Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
(MARK
ONE)
|X|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
FOR
THE FISCAL YEAR ENDED - OCTOBER 31, 2005
OR
|_|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
FOR
THE TRANSITION PERIOD FROM ______ TO______
COMMISSION
FILE NUMBER 000-28489
ADVAXIS,
INC.
(Exact
name of registrant as specified in its charter)
Colorado
(State
or other jurisdiction 0of
incorporation
or organization)
|
84-1521955
(I.R.S.
Employer Identification No.)
|
212
Carnegie Center
Suite
206
Princeton,
New Jersey
|
08540
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code:
|
(732)
545-1590
|
Securities
registered pursuant to Section 12(b) of the Act:
|
Common
Stock - $.01 par value
The
Common Stock is listed on the American Stock Exchange
|
Securities
registered pursuant to Section 12(g) of the Act:
|
[None]
|
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that Registrant was required
to
file such reports) and (2) has been subject to such filing requirements for
at
least the past 90 days. Yes
[X] No [_]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [_]
Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Rule
12b-2 of the Act). Yes [_] No [X]
The
aggregate market value of the voting common equity held by non-affiliates of
the
registrant as of December 31, 2005 was approximately $4,620,000 based upon
the
closing bid price of the registrant’s Common Stock on the Over the Counter
Bulletin Board, at December 30, 2005. (For purposes of determining this amount,
only directors, executive officers, and 10% or greater stockholders and their
respective affiliates have been deemed affiliates).
Registrant
had 37,768,932 shares of Common Stock, par value $0.001 per share, issued and
outstanding as of December 31, 2005.
DOCUMENTS
INCORPORATED BY REFERENCE
The
Exhibits to this Annual Report have been incorporated by reference from other
filings by the Company with the Securities and Exchange Commission.
FORWARD
LOOKING STATEMENTS
This
Annual Report on Form 10-K contain “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. When used in this Annual Report, statements that
are
not statements of current or historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words “plan”, “intend”, “may,”
“will,” “expect,” “believe”, “could,” “anticipate,” “estimate,” or “continue” or
similar expressions or other variations or comparable terminology are intended
to identify such forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of
the
date hereof. Except as required by law, the Company undertakes no obligation
to
update any forward-looking statements, whether as a result of new information,
future events or otherwise.
Table
of Contents
Form
10-K
Index
PART
I
|
|
|
|
PAGE
|
Item
1.
|
Business
|
1
|
Item
2.
|
Properties
|
43
|
Item
3.
|
Legal
Proceedings
|
44
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
45
|
|
PART
II
|
|
Item
5.
|
Market
for the Registrant’s Common Equity and
|
|
|
|
|
Related
Stockholder Matters
|
46
|
Item
6.
|
Management’s
Discussion and Analysis of Financial
|
47
|
Item
7.
|
Financial
Statements and Supplementary Data
|
59
|
Item
8.
|
Changes
in and Disagreements with Accountants
|
|
|
|
|
on
Accounting and Financial Disclosure
|
80
|
Item
8A.
|
Controls
and Procedures
|
81
|
Item
8B
|
Other
Information
|
82
|
|
PART
III
|
|
Item
9.
|
Directors
and Executive Officers of the Registrant
|
83
|
Item
10.
|
Executive
Compensation
|
88
|
Item
11.
|
Security
Ownership of Certain Beneficial Owners
|
|
|
|
|
and
Management and Related Stockholder Matters
|
94
|
Item
12.
|
Certain
Relationships and Related Transactions
|
98
|
Item
13.
|
Exhibits
|
100
|
Part
1
Item
1: BUSINESS
History
of the Company
We
were
originally incorporated in the State of Colorado on June 5, 1987 under the
name
Great Expectations, Inc. We were administratively dissolved January 1, 1997
and
reinstated June 18, 1998 under the name Great Expectations and Associates,
Inc.
In 1999, we became a reporting company under the Securities Exchange of 1934
(the “Exchange Act’). Until November 2004, we
were a
shell company without any business. On November 12, 2004, we acquired Advaxis,
Inc., a Delaware corporation (“Advaxis”), through a Share Exchange and
Reorganization Agreement, dated as of August 25, 2004 (the “Share Exchange”), by
and among Advaxis, the stockholders of Advaxis and us. As a result of such
acquisition, Advaxis become our wholly-owned subsidiary and our sole operating
company.
On
December 23, 2004, we amended and restated our articles of incorporation and
changed our name to Advaxis, Inc. Our principal executive offices are located
at
212 Carnegie Center, Suite 206, Princeton, NJ 08540 and
our
telephone number is (732) 545-1590.
_______________
Recent
Developments
In
November 2004, we acquired 100% of the stock of Advaxis. Advaxis was organized
in 2002 to develop the Listeria System under patents licensed from Penn which
are described above under “General” and later in this prospectus under
“Business.”
The
acquisition of Advaxis was pursuant to the Share Exchange. In connection with
the Share Exchange (i) our existing stockholders entered into a Surrender and
Cancellation Agreement whereby such stockholders contributed to us 199 shares
of
every 200 shares of common stock beneficially owned by them so that their
ownership was reduced to 752,600 shares of common stock and (ii) we issued
to
the existing stockholders of Advaxis and others 16,350,323 shares of common
stock, warrants to purchase 584,885 shares of common stock and options to
purchase 2,381,525 shares of common stock. Upon the closing of the Share
Exchange, the total number of shares of our common stock outstanding was
20,069,333 shares on a fully-diluted basis. The transaction is being accounted
for as a recapitalization. The historical financial statements of Advaxis are
our financial statements for reporting purposes.
On
November 12, 2004, we completed an initial closing of a private placement
offering (the “Private Placement”), whereby we sold an aggregate of $2.925
million worth
of
units to accredited investors. Each unit was sold for $25,000 (the “Unit Price”)
and consisted of (a) 87,108 shares of common stock and (b) a warrant to
purchase, at any time prior to the fifth anniversary following the date of
issuance of the warrant, 87,108 shares of common stock included at a price
equal
to $0.40 per share of common stock (a “Unit”). In consideration of the
investment, we granted to each investor certain registration rights and
anti-dilution rights. Also, in November 2004, we converted approximately
$618,000 aggregate principal of promissory notes and accrued interest
outstanding into Units.
On
December 8, 2004, we completed a second closing of the Private Placement,
whereby we sold an aggregate of $200,000 of Units to accredited
investors.
On
January 4, 2005, we completed a third and final closing of the Private
Placement, whereby we sold an aggregate of $128,000 of Units to accredited
investors.
The
aggregate sale of the Units in the Private Placement was
$3,253,000.
Pursuant
to the terms of a investment banking agreement, dated March 19, 2004, by and
between us and Sunrise Securities, Corp. (the “Placement Agent”), we issued to
the Placement Agent and its designees an aggregate of 2,283,445 shares of common
stock and warrants to purchase up to an aggregate of 2,666,900 shares of common
stock. The shares were issued as part consideration for the services of the
Placement Agent, as our placement agent in the Private Placement. In addition,
we paid the Placement Agent a total cash fee of $50,530.
On
January 12, 2005, we completed a second private sale of Units whereby we sold
an
aggregate of $1,100,000 of Units to a single investor. As with the Private
Placement, each Unit issued and sold in this subsequent private placement was
sold at $25,000 per Unit and is comprised of (i) 87,108 shares of our common
stock, and (ii) a five-year warrant to purchase 87,108 shares of our common
stock at an exercise price of $0.40 per share.
Pursuant
to the terms of a certain Registration Rights Agreement, dated as of November
12, 2004, by and among us and certain of our stockholders and a Registration
Rights Agreement, dated as of January 12, 2005, by and between us and one of
our
stockholders, we are obligated to issue shares of our common stock to certain
stockholders on a monthly basis if this registration statement is not declared
effective by a certain date. As of May 10, 2005, we were obligated to issue
an
aggregate of 409,401 shares (the “Penalty
Shares”)
to
such stockholders..
Our
auditors, in their report on our financial statements as of December 31, 2002
and 2003, indicated that the Company has incurred losses from operations, has
a
working capital deficiency, and a shareholder’s deficiency, which raise
substantial doubt about the Company’s ability to continue as a going concern.
Subsequent to the issuance of those financial statements the Company has raised
additional equity financing in the Private Placement and intends to raise
additional funds. As a result of raising such funds our ability to continue
as a
going concern is no longer an issue for our accountants.
Our
Website
We
maintain a website at www.advaxis.com which contains descriptions of our
technology, our drugs and the trial status of each drug.
General
We
are a
development stage biotechnology company utilizing multiple mechanisms of
immunity with the intent to develop cancer vaccines that are more effective
and
safer than existing vaccines. To that end, we have licensed rights from Penn
to
use the Listeria System to secrete a protein sequence containing a
tumor-specific antigen. Using the Listeria System, we believe we will force
the
body’s immune system to process and recognize the antigen as if it were foreign,
creating the immune response needed to attack the cancer. Our licensed Listeria
System, developed at Penn over the past 10 years, provides a scientific basis
for believing that this therapeutic approach induces a significant immune
response to a tumor. Accordingly, we believe that the Listeria System is a
broadly enabling platform technology that can be applied to many types of
cancers. In addition, we believe there may be useful applications in infectious
diseases and auto-immune disorders.
The
therapeutic approach that comprises the Listeria System is based upon the
innovative work of Yvonne Paterson, Ph.D., Professor of Microbiology at Penn,
involving the creation of genetically engineered Listeria that stimulate the
innate immune system and induce an antigen-specific immune response involving
humoral and cellular components. We have obtained the Penn License to exploit
the Listeria System.
We
have
focused our initial development efforts upon cancer vaccines targeting cervical,
breast, Prostate, ovarian, lung and other cancers. Our lead products in
development are as follows:
Product
|
|
Indication
|
|
Stage
|
|
|
|
|
|
|
|
Lovaxin
C
|
|
Cervical
and head and neck cancers
|
|
Pre-clinical;
Phase I study in cervical cancer anticipated to commence in early
2006
|
|
|
|
|
|
|
|
Lovaxin
B
|
|
Breast
cancer and melanoma
|
|
Pre-clinical;
Phase I study anticipated to commence in late 2006
|
|
|
|
|
|
|
|
Lovaxin
P
|
|
Prostate
cancer
|
|
Pre-clinical;
Phase I study anticipated to commence in late 2006
|
|
|
|
|
|
|
|
Lovaxin
W
|
|
Wilms
tumor and leukemia
|
|
Pre-clinical;
|
|
|
|
|
|
|
|
Lovaxin
T
|
|
Cancer
through control of telomerase
|
|
Pre-clinical
|
|
|
|
|
|
|
|
Lovaxin
H
|
|
Prophylactic
vaccine for HIV (AIDS)
|
|
Pre-clinical
|
|
|
|
|
|
|
|
*
Possible delays of up to three months may occur based on the production schedule
of Cobra Biomanufacturing PLC of material, vaccine stability testing and the
issuance of required regulatory approval.
See
“Business - Research and Development Programs”.
Since
our
formation, we have had a history of losses which as of October 31, 2005
aggregate $3,420,546, and because of the long development period for new drugs,
we expect to continue to incur losses for several years. Our business plan
to
date has been realized by substantial outsourcing of virtually all major
functions of drug development including scaling up for manufacturing, research
and development, grant applications and others. The expenses of these outsourced
services account for most of our accumulated loss. We cannot predict when,
if
ever, any of our product candidates will become commercially viable or FDA
approved. Even if one or more of our products becomes commercially viable and
receives FDA approval, we are not certain that we will ever become a profitable
business.
Strategy
During
the next 12 to 24 months our strategic focus will be to achieve several
objectives.
The
foremost of these objectives are as follows:
· |
Initiate
and complete Phase I clinical study of Lovaxin C;
|
· |
Continue
the pre-clinical development of our product candidates, as well as
continue research to expand our technology platform;
and
|
· |
Initiate
strategic and development collaborations with biotechnology and
pharmaceutical companies.
|
There
are
many potential obstacles to the implementation of our proposed strategy. Among
the potential obstacles we may encounter with respect to the Phase I clinical
study of Lovaxin C are: difficulty in recruiting patients for the study; a
material, adverse medical result in a patient during the study; and extended
time for FDA approval of the IND (or foreign regulatory authority approval)
required to proceed with the test.
Among
the
potential obstacles which we may encounter with respect to continuing
preclinical development of our product candidates such as Lovaxin B or T are
ambiguous animal data not sufficient to establish a proof of concept;
insufficient or adverse preclinical data on future products; and unexpected
higher costs or preclinical studies.
Among
the
potential obstacles which we may encounter in establishing strategic
collaborations are: we may be perceived by desirable potential partners as
too
early stage; we may need to demonstrate more human safety or efficicacy data;
or
our technology may be perceived as a high risk for patents or to the
environment.
Initiate
and Complete Phase I Clinical Study of Lovaxin C.
We have
had several meetings with the FDA and the Recombinant Advisory Committee of
the
National Institutes of Health (the “NIH”) and have designed a Phase I clinical
study, which is primarily a study of the safety of Lovaxin C. We plan to
commence this clinical study in the first quarter 2006 and complete this
clinical study by the late 2006. We anticipate that the study will be conducted
on 20 to 30 patients with advanced cervical cancer.
We
have
demonstrated that the therapeutic response works in concept. In preparation
for
the commencement of our Phase I study of Lovaxin C, we have done the
following:
· |
optimized
the Listeria strain to be used;
|
· |
identified
and contracted with a manufacturing partner for material manufactured
in
accordance with “good manufacturing practices” or “GMP” as established by
the FDA;
|
· |
identified
a principal investigator for the
trial;
|
· |
written
a protocol; and
|
· |
commenced
preparing an investigational new drug application, or IND, with an
external consulting group.
|
Following
the completion of the Phase I study and assuming that the results of this study
are favorable, we intend to prepare Phase II clinical studies to demonstrate
sufficient induction of immunity and therapeutic efficacy, as well as to
optimize the dosage and dosing regimen for the final vaccine formulation.
Thereafter, and assuming that the results of this study are favorable, we intend
to conduct Phase III clinical studies to demonstrate safety, efficacy and the
potency of the investigational vaccine. Such studies are expected to occur
in
the next five to ten years. Throughout this process, we will be meeting with
the
FDA prior to and at the conclusion of each phase to reach a consensus before
initiating any studies, in order to minimize regulatory risks during this
clinical development process.
At
the
conclusion of the Phase III studies, we intend to prepare and file a BLA with
the FDA. Prior to submission of the BLA, we intend to seek Fast Track
designation from the FDA, which shortens the internal FDA review process for
the
BLA to six months. As we accrue clinical data demonstrating the safety, efficacy
and potency of the product in Phase I and II clinical studies we will also
explore other regulatory approval options with the FDA that could expedite
the
licensure of the final vaccine.
Continue
Pre-Clinical Development of Our Products, as well as Continued Research to
Expand Our Technology Platform. We intend to continue to devote a substantial
portion of our resources to the continued pre-clinical development of our
product candidates as well as the continued research to expand our technology
platform. Specifically, we intend to focus upon research relating to combining
our Listeria System with new and additional tumor antigens which, if successful
may lead to additional cancer vaccines and other therapeutic products. These
activities will require significant financial resources, as well as areas of
expertise beyond those readily available. In order to provide additional
resources and capital, we may enter into research, collaborative, or commercial
partnerships, joint ventures, or other arrangements with competitive or
complementary companies, including major international pharmaceutical companies,
or with universities, such as its relationship with Penn and UCLA. See “Business
- Partnerships and Agreements - Penn”.
Background
Cancer
Despite
tremendous advances in science, cancer remains a major health problem, and
for
many it continues to be the most feared of diseases. Although age-adjusted
mortality rates for all cancer fell during the 1990’s, particularly for the
major cancer sites (lung, colorectal, breast, and prostate), mortality rates
are
still increasing in certain sites such as liver and non-Hodgkin’s lymphoma. The
American Cancer Society estimates that more than eight million Americans were
treated for cancer in 1999. According to the HCUP, in 2000, treatment of the
top
five cancers resulted in $10.8 billion in hospital costs.
Cancer
is
the second largest cause of death in the United States, exceeded only by heart
disease. Approximately 1,268,000 new cases of cancer were expected to be
diagnosed in 2001, and 553,400 Americans were expected to die from the disease.
Since 1990, nearly 15 million new cases have been diagnosed. The NIH estimates
the overall cost for cancer in the year 2000 at $180.3 billion: $60 billion
for
direct medical costs, $15 billion for indirect morbidity costs (loss of
productivity due to illness) and, $105.2 billion for indirect mortality costs
(cost of lost productivity due to premature death). (Source: cancer facts &
figures 2001, American Cancer Society).
Immune
System and Normal Antigen Processing
Living
creatures, including humans, are continually confronted with potentially
infectious agents. The immune system has developed multiple mechanisms that
allows the body to recognize these agents as foreign, and to target a variety
of
immunological responses, including innate, antibody, and cellular immunity,
that
mobilize the body’s natural defenses against these foreign agents that will
eliminate them. In this regard, there are a host of cells involved in the
recognition of and response to antigens, substances, typically proteins, that
are recognized by the body’s immune system and generate an immune response.
Antigens are frequently found on the outside of invading cells like bacteria,
but can also be found on the body’s own cells when they are either infected by a
virus or transformed into a cancer cell.
The
combination of the antibody (also called humoral) system and the cell mediated
system results in the immune response. Different disorders need a different
mix
of responses to eliminate the problem, e.g., a streptococcal infection is
typically attacked primarily by the humoral system, and a cancer cell is
typically attacked by the cell mediated system.
The
first
step in recognizing a foreign antigen is antigen processing. When cells involved
in the recognition and response encounter an antigen that they do not recognize,
they ingest the antigen. The antigen is then cut into small pieces and the
pieces are combined with proteins called “MHCs” and pushed out to the cell
surface. On the cell surface, the antigen is then able to interact with certain
classes of cells created by the immune system that produce the specialized
cells
needed to help in the production of antibodies and the induction of cytotoxic
lymphocytes, primarily with antibodies. This system is called the exogenous
pathway, since it is the prototypical response to an exogenous antigen like
a
bacteria.
There
exists another pathway, called the endogenous pathway. In this system, when
one
of the body’s cells begins to create unusual proteins, the protein is processed
and expelled to the surface cell and is the cytoplasm into fragments. These
are
directed into the endoplasmic reticulum, where they bind major
Historocompatibility Complex proteins, and then traffic to the cell surface.
This signal then calls immune cells to come to the site of the infection and
kill the cell. The endogenous pathway is used by the body to eliminate cells
that are creating unusual proteins (e.g., cancer cells or cells infected with
a
virus).
In
clinical cancer, the body does not recognize the cancer cells as foreign. Our
technology forces the body to recognize tumor-associated or tumor-specific
antigens as foreign, thus creating the immune response needed to attack the
cancer. It does this by combining elements of the endogenous and exogenous
pathways utilizing a number of biologic characteristics of the Listeria
bacteria.
Mechanism
of Action
Listeria
is a bacteria well known to medical science because it can cause an infection
in
humans. When Listeria enters the body, it is seen as foreign by the antigen
processing cells and ingested into cellular compartments called lysosomes,
whose
destructive enzymes kill most of the bacteria. A certain percentage of these
bacteria, however, are able to break out of the lysosomes and enter into the
cytoplasm of the cell, where they are relatively safe from the immune system.
The bacteria multiply in the cell, and the Listeria is able to force the cell
to
move the bacteria to its cell surface so it can push into neighboring cells
and
spread. In this way, Listeria can cause various clinical conditions, including
sepsis, meningitis and placental infections in pregnant women.
Listeria
produces a substance known as listeriolysin (“LLO”), a protein that cuts a hole
in the membrane of the lysosome and allows the bacteria to escape into the
relatively safe cytoplasm. Once in the cytoplasm, however, LLO is also capable
of cutting a hole in the cell membrane. This would destroy the cell, and spill
the bacteria back out into the space between the cells, where it would be
exposed to more immune cell attacks and destruction. To prevent this, LLO has
a
sequence of approximately 30 amino acids attached to it known as the
PEST1
sequence. This PEST sequence is used by normal cells to force the rapid turnover
of proteins that need only have a short life in the cytoplasm. Listeria has
evolved the ability to utilize this PEST sequence itself as a routing tag that
tells the cells to grab the LLO in the cytoplasm and pull it into the
endoplasmic reticulum, where it is processed just like a protein antigen in
the
endogenous pathway. The benefit for the Listeria is that the LLO is neutralized
and the bacteria can continue to prosper inside the cell; the benefit provided
by our technology is that we now have a path into the antigen processing system
that causes an immune response of the tumor-specific antigen.
Research
and Development Program
Overview
We
use
genetically engineered Listeria monocytogenes as a therapeutic agent. We start
with an attenuated Listeria, and then add to this bacteria a plasmid that
encodes a protein sequence that includes a portion of the LLO molecule
(including the PEST sequence) and the tumor antigen of interest. This protein
is
secreted by the Listeria inside the antigen processing cells, which then results
in the immune response as discussed above.
________________
1 |
PEST
is a part of the LLO protein that is believed to facilitate rapid
degradation of LLO in the cytoplasm. It appears to facilitate movement
of
the protein into the endoplasmic reticulum of the cell. In Advaxis’
application, the PEST sequence enhances the cell-mediated response
to an
attached antigen, presumably by preferential movement of the antigen
sequence in to the intracellular protein processing system of antigen
processing cells such as macrophages and dendritic
cells.
|
We
can
use different tumor antigens (or other antigens) in this system. By varying
the
antigen, we create different therapeutic agents. Our lead agent, Lovaxin C,
uses
a human papillomavirus derived antigen that is present in cervical cancers.
Lovaxin B uses her2/neu, an antigen found in many breast cancer and melanoma
cells, to induce an immune response that should be useful in treating these
conditions. The table below shows a list of potential products and their current
status:
Product
|
|
Indication
|
|
Stage
|
|
|
|
|
|
Lovaxin
C
|
|
Cervical
and head and neck cancers
|
|
Pre-clinincal;
Phase I study in cervical cancer anticipated to commence in early
2006*
|
Lovaxin
B
|
|
Breast
cancer and melanoma
|
|
Pre-clinical;
Phase I study anticipated to commence in late 2006
|
Lovaxin
P
|
|
Ovarian
melanoma and lung cancer
|
|
Pre-clinical;
Phase I study anticipated to commence in late 2006
|
Lovaxin
W
|
|
Wilms
tumor and leukemia
|
|
Pre-clinical
|
Lovaxin
T
|
|
Cancer
through control of telomerase
|
|
Pre-clinical
|
Lovaxin
H
|
|
Prophylactic
vaccine for HIV (AIDS)
|
|
Pre-clinical
|
|
|
|
|
|
*
Possible delays of up to three months may occur based on the production schedule
of Cobra Biomanufacturing PLC of material, vaccine stability testing, and the
issuance of required regulatory approvals.
Partnerships
and Agreements
Penn
We
have
entered into a 20-year exclusive worldwide license, with the right to grant
sublicenses, with Penn with respect to the innovative work of Yvonne Paterson,
Ph.D., Professor of Microbiology in the area of innate immunity, or the immune
response attributable to immune cells, including dentritic cells, macrophages
and natural killer cells, that respond to pathogens non-specifically. The
license provides us with the exclusive rights to the patent portfolio developed
at Penn in connection with Dr. Paterson and requires us to raise capital, pay
various milestone and licensing payments and commercialize the technology.
In
exchange for the license, Penn received shares of our common stock currently
representing approximately 10.68% of our common stock on a fully-diluted basis.
In addition, Penn is entitled to receive a non-refundable license initial fee,
license fees, royalty payments and milestone payments based on net sales and
percentages of sublicense fees and certain commercial milestones, as follows:
Under a licensing agreement, Penn is entitled to receive royalties in the
following amounts: 1.5% on net sales in countries with pending or issued
patents; and 1.0% on net sales in countries without pending or issued patents.
Notwithstanding these royalty rates, we have agreed to pay $525,000 divided
over
a four-year period as a minimum royalty after the first commercial sale of
a
product under the license (which payments we are not expecting to begin paying
within the next five years). We are also obligated to pay up to $660,000 to
Penn
(which amount is already reflected as an obligation on our balance sheet upon
receiving financing or on certain dates on or before December 15, 2007,
whichever is earlier. After the 6th anniversary of the licensing agreement,
we
shall pay Penn annual license maintenance fees of $125,000 per year. In
addition, we are obligated to reimburse Penn for all attorneys fees,
expenses, official fees and other charges incurred in the preparation,
prosecution and maintenance of the patents licensed from
Penn.
Furthermore,
upon the achievement of the first sale of a product in certain fields, Penn
shall be entitled to certain milestone payments, as follows: $2,500,000 shall
be
due for first commercial sale of the first product in the cancer field (of
which
$1,000,000 shall be paid within forty-five (45) days of the date of the first
commercial sale, $1,000,000 shall be paid on the first anniversary of the first
commercial sale; and $500,000 shall be paid on the second anniversary of the
date of the first commercial sale). In addition, $1,000,000 shall be due and
payable within forty-five (45) days following the date of the first commercial
sale of a product in any of the following fields (a) Infectious Disease, (b)
Allergy, (c) Autoimmune Disease, and (d) any other therapeutic indications
for
which licensed products are developed. Therefore, the maximum total potential
amount of milestone payments is $6,500,000.
