cutting-edge research and development. In addition, the members of the management team have experience in setting up the necessary infrastructure for early-stage companies that will ultimately make them successful. In the case of Immage Biotherapeutics, we believe both the advisory board and board of directors are exceptional individuals in their respective fields.
Current Undertakings
Immage Biotherapeutics is currently proceeding to:
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Develop, characterize, and scale production of a IMT-001 (Immagene Ò), a hybrid/fusion protein vaccine for MAGE A;
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Complete pre-IND work for IMT-001;
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Ramp business development efforts aimed at securing strategic partnerships, alliances, and licensees.
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Therefore, the Company intends to enter agreements with drug development partners that are interested in cutting edge immunotherapies products. Company operations will be designed to increase revenues and maintenance of operating expenses. The Company's management intends to aggressively protect its intellectual property, not only the peptide immunotherapies formulations, but also its trade names. With the peptide immunotherapies formulation, Immage Biotherapeutics will be able to enter the immunotherapies markets and focus on early licensing of our products.
Results of Operations
For the Three Months Ended November 30, 2016 and 2015:
For the three-month period ended November 30, 2016, we had no revenue. Expenses for the three-month period ended November 30, 2016, totaled $1,670,852 resulting in a net loss of $1,670,852 as compared to a net loss of $34,026 for the three months ended November 30, 2015. For the three-month period ended November 30, 2016, selling, general and administrative expenses were $27,962, professional fees were $17,824 and research and development expenses were $1,625,066, as compared to selling, general and administrative expenses of $19,796, professional fees of $13,429 and research and development expenses of $0 for the three-month period ended November 30, 2015.
For the three-month period ended November 30, 2016, our selling, general and administrative expenses increased by $8,166, primarily due to an increase in salaries and wages, and amortization expense. Research and development expenses increased by $1,625,066, of which $1,550,000 was related to the issuance of 5 million shares of common stock to Pepvax, Inc. under the License Agreement. The remaining $75,066 of research and development expenses were due to programs initiated by the Company during the period ending November 30, 2016. Our professional fees increased by approximately $4,395 due to increased investor relationship costs incurred for the period ending November 30, 2016 of $6,669, which were not incurred in the three month period ended November 30, 2015.
Capital Resources and Liquidity
Our auditors have issued a "going concern" opinion, relative to our annual financial statements for the fiscal year ended August 31, 2016, meaning that there is substantial doubt if we can continue as an on-going business for the next twelve months unless we obtain additional capital. As of November 30, 2016, we have a total of $132,968 in current assets, working capital of $30,512, and an accumulated deficit of $1,973,684. The Company will be dependent upon the raising of additional capital through placement of our common stock or debt in order to implement its business plan. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The Company is funding its operations by way of share issuances and advances from related parties. Management plans to seek additional funding to fund the operation of the Company’s business.
Off-balance sheet arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company\'s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
Reports to Security Holders
We will make available free of charge any of our filings as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the Securities and Exchange Commission ("SEC"). We are not including the information contained in our website as part of, or incorporating it by reference into, this report on Form 10-Q.
The public may read and copy any materials we file with the Securities and Exchange Commission ("SEC"). at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20002. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at (http://www.sec.gov).