As
a
result of the abovementioned payments, we may pay Penn significant amounts.
If
over the next 10 years we have net sales in the aggregate amount of $100 million
from our cancer products, our total payments to Penn shall be $5,535,000. If
over the next 10 years our net sales total an aggregate amount of $10 million
from our cancer products, our total payments to Penn shall be $4,560,000.
However,
Penn is not involved in management of our company or in exploitation of the
patent portfolio. Based on the agreements with Penn, we will be responsible
for
filing new patents and maintaining the existing patents.
Dr.
Yvonne Paterson
Dr.
Paterson is a Professor in the Department of Microbiology at Penn and the
inventor of our licensed technology. She has been an invited speaker at national
and international health field conferences and leading academic institutions.
She has served on many federal advisory boards, such as the NIH expert panel
to
review primate centers, the Office of AIDS Research Planning Fiscal Workshop,
and the Allergy and Immunology NIH Study Section. She has been Section Editor
of
the Journal of Immunology since 1994. She has written over 115 publications
in
immunology (including a recently published book) with emphasis during the last
several years on the areas of HIV, AIDS and cancer research. Her instruction
and
mentorship has trained over 30 post-doctoral and doctoral students in the fields
of Biochemistry and Immunology, many of whom are research leaders in academia
and industry.
Dr.
Paterson is currently the principal investigator on grants from the federal
government and charitable foundations totaling approximately $1.8 million
dollars per year. Her research interests are broad, but her laboratory has
been
focused for the past ten years on developing novel approaches for prophylactic
vaccines against infectious disease and immunotherapeutic approaches to cancer.
The approach of the laboratory is based on a long-standing interest in the
properties of proteins that render them immunogenic and how such immunogenicity
may be modulated within the body.
Consulting
Agreement.
We
entered into a renewed consulting agreement with Dr. Paterson in January 2005
which expires on January 31, 2006 with automatic renewals for up to six
additional periods of six months each pursuant to which we have had access
to
Dr. Paterson’s consulting services for one full day per week. Dr. Paterson has
advised us on an exclusive basis on various issues related to our technology,
manufacturing issues, establishing our lab, knowledge transfer, and our
long-term research and development program. Pursuant to the agreement, Dr.
Paterson has received options to purchase 169,048 shares of our common stock
subject to vesting. Dr. Paterson is to receive $3,000 per month throughout
the
term of the Agreement; provided, that upon the closing of an additional $3
million in equity capital, Dr. Paterson shall receive $5,000 per month;
provided, further, that upon the closing of an additional $6 million in equity
capital, Dr. Paterson shall receive $7,000 per month; and provided, further,
that upon the closing of an additional of $9 million in equity capital, Dr.
Pateron shall receive $9,000 per month. In addition, subject to the adoption
of
a new stock option plan by our stockholders, Dr. Paterson shall receive options
to purchase 400,000 shares of common stock at an exercise price of $0.28 per
share with 40,000 fully vested when granted and the remaining 360,000 options
vesting equally over 48 months; provided that Dr. Paterson remains a consultant
over the four year period. Since February 1, 2005, Dr. Paterson is being paid
$3,000 per month, and holds options to purchase a total of 169,048 shares of
Common Stock. We intend to grant as options to purchase an additional 400,000
shares of common stock upon adoption of a new stock option plan by the
Company.
Sponsored
Research Agreement.
We
entered into a sponsored research agreement which terminates on June 30,
2005 with Penn and Dr. Paterson and have paid approximately $199,000 to sponsor
her continued research in this area.
We
entered into another sponsored research agreement with Penn and Dr. Paterson
under which we are obligated to pay $118,755 for sponsored research covering
the
development of a potential vaccine candidate based on our Listeria technology.
We
intend
to enter into additional sponsored research agreements with Penn in the future
with respect to research and development on our produce candidates.
We
believe that Dr. Paterson’s continuing research will serve as a source of
ongoing findings and data that both supports and strengthen the existing
patents. Her work will expand the claims of the patent portfolio (potentially
including adding claims for new tumor specific antigens, the utilization of
new
vectors to deliver antigens, and applying the technology to new disease
conditions) and create the infrastructure for the future filing of new
patents.
Scientific
Advisory Board.
Dr.
Paterson is also the chairman of our Scientific Advisory Board and one of our
stockholders.
Dr.
David Filer
We
have
entered a consulting agreement with Dr. David Filer, a biotech consultant.
The
Agreement commenced on January 7, 2005 and has a six month term, which may
be
extended upon the agreement of both parties. Dr. Filer shall provide to us
for
three
days per month during the term of the agreement assistance on its development
efforts, reviewing our scientific technical and business data and materials
and
introducing us to industry analysts, institutional investors collaborators
and
strategic partners. In
consideration for the consulting services we will pay Dr. Filer $2,000 per
month. In addition, subject
to the adoption of a new stock option plan by our stockholders,
Dr.
Filer will receive 40,000 options to purchase shares of common stock, vesting
monthly over 12 months provided that the agreement is not terminated.
Freemind
Group LLC (“Freemind”)
We
have
entered into an agreement with Freemind to develop and manage our grant writing
strategy and application program. Advaxis will pay Freemind according to a
fee
structure based on achievement of grants awarded to us at the rate of 6-7%
of
the grant amount. Advaxis will also pay Freemind fixed consulting fees based
on
the type of grants submitted, ranging from $5,000-7,000 depending on the type
of
application submitted. Freemind, has extensive experience in accessing public
financing opportunities, the national SBIR and related NIH/NCI programs.
Freemind has assisted us to file a $41.96 million grant application with NIH
on
December 1, 2005, covering the use of Lovaxin C for cervical dysplasia.
UCLA
We
have
entered into a nonexclusive license and bailment agreement with the Regents
of
the University of California (“UCLA”) to commercially develop products using the
XFL7 strain of Listeria monoctyogenes in humans and animals. The agreement
is
effective for a period of 15 years and renewable by mutual consent of the
parties. Advaxis is to pay UCLA an initial licensee fee and annual maintenance
fees for use of the Listeria. We may not sell products using the XFL7 strain
Listeria other than agreed upon products or sublicense the rights granted under
the license agreement without the prior written consent of UCLA.
Cobra
Biomanufacturing PLC
In
July
2003, we entered into an agreement with Cobra Biomanufacturing PLC for the
purpose of manufacturing our cervical cancer vaccine Lovaxin C. Cobra has
extensive experience in manufacturing gene therapy products for investigational
studies. Cobra is a full service manufacturing organization that manufactures
and supplies DNA-based therapeutics for the pharmaceutical and biotech industry.
These services include the GMP manufacturing of DNA, recombinant protein,
viruses, mammalian cell products and cell banking. Cobra’s manufacturing plan
for us calls for several manufacturing stages, including process development,
manufacturing of non-GMP material for toxicology studies and manufacturing
of
GMP material for the Phase I trial. The agreement is to expire upon the delivery
and completion of stability testing of the GMP material for the Phase I trial,
now estimated to occur by December 31, 2005. Cobra has agreed to convert
$300,000 of its existing fees for manufacturing into future royalties from
the
sales of Lovaxin C at the rate of 1.5% of net sales, with payments not to exceed
$1,950,000.
In
November 2005, in order to cover Lovaxin C on a long-term basis and to cover
other drug candidates which we are developing, we entered into a Strategic
Collaboration and Long-Term Vaccine Supply Agreement for Listeria Cancer
Vaccines, under which Cobra will manufacture experimental and commercial
supplies of our Listeria
cancer
vaccines, beginning with Lovaxin C, our therapeutic vaccine for the treatment
of
cervical and head and neck cancers that will be entering a phase I/II study
in
cervical cancer patients later this year. The new agreement leaves the existing
agreement in place with respect to the studies contemplated therein, and
supersedes a prior agreement and provides for mutual exclusivity, priority
of
supply, collaboration on regulatory issues, research and development of
manufacturing processes that have already resulted in new intellectual property
owned by Advaxis, and the long-term supply of live Listeria
based
vaccines on a discounted basis.
LVEP
Management, LLC
We
entered into a consulting agreement with LVEP Management, LLC (“LVEP”) which is
controlled by the estate of Scott Flamm, one of our a former directors and
a
principal shareholder. LVEP employs Mr. Roni Appel, our President, Chief
Executive Officer and Chief Financial Officer, and a director and a principal
shareholder of the Company. Pursuant to the consulting agreement, dated as
of
January 19, 2005, and amended on April 15, 2005, and further amended on October
31, 2005, LVEP is to provide various financial and strategic consulting services
to us.
Under
the
October 31, 2005 amendment the initial term of the consulting agreement was
extended until December 31, 2007 and thereafter the term of the agreement shall
be automatically extended for one year periods unless we notify LVEP at least
60
days prior to the end of term of our intent not to extend. In addition, the
Consulting Agreement may be terminated by us for any reason upon 60 days prior
notice or by Consultant upon 45 days prior notice, Upon such notice all
compensation and bonuses payable under the Consulting Agreement shall continue
until the later to occur of the end of the term or twelve (12) months from
such
termination. In consideration for providing the consulting services, under
the
Consulting Agreement as amended LVEP shall receive compensation of $250,000
per
year payable at the rate of $20,833.33 per month for the term of the agreement
plus reimbursement of approved expenses in connection with providing the
consulting services. LVEP intends to pay all such compensation to Mr. Appel.
The
Consultant will receive a bonus payment at the end of 2005 not to exceed
$75,000. In subsequent years the bonus shall equal 40% of the base consulting
compensation. At the election of the Company or of Consultant up to 100% of
the
bonus may be paid in common stock of the Company .Additionally, LVEP shall
receive additional options to purchase common stock of the Company bringing
options held LVEP (including the existing 3%) to 5% of the outstanding shares
and options of the Company as of December 31, 2005. The incremental options
shall vest monthly over four years commencing in April, 2005. LVEP has assigned
such options to Mr. Appel.
The
Investor Relations Group, Inc (“IRG”)
We
entered into an agreement with IRG whereby IRG will serve as an investor
relations and public relations consultant. The term of this agreement is on
a
month to month basis. In consideration for performing its services, SGI is
to be
paid $10,000 per month, and 200,000 common shares over a period of 18 months
commencing October 1, 2005, provided the agreement has not terminated.
PATENTS
AND LICENSES
Dr.
Paterson and Penn have invested significant resources and time in developing
a
broad base of intellectual property around the cancer vaccine platform
technology to which we have a 20-year exclusive worldwide license and a right
to
grant sublicenses to pursuant to our license agreement with Penn. Penn currently
has eight issued and 12 pending patents in the United States and other countries
including Japan, Canada, Israel, Australia, and the European Union, through
the
Patent Cooperation Treaty (PCT) system pursuant to which we have an exclusive
license to exploit the patents. We believe that these patents will allow us
to
take a strong lead in the field of Listeria-based therapy.
The
Penn
patent portfolio is currently comprised of the following:
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|
Patents
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U.S.
Patent No. 6,051,237, issued April 18, 2000. Patent Application No.
08/336,372, filed November 8, 1994 for “Specific Immunotherapy of Cancer
Using a Live Recombinant Bacterial Vaccine Vector.” Filed November 8,
1994. Expires April 18, 2017.
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|
|
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U.S.
Patent No. 6,565,852, issued May 20, 2003, Paterson, et al., CIP
Patent
Application No. 09/535,212, filed March 27, 2000 for “Specific
Immunotherapy of Cancer Using a Live Recombinant Bacterial Vaccine
Vector.” Filed March 27, 2000. Expires May 20, 2020.
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|
|
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U.S.
Patent No. 6,099,848, issued August 8, 2000. Frankel et al., Patent
Application No. 08/972,902 “Immunogenic Compositions Comprising DAL/DAT
Double-Mutant, Auxotrophic, Attentuated Strains of Listeria and Their
Methods of Use.” Filed November 18, 1997. Expires November 18,
2017.
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|
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U.S.
Patent No. 6,504,020, issued January 7, 2003 of Divisional Application
No.
09/520,207 “Isolated Nucleic Acids Comprising Listeria DAL And DAT Genes”.
Filed March 7, 2000., Frankel et al. Expires March 7,
2020.
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|
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U.S.
Patent No. 6,635,749, issued October 21, 2003; Divisional U.S. Patent
Application No. 10/136,253 for “Isolated Nucleic Acids Comprising Listeria
DAL and DAT Genes.” Filed May 1, 2002, Frankel, et al. Filed May 1, 2022.
Expires November 18, 2017.
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|
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U.S.
Patent No. 5,830,702, issued November 3, 1998. Patent Application
No.
08/366,477, filed December 30, 1994 for “Live, Recombinant Listeria SSP
Vaccines and Productions of Cytotoxic T Cell Response” Portnoy, et al.
Filed December 30, 1997. Expires November 3, 2015.
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|
|
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US
Patent No. 6,767,542 issued July 27, 2004, Paterson, et al. Patent
Application No. 09/735,450 for “Compositions and Methods for Enhancing
Immunogenicity of Antigens.” Filed December 13, 2000. Expires March 29,
2020.
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|
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U.S.
Patent Application No. 10/441,851, “Methods And Compositions For
Immunotherapy of Cancer,” Filed May 20, 2003, Paterson et
al.
|
|
|
|
U.S.
Patent Application No. 10/239,703 for “Compositions and Methods for
Enhancing Immunogenicity of Antigens.” Filed September 24, 2002, Paterson,
et al.
|
|
|
|
Patent
Application No. 09/537,642 for “Fusion of Non-Hemolytic, Truncated Form of
Listeriolysis o to Antigens to Enhance Immunogenicity.” Filed March 29,
2000. Paterson, et al.
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|
|
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U.S.
Patent Application No. 10/660,194, “Immunogenic Compositions Comprising
DAL/DAT Double Mutant, Auxotrophic Attenuated Strains Of Listeria
And
Their Methods Of Use,” Filed September 11, 2003, Frankel et
al.
|
International
|
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Patents
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|
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Australian
Patent No. 730296, Patent Application No. 14108/99 for “Bacterial Vaccines
Comprising Auxotrophic, Attenuated Strains of Listeria Expressing
Heterologous Antigens.” Filed May 18, 2000. Frankel, et al. Expires
November 13, 2018.
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Patent
Applications
|
|
|
|
Canadian
Patent Application No. 2,204,666, for “Specific Immunotherapy of Cancer
Using a Live Recombinant Bacterial Vaccine Vector”. Filed November 3,
1995, Paterson et al.
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|
|
|
Canadian
Patent Application No. 2,309,790 for “Bacterial Vaccines Comprising
Auxotrophic, Attenuated Strains of Listeria Expressing Heterologous
Antigens.” Filed May 18, 2000, Frankel, et al.
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|
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Canadian
Patent Application No. 2,404,164 for “Compositions and Methods for
Enhancing Immunogenicity of Antigens.” Filed March 26, 2001. Paterson, et
al.
|
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European
Patent Application No. 95939926.2, for “Specific Immunotherapy of Cancer
Using a Live Recombinant Bacterial Vaccine Vector”. Filed November 3,
1995, Paterson, et al.
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|
|
|
European
Patent Application No. 01928324.1 for “Compositions and Methods for
Enhancing Immunogenicity of Antigens.” Filed March 26, 2001. Paterson, et
al.
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|
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European
Patent Application No. 98957980.0 for “Bacterial Vaccines Comprising
Auxotrophic, Attenuated Strains of Listeria Expressing Heterologous
Antigens.” Filed May 18, 2000, Frankel, et al.
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Israel
Patent Application No. 151942 for “Compositions and Methods for Enhancing
Immunogenicity of Antigens.” Filed March 26, 2001, Paterson, et
al.
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Japanese
Patent Application No. 515534/96, filed November 3, 1995 for “Specific
Immunotherapy of Cancer Using a Live Recombinant Bacterial Vaccine
Vector”, Paterson, et al.
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Japanese
Patent Application No. 2001-570290 for “Compositions and Methods for
Enhancing Immunogenicity of Antigens.” Filed March 26, 2001, Paterson, et
al.
|
In
2001,
an issue arose regarding the inventorship of U.S. Patent 6,565,852 and U.S.
Patent Application No. 09/537,642. These patent rights are included in the
patent rights licensed by Advaxis from Penn. It is contemplated by GSK, Penn
and
us that the issue will be resolved through: (1) a correction of
inventorship to add certain GSK inventors, (2) where necessary and appropriate,
an assignment of GSK’s possible rights under these patent rights to Penn, and
(3) a sublicense from us to GSK of certain subject matter, which is not central
to our business plan. To date, this arrangement has not been finalized and
we
cannot assure that this issue will ultimately be resolved in the manner
described above.
Pursuant
to our license with Penn, we have a three year option to license from Penn
any
new future invention conceived by either Dr. Yvonne Paterson or by Dr. Fred
Frankel in the vaccine area. We intend to expand our intellectual property
base
by exercising this option and gaining access to such future inventions. Further,
our consulting agreement with Dr. Paterson provides, among other things, that,
to the extent that Dr. Paterson’s consulting work results in new inventions,
such inventions will be assigned to Penn, and we will have access to those
inventions under license agreements to be negotiated.
Our
approach to the our intellectual property portfolio is to aggressively create
significant offensive and defensive patent protection for every product and
technology platform that we develop. We work closely with our patent counsel
to
maintain a coherent and aggressive strategic approach to building our patent
portfolio with an emphasis in the field of cancer vaccines.
We
have
become aware of a public company, Cerus Corporation, which has issued a press
release claiming to have a proprietary Listeria-based approach to a cancer
vaccine. We believe that through our exclusive license with Penn of U.S. Patent
Nos. 5,830,702, 6,051,237 and 6,565,852, we have the earliest known and dominant
patent position for the use of recombinant Listeria monocytogenes expressing
proteins or tumor antigens as a vaccine for the treatment of infectious diseases
and tumors. Based on searches of publicly available databases, we do not believe
that Cerus or The University of California Berkeley (which is where Cerus’
consulting scientist works) or any other third party owns any published Listeria
patents or has any issued patent claims that might materially negatively affect
our freedom to operate our business in the field of Listeria monocytogenes.
We
have
received written notice from the European Patent Office that Cerus has filed
an
opposition against European Patent Application Number 0790835 (EP 835 Patent)
which was granted by the European Patent Office and which is assigned to The
Trustees of the University of Pennsylvania and exclusively licensed to us.
We
are defending against Cerus’ allegations in the Opposition that the EP 835
Patent, which claims a vaccine for inducing a tumor specific antigen with a
recombinant live Listeria, is deficient because of (i) insufficient disclosure
in the specifications of the granted claims, (ii) the inclusion of additional
subject matter in the granted claims, and (iii) a lack of inventive steps of
the
granted claims of the EP 835 Patent. We believe that Cerus’allegations in the
opposition have no basis and it plans to vigorously defend the claims.
The
opposition is in the early stages and, as yet, we are unable to evaluate the
merits, if any, to the opposition proceeding. If the European Patent Office
rules that the allegations are correct in whole or in part, and such ruling
is
upheld on appeal, our patent position in Europe may be eroded to the degree
that
the claims of the patent are narrowed or not allowed. The likely result of
this
decision will be increased competition for us in the European market for
recombinant live Listeria based vaccines. Regardless of the outcome of the
opposition proceeding, we believe that our freedom to operate in Europe, or
any
other territory, for its recombinant live Listeria based vaccine products will
not be diminished.
For
more
information about Cerus Corporation and its claims with respect to
listeria-based technology, you should visit their web site at www.cerus.com
or to
view its publicly filed documents, www.sec.gov.
Trademarks
We
have
two trademark applications pending in the United States relating to the
trademark of “Advaxis” and ten trademark applications pending relating to the
trademark of “Lovaxin” in the United States and internationally. We work closely
with our trademark counsel to build a brand name for ourself and potential
products. Aventis, Inc. has filed trademark opposition proceedings in the United
States Patent and Trademark Office against our trademark applications Serial
Nos. 78/252527 and 78/252586 related to the trademark of “Advaxis”.
The opposition proceedings are in the early stages and it is impossible to
assess the merits at this point. We will vigorously defend our
trademark applications. As a result of the opposition, we may lose or need
to
abandon the trademark “Advaxis”).
Governmental
Regulation
The
Drug Development Process
The
FDA
requires that pharmaceutical and certain other therapeutic products undergo
significant clinical experimentation and clinical testing prior to their
marketing or introduction to the general public. Clinical testing, known as
clinical trials or clinical studies, is either conducted internally by
pharmaceutical or biotechnology companies or is conducted on behalf of these
companies by contract research organizations.
The
process of conducting clinical studies is highly regulated by the FDA, as well
as by other governmental and professional bodies. Below, we describe the
principal framework in which clinical studies are conducted, as well as describe
a number of the parties involved in these studies.
Protocols.
Before
commencing human clinical studies, the sponsor of a new drug must submit an
investigational new drug application, or IND, to the FDA. The application
contains what is known in the industry as a protocol.
A
protocol is the blueprint for each drug study. The protocol sets forth, among
other things, the following:
· |
who
must be recruited as qualified
participants;
|
· |
how
often to administer the drug;
|
·
|
what
tests to perform on the participants;
and
|
·
|
what
dosage of the drug to give to the
participants.
|
Institutional
Review Board.
An
institutional review board is an independent committee of professionals and
lay
persons which reviews clinical research studies involving human beings and
is
required to adhere to guidelines issued by the FDA. The institutional review
board does not report to the FDA, but its records are audited by the FDA. Its
members are not appointed by the FDA. All clinical studies must be approved
by
an institutional review board. The institutional review board’s role is to
protect the rights of the participants in the clinical studies. It approves
the
protocols to be used, the advertisements which the company or contract research
organization conducting the study proposes to use to recruit participants,
and
the form of consent which the participants will be required to sign prior to
their participation in the clinical studies.
Clinical
Trials.
Human
clinical studies or testing of a potential product are generally done in three
stages known as Phase I through Phase III testing. The names of the phases
are
derived from the regulations of the FDA. Generally, there are multiple studies
conducted in each phase.
Phase
I.
Phase I
studies involve testing a drug or product on a limited number of healthy
participants, typically 24 to 100 people at a time. Phase I studies determine
a
drug’s basic safety and how the drug is absorbed by, and eliminated from, the
body. This phase lasts an average of six months to a year.
Phase
II.
Phase
II trials involve testing up to 200 participants at a time who may suffer from
the targeted disease or condition. Phase II testing typically lasts an average
of one to two years. In Phase II, the drug is tested to determine its safety
and
effectiveness for treating a specific illness or condition. Phase II testing
also involves determining acceptable dosage levels of the drug. If Phase II
studies show that a new drug has an acceptable range of safety risks and
probable effectiveness, a company will continue to review the substance in
Phase
III studies.
Phase
III.
Phase
III studies involve testing large numbers of participants, typically several
hundred to several thousand persons. The purpose is to verify effectiveness
and
long-term safety on a large scale. These studies generally last two to three
years. Phase III studies are conducted at multiple locations or sites. Like
the
other phases, Phase III requires the site to keep detailed records of data
collected and procedures performed.
New
Drug Approval. The
results of the clinical trials are submitted to the FDA as part of a new drug
application (“NDA”). Following
the completion of Phase III studies, assuming the sponsor of a potential product
in the United States believes it has sufficient information to support the
safety and effectiveness of its product, it submits an NDA to the FDA requesting
that the product be approved for marketing. The application is a comprehensive,
multi-volume filing that includes the results of all clinical studies,
information about the drug’s composition, and the sponsor’s plans for producing,
packaging and labeling the product. The FDA’s review of an application can take
a few months to many years, with the average review lasting 18 months. Once
approved, drugs and other products may be marketed in the United States, subject
to any conditions imposed by the FDA.
Phase
IV.
The FDA
may require that the sponsor conduct additional clinical trials following new
drug approval. The purpose of these trials, known as Phase IV studies, is to
monitor long-term risks and benefits, study different dosage levels or evaluate
safety and effectiveness. In recent years, the FDA has increased its reliance
on
these trials. Phase IV studies usually involve thousands of participants. Phase
IV studies also may be initiated by the company sponsoring the new drug to
gain
broader market value for an approved drug. For example, large-scale trials
may
also be used to prove effectiveness and safety of new forms of drug delivery
for
approved drugs. Examples may be using an inhalation spray versus taking tablets
or a sustained-release form of medication versus capsules taken multiple times
per day.
The
drug
approval process is time-consuming, involves substantial expenditures of
resources, and depends upon a number of factors, including the severity of
the
illness in question, the availability of alternative treatments, and the risks
and benefits demonstrated in the clinical trials.
On
November 21, 1997, former President Clinton signed into law the Food and Drug
Administration Modernization Act. That act codified the FDA’s policy of granting
"Fast Track" approval for cancer therapies and other therapies intended to
treat
serious or life threatening diseases and that demonstrate the potential to
address unmet medical needs. The Fast Track program emphasizes close, early
communications between FDA and the sponsor to improve the efficiency of
preclinical and clinical development, and to reach agreement on the design
of
the major clinical efficacy studies that will be needed to support approval.
Under the Fast Track program, a sponsor also has the option to submit and
receive review of parts of the NDA or BLA on a rolling schedule approved by
FDA,
which expedites the review process.
The
FDA’s
Guidelines for Industry Fast Track Development Programs require that a clinical
development program must continue to meet the criteria for Fast Track
designation for an application to be reviewed under the Fast Track Program.
Previously, the FDA approved cancer therapies primarily based on patient
survival rates or data on improved quality of life. While the FDA could consider
evidence of partial tumor shrinkage, which is often part of the data relied
on
for approval, such information alone was usually insufficient to warrant
approval of a cancer therapy, except in limited situations. Under the FDA’s new
policy, which became effective on February 19, 1998, Fast Track designation
ordinarily allows a product to be considered for accelerated approval through
the use of surrogate endpoints to demonstrate effectiveness. As a result of
these provisions, the FDA has broadened authority to consider evidence of
partial tumor shrinkage or other surrogate endpoints of clinical benefit for
approval. This new policy is intended to facilitate the study of cancer
therapies and shorten the total time for marketing approvals. Under accelerated
approval, the manufacturer must continue with the clinical testing of the
product after marketing approval to validate that the surrogate endpoint did
predict meaningful clinical benefit. To the extent applicable we intend to
take
advantage of the Fast Track programs to obtain accelerated approval on our
future products; however, it is too early to tell what effect, if any, these
provisions may have on the approval of our product candidates.
The
Orphan Drug Act provides incentives to develop and market drugs (“Orphan Drugs”)
for rare disease conditions in the United States. A drug that receives Orphan
Drug designation and is the first product to receive FDA marketing approval
for
its product claim is entitled to a seven-year exclusive marketing period in
the
United States for that product claim. A drug which is considered by the FDA
to
be different than such FDA-approved Orphan Drug is not barred from sale in
the
United States during such exclusive marketing period even if it receives
approval for the same claim. We can provide no assurance that the Orphan Drug
Act’s provisions will be the same at the time of the approval, if any, of our
products.
Other
Regulations
Various
Federal and state laws, regulations, and recommendations relating to safe
working conditions, laboratory practices, the experimental use of animals,
and
the purchase, storage, movements, import, export, use, and disposal of hazardous
or potentially hazardous substances, including radioactive compounds and
infectious disease agents, are used in connection with our research or
applicable to our activities. They include, among others, the United States
Atomic Energy Act, the Clean Air Act, the Clean Water Act, the Occupational
Safety and Health Act, the National Environmental Policy Act, the Toxic
Substances Control Act, and Resources Conservation and Recovery Act, national
restrictions on technology transfer, import, export, and customs regulations,
and other present and possible future local, state, or federal regulation.
The
extent of governmental regulation which might result from future legislation
or
administrative action cannot be accurately predicted.
Manufacturing
The
FDA
requires that any drug or formulation to be tested in humans be manufactured
in
accordance with its GMP regulations. This has been extended to include any
drug
which will be tested for safety in animals in support of human testing. The
GMPs
set certain minimum requirements for procedures, record-keeping, and the
physical characteristics of the laboratories used in the production of these
drugs.
We
have
entered into a Long Term Vaccine Supply Agreement with Cobra
Biomanufacturing PLC for the purpose of manufacturing our vaccines. Cobra has
extensive experience in manufacturing gene therapy products for investigational
studies. Cobra is a full service manufacturing organization that manufactures
and supplies DNA-based therapeutics for the pharmaceutical and biotech industry.
These services include the GMP manufacturing of DNA, recombinant protein,
viruses, mammalian cells products and cell banking. Cobra’s manufacturing plan
for us calls for several manufacturing stages, including process development,
manufacturing of non-GMP material for toxicology studies and manufacturing
of
GMP material for the Phase I trial.
Competition
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. As
a
result, our actual or proposed products could become obsolete before we recoup
any portion of our related research and development and commercialization
expenses. The biotechnology and biopharmaceutical industries are highly
competitive, and this competition comes from both from biotechnology firms
and
from major pharmaceutical and chemical companies, including Antigenics, Inc.,
Avi BioPharma, Inc., Bachria, Biomira, Inc., Corixa Corporation, Dendreon
Corporation, Epimmune, Inc., Genzyme Corp., Progenics Pharmaceuticals, Inc.,
Vical Incorporated, CancerVax Corporation, Genitope Corporation and Xcyte
Therapies, Inc., each of which is pursuing cancer vaccines. Many of these
companies have substantially greater financial, marketing, and human resources
than we do (including, in some cases, substantially greater experience in
clinical testing, manufacturing, and marketing of pharmaceutical products).
We
also experience competition in the development of our products from universities
and other research institutions and compete with others in acquiring technology
from such universities and institutions. In addition, certain of our products
may be subject to competition from products developed using other technologies,
some of which have completed numerous clinical trials.
We
expect
that our products under development and in clinical trials will address major
markets within the cancer sector. Our competition will be determined in part
by
the potential indications for which drugs are developed and ultimately approved
by regulatory authorities. Additionally, the timing of market introduction
of
some of our potential products or of competitors’ products may be an important
competitive factor. Accordingly, the relative speed with which we can develop
products, complete pre-clinical testing, clinical trials and approval processes
and supply commercial quantities to market are expected to be important
competitive factors. We expect that competition among products approved for
sale
will be based on various factors, including product efficacy, safety,
reliability, availability, price and patent position. See “Business - Research
and Development Programs” and “Business - Competition”.
Cerus
Corporation, a public company, has issued a press release claiming to have
a
proprietary Listeria-based approach to a cancer vaccine. We believe that through
our exclusive license with Penn of U.S. Patent Nos. 5,830,702, 6,051,237 and
6,565,852, we have the earliest known patent position for the use of recombinant
Listeria monocytogenes expressing proteins or tumor antigens as a vaccine for
the treatment of infectious diseases and tumors. Based on searches of publicly
available databases, we do not believe that Cerus or The University of
California Berkeley (which is where Cerus’ consulting scientist works) or any
other third party owns any published Listeria patents or has any issued patent
claims that might materially negatively affect our freedom to operate our
business in the field of Listeria monocytogenes. We had received written notice
form the European Patent Office that Cerus has filed an opposition against
European Patent Application Number 0790835 (EP 835 Patent) which was granted
by
the European Patent Office and which is assigned to The Trustees of the
University of Pennsylvania and exclusively licensed to us. We are defending
against Cerus’ allegations in the Opposition that the EP 835 Patent, which
claims a vaccine for inducing a tumor specific antigen with a recombinant live
Listeria, is deficient because of (i) insufficient disclosure in the
specifications of the granted claims, (ii) the inclusion of additional subject
matter in the granted claims, and (iii) a lack of inventive steps of the granted
claims of the EP 835 Patent. We believe that Cerus’ allegations in the
opposition have no basis and it plans to vigorously defend the claims.
For
more
information about Cerus Corporation and its claims with respect to
listeria-based technology, you should visit their web site at www.cerus.com
or to
view its publicly filed documents, www.sec.gov.
Scientific
Advisory Board
We
maintain a scientific advisory board consisting of internationally recognized
scientists who advise us on scientific and technical aspects of our business.
The scientific advisory board meets periodically to review specific projects
and
to assess the value of new technologies and developments to us. In addition,
individual members of the scientific advisory board meet with us periodically
to
provide advice in particular areas of expertise. The scientific advisory board
consists of the following members, information with respect to whom is set
forth
below: Yvonne Paterson, Ph.D.; Carl June, M.D.; Pramod Srivastava, Ph.D.; and
Bennett Lorber, M.D.
Dr.
Yvonne Paterson.
For a
description of our relationship with Dr. Paterson, please see “Business -
Partnerships and Agreements”.
Carl
June, M.D. Dr.
June
is currently Director of Translational Research at the Abramson Cancer Center
at
Penn, and is an Investigator of the Abramson Family Cancer Research Institute.
He is a graduate of the Naval Academy in Annapolis, and Baylor College of
Medicine in Houston. He had graduate training in immunology and malaria with
Dr.
Paul-Henri Lambert at the World Health Organization, Geneva, Switzerland from
1978 to 1979, and post-doctoral training in transplantation biology with Dr.
E.
Donnell Thomas at the Fred Hutchinson Cancer Research Center in Seattle from
1983 to 1986. He is board certified in Internal Medicine and Medical Oncology.
Dr. June founded the Immune Cell Biology Program and was head of the Department
of Immunology at the Naval Medical Research Institute from 1990 to 1995. Dr.
June rose to Professor in the Departments of Medicine and Cell and Molecular
Biology at the Uniformed Services University for the Health Sciences in
Bethesda, Maryland before assuming his current positions as of February 1,
1999.
Dr. June maintains a research laboratory that studies various mechanisms of
lymphocyte activation that relate to immune tolerance and adoptive
immunotherapy.
Pramod
Srivastava, Ph.D. Dr.
Srivastava is Professor of Immunology at the University of Connecticut School
of
Medicine, where he is also Director of the Center for Immunotherapy of Cancer
and Infectious Diseases. He holds the Physicians Health Services Chair in Cancer
Immunology at the University. Professor Srivastava is the Scientific Founder
of
Antigenics, Inc. He serves on the Scientific Advisory Council of the Cancer
Research Institute, New York, and was a member of the Experimental Immunology
Study Section of the National Institutes of Health of the U.S. Government (1994
to 1999). He serves presently on the Board of Directors of two privately held
companies: Ikonisys (New Haven, Connecticut) and CambriaTech (Lugano,
Switzerland). In 1997, he was inducted into the Roll of Honor of the
International Union Against Cancer and was listed in Who’s Who in Science and
Engineering. He is among the 20 founding members of the Academy of Cancer
Immunology, New York. Dr. Srivastava obtained his bachelor’s degree in biology
and chemistry and a master’s degree in botany (paleontology) from the University
of Allahabad, India. He then studied yeast genetics at Osaka University, Japan.
He completed his Ph.D. in biochemistry at the Center for Cellular and Molecular
Biology, Hyderabad, India, where he began his work on tumor immunity, including
identification of the first proteins that can mediate tumor rejection. He
trained at Yale University and Sloan-Kettering Institute for Cancer Research.
Dr. Srivastava has held faculty positions at the Mount Sinai School of Medicine
and Fordham University in New York City.
Bennett
Lorber, M.D. Dr.
Lorver attended Swarthmore College where he studied zoology and art history.
He
graduated from the University of Pennsylvania School of Medicine and did his
residency in internal medicine and fellowship in infectious diseases at Temple
University, following which he joined the Temple faculty. At Temple he rose
through the ranks to become Professor of Medicine and, in 1988, was named the
first recipient of the Thomas Durant Chair in Medicine. He is also a Professor
of Microbiology and Immunology and serves as the Chief of the Section of
Infectious Diseases. He is a Fellow of the American College of Physicians,
a
Fellow of the Infectious Diseases Society of America, and a Fellow of the
College of Physicians of Philadelphia where he serves as College Secretary
and
as a member of the Board of Trustees. Dr. Lorber’s major interest in infectious
diseases is in human listeriosis, an area in which he is regarded as an
international authority. He has also been interested in the impact of societal
changes on infectious disease patterns as well the relationship between
infectious agents and chronic illness, and he has authored papers exploring
these associations. He has been repeatedly honored for his teaching; among
his
honors are 10 golden apples, the Temple University Great Teacher Award, the
Clinical Practice Award from the Pennsylvania College of Internal Medicine,
and
the Bristol Award from the Infectious Diseases Society of America. On two
occasions the graduating medical school class dedicated their yearbook to Dr.
Lorber. In 1996 he was the recipient of an honorary Doctor of Science degree
from Swarthmore College. Dr. Lorber is also a professional painter and an
accomplished guitarist.
David
B. Weiner, Ph.D.
Dr. David Weiner received his B.S in Biology from the State University of New
York and performed undergraduate research in the Department of Microbiology,
Chaired by Dr. Arnie Levine, at Stony Brook University. He completed his MS.
and
Ph.D. in Developmental Biology/Immunology from the Children’s Hospital Research
Foundation at the University of Cincinnati in 1986. He completed his Post
Doctoral Fellowship in the Department of Pathology at the University of
Pennsylvania in 1989, under the direction of Dr. Mark Greene. At that time
he
joined the Faculty at the Wistar Institute in Philadelphia. He was recruited
back to the University of Pennsylvania in 1994. He is currently an Associate
Professor with Tenure in the Department of Pathology, and he is the Associate
Chair of the Gene Therapy and Vaccines Graduate Program at the University of
Pennsylvania. Of relevance during his career he has worked extensively in the
areas of molecular immunology, the development of vaccines and vaccine
technology for infectious diseases and in the area of molecular oncology and
immune therapy. His laboratory is considered one of the founders of the field
of
DNA vaccines as his group not only was the first to report on the use of this
technology for vaccines against HIV, but was also the first group to advance
DNA
vaccine technology to clinical evaluation. In addition he has worked on the
identification of novel approaches to inhibit HIV infection by targeting the
accessory gene functions of the virus. Dr. Weiner has authored over 260 articles
in peer reviewed journals and is the author of 28+ awarded US patents as well
as
their international counterparts. He has served and still serves on many
national and international review boards and panels including NIH Study section,
WHO advisory panels, the NIBSC, Department of Veterans Affairs Scientific Review
Panel, as well as the FDA Advisory panel - CEBR, and AACTG among others. He
also
serves or has served in an advisory capacity to several Biotechnology and
Pharmaceutical Companies. Dr. Weiner has, through training of young people
in
his laboratory, advanced over 35 undergraduate scientists to Medical School
or
Doctoral Programs and has trained 28 Post Doctoral Fellows and 7 Doctoral
Candidates as well as served on 14 Doctoral Student Committees
EMPLOYEES:
As
of
January 1, 2006, we have three employees, all of whom are on a full-time
basis.
Mr.
Roni
Appel currently serves as our Chief Executive Officer and Chief Financial
Officer.
Additional
senior employees have been identified and are anticipated to join Advaxis in
the
near future.
We
anticipate increasing the number of employees in the research and development
department significantly during the next two years, as well as increasing the
number of employees in the general and administrative and business development
department.
The
aggregate
compensation paid to our directors and executive officers, including stock
based
compensation, for
the
year ended December 31, 2003, December
31, 2004 and December 31, 2005 was approximately $183,692, $238,795 and
$444,250, respectively. This amount includes $0 set aside or accrued to provide
pension, severance, retirement, or similar benefits or expenses, but does not
include business travel, relocation, professional and business association
dues
and expenses reimbursed to office holders and other benefits commonly reimbursed
or paid by similarly situated companies. None of our directors has so far
received any compensation for his or her services as a director other than
stock
options and reimbursement of expenses.
RISK
FACTORS
Risks
Specific to Us
We
are a development stage company.
We
are a
development stage company with a history of losses and can provide no assurance
as to future operating results. As a result of losses which will continue
throughout our development stage, we may exhaust our financial resources and
be
unable to complete the development of our production. Our deficit will continue
to grow during our drug development period.
We
have
sustained losses from operations in each fiscal year since our inception and
losses are expected to continue, due to the substantial investment in research
and development, for the next several years. At October 31, 2005, we had an
accumulated deficit of $3,464,430 and stockholders’ equity of $2,962,039. We
expect to spend substantial additional sums on the continued research and
development of proprietary products and technologies with no certainty that
losses will not increase or that we will ever become profitable as a result
of
these expenditures.
We
will require substantial additional financing in order to meet our business
objectives.
Although
we believe that the net proceeds received from the sale of Units will be
sufficient to finance our currently planned operations for the near-term
(approximately 12 months), such amounts will not be sufficient to meet our
longer-term cash requirements or cash requirements for the commercialization
of
certain products currently in development. We will be required to issue equity
or debt securities or enter into other financial arrangements, including
relationships with corporate and other partners, in order to raise substantial
additional capital during the five to ten year period of product development
and
the United States Food and Drug Administration (“FDA”) testing through Phase III
testing. Depending upon market conditions, we may not be successful in raising
sufficient additional capital for our long-term requirements. If we fail to
raise sufficient additional financing we will not be able to develop our product
candidates, we will be required to reduce staff, reduce or eliminate research
and development, slow the development of our product candidates and outsource
or
eliminate several business functions. Even if we are successful in raising
such
additional financing, we may not be able to successfully complete planned
clinical trials, development, and marketing of all, or of any, of our product
candidates. In such event, our business, prospects, financial condition and
results of operations could be materially adversely affected. We may be required
to reduce our staff, discontinue certain research or development programs of
our
future products, and cease to operate. We may not be able to conduct clinical
trial in Lovaxin C. See “Management’s Discussion and Analysis of Financial
Condition and Plan of Operations”.
Our
limited operating history does not afford investors a sufficient history on
which to base an investment decision.
We
commenced our Listeria System vaccine development business in February 2002
and
have existed as a development stage company since such time. Prior thereto
we
conducted no business. Accordingly, we have a limited operating history.
Investors must consider the risks and difficulties we have encountered in the
rapidly evolving vaccine and therapeutic biopharmaceutical industry. Such risks
include the following:
· |
competition
from companies that have substantially greater assets and financial
resources than we have;
|
· |
need
for acceptance of products;
|
· |
ability
to anticipate and adapt to a competitive market and rapid technological
developments;
|
· |
amount
and timing of operating costs and capital expenditures relating to
expansion of our business, operations and
infrastructure;
|
· |
need
to rely on multiple levels of outside funding due to the length of
the
product development cycles and governmental approved protocols associated
with the pharmaceutical industry;
and
|
· |
dependence
upon key personnel including key independent consultants and
advisors.
|
We
cannot
be certain that our strategy will be successful or that we will successfully
address these risks. In the event that we do not successfully address these
risks, our business, prospects, financial condition and results of operations
could be materially and adversely affected. We may be required to reduce our
staff, discontinue certain research or development programs of our future
products, and cease to operate. We may not be able to conduct clinical trials
in
Lovaxin C.
We
can provide no assurance of the successful and timely development of new
products.
Our
products are at various stages of research and development. Further development
and extensive testing will be required to determine their technical feasibility
and commercial viability. Our success will depend on our ability to achieve
scientific and technological advances and to translate such advances into
reliable, commercially competitive products on a timely basis. Vaccine products
that we may develop are not likely to be commercially available until the second
part of this decade. The proposed development schedules for our products may
be
affected by a variety of factors, including technological difficulties,
proprietary technology of others, and changes in governmental regulation, many
of which will not be within our control. Any delay in the development,
introduction or marketing of our products could result either in such products
being marketed at a time when their cost and performance characteristics would
not be competitive in the marketplace or in the shortening of their commercial
lives. In light of the long-term nature of our projects, the unproven technology
involved and the other factors described elsewhere in “Risk Factors”, there can
be no assurance that we will be able to complete successfully the development
or
marketing of any new products. See “Business - Research and Development
Program”.
Our
research and development expenses are subject to
uncertainty.
Factors
affecting our research and development (or R&D) expenses include, but are
not limited to:
· |
The
number of and the outcome of clinical studies we are planning to
conduct.
For example, our R&D expenses may increase based on the number of
late-stage clinical studies which we may be required to
conduct;
|
· |
The
number of products entering into development from late-stage research.
For
example, there is no guarantee that internal research efforts will
succeed
in generating sufficient data for us to make a positive development
decision or that an external candidate will be available on terms
acceptable to us. Some promising candidates may not yield sufficiently
positive pre-clinical results to meet our stringent development
criteria;
|
· |
In-licensing
activities, including the timing and amount of related development
funding
or milestone payments. For example, we may enter into agreements
requiring
us to pay a significant up-front fee for the purchase of in-process
research and development which we may record as an R&D
expense;
|
· |
As
part of our strategy, we invest in R&D. R&D as a percent of future
potential revenues can fluctuate with the changes in future levels
of
revenue. Lower revenues can lead to more limited spending on R&D
efforts; and
|
· |
Future
levels of revenue.
|
We
are subject to numerous risks inherent in conducting clinical
trials.
We
must
outsource our clinical trials and are in the process of negotiating with third
parties to conduct such trials. We are not certain that we will successfully
conclude agreements for the conduct of our clinical trials. Delay in concluding
such agreements would delay the commencement of the Phase 1 Trial of Lovaxin
C.
Agreements
with clinical investigators and medical institutions for clinical testing and
with other third parties for data management services place substantial
responsibilities on these parties, which could result in delays in, or
termination of, our clinical trials if these parties fail to perform as
expected. For example, if any of our clinical trial sites fail to comply with
FDA-approved good clinical practices, we may be unable to use the data gathered
at those sites. If these clinical investigators, medical institutions or other
third parties do not carry out their contractual duties or obligations or fail
to meet expected deadlines, or if the quality or accuracy of the clinical data
they obtain is compromised due to their failure to adhere to our clinical
protocols or for other reasons, our clinical trials may be extended, delayed
or
terminated, and we may be unable to obtain regulatory approval for or
successfully commercialize Lovaxin C.
We
or
regulators may suspend or terminate our clinical trials for a number of reasons.
We may voluntarily suspend or terminate our clinical trials if at any time
we
believe that they present an unacceptable risk to the patients enrolled in
our
clinical trials. In addition, regulatory agencies may order the temporary or
permanent discontinuation of our clinical trials at any time if they believe
that the clinical trials are not being conducted in accordance with applicable
regulatory requirements or that they present an unacceptable safety risk to
the
patients enrolled in our clinical trials.
Our
clinical trial operations are subject to regulatory inspections at any time.
If
regulatory inspectors conclude that we or our clinical trial sites are not
in
compliance with applicable regulatory requirements for conducting clinical
trials, we may receive reports of observations or warning letters detailing
deficiencies, and we will be required to implement corrective actions. If
regulatory agencies deem our responses to be inadequate, or are dissatisfied
with the corrective actions we or our clinical trial sites have implemented,
our
clinical trials may be temporarily or permanently discontinued, we may be fined,
we or our investigators may be precluded from conducting any ongoing or any
future clinical trials, the government may refuse to approve our marketing
applications or allow us to manufacture or market our products, and we may
be
criminally prosecuted.
The
successful development of biopharmaceuticals is highly
uncertain.
Successful
development of biopharmaceuticals is highly uncertain and is dependent on
numerous factors, many of which are beyond our control. Products that appear
promising in the early phases of development may fail to reach the market for
several reasons including:
· |
Pre-clinical
study results that may show the product to be less effective than
desired
(e.g., the study failed to meet its primary objectives) or to have
harmful
or problematic side effects;
|
· |
Failure
to receive the necessary regulatory approvals or a delay in receiving
such
approvals. Among other things, such delays may be caused by slow
enrollment in clinical studies, length of time to achieve study endpoints,
additional time requirements for data analysis, or BLA preparation,
discussions with the FDA, an FDA request for additional pre-clinical
or
clinical data, or unexpected safety or manufacturing
issues.
|
· |
Manufacturing
costs, pricing or reimbursement issues, or other factors that make
the
product uneconomical; and
|
· |
The
proprietary rights of others and their competing products and technologies
that may prevent the product from being
commercialized.
|
Success
in pre-clinical and early clinical studies does not ensure that large-scale
clinical studies will be successful. Clinical results are frequently susceptible
to varying interpretations that may delay, limit or prevent regulatory
approvals. The length of time necessary to complete clinical studies and to
submit an application for marketing approval for a final decision by a
regulatory authority varies significantly from one product to the next, and
may
be difficult to predict.
We
must comply with significant government regulations.
The
research and development, manufacture and marketing of human therapeutic and
diagnostic products are subject to regulation, primarily by the FDA in the
United States and by comparable authorities in other countries. These national
agencies and other federal, state, local and foreign entities regulate, among
other things, research and development activities (including testing in animals
and in humans) and the testing, manufacturing, handling, labeling, storage,
record keeping, approval, advertising and promotion of the products that we
are
developing. Noncompliance with applicable requirements can result in various
adverse consequences, including, delay in approving or refusal to approve
product licenses or other applications, suspension or termination of clinical
investigations, revocation of approvals previously granted, fines, criminal
prosecution, recall or seizure of products, injunctions against shipping
products and total or partial suspension of production and/or refusal to allow
a
company to enter into governmental supply contracts.
The
process of obtaining requisite FDA approval has historically been costly and
time consuming. Current FDA requirements for a new human drug or biological
product to be marketed in the United States include: (1) the successful
conclusion of pre-clinical laboratory and animal tests, if appropriate, to
gain
preliminary information on the product’s safety; (2) filing with the FDA of an
Investigational New Drug Application (“INDA”), to conduct human clinical trials
for drugs or biologics; (3) the successful completion of adequate and
well-controlled human clinical investigations to establish the safety and
efficacy of the product for its recommended use; and (4) filing by a Company
and
acceptance and approval by the FDA of a New Drug Application ("NDA") for a
drug
product or a Biological License Application ("BLA") for a biological product
to
allow commercial distribution of the drug or biologic. A delay in one or more
of
the procedural steps outlined above could be harmful to us in terms of getting
our product candidates through clinical testing and to market.
We
can provide no assurance that the Advaxis products will obtain regulatory
approval or that the results of clinical studies will be
favorable.
The
testing, marketing and manufacturing of any product will require the approval
of
the FDA. We cannot predict with any certainty the amount of time necessary
to
obtain such FDA approval and whether any such approval will ultimately be
granted. Preclinical and clinical trials may reveal that one or more products
is
ineffective or unsafe, in which event further development of such products
could
be seriously delayed or terminated. Moreover, obtaining approval for certain
products may require the testing on human subjects of substances whose effects
on humans are not fully understood or documented. Delays in obtaining FDA or
any
other necessary regulatory approvals of any proposed product and failure to
receive such approvals would have an adverse effect on the product’s potential
commercial success and on our business, prospects, financial condition and
results of operations. In addition, it is possible that a product may be found
to be ineffective or unsafe due to conditions or facts which arise after
development has been completed and regulatory approvals have been obtained.
In
this event, we may be required to withdraw such product from the market. To
the
extent that our success will depend on any regulatory approvals from
governmental authorities outside of the United States which perform roles
similar to that of the FDA, uncertainties similar to those stated above will
also exist. See “Business - Governmental Regulation”.
We
rely upon patents to protect our technology. We may be unable to protect our
intellectual property rights and we may be liable for infringing the
intellectual property rights of others.
Our
ability to compete effectively will depend on our ability to maintain the
proprietary nature of our technologies, including the Listeria System, and
the
proprietary technology of others with which we have entered into licensing
agreements. We have licensed eight patents and 12 patent applications from
Penn.
Further, we rely on a combination of trade secrets and nondisclosure, and other
contractual agreements and technical measures to protect our rights in the
technology. We depend upon confidentiality agreements with our officers,
employees, consultants, and subcontractors to maintain the proprietary nature
of
the technology. These measures may not afford us sufficient or complete
protection, and others may independently develop technology similar to ours,
otherwise avoid the confidentiality agreements, or produce patents that would
materially and adversely affect our business, prospects, financial condition,
and results of operations. Such competitive events, technologies and patents
may
limit our ability to raise funds, prevent other companies from collaborating
with us, and in certain cased prevent us from further developing our technology
due to third party patent blocking right. Such competitive events, technologies
and patents may limit our ability to raise funds, prevent other companies from
collaborating with us, and in certain cases prevent us from further developing
our technology due to third party patent blocking right.
We
believe that our technology and the technology licensed from Penn do not
infringe the rights of others; however, we cannot assure you that the technology
licensed from Penn will not, in the future be found to infringe upon the rights
of others. We have become aware of a public company, Cerus Corporation, which
has issued a press release claiming to have a proprietary Listeria-based
approach to a cancer vaccine. We believe that through our exclusive license
with
Penn of U.S. Patent Nos. 5,830,702, 6,051,237 and 6,565,852, we have the
earliest known and dominant patent position for the use of recombinant Listeria
monocytogenes expressing proteins or tumor antigens as a vaccine for the
treatment of infectious diseases and tumors. Based on searches of publicly
available databases, we do not believe that Cerus or The University of
California Berkeley (which is where Cerus’ consulting scientist works) or any
other third party owns any published Listeria patents or has any issued patent
claims that might materially negatively affect our freedom to operate our
business (as currently contemplated to be operated) in the field of Listeria
monocytogenes. We had received written notice from the European Patent Office
that Cerus has filed and opposition against European Patent Application Number
0790835 (EP 835 Patent) which was granted by the European Patent Office and
which is assigned to The Trustees of the University of Pennsylvania and
exclusively licensed to us. We are defending against Cerus’s allegation in the
Opposition that the EP 835 Patent, which claims a vaccine of inducing a tumor
specific antigen with a recombinant live Liseria, is deficient because of (i)
insufficient disclosure in the specifications of the granted claims, (ii) the
inclusion of additional subject matter in the granted claims, and (iii) a lack
of inventive steps of the granted claims of the EP 835 Patent. We believe that
Cerus’ allegations in the opposition have no basis and it plans to vigorously
defend the claims. For
more
information about Cerus Corporation and its claims with respect to
listeria-based technology, you should visit their web site at www.cerus.com
or to
view its publicly filed documents, www.sec.gov.
Others
may assert infringement claims against us, and should we be found to infringe
upon their patents, or otherwise impermissibly utilize their intellectual
property, our ability to continue to use our technology or the licensed
technology could be materially restricted or prohibited. If this event occurs,
we may be required to obtain licenses from the holders of our intellectual
property, enter into royalty agreements or redesign our products so as not
to
utilize this intellectual property, each of which may prove to be uneconomical
or otherwise impossible. Licenses or royalty agreements required in order for
us
to use this technology may not be available on acceptable terms, or at all.
These claims could result in litigation, which could materially adversely affect
our business, prospects, financial condition and results of operations. Such
competitive events, technologies and patents may limit our ability to raise
funds, prevent other companies from collaborating with us, and in certain cases
prevent us from further developing our technology due to third party patent
blocking right. See “Business—Patents and Licenses”. See
“Business—Patents and Licenses”.
We
are dependent upon our license agreement with Penn, as well as proprietary
technology of others.
The
manufacture and sale of any products developed by us will involve the use of
processes, products or information, the rights to certain of which are owned
by
others. Although we have obtained licenses with regard to the use of Penn’s
patents as described herein and certain of such processes, products and
information of others, we can provide no assurance that such licenses will
not
be terminated or expire during critical periods, that we will be able to obtain
licenses for other rights which may be important to us, or, if obtained, that
such licenses will be obtained on commercially reasonable terms. If we are
unable to maintain and/or obtain licenses, we may have to develop alternatives
to avoid infringing or the patents of others, potentially causing increased
costs and delays in product development and introduction or preclude the
development, manufacture, or sale of planned products. Some of our licenses
provide for limited periods of exclusivity that require minimum license fees
and
payments and/or may be extended only with the consent of the licensor. We can
provide no assurance that we will be able to meet these minimum license fees
in
the future or that these third parties will grant extensions on any or all
such
licenses. This same restriction may be contained in licenses obtained in the
future. Additionally, we can provide no assurance that the patents underlying
any licenses will be valid and enforceable. Furthermore, we call to your
attention that in 2001 an issue arose regarding the inventorship of U.S. Patent
6,565,852 and U.S. Patent Application No. 09/537,642 of Penn. These patent
rights are included in the patent rights licensed by us from Penn. It is
contemplated by GlaxoSmithKline Biologicals PLC (“GSK”) Penn and us that the
issue will be resolved through: (1) a correction of inventorship to add certain
GSK inventors, (2) where necessary and appropriate, an assignment of GSK’s
possible rights under these patent rights to Penn, and (3) a sublicense from
us
to GSK. To date, this arrangement has not been finalized and we cannot assure
that this issue will ultimately be resolved in the manner described above.
See
“Business - Patents and Licenses”. To the extent any products developed by us
are based on licensed technology, royalty payments on the licenses will reduce
our gross profit from such product sales and may render the sales of such
products uneconomical. See “Business - Corporate Partnerships and
Agreements”.
We
have no manufacturing, sales, marketing or distribution capability and we must
rely upon third parties for such.
We
do not
intend to create facilities to manufacture our products and therefore are
dependent upon third parties to do so. We currently have an agreement with
Cobra
Manufacturing for production of our vaccines for research and development and
testing purposes. Our reliance on third parties for the manufacture of our
products creates a dependency that could severely disrupt our research and
development, our clinical testing, and ultimately our sales and marketing
efforts if the source of such supply prove to be unreliable or unavailable.
If
the contracted manufacturing source is unreliable or unavailable, we may not
be
able to replace the development of our product candidates, including the
clinical testing program, could not go forward and our entire business plan
could fail.
If
we are unable to establish or manage strategic collaborations in the future,
our
revenue and product development may be limited.
Our
strategy includes eventual substantial reliance upon strategic collaborations
for marketing and commercialization of Lovaxin C, and we may rely even more
on
strategic collaborations for research, development, marketing and
commercialization of our other product candidates. To date, we have not entered
into any strategic collaborations with third parties capable of providing these
services although we have been heavily reliant upon third party outsourcing
for
our research and development activities. In addition, we have not yet marketed
or sold any of our product candidates or entered into successful collaborations
for these services in order to ultimately commercialize our product candidates.
Establishing strategic collaborations is difficult and time-consuming. Our
discussion with potential collaborators may not lead to the establishment of
collaborations on favorable terms, if at all. For example, potential
collaborators may reject collaborations based upon their assessment of our
financial, regulatory or intellectual property position. If we successfully
establish new collaborations, these relationships may never result in the
successful development or commercialization of our product candidates or the
generation of sales revenue. To the extent that we enter into co-promotion
or
other collaborative arrangements, our product revenues are likely to be lower
than if we directly marketed and sold any products that we may
develop.
Management
of our relationships with our collaborators will require:
· |
significant
time and effort from our management
team;
|
· |
coordination
of our research and development programs with the research and development
priorities of our collaborators;
and
|
· |
effective
allocation of our resources to multiple
projects.
|
If
we
continue to enter into research and development collaborations at the early
phases of product development, our success will in part depend on the
performance of our corporate collaborators. We will not directly control the
amount or timing of resources devoted by our corporate collaborators to
activities related to our product candidates. Our corporate collaborators may
not commit sufficient resources to our research and development programs or
the
commercialization, marketing or distribution of our product candidates. If
any
corporate collaborator fails to commit sufficient resources, our preclinical
or
clinical development programs related to this collaboration could be delayed
or
terminated. Also, our collaborators may pursue existing or other
development-stage products or alternative technologies in preference to those
being developed in collaboration with us. Finally, if we fail to make required
milestone or royalty payments to our collaborators or to observe other
obligations in our agreements with them, our collaborators may have the right
to
terminate those agreements.
We
may incur substantial liabilities from any product liability claims if our
insurance coverage for those claims is inadequate.
We
face
an inherent risk of product liability exposure related to the testing of our
product candidates in human clinical trials, and will face an even greater
risk
if the product candidates are sold commercially. An individual may bring a
liability claim against us if one of the product candidates causes, or merely
appears to have caused, an injury. If we cannot successfully defend ourselves
against the product liability claim, we will incur substantial liabilities.
Regardless of merit or eventual outcome, liability claims may result in:
· |
decreased
demand for our product candidates,
|
· |
injury
to our reputation,
|
· |
withdrawal
of clinical trial participants,
|
· |
costs
of related litigation,
|
· |
substantial
monetary awards to patients or other claimants,
|
· |
the
inability to commercialize product candidates,
and
|
· |
increased
difficulty in raising required additional funds in the private and
public
capital markets.
|
We
currently do not have product liability insurance. We intend to obtain insurance
coverage and to expand such coverage to include the sale of commercial products
if marketing approval is obtained for any of our product candidates. However,
insurance coverage is increasingly expensive. We may not be able to maintain
insurance coverage at a reasonable cost and we may not be able to obtain
insurance coverage that will be adequate to satisfy any liability that may
arise.
We
may incur significant costs complying with environmental laws and regulations.
We
will
use hazardous materials, including chemicals and biological agents and compounds
that could be dangerous to human health and safety or the environment. As
appropriate, we will store these materials and wastes resulting from their
use
at our or our outsourced laboratory facility pending their ultimate use or
disposal. We will contract with a third party to properly dispose of these
materials and wastes. We will be subject to a variety of federal, state and
local laws and regulations governing the use, generation, manufacture, storage,
handling and disposal of these materials and wastes. We may also incur
significant costs complying with environmental laws and regulations adopted
in
the future.
If
we use biological and hazardous materials in a manner that causes injury, we
may
be liable for damages.
Our
research and development and manufacturing activities will involve the use
of
biological and hazardous materials. Although we believe our safety procedures
for handling and disposing of these materials will comply with federal, state
and local laws and regulations, we cannot entirely eliminate the risk of
accidental injury or contamination from the use, storage, handling or disposal
of these materials. We do not carry specific biological or hazardous waste
insurance coverage, workers compensation or property and casualty and general
liability insurance policies which include coverage for damages and fines
arising from biological or hazardous waste exposure or contamination.
Accordingly, in the event of contamination or injury, we could be held liable
for damages or penalized with fines in an amount exceeding our resources, and
our clinical trials or regulatory approvals could be suspended or terminated.
We
need to attract and retain highly skilled personnel; we may be unable to
effectively manage growth with our limited resources.
At
the
date of this report, we have three employees. We intend to expand our operations
and staff materially. Our new employees will include a number of key managerial,
technical, financial, research and development and operations personnel who
will
not have been fully integrated into our operations. We expect the expansion
of
our business to place a significant strain on our limited managerial,
operational and financial resources. We will be required to expand our
operational and financial systems significantly and to expand, train and manage
our work force in order to manage the expansion of our operations. Our failure
to fully integrate our new employees into our operations could have a material
adverse effect on our business, prospects, financial condition and results
of
operations. Our ability to attract and retain highly skilled personnel is
critical to our operations and expansion. We face competition for these types
of
personnel from other technology companies and more established organizations,
many of which have significantly larger operations and greater financial,
technical, human and other resources than we have. We may not be successful
in
attracting and retaining qualified personnel on a timely basis, on competitive
terms, or at all. If we are not successful in attracting and retaining these
personnel, our business, prospects, financial condition and results of
operations will be materially adversely affected. In such circumstances we
may
be unable to conduct certain research and development programs, unable to
adequately manage our clinical trials of Lovaxin C and other products, and
unable to adequately address the management needs of the Company. See
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations”, “Business - Strategy”, and
“Business--Employees.”
We
depend upon our senior management and key consultants and their loss or
unavailability could put us at a competitive disadvantage.
We
depend
upon the efforts and abilities of our senior executive, as well as the services
of several key consultants, including Yvonne Paterson, Ph.D. The loss or
unavailability of the services of any of these individuals for any significant
period of time could have a material adverse effect on our business, prospects,
financial condition and results of operations. We have not obtained, do not
own,
nor are we the beneficiary of, key-person life insurance. See
“Management—Employment Agreements”.
Risks
Related to the Biotechnology / Biopharmaceutical Industry
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. We may be unable
to
compete with more substantial enterprises.
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. Competition
in the biopharmaceutical industry is based significantly on scientific and
technological factors. These factors include the availability of patent and
other protection for technology and products, the ability to commercialize
technological developments and the ability to obtain governmental approval
for
testing, manufacturing and marketing. We compete with specialized
biopharmaceutical firms in the United States, Europe and elsewhere, as well
as a
growing number of large pharmaceutical companies that are applying biotechnology
to their operations. Many biopharmaceutical companies have focused their
development efforts in the human therapeutics area, including cancer. Many
major
pharmaceutical companies have developed or acquired internal biotechnology
capabilities or made commercial arrangements with other biopharmaceutical
companies. These companies, as well as academic institutions and governmental
agencies and private research organizations, also compete with us in recruiting
and retaining highly qualified scientific personnel and consultants. Our ability
to compete successfully with other companies in the pharmaceutical field will
also depend to a considerable degree on the continuing availability of capital
to us.
We
are
aware of certain products under development or manufactured by competitors
that
are used for the prevention, diagnosis, or treatment of certain diseases we
have
targeted for product development. Various companies are developing
biopharmaceutical products that potentially directly compete with our product
candidates even though their approach to such treatment is different. Several
companies, such as Cerus Corporation, in particular, Dandreon Corporation and
CancerVax Corporation, are developing cancer vaccines which would be directly
competitive with our product candidates. In addition, numerous other companies,
many of which have greater financial resources than we do, are actively engaged
in the research and development of cancer vaccines, and are in Stage II and
Stage III Testing of such products. Such companies include: Antigenics, Inc.;
Avi BioPharma, Inc.; Biomira, Inc.; Corixa Corporation; Dendreon Corporation;
Epimmune, Inc.; Genzyme Corp.; Progenics Pharmaceuticals, Inc.; Vical
Incorporated; CancerVax Corporation; Genitope Corporation; and Xcyte Therapies,
Inc.
We
expect
that our products under development and in clinical trials will address major
markets within the cancer sector. Our competition will be determined in part
by
the potential indications for which drugs are developed and ultimately approved
by regulatory authorities. Additionally, the timing of market introduction
of
some of our potential products or of competitors’ products may be an important
competitive factor. Accordingly, the relative speed with which we can develop
products, complete pre-clinical testing, clinical trials and approval processes
and supply commercial quantities to market are expected to be important
competitive factors. We expect that competition among products approved for
sale
will be based on various factors, including product efficacy, safety,
reliability, availability, price and patent position. See “Business - Research
and Development Programs” and “Business - Competition”.
Risks
Related to the Securities Markets and Investments in our Common
Stock
The
price of our common stock may be volatile.
The
trading price of our common stock may fluctuate substantially. The price of
the
common stock that will prevail in the market after the sale of the shares of
common stock by the selling stockholders may be higher or lower than the price
you have paid, depending on many factors, some of which are beyond our control
and may not be related to our operating performance. These fluctuations could
cause you to lose part or all of your investment in our common stock. Those
factors that could cause fluctuations include, but are not limited to, the
following:
· |
price
and volume fluctuations in the overall stock market from time to
time;
|
· |
fluctuations
in stock market prices and trading volumes of similar companies;
|
· |
actual
or anticipated changes in our earnings or fluctuations in our operating
results or in the expectations of securities analysts;
|
· |
general
economic conditions and trends;
|
· |
major
catastrophic events;
|
· |
sales
of large blocks of our stock;
|
· |
departures
of key personnel;
|
· |
changes
in the regulatory status of our product candidates, including results
of
our clinical trials;
|
· |
events
affecting Penn or any future collaborators;
|
· |
announcements
of new products or technologies, commercial relationships or other
events
by us or our competitors;
|
· |
regulatory
developments in the United States and other countries;
|
· |
failure
of our common stock to be listed quoted on the Nasdaq Small Cap Market,
American Stock Exchange, OTC Bulletin Board or other national market
system;
|
· |
changes
in accounting principles; and
|
· |
discussion
of us or our stock price by the financial and scientific press and
in
online investor communities.
|
In
the
past, following periods of volatility in the market price of a company’s
securities, securities class action litigation has often been brought against
that company. Due to the potential volatility of our stock price, we may
therefore be the target of securities litigation in the future. Securities
litigation could result in substantial costs and divert management’s attention
and resources from our business.
If
additional authorized shares of our common stock available for issuance or
shares eligible for future sale were introduced into the market, it could hurt
our stock price.
We
are
authorized to issue 500,000,000 shares of common stock. As of December 31,
2005,
there were an aggregate of 37,768,932 shares of our common stock issued and
outstanding on a fully diluted basis. In addition, 4,643,136 shares of our
common stock may be issued upon the exercise of currently outstanding stock
options and 20,509,220 shares of common stock may be issued upon the exercise
of
current outstanding warrants. We are unable to estimate the amount, timing
or
nature of future sales of outstanding common stock. Sales of substantial amounts
of the common stock in the public market by these holders or perceptions that
such sales may take place may lower the common stock’s market
price.
Our
common stock is considered to
be “penny
stock”.
Our
common stock may be deemed to be “penny stock” as that term is defined in Rule
3a51-1, promulgated under the Securities and Exchange Act of 1934, as amended
(the “Exchange Act”). Penny stocks are stocks:
· |
with
a price of less than $5.00 per share;
|
· |
that
are not traded on a “recognized” national exchange;
|
· |
whose
prices are not quoted on the NASDAQ automated quotation system; or
|
· |
of
issuers with net tangible assets less than $2,000,000 (if the issuer
has
been in continuous operation for at least three years) or $5,000,000
(if
in continuous operation for less than three years), or with average
revenue of less than $6,000,000 for the last three years.
|
Section
15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder require
broker-dealers dealing in penny stocks to provide potential investors with
a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any transaction
in a
“penny stock” for the investor’s account. We urge potential investors to obtain
and read this disclosure carefully before purchasing any shares that are deemed
to be “penny stock.”
Rule
15g-9 promulgated under the Exchange Act requires broker-dealers in penny stocks
to approve the account of any investor for transactions in such stocks before
selling any “penny stock” to that investor. This procedure requires the
broker-dealer to:
· |
obtain
from the investor information about his or her financial situation,
investment experience and investment objectives;
|
· |
reasonably
determine, based on that information, that transactions in penny
stocks
are suitable for the investor and that the investor has enough knowledge
and experience to be able to evaluate the risks of “penny stock”
transactions;
|
· |
provide
the investor with a written statement setting forth the basis on
which the
broker-dealer made his or her determination; and
|
· |
receive
a signed and dated copy of the statement from the investor, confirming
that it accurately reflects the investor’s financial situation, investment
experience and investment objectives.
|
Compliance
with these requirements may make it harder for investors in our common stock
to
resell their shares to third parties. Accordingly, our common stock should
only
be purchased by investors, who understand that such investment is a long-term
and illiquid investment, and are capable of and prepared to bear the risk of
holding the common stock for an indefinite period of time.
We
may incur increased costs as a result of recently enacted and proposed changes
in laws and regulations relating to corporate governance matters.
Recently
enacted and proposed changes in the laws and regulations affecting public
companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules
adopted or proposed by the SEC and by the Nasdaq Stock Market, will result
in
increased costs to us as we evaluate the implications of these laws and
regulations and respond to their requirements. These laws and regulations could
make it more difficult or more costly for us to obtain certain types of
insurance, including director and officer liability insurance, and we may be
forced to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. The impact of these events
could also make it more difficult for us to attract and retain qualified persons
to serve on our board of directors, our board committees or as executive
officers. We are presently evaluating and monitoring developments with respect
to these laws and regulations and cannot predict or estimate the amount or
timing of additional costs we may incur to respond to their requirements.
A
limited public trading market may cause volatility in the price of our common
stock.
We
have
applied to have our common stock quoted on the OTC Bulletin Board. The quotation
of our common stock on the OTC Bulleting Board does not assure that a
meaningful, consistent and liquid trading market currently exists, and in recent
years such market has experience extreme price and volume fluctuations that
have
particularly affected the market prices of many smaller companies like us.
Our
common stock is thus subject to this volatility. Sales of substantial amounts
of
common stock, or the perception that such sales might occur, could adversely
affect prevailing market prices of our common stock and our stock price may
decline substantially in a short time and our shareholders could suffer losses
or be unable to liquidate their holdings.
There
is no assurance of an established public trading market.
A
regular
trading market for our common stock may not be established or sustained in
the
future. The NASD has enacted recent changes that limit quotation on the OTC
Bulletin Board to securities of issuers that are current in their reports filed
with the SEC. The effect on the OTC Bulletin Board of these rule changes and
other proposed changes cannot be determined at this time. The OTC Bulletin
Board
is an inter-dealer, over-the-counter market that provides significantly less
liquidity than the NASDAQ Stock Market. Quotes for stocks included on the OTC
Bulletin Board are not listed in the financial sections of newspapers as are
those for the NASDAQ Stock Market. Therefore, prices for securities traded
solely on the OTC Bulletin Board may be difficult to obtain and holders of
common stock may be unable to resell their securities at or near their original
offering price or at any price. Market prices for our common stock will be
influenced by a number of factors, including:
· |
The
issuance of new equity securities pursuant to a future
offering;
|
· |
Changes
in interest rates;
|
· |
Competitive
developments, including announcements by competitors of new products
or
services or significant contracts, acquisitions, strategic partnerships,
joint ventures or capital
commitments;
|
· |
Variations
in quarterly operating results
|
· |
Change
in financial estimates by securities
analysts;
|
· |
The
depth and liquidity of the market for our common
stock;
|
· |
Investor
perceptions of our company and the technologies industries generally;
and
|
· |
General
economic and other national
conditions.
|
We
have
applied to have our common stock quoted on the OTC Bulletin Board. In addition
we are subject to a covenant to use our best efforts to apply to be listed
on
the American Stock Exchange or quoted on the Nasdaq National Stock Market.
We
cannot assure you that we will be successful in obtaining approval for such
applications.
We
may not be able to achieve secondary trading of our stock in certain states
because our common stock is not nationally traded.
Because
our common stock is not approved for trading on the Nasdaq National Market
or
listed for trading on a national securities exchange, our common stock is
subject to the securities laws of the various states and jurisdictions of the
United States in addition to federal securities law. This regulation covers
any
primary offering we might attempt and all secondary trading by our stockholders.
While we intend to take appropriate steps to register our common stock or
qualify for exemptions for our common stock, in all of the states and
jurisdictions of the United States, if we fail to do so the investors in those
jurisdictions where we have not taken such steps may not be allowed to purchase
our stock or those who presently hold our stock may not be able to resell their
shares without substantial effort and expense. These restrictions and potential
costs could be significant burdens on our stockholders.
Our
executive officers, directors and principal stockholders control our business
and may make decisions that are not in our best interests.
Our
officers, directors and principal stockholders, and their affiliates, in the
aggregate, beneficially own approximately 63.79% of the outstanding shares
of
our common stock on a fully diluted basis. As a result, such persons, acting
together, have the ability to substantially influence all maters submitted
to
our stockholders for approval, including the election and removal of directors
and any merger, consolidation or sale of all or substantially all of our assets,
and to control our management and affairs. Accordingly, such concentration
of
ownership may have the effect of delaying, deferring or preventing a change
in
discouraging a potential acquirer from making a tender offer or otherwise
attempting to obtain control of our business, even if such a transaction would
be beneficial to other stockholders.
Sales
of additional equity securities may adversely affect the market price of our
common stock and your rights in us may be reduced.
Our
stockholders who purchased shares in the private placement hereunder have the
right to sell such securities pursuant to a pending registration statement.
We
expect to continue to incur product development and selling, general and
administrative costs, and in order to satisfy our funding requirements, we
will
need to sell additional equity securities, which may be subject to similar
registration rights. The sale or the proposed sale of substantial amounts of
our
common stock in the public markets may adversely affect the market price of
our
common stock and our stock price may decline substantially. Our stockholders
may
experience substantial dilution and a reduction in the price that they are
able
to obtain upon sale of their shares. Also, any new equity securities issued
may
have greater rights, preferences or privileges than our existing common
stock.
Additional
authorized shares of common stock available for issuance may adversely affect
the market.
We
are
authorized to issue 500,000,000 shares of our common stock. As of December
31,
2005, we had 37,768,932 shares of our common stock issued and outstanding,
excluding shares issuable upon exercise of our outstanding warrants and options.
As of December 31, 2005, we had outstanding 4,643,136 options to purchase shares
of our common stock at a weighted exercise price of $0.23 per share and
outstanding warrants to purchase 20,509,220 shares of our common stock, with
exercise prices ranging from $0.1952 to $0.40 per share. Pursuant to our 2004
Stock Option Plan, 2,381,525 shares of common stock are reserved for issuance
under the plan. Pursuant to our 2005 Stock Option Plan, which is subject to
shareholder approval, 5,600,000 shares of common stock are reserved for issuance
under the plan. To the extent the shares of common stock are issued or options
and warrants are exercised, holders of our common stock will experience
dilution. In addition, in the event of any future financing of equity securities
or securities convertible into or exchangeable for, common stock, holders of
our
common stock may experience dilution.
Shares
eligible for future sale may adversely affect the market.
From
time
to time, certain of our stockholders may be eligible to sell all or some of
their shares of common stock by means of ordinary brokerage transactions in
the
open market pursuant to Rule 144 (“Rule 144”) promulgated under the Securities
Act of 1933, as amended (the “Securities Act of 1933”), subject to certain
limitations. In general, pursuant to Rule 144, a stockholder (or stockholders
whose shares are aggregated) who has satisfied a one-year holding period may,
under certain circumstances, sell within any three-month period a number of
securities which does not exceed the greater of 1% of the then outstanding
shares of common stock or the average weekly trading volume of the class during
the four calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of securities, without any limitations, by a
non-affiliate of our company who has satisfied a two-year holding period. Any
substantial sale of our common stock pursuant to Rule 144 or pursuant to any
resale prospectus may have an adverse effect on the market price of our
securities.
An
aggregate of 56,730,045 shares of common stock are registered with the SEC
in a
registration statement. These shares would otherwise be eligible for future
sale
under Rule 144 after passage of the minimum one year holding period for holders
who are not officers, directors or affiliates of the Company. The registration
and subsequent sales of such shares of common stock will likely have an adverse
effect on the market price of our common stock when it commences to
trade.
We
are able to issue shares of preferred stock with rights superior to those of
holders of our common stock. Such issuances can dilute the tangible net book
value of shares of our common stock.
Our
Articles of Incorporation provide for the authorization of 5,000,000 shares
of
“blank check” preferred stock. Pursuant to our Articles of Incorporation, our
Board of Directors is authorized to issue such “blank check” preferred stock
with rights that are superior to the rights of stockholders of our common stock,
at a purchase price then approved by our Board of Directors, which purchase
price may be substantially lower than the market price of shares of our common
stock, without stockholder approval.
We
do not intend to pay dividends.
We
have
never declared or paid any dividends on our securities. We currently intend
to
retain our earnings for funding growth and, therefore, do not expect to pay
any
dividends in the foreseeable future.
Item
2: DESCRIPTION
OF PROPERTY
Our
corporate offices are currently located at the corporate center at 212 Carnegie
Center, Suite 206, Princeton, New Jersey 08540. We have entered into a
lease effective April 1, 2005, which will continue on a monthly basis at a
biotech industrial park located at 675 Rt. 1, Suite 117, North Brunswick, NJ
08902 for research and development offices and executive offices. We believe
that our facility will be sufficient for our purposes for the foreseeable
future. Our monthly payment on this facility
will be approximately $3,000 per month. In the event that our facility should,
for any reason, become unavailable, we believe that alternative facilities
are
available at competitive rates.
Item
3: Legal
Proceedings
There
are
no material legal proceedings threatened against us. In the ordinary course
of
our business we may become subject to litigation regarding our products or
our
compliance with applicable laws, rules, and regulations. Aventis,
Inc. has filed trademark opposition proceedings in the United States Patent
and
Trademark Office against our trademark applications Serial Nos. 78/252527
and 78/252586 related to the trademark of “Advaxis”.
We
had
received written notice from the European Patent Office that Cerus has filed
an
opposition against European Patent Application Number 0790835 (EP 835 Patent)
which was granted by the European Patent Office and which is assigned to The
Trustees of the University of Pennsylvania and exclusively licensed to us.
We
are defending against Cerus’ allegations in the Opposition that the EP 835
Patent, which claims a vaccine for inducing a tumor specific antigen with
recombinant live Listeria, is deficient because of (i) insufficient disclosure
in the specifications of the granted claims, (ii) the inclusion of additional
subject matter in the granted claims, and (iii) a lack of inventive steps of
the
granted claims of the EP 835 Patent. We believe that Cerus’ allegations in
opposition have no basis and it plans to vigorously defend the
claims.
The
opposition is in the early stages and, as yet, we are unable to evaluate the
merits, if any, to the opposition proceeding. If the European Patent Office
rules that the allegations are correct in whole or in part, and such ruling
is
upheld on appeal, our patent position in Europe may be eroded to the degree
that
the claims of the patent are narrowed or not allowed. The likely result of
this
decision will be increased competition for us in the European market for
recombinant live Listeria based vaccines. Regardless of the outcome of the
opposition proceeding, we believe that our freedom to operate in Europe, or
any
other territory, for its recombinant live Listeria based vaccine products will
not b diminished.
Item
4: Submission
Of Matters To A Vote Of Security Holders
No
matter
was submitted to a vote of stockholders during the fourth quarter of our fiscal
year ended October 31, 2005.
Part
II
Item
5: Market
For Registrant’s Common Equity And Related
Stockholder Matters.
Since
July 28, 2005, our Common Stock has quoted on the Over the Counter Bulletin
Board (OTC BB symbol ADXS). The following table shows, for the periods
indicated, the high and low sales prices per share of our Common Stock as
reported by the American Stock Exchange.
Common
Stock
Quarter ended |
High |
Low |
|
|
|
Fiscal Year ended October 31,
2005 |
$ 1.25 |
$
0.12 |
|
|
|
December 31, 2005 |
$ 0.25 |
$
0.15 |
On
January 20, 2006, the last reported sale price of our Common Stock, as quoted
on
the OTC BB, was $ 0.186 per share.
Item
6: Management’s
Discussion And Analysis Of Financial Condition And Results Of Operations And
Plan Of Operations
This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations and other portions of this Annual Report
contain forward-looking information that involve risks and uncertainties. Our
actual results could differ materially from those anticipated by the
forward-looking information. Factors that may cause such differences include,
but are not limited to, availability and cost of financial resources, product
demand, market acceptance and other factors discussed in this prospectus under
the heading “Risk Factors”. This Management’s Discussion and Analysis of
Financial Condition and Results of Operations and Plan of Operations should
be
read in conjunction with our financial statements and the related notes included
elsewhere in this Annual Report.
Overview
We
are a
biotechnology company utilizing multiple mechanisms of immunity with the intent
to develop cancer vaccines that are more effective and safer than existing
vaccines. We believe that by using our licensed Listeria System to engineer
a
live attenuated Listeria monocytogenes bacteria to secrete a protein sequence
containing a tumor-specific antigen, we will force the body’s immune system to
process and recognize the antigen as if it were foreign, creating the immune
response needed to attack the cancer. The licensed Listeria System, developed
at
Penn over the past 10 years, provides a scientific basis for believing that
this
therapeutic approach induces a significant immune response to the tumor.
Accordingly, we believe that the Listeria System is a broadly enabling platform
technology that can be applied in many cancers, infectious diseases and
auto-immune disorders.
Our
therapeutic approach is based upon, and we have obtained an exclusive license
with respect to, the innovative work of Yvonne Paterson, Ph.D., Professor of
Microbiology at Penn involving the creation of genetically engineered Listeria
that stimulate the innate immune system and induce an antigen-specific immune
response involving humoral and cellular components.
We
have
focused our initial development efforts on six lead compounds and anticipate
commencing a Phase I clinical study of Lovaxin C, a potential cervical and
neck
cancer vaccine, in early 2006. See “Business - Research and Development
Program”.
We
were
originally incorporated in the state of Colorado on June 5, 1987 under the
name
Great Expectations, Inc. We were administratively dissolved January 1, 1997
and
reinstated June 18, 1998 under the name Great Expectations and Associates,
Inc.
In 1999, we became a reporting company under the Securities Exchange Act of
1934, as amended. We were a publicly-traded “shell” company in November 2004
without any business. On November 12, 2004, we acquired Advaxis through the
Share Exchange, as a result of which Advaxis become our wholly-owned subsidiary
and our sole operating company. For financial reporting purposes, we have
treated the Share Exchange as a recapitalization. As a result of the foregoing
as well as the fact that the Share Exchange is treated as a recapitalization
of
Advaxis rather than as a business combination, the historical financial
statements of Advaxis became our historical financial statements after the
Share
Exchange.
On
November
12, 2004, December 8, 2004 and January 4, 2005,
we
closed a private offering of an aggregate of 11,334,495 shares of our common
stock and warrants to purchase an aggregate of 11,334,495 shares of our common
stock resulting in aggregate net proceeds of approximately $3,253,000. Such
offering was solely to “accredited investors”, as defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, through the Placement Agent.
See
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations - Liquidity and Capital
Resources”.
On
November 12, 2004 we converted $595,000 of aggregate principal promissory notes
plus accrued interest outstanding into an aggregate of 2,136,441 shares of
our
common stock and warrants to purchase 2,223,549 shares of our common
stock.
On
January
12, 2005, we
closed
a private offering of 3,832,753 shares of our common stock and warrants to
purchase 3,832,753 shares of our common stock resulting in aggregate net
proceeds of approximately $1,100,000. Such offering was to a single “accredited
investor”, as defined in Rule 501(a) of Regulation D under the Securities Act of
1933. See “Management’s Discussion and Analysis of Financial Condition and
Results of Operations and Plan of Operations - Liquidity and Capital
Resources”.
To
date
we have been in the development stage. During the year ended December 31, 2003,
the ten months ended October 31, 2004 and the twelve months ended October 31,
2005, we had no customers and focused our efforts on research and development
related to our product candidates, capital raising and formation, and activities
relating to the Share Exchange. During these periods, our net loss was $909,745,
$538,076 and $1,805,789, respectively. As of December 31, 2003, October 31,
2004
and October 31, 2005, we had a working capital (deficit) of ($997,184),
($1,396,062) and $1,365,741, respectively and an accumulated deficit of
$1,076,861, $1,658,641 and $3,464,430, respectively.
Plan
of Operations
We
intend
to use the proceeds of the Private Placement closed on November 12, 2004,
December 8, 2004 and January 4, 2005 and the proceeds of the offering closed
on
January 12, 2005 to conduct a Phase I clinical trial in cervical cancer using
Lovaxin C, one of our lead product candidates in development using our Listeria
System. We intend to expand our research and development team and further the
development of the product candidates. We also intend to deploy a portion of
the
funds in expanding our manufacturing capabilities and in strategic activities.
Our corporate staff will be responsible for the general and administrative
activities.
During
the next 12 to 24 months, we anticipate that our strategic focus will be to
achieve several objectives. Our foremost objectives are as follows and are
further described under “Business - Strategy”:
· |
Initiate
and complete phase I clinical study of Lovaxin C;
|
· |
Continue
pre-clinical development of our
products;
|
· |
Continue
research to expand our technology
platform.
|
Accounting
Policies; Impact of Growth
Below
is
a brief description of basic accounting principles which we have adopted in
determining our recognition of expenses, as well as a brief description of
the
effects that our management believes that our anticipated growth will have
on
our revenues and expenses in the future 12 months.
Revenues.
We do
not anticipate
that we will record any material revenues during at least the twelve months
ending October 31, 2006. When we recognize revenues, we anticipate that
the
revenue sources will be principally comprised of grants and licensing fees.
Expenses.
We
recorded operating expenses for the year ended December 31, 2003, the ten months
ended October 31, 2004 and the year ended October 31, 2005 of $897,076 $650,310
and $2,395,328, respectively.
The
preparation of financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenue and expenses,
and related disclosure of contingent assets and liabilities. On an on-going
basis, we evaluate our estimates, based on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances.
Actual results may differ from these estimates under different assumptions
or
conditions.
We
believe the following critical accounting policy involves significant estimate
and judgment. We amortize trademark and patent costs over their estimated useful
lives. We may be required to adjust these lives based on advances in science
and
competitor actions. We review the recorded amounts of trademarks and patents
at
each period end to determine if their carrying amount is still recoverable
based
on expectations regarding potential licensing of the intangibles or sales of
related products. Such an assessment, in the future, may result in a conclusion
that the assets are impaired, with a corresponding charge against
earnings.
Due
to
the limited nature of our operations, we do not identify any other accounting
policies involving estimates or assumptions that are material due to the levels
of subjectivity and judgment necessary to account for highly uncertain matters
or the susceptibility of such matters to change, and where the impact of the
estimates and assumptions on financial condition or operating performance is
material.
In
accordance with Securities and Exchange Commission Staff Accounting Bulletin
(SAB) No. 104, revenue from license fees and grants is recognized when the
following criteria are met; persuasive evidence of an arrangement exists,
services have been rendered, the contract price is fixed or determinable, and
collectibility is reasonably assured. In licensing arrangements, delivery does
not occur for revenue recognition purposes until the license term begins.
Nonrefundable upfront fees received in exchange for products delivered or
services performed that do not represent the culmination of a separate earnings
process will be deferred and recognized over the term of the agreement using
the
straightline method or another method if it better represents the timing and
pattern of performance.
For
revenue contracts that contain multiple elements, we will determine whether
the
contract includes multiple units of accounting in accordance with EITF No.
00-21, Revenue Arrangements with Multiple Deliverables. Under that guidance,
revenue arrangements with multiple deliverables are divided into separate units
of accounting if the delivered item has value to the customer on a standalone
basis and there is objective and reliable evidence of the fair value of the
undelivered item.
Research
and Development.
During
the year ended December 31, 2003, the ten months ended October 31, 2004, and
the
year ended October 31, 2005, we recorded research
and development expenses of $491,508, $125,942 and $1,175,536, respectively.
Such expenses were principally comprised of manufacturing scale up and process
development, license fees, sponsored research and consulting. We
recognize research and development expenses as incurred.
During
the year ending December 31, 2006 and beyond, we anticipate that our research
and development expenses will increase as a result of our expanded development
and commercialization efforts related to clinical trials, product development,
and development of strategic and other relationships that will be required
ultimately for the licensing, manufacture and distribution of our product
candidates. We regard four of our product candidates as major research and
development projects. The timing, costs and risks of those projects are as
follows:
Lovaxin
C
- Phase I trial Summary Information
· |
Cost
incurred to date: approximately
$1,000,000
|
· |
Estimated
future costs: $700,000
|
· |
Anticipated
completion date: late 2006
|
· |
Risks
and uncertainties:
|
– |
the
FDA (or relevant foreign regulatory authority) may not approve the
study
|
– |
any
adverse event in a patient in the
trial
|
– |
difficulty
in recruiting patients
|
– |
strong
side effects in patients in the
trial
|
· |
Commencement
of material cash flows:
|
– |
Unknown
at this stage and dependent upon a licensing deal or pursuant to
a
marketing collaboration subject to regulatory approval to market
and sell
the product.
|
Lovaxin
B
- Phase I trial Summary Information
· |
Cost
incurred to date: $300,000
|
· |
Estimated
future costs: $1,800,000
|
· |
Anticipate
completion dates: second quarter of
2007
|
· |
Risks
and uncertainties:
|
– |
Obtaining
favorable animal data
|
– |
Proving
low toxicity in animals and obtaining favorable animal
data
|
– |
Manufacturing
scale up to GMP level
|
– |
FDA
(or foreign regulatory authority) may not approve the
study
|
– |
The
occurrence of an adverse event in a
patient
|
· |
Commencement
of material cash flows:
|
– |
Unknown
at this stage, upon a licensing deal or pursuant to a marketing
collaberation subject to regulatory approval to market and sell the
product.
|
Lovaxin
T
- Phase I trial Summary Information
· |
Cost
incurred to date: $100,000
|
· |
Estimated
future costs: $1,500,000
|
· |
Anticipate
completion dates: third quarter of
2007
|
· |
Risks
and uncertainties:
|
– |
Obtaining
favorable animal data
|
– |
Proving
low toxicity in animals and obtaining favorable animal
data
|
– |
Manufacturing
scale up to GMP levels
|
– |
FDA
(or foreign regulatory authority) may not approve the study
initiation
|
– |
Adverse
event in a patient in the program
|
· |
Commencement
of material cash flows:
|
– |
Unknown
at this stage and dependent upon a licensing deal or pursuant to
a
marketing collaberation subject to regulatory approval to market
and sell
the product.
|
Lovaxin
NY - Phase I trial Summary Information
· |
Cost
incurred to date: $200,000
|
· |
Estimated
future costs: Unknown at this
stage.
|
· |
Anticipated
completion dates: Unknown at this
stage.
|
· |
Risks
and uncertainties:
|
– |
Obtaining
favorable animal data
|
– |
Proving
low toxicity in animals and obtaining favorable animal
data
|
– |
Manufacturing
scale up to GMP levels
|
– |
FDA
(or foreign regulatory authority) may not approve the
study
|
– |
The
occurrence of an adverse event in a patient in the
program
|
· |
Commencement
of material cash flows:
|
– |
Unknown
at this stage and dependent upon a licensing deal or pursuant to
a
marketing collaberation subject to regulatory approval to market
and sell
the product.
|
General
and Administrative Expenses.
During
the year ended December 31, 2003 the ten months ended October 31, 2004, and
the
year ended October 31, 2005, we
recorded general and administrative expenses of $405,568 $524,368 and
$1,219,792, respectively. General and administrative costs primarily include
the
salaries for executive, finance, facilities, insurances, accounting and legal
assistance, as well as other corporate and administrative functions that serve
to support Advaxis’ current and our future operations and provide an
infrastructure to support this anticipated future growth. During
the year ending December 31, 2006 and beyond, we anticipate that our
general
and administrative costs will increase due to the increased compliance
requirements, including, without limitation, legal, accounting, and insurance
expenses, arising out of complying with periodic reporting and other regulations
applicable to public companies.
Interest
Expense.
During
the year ended December 31, 2003 and the ten months ended October 31, 2004,
we
recorded interest expense of $17,190 and $4,229, respectively and for the year
ended October 31, 2005, we recorded interest income of $36,671. Interest
expense, relates primarily to our convertible promissory notes which have been
converted into Units at the initial closing of our Private Placement on November
12, 2004. Each Unit consisting of 87,108 shares of common stock and warrants
to
purchase 87,108 shares of common stock. Interest Income relates primarily to
our
bank cash deposits.
Recently
Issued Accounting Pronouncements. In
December 2004, the Financial Accounting Standards Board issued FASB Statement
No. 123 (revised 2004), share-based payment. This statement requires that
compensation cost relating to share based payment transactions be recognized
in
financial statements. The cost will be measured based on the fair value of
the
equity or liability instruments issued. At present, we are unable to determine
what effect, if any, the adoption of FASB Statement No. 123 (revised 2004)
will
have on our financial statements.
Results
of Operations
|
Year
Ended October 31, 2005 Compared to the Year Ended October 31,
2004
|
Revenue.
Our
revenue increased by $436,462 or 375% from $116,406 for the year ended October
31, 2004 to $552,868 for the year ended October 31, 2005 due to the increase
in
grant money received by the Company in these periods.
Research
and Development Expenses. Research
and development expenses increased by $1,034,916 or 736% from $140,620 for
the
twelve months ended October 31, 2004 to $1,175,536 for the twelve months ended
October 31, 2005. This decrease was principally attributable to the
following:
· |
an
increase in our related manufacturing expenses of $416,842 or 5,710%
from
$(7,300) to $409,542; such increase reflects the delay in the
manufacturing program during 2004 because of delays in funding, and
the
manufacturing of Lovaxin C in 2005 for toxicology and clinical
trials;
|
· |
an
increase in expenses related to toxicology studies from $0 to $293,105;
such increase reflects the initiation of toxicology studies by Pharm
Olam
in connection with our Lovaxin C product candidates, and the payment
of
deferred license fees to Penn;
|
· |
an
increase in wages and salaries related to our research and development
program from $0 to $166,346; such increase reflects the recruitment
of our
R&D management team in early
2005.
|
· |
an
increase in subcontracted work of $141,366 or 100% from $0 to $141,366;
such increase reflects the subcontract work performed by Dr. Paterson
at
Penn, pursuant to certain grants.
|
General
and Administrative Expenses. General
and administrative expenses increased by $644,659 or 112% from $575,133 for
the
year ended October 31, 2004 to $1,219,792 for the year ended October 31, 2005.
This decrease is primarily attributable to the following:
· |
employee
related expenses increased by $123,157, or 56.4%, from $218,482 for
the
twelve months ended October 31, 2004 to $341,639 for the twelve months
ended October 31, 2005 arising from a bonus to Mr. Derbin, the Chief
Executive Officer, in stock, an increase in the salary of Mr. Derbin,
and
the cost of health insurance initiated in 2005;
|
· |
Offering
expenses increased by $117,498, or 100%, from $0 for the twelve months
ended October 31, 2004 to $117,498 for the twelve months ended October
31,
2005 arising from legal and banking expenses relating to the private
placement closed in November 2004;
|
· |
An
increase in professional fees from $231,686 for the twelve-months
ended
October 31, 2004 to $460,691 for the twelve months ended October
31, 2005,
primarily as a result of an increase in legal fees, public relations
fees,
consulting fees and accounting fees.
|
Interest
Expenses. Interest
expense decreased by $5,825 or 44.4% from $13,132 for the year ended October
31,
2004 to $7,307 for the year ended October 31, 2005. The decrease results
primarily from a reduction on interest payable on certain notes which were
converted on November 12, 2004.
Other
Income. Other
Income increased by $43,907 or 61,841% from $71 for the twelve months ended
October 31, 2004 to $43,978 for the twelve months ended October 31, 2005. The
increase results primarily from an increase in interest paid to the company
on
cash deposits held by the Company.
No
provision for income taxes was made for the year ended October 31, 2004 or
2005
due to significant tax losses during and prior to such periods.
Ten
Months Ended October 31, 2004 Compared to the Ten Months Ended October 31,
2003
Revenue.
Our
revenue increased by $112,806 or 3133.5% from $3,600 for the ten months ended
October 31, 2003 to $116,406 for the ten months ended October 31, 2004 due
to
the increase in grant money received by the Company in these
periods.
Research
and Development Expenses. Research
and development expenses decreased by $320,382, or 71.8%, from $446,324 for
the
ten months ended October 31, 2003 to $125,942 for the ten months ended October
31, 2004. This decrease was principally attributable to the
following:
· |
A
decrease in our manufacturing expenses of $228,452 or 103.9% from
$219,948
to $(8,504); such decrease reflects the delay in the manufacturing
program
during 2004 because of delays in
funding;
|
· |
A
decrease in our License Fees of $110,164 or 196.4% from $56,082 to
$(54,082); such decrease reflects the reclassification of License
Fees
from an R&D expense to an investment;
|
· |
A
decrease in our outside research fees from $97,306 to $38,382; such
decrease reflects the completion in year 2004 of our expenses resulting
from our sponsored research agreement with Penn;
and
|
· |
Development
consulting expenses increased from $72,988 to $150,147 or 105.7%.
This
increase reflects primarily increased success fees due to DNA Bridges
in
connection with two NIH grants awarded to the Company in
2004
|
General
and Administrative Expenses. General
and administrative expenses increased by $148,965 or 39.7% from $375,403 for
the
ten months ended October 31, 2003 to $524,368 for the ten months ended October
31, 2004. This decrease was principally attributable to the following:
· |
employee
related expenses increased by $34,790, or 22.5%, from $154,512 for
the ten
months ended October 31, 2003 to $189,302 for the ten months ended
October
31, 2004 arising from a bonus to Mr. Derbin, the Chief Executive
Officer,
in stock;
|
· |
professional
fees increased by $14,368 from $204,145 for the ten months ended
October
31, 2003 to $218,514 for the ten months ended October 31, 2004 principally
due to (a) an increase in consulting fees from $95,651 to $110,332,
and
(b) an increase in accounting fees from $350 to $23,070;
|
· |
Insurance
expense was increased from $1,901 for the ten months ended October
31,
2003 to $9,929 for the ten months ended October 31, 2004;
and
|
· |
Other
General and Administrative expenses increased by $66,701 from $14,844
to
$81,545 principally due to an increase in amortization expenses,
information technology and internet expenses, postage, telephone
and
travel expenses.
|
Interest
Expenses.
Interest
expense decreased by $4,059, or 49%, from $8,288 for the ten months ended
October 31, 2003 to $4,229 for the ten months ended October 31, 2004. The
decrease results primarily from a reduction on interest payable on certain
fees
owed to Penn.
Other
Income.
Other
Income increased by $112,357, or 2,736%, from $4,106 for the ten months ended
October 31, 2003 to $116,463_for the ten months ended October 31, 2004. The
increase results primarily from an increase in grants from $3,600 to
$116,406.
Year
ended December 31, 2003 and the period from March 1, 2002 (inception) to
December 31, 2002
Revenue.
Our
revenue increased by $2,977, or 291%, from $1,023 for the period from March
1,
2002 (inception) to December 31, 2002 to $4,000 for the year ended December
31,
2003 due to the increase in grant money received by the Company in these
periods.
Research
and Development Expenses. Research
and development expenses increased by $440,610, or 865.7%, from $50,898 for
the
period from March 1, 2002 (inception) through December 31, 2002 to $491,508
for
the year ended December 31, 2003. This increase was principally attributable
to
the increase in outside research expenses increased by $33,838, or 53%, from
$63,468 for the period from March 1, 2002 (inception) through December 31,
2002
to $97,306 for the year ended December 31, 2003 due to increased research fees
due to Penn relating to an increased research program, the initiation of our
manufacturing scale up program with Cobra Biomanufacturing PLC in year 2003
where such plan did not yet exist in year 2002 as well as the hire of certain
pre clinical and regulatory consultants in early 2003 such as Therrimune
Research Corporation, Dr. Bruce Mackler and AccessBio.
General
and Administrative Expenses. General
and administrative expenses increased by $288,565 or 246.6% from $117,003 for
the period from March 31, 2002 (inception) through December 31, 2002 to $405,568
for the year ended December 31, 2003. This increase is primarily attributable
to
the increase in professional fees increased by $316,457, or 328.85%, from
$96,231 for the period from March 1, 2002 (inception) to December 31, 2002
to
$412,688 for the year ended December 31, 2003 due to increased consulting and
legal requirements and increased consulting fees paid to financial advisors
in
2003.
Other
Income.
Other
Income increased by $521 from $0 for the period from March 1, 2002 (inception)
to December 31, 2002 to $521 for the year ended December 31, 2003. The decrease
results from a decrease in interest paid to the company on cash deposits held
by
the Company.
Interest
Expenses. Interest
expense increased by $17,190 from $0 for the period from March 31, 2002
(inception) through December 31, 2002 to $17,190 for the year ended December
31,
2003. The increase results primarily from the interest attributable to notes
issued during such later period.
No
provision for income taxes was made for the period from March 31, 2002
(inception) through December 31, 2002 or the year ended December 31, 2003 due
to
significant tax losses incurred.
Liquidity
and capital resources
At
December 31, 2003, October 31, 2004 and October 31, 2005, our cash was $47,160,
$32,279 and $2,075,206, respectively, and we had a working capital deficit
of
$997,184 and $1,396,062 at December 31, 2003 and October 31, 2004, respectively,
and working capital of $1,365,742 at October 31, 2005.
To
date,
our principal sources of liquidity has been cash provided by private offerings
of our securities. These offering have been structured so as to be exempt from
the prospectus delivery requirements under the Securities Act of 1933. Our
principal uses of cash have been research and development and working capital.
We anticipate these uses will continue to be our principal uses of cash in
the
future.
Although
we believe that the net proceeds received by us from the Private Placement
and
the private offerings will be sufficient to finance our currently planned
operations for approximately the next 12 to 24 months, we do not believe that
these amounts will be sufficient to meet our longer-term cash requirements
or
our cash requirements for the commercialization of any of our existing or future
product candidates. We will be required to issue equity or debt securities
or to
enter into other financial arrangements, including relationships with corporate
and other partners, in order to raise additional capital. Depending upon market
conditions, we may not be successful in raising sufficient additional capital
for our long-term requirements. In such event, our business, prospects,
financial condition and results of operations could be materially adversely
affected.
The
following factors, among others, could cause actual results to differ from
those
indicated in the above forward-looking statements: increased length and scope
of
our clinical trials, increased costs related to intellectual property related
expenses, increased cost of manufacturing and higher consulting costs. These
factors or additional risks and uncertainties not known to us or that we
currently deem immaterial may impair business operations and may cause our
actual results to differ materially from any forward-looking statement.
Although
we believe the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform them to actual results
or to make changes in our expectations.
We
expect
our future sources of liquidity to be primarily equity capital raised from
investors, as well as licensing fees and milestone payments in the event we
enter into licensing agreements with third parties, and research collaboration
fees in the event we enter into research collaborations with third
parties.
On
November 12, 2004, we sold to accredited investors at an initial closing of
the
Private Placement 117 Units at $25,000 per unit for an aggregate purchase price
of $2,925,000. Each Unit is comprised of (i) 87,108 shares of our common stock
and (ii) a five-year warrant to purchase 87,108 shares of our common stock
at an
exercise price of $0.40 per share. At the initial closing, the accredited
investors received an aggregate of 10,191,638 shares of common stock and
warrants to purchase 10,191,638 shares of common stock. In addition, on November
12, 2004, $595,000 aggregate principal amount of convertible promissory notes
of
Advaxis, including accrued interest, were converted into units on the same
terms
as those upon which the Units sold. The holders of these notes received an
aggregate of 2,136,441 shares of common stock and warrants to purchase 2,136,441
shares of common stock upon conversion of these notes plus accrued interest
thereon.
On
December 8, 2004, we sold to accredited investors at a second closing of the
Private Placement 8 units for an aggregate purchase price of $200,000. At such
closing, the accredited investors received an aggregate of 696,864 shares of
common stock and warrants to purchase 696,864 shares of Common Stock.
On
January 4, 2005, we sold to accredited investors at a third closing of the
Private Placement 5.12 Units for an aggregate purchase price of $128,000. At
such closing, the accredited investors received an aggregate of 445,993 shares
of common stock and warrants to purchase 445,993 shares of Common Stock.
Pursuant
to the terms of a investment banking agreement, dated March 19, 2004, by and
between us and Sunrise Securities, Corp. (“Sunrise” or the “Placement Agent”),
we issued to the Placement Agent and its designees an aggregate of 2,283,445
shares of common stock and warrants to purchase up to an aggregate of 2,666,900
shares of common stock. The shares were issued as part consideration for the
services of Sunrise, as our placement agent in the Private Placement. In
addition, we paid Sunrise a total cash fee of $50,530.
On
January 12, 2005, we sold to one accredited investor at a closing of a
subsequent private placement offering 44 units for an aggregate purchase price
of $1,100,000. As with the Private Placement, each Unit issued and sold in
this
subsequent private placement was sold at $25,000 per unit and is comprised
of
(i) 87,108 shares of our common stock, and (ii) a five-year warrant to purchase
87,108 shares of our common stock at an exercise price of $0.40 per share.
At
such closing, the accredited investor received an aggregate of 3,832,752 shares
of common stock and warrants to purchase 3,832,752 shares of common stock.
We
are
party to a license agreement, dated June 17, 2002, as amended, between Advaxis
and The Trustees of the University of Pennsylvania, pursuant to which Advaxis
has agreed to pay $525,000, divided over a four-year period as a royalty after
the first commercial sale of our products covered by the license. Since the
first commercial sale of our products will occur only pursuant to obtaining
regulatory approval to market and sell our products, we do not anticipate the
obligation to make such payments in the next five years. Advaxis is also
obligated to pay annual license maintenance fees under this agreement ranging
from $25,000 to $125,000 per year after the first commercial sale of a product
under the license, as well as pay up to $482,000 to the licensor upon receiving
financing. The amount due is contingent upon the size of the financing.
For
a
description of material employment agreements to which we are party, see
“Certain Relationships and Related Party Transactions”.
Critical
Accounting Policies
The
preparation of financial statements requires the Company to make estimates
and
judgments that affect the reported amounts of assets, liabilities, revenue
and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, the Company evaluates its estimates, based on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions.
The
Company believes the following critical accounting policy involves significant
estimate and judgment. The Company amortizes trademark and patent costs over
their estimated useful lives. The Company may be required to adjust these lives
based on advances in science and competitor actions. The Company reviews the
recorded amounts of trademarks and patents at each period end to determine
if
their carrying amount is still recoverable based on expectations regarding
potential licensing of the intangibles or sales of related products. Such an
assessment, in the future, may result in a conclusion that the assets are
impaired, with a corresponding charge against earnings.
Due
to
the limited nature of the Company’s operations, the Company has not identified
any other accounting policies involving estimates or assumptions that are
material due to the levels of subjectivity and judgment necessary to account
for
highly uncertain matters or the susceptibility of such matters to change, and
where the impact of the estimates and assumptions on financial condition or
operating performance is material.
Impact
of Inflation
We
believe that our results of operations are not dependent upon moderate changes
in inflation rates.
Item
7: FINANCIAL
STATEMENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors of Advaxis, Inc.
We
have
audited the accompanying balance sheet of Advaxis, Inc. (a development stage
company) as of October 31, 2005 the related statements of operations,
shareholders' equity (deficiency), and cash flows for the year ended December
31, 2003, the period from January 1, 2004 to October 31, 2004, the year ended
October 31, 2005 and the period from March 1, 2002 (inception) to October 31,
2005. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Advaxis, Inc. as of October 31,
2005 the results of its operations and its cash flows for the year ended
December 31, 2003, the period from January 1, 2004 to October 31, 2004, the
year
ended October 31, 2005 and the period from March 1, 2002 (inception) to October
31, 2005 in conformity with United States generally accepted accounting
principles.
/s/
GOLDSTEIN GOLUB KESSLER LLP
GOLDSTEIN
GOLUB KESSLER LLP
New
York,
New York
November
29, 2005
ADVAXIS,
INC.
|
|
(a
development stage company)
|
|
BALANCE
SHEET
|
|
|
|
October
31, 2005
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
Asset - cash
|
|
$
|
2,075,206
|
|
|
Fixed
Assets (net of depreciation)
|
|
|
73,145
|
|
|
Intangible
Assets (net of amortization)
|
|
|
751,088
|
|
|
Other
Assets
|
|
|
4,600
|
|
|
Total
Assets
|
|
$
|
2,904,039
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
651,887
|
|
|
Notes
payable, current portion
|
|
|
57,577
|
|
|
Total
current liabilities
|
|
|
709,464
|
|
|
|
|
|
|
|
|
Notes
Payable, net of current portion
|
|
|
443,000
|
|
|
Total
liabilities
|
|
|
1,152,464
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity (Deficiency):
|
|
|
|
|
|
Common
stock - $0.001 par value; authorized 500,000,000 shares, issued and
outstanding 37,686,427 shares at October 31, 2005
|
|
|
37,686
|
|
|
Additional
paid-in capital
|
|
|
5,178,319
|
|
|
Deficit
accumulated during the development stage
|
|
|
(3,464,430
|
)
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
1,751,575
|
|
|
Total
Liabilities and Shareholders' Equity
|
|
$
|
2,904,039
|
|
|
The
accompanying notes and the report of independent registered public accounting
firm should be read in conjunction with the financial statements.
ADVAXIS,
INC.
|
|
(a
development stage company)
|
|
STATEMENT
OF OPERATIONS
|
|
|
|
Year
ended
December
31,
|
|
Ten
Month Period
ended
October 31,
|
|
Year
ended
October
31,
|
|
Period
from
March
1,
2002
(inception)
to
October
31,
|
|
|
|
|
2003
|
|
2004
|
|
2005
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
4,000
|
|
$
|
116,406
|
|
$
|
552,868
|
|
$
|
674,297
|
|
|
Research
and development expenses
|
|
$
|
491,508
|
|
|
125,942
|
|
|
1,175,536
|
|
|
1,843,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
405,568
|
|
|
524,368
|
|
|
1,219,792
|
|
|
2,266,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income (expense)
|
|
|
(17,190
|
)
|
|
(4,229
|
)
|
|
36,671
|
|
|
15,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
521
|
|
|
57
|
|
|
|
|
|
521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(909,745
|
)
|
|
(538,076
|
)
|
|
(1,805,789
|
)
|
|
(3,420,546
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
attributed to preferred stock
|
|
|
|
|
|
43,884
|
|
|
|
|
|
43,884
|
|
|
Net
loss applicable to common stock
|
|
$
|
(909,745
|
)
|
$
|
(581,960
|
)
|
$
|
(1,805,789
|
)
|
$
|
(3,464,430
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share
|
|
$
|
(0.06
|
)
|
|
($0.04
|
)
|
|
($0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares; basic and diluted
|
|
|
15,597,723
|
|
|
15,597,723
|
|
|
35,783,666
|
|
|
|
|
|
The
accompanying notes and the report of independent registered public accounting
firm should be read in conjunction with the financial statements.
ADVAXIS,
INC.
|
|
(a
development stage company)
|
|
STATEMENT
OF SHAREHOLDERS' EQUITY (DEFICIENCY)
|
|
Period
from March 1, 2002 (inception) to October 31,
2005
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in Capital
|
|
|
Deficit
Accumulated During the Development Stage
|
|
|
Shareholders'
Equity (Deficiency)
|
|
|
|
|
|
Number
of Shares Outstanding
|
|
|
Amount
|
|
|
Number
of shares outstanding
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock issued
|
|
|
3,418.18
|
|
$
|
235,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
235,000
|
|
|
Common
Stock Issued
|
|
|
|
|
|
|
|
|
40,000
|
|
|
40
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
Options
granted to consultants and professionals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,493
|
|
|
|
|
|
10,493
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(166,936
|
)
|
|
(166,936
|
)
|
|
Retroactive
restatement to reflect recapitalization on November 12, 2004
|
|
|
(-3,418.18
|
)
|
|
(-235,000
|
)
|
|
15,557,723
|
|
|
15,558
|
|
|
219,442
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2002
|
|
|
|
|
|
|
|
|
15,597,723
|
|
|
15,598
|
|
|
229,895
|
|
|
(166,936
|
)
|
|
78,557
|
|
|
Note
payable converted into preferred stock
|
|
|
232.27
|
|
|
15,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,969
|
|
|
Options
granted to consultants and professionals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,484
|
|
|
|
|
|
8,484
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(909,745
|
)
|
|
(909,745
|
)
|
|
Retroactive
restatement to reflect recapitalization on November 12, 2004
|
|
|
(-232.27
|
)
|
|
(-15,969
|
)
|
|
|
|
|
|
|
|
15,969
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2003
|
|
|
-
0
-
|
|
|
-
0
-
|
|
|
15,597,723
|
|
|
15,598
|
|
|
254,348
|
|
|
(1,076,681
|
)
|
|
(806,735
|
)
|
|
Stock
dividend on preferred stock
|
|
|
638.31
|
|
|
43,884
|
|
|
|
|
|
|
|
|
|
|
|
(43,884
|
)
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(538,076
|
)
|
|
(538,076
|
)
|
|
Options
granted to consultants and professionals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,315
|
|
|
|
|
|
5,315
|
|
|
Retroactive
restatement to reflect recapitalization on November 12, 2004
|
|
|
(638.31
|
)
|
|
(43,884
|
)
|
|
|
|
|
|
|
|
43,884
|
|
|
|
|
|
|
|
|
Balance
at October 31, 2004
|
|
|
-
0
-
|
|
|
-
0
-
|
|
|
15,597,723
|
|
|
15,598
|
|
|
303,547
|
|
|
(1,658,641
|
)
|
|
(1,339,496
|
)
|
|
The
accompanying notes and the report of independent registered public accounting
firm should be read in conjunction with the financial statements.
ADVAXIS,
INC.
|
|
(a
development stage company)
|
|
STATEMENT
OF SHAREHOLDERS' EQUITY (DEFICIENCY)
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in Capital
|
|
|
Deficit
Accumulated During the Development Stage
|
|
|
Shareholders'
Equity (Deficiency)
|
|
|
|
|
|
Number
of Shares Outstanding
|
|
|
Amount
|
|
|
Number
of shares outstanding
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued to Placement Agent on recapitalization
|
|
|
|
|
|
|
|
|
752,600
|
|
|
753
|
|
|
(753
|
)
|
|
|
|
|
|
|
|
Effect
of recapitalization
|
|
|
|
|
|
|
|
|
752,600
|
|
|
753
|
|
|
(753
|
)
|
|
|
|
|
|
|
|
Options
granted to consultants and professionals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,924
|
|
|
|
|
|
64,924
|
|
|
Conversion
of Note payable to Common Stock
|
|
|
|
|
|
|
|
|
2,136,441
|
|
|
2,136
|
|
|
611,022
|
|
|
|
|
|
613,158
|
|
|
Issuance
of Common Stock for cash, net of shares to Placement Agent
|
|
|
|
|
|
|
|
|
17,450,693
|
|
|
17,451
|
|
|
4,335,549
|
|
|
|
|
|
4,353,000
|
|
|
Issuance
of common stock to consultants
|
|
|
|
|
|
|
|
|
586,970
|
|
|
587
|
|
|
166,190
|
|
|
|
|
|
166,777
|
|
|
Issuance
of common stock in connection with the registration statement
|
|
|
|
|
|
|
|
|
409,401
|
|
|
408
|
|
|
117,090
|
|
|
|
|
|
117,498
|
|
|
Issuance
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(329,673
|
)
|
|
|
|
|
(329,673
|
)
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,805,789
|
)
|
|
(1,805,789
|
)
|
|
Restatement
to reflect recapitalization on November 12, 2004 including cash paid
of
$44,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(88,824
|
)
|
|
|
|
|
(88,824
|
)
|
|
Balance
at October 31, 2005
|
|
$
|
-
0 -
|
|
$
|
-
0 -
|
|
|
37,686,428
|
|
|
37,686
|
|
|
5,178,319
|
|
|
(3,464,430
|
)
|
|
1,751,575
|
|
|
The
accompanying notes and the report of independent registered public accounting
firm should be read in conjunction with the financial statements.
ADVAXIS,
INC.
(a
development stage company)
|
|
STATEMENT
OF CASH FLOWS
|
|
|
|
Year
ended
December
31,
|
|
Tenth
Month
Period
ended
October
31
|
|
Year
ended
October
31,
|
|
Period
from March 1,
2002
(inception) to
October
31,
|
|
|
|
|
2003
|
|
2004
|
|
2005
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$(909,745)
|
|
$(538,076)
|
|
$(1,805,789)
|
|
$(3,420,546)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Value
assigned to options given as payment to consultants and professionals
|
|
8,484
|
|
5,315
|
|
64,924
|
|
89,217
|
|
|
Amortization
expense
|
|
3,171
|
|
15,818
|
|
33,669
|
|
52,658
|
|
|
Depreciation
expense
|
|
|
|
|
|
7,432
|
|
7,432
|
|
|
Accrued
interest on Notes Payable
|
|
|
|
|
|
12,308
|
|
12,308
|
|
|
Non
cash Charges
|
|
|
|
|
|
166,777
|
|
166,777
|
|
|
Value
of Penalty Shares Issued
|
|
|
|
|
|
117,498
|
|
117,498
|
|
|
Increase
in Other Assets
|
|
|
|
|
|
(4,600)
|
|
(4,600)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in accounts payable
|
|
933,111
|
|
80,307
|
|
(132,149)
|
|
967,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
35,021
|
|
(436,636)
|
|
(1,539,930)
|
|
(2,012,163)
|
|
|
CASH
FLOWS USED IN INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Cash
paid on acquisition of Great Expectations
|
|
|
|
|
|
(44,940)
|
|
(44,940)
|
|
|
Cost
of Furniture & Equipment
|
|
|
|
|
|
(80,577)
|
|
(80,577)
|
|
|
Cost
of Intangible Assets
|
|
(277,243)
|
|
(124,469)
|
|
(314,953)
|
|
(716,665)
|
|
|
Net
cash used in Investing Activities
|
|
(277,243)
|
|
(124,469)
|
|
(440,470)
|
|
(842,182)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from notes payable
|
|
85,000
|
|
546,224
|
|
|
|
671,224
|
|
|
Net
proceeds on issuance of preferred stock
|
|
|
|
|
|
|
|
235,000
|
|
|
Net
Proceeds on Issuance of Common Stock
|
|
|
|
|
|
4,023,327
|
|
4,023,327
|
|
|
Cash
provided by financing activities
|
|
85,000
|
|
546,224
|
|
4,023,327
|
|
4,896,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
(157,222)
|
|
(14,881)
|
|
2,042,927
|
|
2,075,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of period
|
|
204,382
|
|
47,160
|
|
32,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at end of period
|
|
$
|
47,160
|
|
$
|
32,279
|
|
$
|
2,075,206
|
|
$
|
2,075,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued to founders
|
|
|
|
|
|
|
|
|
|
|
$
|
40
|
|
|
Notes
Payable and Accrued Interest Converted to Preferred Stock
|
|
$
|
15,969
|
|
|
|
|
|
|
|
$
|
15,969
|
|
|
Stock
Dividend on Preferred Stock
|
|
|
|
|
$
|
43,884
|
|
|
|
|
$
|
43,884
|
|
|
Notes
Payable and Accrued Interest Converted to Common
|
|
|
|
|
|
|
|
$
|
613,158
|
|
$
|
613,158
|
|
|
Intangible
Assets Acquired with Notes Payable
|
|
|
|
|
$
|
360,000
|
|
|
|
|
$
|
360,000
|
|
|
The
accompanying notes and the report of independent registered public accounting
firm should be read in conjunction with the financial statements.
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
1.
PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
|
Advaxis,
Inc. (the "Company") was incorporated in 2002 and is a biotechnology
company researching and developing new cancer-fighting techniques.
The
Company is in the development stage and its operations are subject
to all
of the risks inherent in an emerging business enterprise.
As
shown in the financial statements, the Company has incurred losses
from
operations, which raise doubt as to the ability of the Company to
continue
as a going concern. Although we believe that the net proceeds received
by
us from the Private Placement and the private offerings will be sufficient
to finance our currently planned operations for approximately the
next 12
to 24 months, we do not believe that these amounts will be sufficient
to
meet our longer-term cash requirements or our cash requirements for
the
commercialization of any of our existing or future product candidates.
We
will be required to issue equity or debt securities or to enter into
other
financial arrangements, including relationships with corporate and
other
partners, in order to raise additional capital. Depending upon market
conditions, we may not be successful in raising sufficient additional
capital for our long-term requirements. In such event, our business,
prospects, financial condition and results of operations could be
materially adversely affected.
In
accordance with Securities and Exchange Commission (SEC) Staff Accounting
Bulletin (SAB) No. 104, revenue from license fees and grants is recognized
when the following criteria are met; persuasive evidence of an arrangement
exists, services have been rendered, the contract price is fixed
or
determinable, and collectibility is reasonably assured. In licensing
arrangements, delivery does not occur for revenue recognition purposes
until the license term begins. Nonrefundable upfront fees received
in
exchange for products delivered or services performed that do not
represent the culmination of a separate earnings process will be
deferred
and recognized over the term of the agreement using the straightline
method or another method if it better represents the timing and pattern
of
performance. Since its inception and through October 31, 2005, all
of the
Company’s revenues have been from grants. For the year ended October 31,
2005, 77% and 13% of the Company’s revenues were received from two grants,
respectively. For the ten month period ended October 31, 2004, all
of the
Company’s revenue was received from one grant.
For
revenue contracts that contain multiple elements, the Company will
determine whether the contract includes multiple units of accounting
in
accordance with EITF No. 00-21, Revenue
Arrangements with Multiple Deliverables .
Under that guidance, revenue arrangements with multiple deliverables
are
divided into separate units of accounting if the delivered item has
value
to the customer on a standalone basis and there is objective and
reliable
evidence of the fair value of the undelivered item.
The
Company maintains its cash in bank deposit accounts which, at times,
may
exceed federally insured limits.
Intangible
assets, which consist primarily of legal costs in obtaining trademarks
and
patents, are being amortized on a straight-line basis over 20
years.
The
Company reviews long-lived assets for impairment whenever events
or
changes in circumstances indicate that the carrying amount of an
asset may
not be recoverable. An asset is considered to be impaired when the
sum of
the undiscounted future net cash flows expected to result from the
use of
the asset and its eventual disposition exceeds its carrying amount.
The
amount of impairment loss, if any, is measured as the difference
between
the net book value of the asset and its estimated fair
value.
|
|
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
|
Basic
loss per share is computed by dividing net loss by the weighted-average
number of shares of common stock outstanding during the periods.
Diluted
earnings per share gives effect to dilutive options, warrants and
other
potential common stock outstanding during the period. Potential common
stock has not been included in the computation of diluted loss per
share,
as the effect would be antidilutive.
Deferred
income taxes are provided for the differences between the bases of
assets
and liabilities for financial reporting and income tax purposes.
A
valuation allowance is established when necessary to reduce deferred
tax
assets to the amount expected to be realized.
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the
use of estimates by management. Actual results could differ from
these
estimates.
The
estimated fair value of the notes payable approximates the carrying
amount
based on the rates available to the Company for similar debt.
Accounts
payable consists entirely of trade accounts payable.
Research
and development costs are charged to expense as incurred.
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 123R,
“Share-Based Payment,” which establishes standards for the Accounting for
transactions in which an entity exchanges its equity instruments
for goods
or services. A Key provision of this statement is the requirement
of a
public entity to measure the cost of employee services received in
exchange for an award of equity instruments, including stock options,
based on the grant-Dale fair market value of the award. That cost
will be
recognized over a period during which an employee is required to
provide
services in exchange for the award. This standard becomes effective
in the
Company’s net fiscal quarter. The Company cannot estimate the future
impact on the financial statements from the implementation SFAS No.
123R.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect
on
the accompanying financial statements.
|
|
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
The
Company has elected to apply APB Opinion No. 25 and related interpretations
in
accounting for its stock options granted to employees and has adopted the
disclosure-only provisions of SFAS No. 123. Had the Company elected to recognize
compensation cost based on the fair value of the options granted at the grant
date as prescribed by SFAS No. 123, the Company's net loss would have been
as
follows:
|
|
Year
ended
December
31,
2003
|
|
10
months ended
October
31,
2004
|
|
Year ended
October
31
2005
|
|
March
1, 2002 (date of
inception)
to October
31,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss as reported
|
|
$
|
(909,745
|
)
|
$
|
(538,076
|
)
|
$
|
(1,805,789
|
)
|
$
|
(3,20,546
|
)
|
|
Add:
Stock based option expense included in recorded net income
|
|
|
8,484
|
|
|
5,315
|
|
|
64,924
|
|
|
89,217
|
|
|
Deduct
stock option compensation expense determined under fair value based
method
|
|
|
(41,407
|
)
|
|
(75,334
|
)
|
|
(200,942
|
)
|
|
(328,176
|
)
|
|
Adjusted
Net Loss
|
|
$
|
(942,668
|
)
|
$
|
(608,095
|
)
|
|
($1,941,807
|
)
|
$
|
(3,659,505
|
)
|
|
Net
Loss per share as reported
|
|
$
|
(0.06
|
)
|
$
|
(0.04
|
)
|
|
($0.05
|
)
|
|
|
|
|
Net
Loss per share pro forma
|
|
$
|
(0.06
|
)
|
$
|
(0.04
|
)
|
|
($0.05
|
)
|
|
|
|
|
The
Company accounts for nonemployee stock-based awards in which goods or services
are the consideration received for the equity instruments issued based on the
fair value of the equity instruments in accordance with the guidance provided
in
the consensus opinion of the Emerging Issues Task Force ("EITF") Issue 96-18,
Accounting
for Equity Instruments that Are Issued to Other than Employees for Acquiring,
or
in Conjunction With Selling Goods or Services .
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
2.
INTANGIBLE
ASSETS:
|
Intangible
assets consist of the following at October 31, 2005:
|
|
Trademarks
|
|
$
|
51,700
|
|
Patents
|
|
|
263,752
|
|
License
|
|
|
485,123
|
|
Less:
Accumulated Amortization
|
|
|
(49,487
|
)
|
|
|
|
|
|
|
|
$
|
751,088
|
|
Estimated
amortization expense is as follows: |
|
Year
ending October 31,
|
|
|
|
2006
|
|
$
|
40,029
|
|
2007
|
|
|
40,029
|
|
2008
|
|
|
40,029
|
|
2009
|
|
|
40,029
|
|
2010
|
|
|
40,029
|
|
|
|
|
|
|
Amortization
expense of intangibles amounted to $33,669 and $15,818 for the year
ended
October 31, 2005 and the ten-month period ended October 31, 2004,
respectively. |
|
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
3.
NOTES
PAYABLE:
|
Notes
payable consist of the following at October 31, 2005:
|
|
Two
notes payable with interest at 8% per annum, due on December 17,
2008. The
lender has served notice demanding payment pursuant to the November
2004
recapitalization and financing
|
|
57,577
|
|
|
|
Note
payable with no interest payable at the time of the closing of the
Company's contemplated $5,000,000 equity financing
|
|
75,000
|
|
|
|
Note
payable with no interest payable at the time of the closing of the
Company's contemplated $5,000,000 equity financing
|
|
8,000
|
|
|
|
Note
payable with no interest payable at December 15, 2006, or at the
time of
the closing of the Company's contemplated $5,000,000 equity financing
|
|
130,000
|
|
|
|
Note
payable with no interest payable at December 15, 2007 or at the time
of
the closing of the Company's contemplated $8,000,000 equity financing
|
|
230,000
|
|
|
|
500,577
|
Less
current portion
|
|
57,577
|
|
|
$
443,000
|
|
|
|
|
|
|
Aggregate
maturities of notes payable at October 31, 2005 are as follows:
|
|
|
|
|
|
Year
ending December 31,
|
|
|
|
|
|
2005
|
|
|
|
|
|
57,577
|
2006
|
|
|
|
|
|
213,000
|
2007
|
|
|
|
|
|
230,000
|
|
|
|
|
|
$
|
500,577
|
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
4.
STOCK
OPTIONS:
|
The
Company has adopted the Advaxis, Inc. 2002 Stock Option Plan (the
"Plan"),
which allows for grants up to 8,000 shares of the Company's common
stock.
This Plan was replaced by the Advaxis 2004 Option Plan, which allows
for
grants up to 2,381,525 shares of the Company's common stock. The
board of
directors adopted the 2005 stock option plan, which allows for grants
up
to 5,600,000 shares of the Company's common stock. The 2005 plan
is
subject to the approval of the Company’s shareholders. Both the 2004 plan
and the 2005 plan shall be administered and interpreted by the Company's
board of directors.
|
|
|
|
|
|
Stock
option activity during the periods indicated is as follows:
|
|
|
|
2004
Plan
|
|
2005
Plan
|
|
Total
|
|
|
|
|
Options
Granted Under the 2004 plan
|
|
Weighted
Average Exercise Price
|
|
Options
Granted Under the 2005 plan
|
|
Weighted
Average Exercise Price
|
|
Options
Granted
|
|
Weighted
Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1, 2003
|
|
|
1,172,767
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
1,172,767
|
|
$
|
0.20
|
|
|
Granted
|
|
|
1,084,085
|
|
|
|
|
|
|
|
|
|
|
|
1,084,085
|
|
|
|
|
|
Outstanding
at December 31, 2003
|
|
|
2,256,852
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
2,256,852
|
|
$
|
0.22
|
|
|
Granted
|
|
|
132,419
|
|
|
|
|
|
|
|
|
|
|
|
132,419
|
|
|
|
|
|
Outstanding
at October 31, 2004
|
|
|
2,389,271
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
2,389,271
|
|
$
|
0.23
|
|
|
Granted
|
|
|
283,730
|
|
$
|
0.20
|
|
|
2,958,817
|
|
$
|
0.29
|
|
|
3,242,547
|
|
$
|
0.29
|
|
|
Forfeited
|
|
|
532,602
|
|
$
|
0.20
|
|
|
256,677
|
|
$
|
0.29
|
|
|
789,279
|
|
$
|
0.23
|
|
|
Outstanding
at October 31, 2005
|
|
|
2,140,399
|
|
$
|
0.24
|
|
|
2,702,140
|
|
$
|
0.29
|
|
|
4,842,539
|
|
$
|
0.27
|
|
|
Vested
and exercisable at October 31, 2005
|
|
|
1,715,496
|
|
$
|
0.24
|
|
|
740,501
|
|
$
|
0.29
|
|
|
2,455,997
|
|
$
|
0.25
|
|
|
At
October 31, 2005, the weighted exercise prices and weighted-average remaining
contractual life of outstanding options were $0.25 and 9 years,
respectively.
The
fair
value of each option is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions used for grants in 2004,
2003 and 2002: dividend yield of 0%; average risk-free interest rates of 6%;
volatility of 30%; and an expected life of 10 years in each year.
On
November 12, 2004, in connection with the recapitalization (see Note 8), the
options granted under the 2003 option plan were canceled, and employees and
consultants were granted options of Advaxis under the 2004 plan. The
cancellation and replacement had no accounting consequence since the aggregate
intrinsic value of the options immediately after the cancellation and
replacement was not greater than the aggregate intrinsic value immediately
before the cancellation and replacement, and the ratio of the exercise price
per
share to the fair value per share was not reduced. Additionally, the original
options were not modified to accelerate vesting or extend the life of the new
options. The table provided in this Note 4 reflects the options on a post
recapitalization basis.
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
5.
SHAREHOLDERS' EQUITY:
|
Prior
to the recapitalization (see Note 8), the Company had convertible
preferred stock with $.001 par value and 50,000 shares authorized.
6,000
of those shares were designated as Series A and 3,418.18, 3,650.45,
and
3.640.45 were issued and outstanding at December 31, 2002, December
31,
2003 and October 31, 2004, respectively. The Company also had 100,000
shares authorized of
$.001
par value common stock with 40,000 shares issued and outstanding
at
December 31, 2002 and 2003, and at October 31, 2004.
The
preferred stock and common stock amounts were retroactively restated
to
reflect the effects of the recapitalization on November 12, 2004
(see Note
8).
|
|
6.
COMMITMENTS AND CONTINGENCIES:
|
Pursuant
to multiple consulting agreements and a licensing agreement, the
Company
is contingently liable for the following:
The
Company is obligated to pay $75,000 to its former patent counsel
upon
receiving financing of $5,000,000 or greater.
The
Company is obligated to pay $8,000 to a consultant upon receiving
financing of $5,000,000 or greater.
|
|
|
Under
a license agreement, the Company is obligated to pay (a) $525,000
in
aggregate, divided over a four-year period as a minimum royalty after
the
first commercial sale of a product. Such payments are not anticipated
within the next five years. (b) The Company is also obligated to
pay after
the 6th anniversary of the licensing agreement, annual license maintenance
fees of $125,000 per year. (c) Upon the achievement of the first
sale of a
product in certain fields, the Company shall be obligated to pay
certain
milestone payments, as follows: $2,500,000 shall be due for first
commercial sale of the first product in the cancer field (of which
$1,000,000 shall be paid within forty-five (45) days of the date
of the
first commercial sale, $1,000,000 shall be paid on the first anniversary
of the first commercial sale; and $500,000 shall be paid on the second
anniversary of the date of the first commercial sale). In addition,
$1,000,000 shall be due and payable within forty-five (45) days following
the date of the first commercial sale of a product in any of the
following
fields (a) Infectious Disease, (b) Allergy, (c) Autoimmune Disease,
and
(d) any other therapeutic indications for which licensed products
are
developed. Therefore, the maximum total potential amount of milestone
payments is $6,500,000. Such milestone payments are not expected
prior to
obtaining a regulatory approval to market and sell the Company’s vaccines,
and such regulatory approval is not expected within the next 5
years.
Under
a consulting agreement with the Company’s scientific inventor, the Company
is obligated to pay $3,000 per month until the Company closes a $3,000,000
equity financing, $5,000 per month pursuant to a $3,000,000 equity
financing, $7,000 per month pursuant to a $6,000,000 equity financing,
and
$9,000 per month pursuant to a $9,000,000 equity
financing.
|
|
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
|
Pursuant
to a Clinical Research Service Agreement, the Company is obligated
to pay
$430,000 to a vendor, of which $215,000 shall be paid pursuant to
a
$5,000,000 equity financing.
The
Company is obligated under a noncancelable operating lease for laboratory
and office space expiring in May 2006 with aggregate future minimum
payments due amounting to $11,500.
J.
Todd Derbin, the President and Chief executive officer of the Company,
have entered into a Termination of Employment Agreement effective
December
31, 2005 pursuant to which Mr. Derbin’s employment by the Company will end
on December 31, 2005. Pursuant to such agreement Mr. Derbin’s salary for
2005 is set at $225,000 plus a bonus for 2005 of $5,000 in shares
of
Common Stock of the Company valued at $0.287 per share. Following
his
resignation Mr. Derbin shall service as a consultant to the Company
for a
fee of $6,250 per month for 6 months ending June 30, 2006. Mr. Derbin
will
continue to serve as Chairman and a member of the Board of directors
of
the Company until at least September 30, 2006.
The
Company has entered into a consulting agreement with LVEP Management
LLC
(LVEP) dated as of January 19, 2005, and amended on April 15, 2005,
and
October 31, 2005, pursuant to which Mr. Roni Appel will serve as
Chief
Executive Officer of the Company. LVEP is owned by Scott Flamm, one
of our
directors and a principal shareholder. LVEP employs Mr. Flamm and
Mr.
Appel. The initial term of the Consulting Agreement as amended is
until
December 31, 2007 and thereafter the term of the agreement shall
be
automatically extended for one year periods unless we notify LVEP
at least
60 days prior to the end of term of our intent not to extend. In
addition,
the Consulting Agreement may be terminated by the Company for any
reason
upon 60 days prior notice or by LVEP upon 45 days prior notice, Upon
such
notice all compensation and bonuses payable under the Consulting
Agreement
shall continue until the later to occur of the end of the term or
twelve
(12) months from such termination. Under the Consulting Agreement
as
amended LVEP shall receive compensation of $250,000 per year payable
at
the rate of $20,833.33 per month for the term of the agreement plus
reimbursement of approved expenses in connection with providing the
consulting services. LVEP intends to pay all such compensation to
Mr.
Appel. The Consultant will receive a bonus payment at the end of
2005 not
to exceed $75,000. In subsequent years the bonus shall equal 40%
of the
base consulting compensation. At the election of the Company up to
50% and
at the election of Consultant up to 100% of the bonus may be paid
in
common stock of the Company. Additionally, LVEP shall receive additional
options to purchase common stock of the Company bringing options
held by
LVEP to 5% of the outstanding shares and options of the Company as
of
December 31, 2005. The incremental options shall vest monthly over
four
years commencing in April, 2006. LVEP has assigned such options to
Mr.
Appel
The
Company entered into an employment agreement with Dr. Vafa Shahabi
PhD to
become Head of Director of Science effective March 1, 2005, terminable
on
30 days notice. The compensation is $100,000 per annum with a potential
bonus of $20,000. In addition, Dr. Shahabi will be granted 150,000
options.
|
|
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
|
The
Company entered into an employment agreement with Dr. John Rothman,
Ph.D
to become Vice President of Clinical Development effective March
7, 2005
for a term of one year ending February 28, 2006 and terminable on
30 days
notice. His compensation is $170,000 per annum, to increase to $180,000
upon the closing of a $15 million equity financing. Upon meeting
incentives to be set by the Company, he will receive a bonus of up
to
$45,000. In addition, Dr. Rothman will be granted 360,000 stock
options.
The
Company is involved in various claims and legal actions arising in
the
ordinary course of business. Management is of the opinion that the
ultimate outcome of these matters would not have a material adverse
impact
on the financial position of the Company or the results of its
operations.
|
|
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
7.
INCOME
TAXES:
|
The
Company has a net operating loss carry forward of approximately $2,619,000
at October 31, 2005 available to offset taxable income through 2025.
|
|
|
|
|
|
The
tax effects of loss carryforwards give rise to a deferred tax asset
and a
related valuation allowance at October 31, 2005 as follows:
|
|
|
|
|
Net
operating losses
|
|
$
|
1,047,593
|
|
Less
valuation allowance
|
|
|
(1,047,593
|
)
|
Deferred
tax asset
|
|
$
|
-0-
|
|
|
The
difference between income taxes computed at the statutory federal
rate of
34% and the provision for income taxes relates to the
following:
|
|
|
|
|
|
Ten-month
|
|
Twelve-month
|
|
Period
from
|
|
|
|
Year
ended
|
|
period
ended
|
|
period
ended
|
|
1-Mar-02
|
|
|
|
December
31,
|
|
October
31,
|
|
October
31,
|
|
(inception)
to
|
|
|
|
2003
|
|
2004
|
|
2005
|
|
October
31,
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Provision
at federal statutory rate
|
|
|
34
|
%
|
|
34
|
%
|
|
34
|
%
|
|
34
|
%
|
Valuation
allowance
|
|
|
(34
|
)
|
|
(34
|
)
|
|
(34
|
)
|
|
(34
|
)
|
|
|
|
-0-
|
%
|
|
-0-
|
%
|
|
-0-
|
%
|
|
-0-
|
%
|
8.
RECAPITALIZATION:
|
On
November 12, 2004, Great Expectations and Associates, Inc. ("Great
Expectations") acquired the Company through a share exchange and
reorganization (the "Recapitalization"), pursuant to which the Company
became a wholly owned subsidiary of Great Expectations. Great Expectations
acquired (i) all of the issued and outstanding shares of common stock
of
the Company and the Series A preferred stock of the Company in exchange
for an aggregate of 15,597,723 shares of authorized, but theretofore
unissued, shares of common stock, no par value, of Great Expectations;
(ii) all of the issued and outstanding warrants to purchase the Company's
common stock, in exchange for warrants to purchase 584,885 shares
of Great
Expectations; and (iii) all of the issued and outstanding options
to
purchase the Company's common stock in exchange for an aggregate
of
2,381,525 options to purchase common stock of Great Expectations,
constituting approximately 96% of the common stock of Great Expectations
prior to the issuance of shares of common stock of Great Expectations
in
the private placement described below. Prior to the closing of the
Recapitalization, Great Expectations performed a 200-for-1 reverse
stock
split, thus reducing the issued and outstanding shares of common
stock of
Great Expectations from 150,520,000 shares to 752,600 shares.
Additionally, 752,600 shares of common stock of Great Expectations
were
issued to the financial advisor in connection with the Recapitalization.
Pursuant to the Recapitalization, there were 17,102,923 common shares
outstanding in Great Expectations.
|
|
ADVAXIS,
INC.
(a
development stage company)
|
|
NOTES
TO FINANCIAL STATEMENTS
|
|
|
As
a result of the transaction, the former shareholders of Advaxis are
the
controlling shareholders of the Company. Additionally, prior to the
transaction, Great Expectations had no substantial assets. Accordingly,
the transaction is treated as a recapitalization, rather than a business
combination. The historical financial statements of Advaxis are now
the
historical financial statements of the Company. Historical shareholders'
equity (deficiency) of Advaxis has been restated to reflect the
recapitalization, and include the shares received in the
transaction.
November
12, 2004, the Company completed an initial closing of a private placement
offering (the “Private Placement”), whereby it sold an aggregate of $2.925
million
worth
of units to accredited investors. Each unit was sold for $25,000
(the
“Unit Price”) and consisted of (a) 87,108 shares of common stock and (b) a
warrant to purchase, at any time prior to the fifth anniversary following
the date of issuance of the warrant, to purchase 87,108 shares of
common
stock included at a price equal to $0.40 per share of common stock
(a
“Unit”). In consideration of the investment, the Company granted to each
investor certain registration rights and anti-dilution rights. Also,
in
November 2004, the Company converted approximately $618,000 of aggregate
principal promissory notes and accrued interest outstanding into
Units.
On
December 8, 2004, the Company completed a second closing of the Private
Placement, whereby it sold an aggregate of $200,000 of Units to accredited
investors.
On
January 4, 2005, the Company completed a third and final closing
of the
Private Placement, whereby it sold an aggregate of $128,000 of Units
to
accredited investors.
Pursuant
to the terms of a investment banking agreement, dated March 19, 2004,
by
and between the Company and Sunrise Securities, Corp. (the “Placement
Agent”), the Company issued to the Placement Agent and its designees an
aggregate of 2,283,445 shares of common stock and warrants to purchase
up
to an aggregate of 2,666,900 shares of common stock. The shares were
issued as part consideration for the services of the Placement Agent,
as
placement agent for the Company in the Private Placement. In addition,
the
Company paid the Placement Agent a total cash fee of $50,530.
On
January 12, 2005, the Company completed a second private placement
offering whereby it sold an aggregate of $1,100,000 of units to a
single
investor. As with the Private Placement, each unit issued and sold
in this
subsequent private placement was sold at $25,000 per unit and is
comprised
of (i) 87,108 shares of common stock, and (ii) a five-year warrant
to
purchase 87,108 shares of our common stock at an exercise price of
$0.40
per share. Upon the closing of this second private placement offering
the
Company issued to the investor 3,832,753 shares of common stock and
warrants to purchase up to an aggregate of 3,832,753 shares of common
stock.
The
aggregate sale from the four private placements was $4,353,000, which
was
netted against transaction costs of $329,673 for net proceeds of
$4,023,327.
|
|
Item
8: Changes
In And Disagreements With Accountants On Accounting And Financial
Disclosure
NONE
Item
8A: Controls
And Procedures
Evaluation
of Disclosure Controls And Procedures.
As
of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our principal executive officer
and principal financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Our disclosure controls
and
procedures are designed to provide a reasonable level of assurance that our
disclosure control objectives are achieved. Our principal executive officer
and
principal financial officer has concluded that our disclosure controls and
procedures are, in fact, effective at providing this reasonable level of
assurance as of the period covered.
Changes
In Internal Controls Over Financial Reporting
In
connection with the evaluation of our internal controls during our last fiscal
quarter, our principal executive officer and principal financial officer has
determined that there are no changes to our internal controls over financial
reporting that has materially affected, or is reasonably likely to materially
effect, our internal controls over financial reporting.
Item
8B: Other
Information
NONE
Item
9: Directors,
Executive Officers, promoters and control persons; compliance with section
16A
of the act
MANAGEMENT
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
J.
Todd Derbin(3) (4)
|
|
53
|
|
Chairman
of the Board of Directors
|
|
|
|
|
|
Dr.
James Patton(1)
|
|
48
|
|
Director
|
|
|
|
|
|
Roni
A. Appel(3) (4)
|
|
39
|
|
President,
Chief Executive Officer, Chief Financial Officer, Secretary and
Director
|
|
|
|
|
|
Dr.
Thomas McKearn(2)
|
|
56
|
|
Director
|
|
|
|
|
|
Richard
Berman (4) (2) (1)
|
|
63
|
|
Director
|
(1) |
Member
of the Audit Committee.
|
(2) |
Member
of the Compensation Committee.
|
(3) |
Member
of the Nominating and Corporate Governance Committee.
|
(4) |
Member
of the Finance Committee
|
J.
Todd Derbin.
Since
January 1, 2006 Mr. Derbin has served as Chairman
of the Board of Directors. Prior thereto,
he
served as the President, Chief Executive Officer and a director of Advaxis
since
November 2002. From 1996 until June, 2001, Mr. Derbin was the founder and
Chairman of the Board of Directors, President, and Chief Executive Officer
of
Micrus Corporation, a market leader in the design and development of highly
differentiated and proprietary interventional neuroradiology devices and
delivery systems. From 1992 until 1996, he served as Director of Corporate
Business Development, Commercial Director - Cardiovascular and Director of
Strategic Planning, Mergers & Share Exchanges with Biocompatibles
International, plc, a UK biotechnology/biomedical Company. Prior to this, Mr.
Derbin served as Chief Executive Officer of Syncare Corporation, developers
of
synthetic wound care products and drug delivery systems. His 20 year tenure
in
life sciences includes senior management, strategic and operational positions
with CollaTec, Inc., a subsidiary of Marion Merrell Dow, and American Medical
Products Corporation’s domestic and international divisions. He began his career
at Procter & Gamble and American Hospital Supply Corporation (Baxter) where
he held marketing positions. Mr. Derbin is an alumnus of Wilkes College and
the
Wharton School of the University of Pennsylvania.
Dr.
James Patton. Dr.
Patton has served as Chairman of our Board and Directors since November 2004
until December 31, 2005. Prior thereto, Dr. Patton served as Chairman of
Advaxis’ Board of Directors since February 2002 and as Advaxis’ Chief Executive
Officer from February 2002 to November 2002. Additionally, since February 1999,
Dr. Patton has served as the President of Comprehensive Oncology Care, LLC,
which owns and operates a cancer treatment facility in Exton, Pennsylvania
and
as Vice President of Millennium Oncology Management, Inc., which provides
technical services for oncology care to four sites. From February 1999 to
September 2003, Dr. Patton served as a consultant to LibertyView Equity Partners
SBIC, LP, a venture capital fund based in Jersey City, New Jersey
(“LibertyView”). From July 2000 to December 2002, Dr. Patton served as a
director of Pinpoint Data Corp. From February 2000 to November 2000, Dr. Patton
served as a director of Healthware Solutions. From June 2000 to June 2003,
Dr.
Patton served as a director of LifeStar Response. He earned his B.S. from the
University of Michigan, his Medical Doctorate from Medical College of
Pennsylvania, and his M.B.A. from the University of Pennsylvania’s Wharton
School. Dr. Patton was also a Robert Wood Johnson Foundation Clinical Scholar.
He has published papers regarding scientific research in human genetics,
diagnostic test performance and medical economic analysis.
Roni
A. Appel.
Mr.
Appel has served as our President and Chief Executive Officer as well as our
Chief Financial Officer since January 1, 2006 and . Prior thereto. Mr. Appel
has
served as a member of our Board of Directors and as our Secretary and Chief
Financial Officer since November 2004. Prior thereto he has served as Advaxis’
Secretary and Chief Financial Officer since it was formed. Since January 1999,
Mr. Appel has been a partner and managing director in LV Equity Partners (fka
LibertyView Equity Partners). From 1998 until 1999, he was a founder and the
director of business development at Americana Financial Services, Inc. From
1994
to 1998, he was an attorney and completed his MBA at Columbia University.
Dr.
Thomas McKearn. Dr.
McKearn has served as a member of our Board of Directors since November 2004.
Prior thereto he served
as
an Advaxis director since July 2002. He brings to Advaxis a 20 plus year
experience in the translation of biotechnology science into innovative products
that address unmet medical needs in oncology. First as one of the founders
of
Cytogen Corporation, then as an Executive Director of Strategic Science and
Medicine at Bristol-Myers Squibb and now as the VP. Medical Affairs at
GPC-Biotech, McKearn has always worked at bringing the most innovative
scientific findings into the clinic and through the FDA regulatory process
for
the ultimate benefit of patients who need better ways to cope with their
afflictions. Prior to entering the then-nascent biotechnology industry in 1981,
McKearn did his medical, graduate and post-graduate training at the University
of Chicago and served on the faculty of the Medical School at the University
of
Pennsylvania.
Richard
Berman . Mr.
Berman has joined the board on September 1, 2005. For the past five years,
Mr.
Berman has been Chairman and CEO of Internet Commerce Corporation, an internet
supply chain company. He is also Chairman of a financial services company and
Candidate Resources, Inc., a company which delivers human resources services
over the web. He is a Director of seven public companies, Dyadic International,
Inc., International Microcomputer Software, Inc., Internet Commerce Corporation,
MediaBay, Inc., NexMed, Inc., GVI Security Solutions, Inc., and Financial
Services Co., which he serves as chairman. Previously, Mr. Berman worked at
Goldman Sachs; was Senior Vice President of Bankers Trust Company, where he
started the M&A and Leverage Buyout Departments. He is a past Director of
the Stern School of Business of NYU where he earned a B.S. and an M.B.A. He
also
has law degrees from Boston College and The Hague Academy of International
Law.
Mr. Berman will receive a director’s fee of $2,000 per month and options for the
purchase of 400,000 shares of Common Stock vesting over four years on a
quarterly basis.
Vafa
Shahabit, Ph.D.
Dr.
Shahabit has been Director of Science effective March 1, 2005, terminable on
30
days notice. Her duties are to work on and/or manage research and development
projects as specified by the Company. Her compensation is $100,000 per
annum.
Dr.
John Rothman, Ph.D.
Dr.
Rothman has been hired as Vice President of Clinical Development effective
March
7, 2005 for a term of one year ending February 28, 2006. His compensation is
$170,000 per annum, to increase to $180,000 upon the closing of a $15 million
equity financing. Upon meeting incentives to be set by the Company, he will
receive a bonus of up to $45,000.
Board
of Directors and Officers
Mr.
McKearn has received an option package of 82,763 options to purchase shares
of
our common stock.
Each
director is elected for a period of one year at our annual meeting of
stockholders and serves until the next such meeting and until his or her
successor is duly elected and qualified. Officers are elected by, and serve
at
the discretion of, our board of directors. Our directors do not presently
receive any compensation for their services as directors. The
board
of directors may also appoint additional directors up to the maximum number
permitted under our by-laws. A director so chosen or appointed will hold office
until the next annual meeting of stockholders.
Each
of
our executive officers serves at the discretion of its board of directors and
holds office until his or her successor is elected or until his or her earlier
resignation or removal in accordance with our articles of incorporation and
by-laws.
Meetings
and Committees of the Board of Directors
During
the twelve months ended October 31, 2005, our board of directors held three
meetings and took action by written consent on three occasions. During the
year
ended December 31, 2004, our board of directors held three meetings and took
action by written consent on 7 occasions.
Audit
Committee
Effective
in November 2004, we established the audit committee of the board of directors
which now consists of Messrs. Berman and Patton.
The
audit
committee is responsible
for the following:
· |
reviewing
the results of the audit engagement with the independent registered
public
accounting firm;
|
· |
identifying
irregularities in the management of our business in consultation
with our
independent accountants, and suggest an appropriate course of
action;
|
· |
reviewing
the adequacy, scope, and results of the internal accounting controls
and
procedures;
|
· |
reviewing
the degree of independence of the auditors, as well as the nature
and
scope of our relationship with our independent registered public
accounting firm;
|
· |
reviewing
the auditors’ fees; and
|
· |
recommending
the engagement of auditors to the full board of
directors.
|
Compensation
Committee
Effective
in November 2004, we established a compensation committee of the board of
directors which now consists of Messrs. Berman and McKearn. The compensation
committee determines the salaries and incentive compensation of our officers
and
provides recommendations for the salaries and incentive compensation of our
other employees and consultants.
The
compensation of our executive officers is determined by the compensation
committee of our board of directors, subject to applicable employment
agreements. Our compensation programs will enable us to attract, motivate,
reward and retain the management talent required to achieve corporate objectives
and thereby increase stockholder value. It is our policy to provide incentives
to our senior management to achieve both short-term and long-term objectives
and
to reward exceptional performance and contributions to the development of our
business. To attain these objectives, our executive compensation program
includes a competitive base salary, cash incentive bonuses and stock-based
compensation.
Stock
options have been granted to our senior executive officer by the board of
directors or the compensation committee under the 2004 Stock Option Plan. We
believe that stock options provide an incentive that focuses the executive’s
attention on managing us from the perspective of an owner with an equity stake
in the business. Options are awarded with an exercise price equal to the market
value of common stock on the date of grant, have a maximum term of ten years
and
generally become exercisable, in whole or in part, starting one year from the
date of grant. Among our executive officers, the number of shares subject to
options granted to each individual generally depends upon the level of that
officer’s responsibility. The largest grants are awarded to the most senior
officers who, in our view, have the greatest potential impact on our
profitability and growth. Previous grants of stock options are reviewed but
are
not considered the most important factor in determining the size of any
executive’s stock option award in a particular year.
From
time
to time, the compensation committee may utilize the services of independent
consultants to perform analyses and to make recommendations to the committee
relative to executive compensation matters. No compensation consultant has
so
far been retained.
Relationship
of Compensation to Performance and Compensation of our executive
officers
The
compensation committee will annually establish, subject to the approval of
the
board of directors and any applicable employment agreements, the salaries that
will be paid to our executive officers during the coming year. In setting
salaries, the compensation committee takes into account several factors,
including competitive compensation data, the extent to which an individual
may
participate in the stock plans maintained by us, and qualitative factors bearing
on an individual’s experience, responsibilities, management and leadership
abilities and job performance.
Nominating
and Corporate Governance Committee
Effective
on November 2004, we established a nominating and corporate governance committee
of our board of directors which initially now consists of Messers. Derbin and
Appel. The functions of the nominating and corporate governance include the
following:
· |
identifying
and recommending to the board of directors individuals qualified
to serve
as directors of the Company and on the committees of the board;
|
· |
advising
the board with respect to matters of board composition, procedures
and
committees;
|
· |
developing
and recommending to the board a set of corporate governance principles
applicable to us and overseeing corporate governance matters generally;
and
|
· |
overseeing
the annual evaluation of the board and our management.
|
The
nominating and corporate governance committee shall be governed by a charter,
which we intend to adopt.
Code
of Ethics
We
have
adopted a code of ethics that applies to our officers, employees and directors,
including our principal executive officers, principal financial officers and
principal accounting officers. The code of ethics sets forth written standards
that are designated to deter wrongdoing and to promote:
· |
Honest
and ethical conduct, including the ethical handling of actual or
apparent
conflicts of interest between personal and professional
relationships;
|
· |
Full,
fair, accurate, timely and understandable disclosure in reports and
documents that a we file with, or submit to, the SEC and in other
public
communications made by us;
|
· |
Compliance
with applicable governmental laws, rules and
regulations;
|
· |
The
prompt internal reporting of violations of the code to an appropriate
person or persons identified in our code of ethics;
and
|
· |
Accountability
for adherence to our code of ethics.
|
A
copy of
our code of ethics has been filed with the SEC as an exhibit to our Form 8K
dated November 12, 2004.
Item
10: Executive
Compensation
The
following table sets forth the compensation earned during the years ended
December 31, 2003 the ten month ended October 31, 2004 and the twelve months
ended October 31, 2005 by our former and current executive management:
|
|
|
|
|
|
|
|
|
Annual
Compensation
|
|
Long
Term
Compensation
Awards
|
Name
And Principal
Position
|
|
Year
|
Salary($)
|
|
Bonus($)
|
|
Securities
Underlying
Options
|
J.
Todd Derbin
Director
(former CEO)
|
|
2005
2004(1)
2003
|
$225,000
$125,000
$150,000
|
|
$45,000
$60,000(4)
|
|
684,473
(6)
--
1,172,727
(6)
|
Dr.
James Patton
Chairman
of the Board of Directors
|
|
2005
2004(1)
2003
|
--
$15,000(2)
$15,750(2)
|
|
--
--
--
|
|
28,175
33,810
|
Roni
Appel
Secretary,
Chief Financial Officer, and Director
|
|
2005
2004(1)
2003
|
$139,250
(5)
$50,000(3)
$60,000(3)
|
|
$35,000
|
|
1,114,344
(5)
35,218
42,262
|
(1)
Information for 2004 reflects the ten month period ended October
31,
2004.
(2)
Dr. Patton was paid consulting fees by the Company of $18,000 in
2003 and
$15,750 in 2004. Dr. Patton’s compensation related to his consulting
agreement which was terminated on November 2004.
(3)
Mr. Appel was paid consulting fees of $60,000 in 2003 and consulting
fees
of $50,000 in the 10 months ended October 31, 2004 through his
beneficial
ownership of Carmel Ventures, Inc. $35,000 of such fees were assigned
to
Mr. Scott Flamm.
(4)
Mr. Derbin’s stock option award was based in his employment contract. His
2003 bonus of $60,000 was paid in 2004 in Common Stock of the Company
on
the basis of a price of $0.1952 per share and
was two-third’s of his maximum bonus of $90,000. The basis for this bonus
was the successful conclusion of several matters of great importance
to
the Company including:
- extending
the patent portfolio and moving it to the care of competent patent
counsel;
- creating
grant opportunities for the company;
- scaling
up manufacturing; and
- creating
certain collaboration opportunities.
In
determining Mr. Debin’s bonus, the Board acted in part on a discretionary
basis.
(5)
Mr. Appel’s compensation in year 2005 was paid through a consulting
agreement between the company and LVEP Management, LLC. See “Certain
Relationships and Related Party Transaction” at p.98.
(6)
Pursuant to a termination of employment agreement, only 928,441
options of
the 2004 grant vested, and only 427,796 options of the 2005 grant
vested.
The balance of the options were surrenderd to the
company.
|
Option
Grants In Recent Fiscal Years
The
following table sets forth each grant of stock options during the years ended
December 31, 2003 the 10 month period ended October 31, 2004 and the year ended
October 31, 2005 to our current and former Chief Executive Officer under a
predecessor stock option plan. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with rules of the SEC and do not
represent our estimate or projection of our common stock price. Actual gains,
if
any, on stock option exercises are dependent on the future performance of our
common stock, overall market conditions and the option holders’ continued
employment through the vesting period. Unless the market price of our common
stock appreciates over the option term, no value will be realized from the
option grants made to these executive officers. The potential realizable values
shown in the table are calculated by assuming that the estimated fair market
value of our common stock on the date of grant increases by 5% and 10%,
respectively, during each year of the option term.
The
outstanding stock options described above became options for our common stock
upon the Share Exchange.
|
|
Individual
Grants
|
|
|
|
|
|
|
|
Potential
Realizable Value At Assumed Annual Rates of Stock Price Appreciation
For
|
|
|
|
|
|
|
Option
Term($)
|
Name
|
Year
|
Number
Of Securities Underlying Options
Granted
|
Percent
Of Total Options Granted To Employees In Fiscal
Year)
|
Exercise
Price
|
Expiration
Date
|
5%
|
10%
|
J.
Todd Derbin(1)
|
2005
|
684,473
|
100%
|
$0.29
|
12/15/2014
|
$
26,543.13
|
$142,486.07
|
Director
(former
CEO)
|
2004
|
--
|
0%
|
--
|
--
|
-
|
-
|
|
2003
|
--
|
0%
|
--
|
--
|
-
|
-
|
Dr.
James Patton
|
2005
|
5,635
|
8%
|
$0.35
|
11/1/2012
|
$
218.52
|
$
1,173.03
|
Chairman
of the Board of Directors
|
2004
|
28,175
|
42%
|
$0.35
|
11/1/2012
|
$
1,092.60
|
$
5,865.16
|
|
2003
|
33,810
|
50%
|
$0.35
|
11/1/2012
|
$
1,311.12
|
$
7,038.19
|
Roni
Appel
|
2005
|
1,114,344
|
93%
|
$0.29
|
3/31/2015
|
$
43,213.06
|
$231,971.89
|
Secretary,
Chief Financial Officer, and Director
|
2004
|
35,218
|
3%
|
$0.35
|
11/1/2012
|
$
1,365.72
|
$
7,331.30
|
|
2003
|
42,262
|
4%
|
$0.35
|
11/1/2012
|
$
1,638.87
|
$
8,797.64
|
____________________
Aggregate
Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
The
following table sets forth information concerning the options exercised by
Advaxis’ current and former executive management in the year ended December 31,
2003 , the 10 months ended October 31, 2004 and the 12 months ended October
31,
2005, and the end of period number and value of unexercised options with respect
to each of these executive officers.
|
|
|
|
Number
Of Securities
|
Value
Of Unexercised
|
Underlying
Unexercised Options
|
In-The-Money
Options
|
At
Fiscal Year-End(2)
|
At
Fiscal Year-End($)(3)
|
|
|
Shares
Acquired
On
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Year
|
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
J.
Todd Derbin
|
2005
|
0
|
$
-
|
1,273,135
|
584,106
|
$
47,033
|
$
17,469
|
Director
(former CEO)
|
2004
|
0
|
$
-
|
586,382
|
586,382
|
$
53,947
|
$
51,015
|
|
2003
|
0
|
$
-
|
293,191
|
879,575
|
$
26,974
|
$
80,921
|
Dr.
James Patton
|
2005
|
0
|
$
-
|
73,253
|
-
|
$
-
|
$
-
|
Chairman
of the Board of Directors
|
2004
|
0
|
$
-
|
29,583
|
-
|
$
-
|
$
-
|
|
2003
|
0
|
$
-
|
33,810
|
-
|
$
-
|
$
-
|
|
|
|
|
|
|
|
|
Roni
Appel
|
2005
|
0
|
$
-
|
254,075
|
951,835
|
$
-
|
$
-
|
Secretary,
Chief Financial
Officer,
and Director
|
2004
|
0
|
$
-
|
91,567
|
-
|
$
-
|
$
-
|
|
2003
|
0
|
$
-
|
49,305
|
-
|
$
-
|
$
-
|
(1) |
Based
on the fair market value of our common stock on the date of exercise,
less
the exercise price payable for such shares.
|
(2) |
Certain
of the options are immediately exercisable for all the option shares
as of
the date of grant but any shares purchased are subject to repurchase
by us
at the original exercise price paid per share if the optionee ceases
service with us before vesting in such shares.
|
(3) |
The
price for end of fiscal year 2005 is based on a price per share of
$0.25.
The price for previous years is based on the fair market value of
our
common stock at fiscal year end of $0.25 per share, determined by
the
board to be equal to our Private Placement price per share less the
exercise price payable for such shares.
|
In
November 2004, our board of directors and stockholders adopted the 2004 Stock
Option Plan (“Plan”). The Plan provides for the grant of options to purchase up
to 2,381,525 shares of our common stock to employees, officers, directors and
consultants. Options may be either “incentive stock options” or non-qualified
options under the Federal tax laws. Incentive stock options may be granted
only
to our employees, while non-qualified options may be issued to non-employee
directors, consultants and others, as well as to our employees.
The
Plan
is administered by “disinterested members” of the board of directors or the
compensation committee, who determine, among other things, the individuals
who
shall receive options, the time period during which the options may be partially
or fully exercised, the number of shares of common stock issuable upon the
exercise of each option and the option exercise price.
Subject
to a number of exceptions, the exercise price per share of common stock subject
to an incentive option may not be less than the fair market value per share
of
common stock on the date the option is granted. The per share exercise price
of
the common stock subject to a non-qualified option may be established by the
board of directors, but shall not, however, be less than 85% of the fair market
value per share of common stock on the date the option is granted. The aggregate
fair market value of common stock for which any person may be granted incentive
stock options which first become exercisable in any calendar year may not exceed
$100,000 on the date of grant.
No
stock
option may be transferred by an optionee other than by will or the laws of
descent and distribution, and, during the lifetime of an optionee, the option
will be exercisable only by the optionee. In the event of termination of
employment or engagement other than by death or disability, the optionee will
have no more than three months after such termination during which the optionee
shall be entitled to exercise the option, unless otherwise determined by the
board of directors. Upon termination of employment or engagement of an optionee
by reason of death or permanent and total disability, the optionee’s options
remain exercisable for one year to the extent the options were exercisable
on
the date of such termination. No similar limitation applies to non-qualified
options.
We
must
grant options under the Plan within ten years from the effective date of the
Plan. The effective date of the Plan was November 12, 2004. Subject to a number
of exceptions, holders of incentive stock options granted under the Plan cannot
exercise these options more than ten years from the date of grant. Options
granted under the Plan generally provide for the payment of the exercise price
in cash and may provide for the payment of the exercise price by delivery to
us
of shares of common stock already owned by the optionee having a fair market
value equal to the exercise price of the options being exercised, or by a
combination of these methods. Therefore, if it is provided in an optionee’s
options, the optionee may be able to tender shares of common stock to purchase
additional shares of common stock and may theoretically exercise all of his
stock options with no additional investment other than the purchase of his
original shares.
Any
unexercised options that expire or that terminate upon an employee’s ceasing to
be employed by us become available again for issuance under the
Plan.
2005
Stock Option Plan
In
June
2005, our board of directors and stockholders adopted the 2005 Stock Option
Plan
(“Plan”). The Plan needs to be approved and adopted by our shareholders in the
next shareholder meeting or as provided in our bylaws.
The
Plan
provides for the grant of options to purchase up to 5,600,000 shares of our
common stock to employees, officers, directors and consultants. Options may
be
either “incentive stock options” or non-qualified options under the Federal tax
laws. Incentive stock options may be granted only to our employees, while
non-qualified options may be issued to non-employee directors, consultants
and
others, as well as to our employees.
The
Plan
is administered by “disinterested members” of the board of directors or the
compensation committee, who determine, among other things, the individuals
who
shall receive options, the time period during which the options may be partially
or fully exercised, the number of shares of common stock issuable upon the
exercise of each option and the option exercise price.
Subject
to a number of exceptions, the exercise price per share of common stock subject
to an incentive option may not be less than the fair market value per share
of
common stock on the date the option is granted. The per share exercise price
of
the common stock subject to a non-qualified option may be established by the
board of directors, but shall not, however, be less than 85% of the fair market
value per share of common stock on the date the option is granted. The aggregate
fair market value of common stock for which any person may be granted incentive
stock options which first become exercisable in any calendar year may not exceed
$100,000 on the date of grant.
Except
when agreed by the board or the administrator of the Plan, no stock option
may
be transferred by an optionee other than by will or the laws of descent and
distribution, and, during the lifetime of an optionee, the option will be
exercisable only by the optionee. In the event of termination of employment
or
engagement other than by death or disability, the optionee will have no more
than three months after such termination during which the optionee shall be
entitled to exercise the option, unless otherwise determined by the board of
directors. Upon termination of employment or engagement of an optionee by reason
of death or permanent and total disability, the optionee’s options remain
exercisable for one year to the extent the options were exercisable on the
date
of such termination. No similar limitation applies to non-qualified
options.
We
must
grant options under the Plan within ten years from the effective date of the
Plan. The effective date of the Plan was January 1, 2005. Subject to a number
of
exceptions, holders of incentive stock options granted under the Plan cannot
exercise these options more than ten years from the date of grant. Options
granted under the Plan generally provide for the payment of the exercise price
in cash and may provide for the payment of the exercise price by delivery to
us
of shares of common stock already owned by the optionee having a fair market
value equal to the exercise price of the options being exercised, or by a
combination of these methods. Therefore, if it is provided in an optionee’s
options, the optionee may be able to tender shares of common stock to purchase
additional shares of common stock and may theoretically exercise all of his
stock options with no additional investment other than the purchase of his
original shares.
Any
unexercised options that expire or that terminate upon an employee’s ceasing to
be employed by us become available again for issuance under the
Plan.
Employment
Agreements
J.
Todd Derbin.
Our
employment agreement with Mr. Derbin as President and Chief Executive Officer
was terminated effective December 31, 2005. On October 31, 2005 we entered
into
a Termination of Employment Agreement effective December 31, 2005 with Mr.
Derbin pursuant to which Mr. Derbin’s employment by the Company will end on
December 31, 2005. Pursuant to such agreement Mr. Derbin’s salary shall be paid
until the end of 2005 at the rate of $225,000 plus a bonus for 2005 equal to
$5,000 in shares of Common Stock of the Company priced at $0.287 per share.
Following his resignation Mr. Derbin shall service as a consultant to the
Company for a fee of $6,250 per month for 6 months ending June 30, 2006. Mr.
Derbin will continue to serve as Chairman and a member of the Board of directors
of the Company until at least September 30, 2006.
Vafa
Shahabit, Ph.D. Dr.
Shahabit has been Head of Director of Science effective March 1, 2005,
terminable on 30 days. Her duties are to work on and/or manage research and
development projects as specified by the Company. The compensation is $100,000
per annum with a potential bonus of $20,000. In addition, Dr. Shahabi will
be
granted 150,000 options.
Dr.
John Rothman, Ph.D. Dr.
Rothman has been hired as Vice President of Clinical Development effective
March
7, 2005 for a term of one year ending February 28, 2006 and terminable on 30
days notice. His compensation is $170,000 per annum, to increase to $180,000
upon the closing of a $15 million equity financing. Upon meeting incentives
to
be set by the Company, he will receive a bonus of up to $45,000. In addition,
Dr. Rothman will be granted 360,000 stock options.
Roni
Appel. Mr.
Appel
is serving as our Chief Executive Officer and Chief Financial Officer pursuant
to the terms of the Consulting Agreement between us and LVEP Managment LLC
described in Section 12 hereof at page 98 under “Certain Relationships
and Related Party Transactions.”
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
and executive officers and persons who own more than ten percent of a registered
class of our equity securities (collectively, “Reporting Persons”) to file with
the SEC initial reports of ownership and reports of changes in ownership of
our
common stock and our other equity securities. Reporting Persons are required
by
SEC regulation to furnish us with copies of all Section 16(a) forms that they
file. Based
solely on the Company’s review of the copies of the forms received by it during
the fiscal years ended October 31, 2005 and written representations that no
other reports were required, the Company believes that each person who, at
any
time during such fiscal year, was a director, officer or beneficial owner of
more than ten percent of the Company’s common stock complied with all Section
16(a) filing requirements during such fiscal year, except with respect to the
following filings: (i) the Trustees of the University of Pennsylvania, who
were
late in filing their Form 3; (ii) James Patton, who was late in filing his
Form
3; (iii) Roni Appel, who was late in filing a Form 3 and three Form 4s; (iii)
Scott Flamm, who was late in filing his amended Form 3; (iv) J. Todd Derbin,
who
has not filed three Form 4s; and (v) Thomas McKearn, who has not filed a Form
3.
· |
each
person
who is known by us to be the owner of record or beneficial owner
of more
than 5% of our
outstanding common stock;
|
· |
each
of
our directors and each of our executive officers;
|
· |
all
of
our directors and executive officers as
a group; and
|
· |
the
number
of
shares
of common stock beneficially
owned
by each such person and such group and the percentage of the outstanding
shares owned by each such person and such
group.
|
As
used
in
the table below and
elsewhere in this prospectus,
the
term beneficial
ownership with
respect to a security consists of sole or shared voting power, including the
power to vote or direct the vote and/or sole or shared investment power,
including the power to dispose or direct the disposition, with respect to the
security through any contract, arrangement, understanding, relationship, or
otherwise, including a right to acquire such power(s) during the next 60 days
following the date of this prospectus. Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment powers with
respect to the shares indicated.
|
|
|
|
|
Name
and Address
|
|
Number
of Shares of Registrant
Common Stock Beneficially
Owned
|
|
Percentage
of Class Beneficially
Owned(1)
|
|
|
|
|
|
Name
and Address of Beneficial Owner
|
|
Shares
of Common Stock Beneficially Owned
|
|
Percentage
of Class Beneficially Owned
|
J.
Todd Derbin(1)(2)
|
|
2,204,390
(3)
|
|
5.59%
|
Roni
Appel(1)(2)
|
|
4,016,467
(4)
|
|
10.31%
|
Estate
of Scott Flamm(1)
|
|
2,914,989
(5)
|
|
7.72%
|
Richard
Berman (1)
|
|
400,000
(6)
|
|
1.05%
|
Dr.
James Patton(1)
|
|
2,913,476
(6a)
|
|
7.92%
|
Dr.
Thomas McKearn(1)
|
|
306,601
(7)
|
|
0.08%
|
The
Trustees of the University of Pennsylvania
Center
for Technology
Transfer,
University of
Pennsylvania
3160
Chestnut Street, Suite 200
Philadelphia,
PA 19104-6283
|
|
6,339,282
|
|
17.2%
|
Sunrise
Equity Partners, LP
641
Lexington Ave-25fl
New
York, NY 10022
|
|
1,835,491
(8)
|
|
4.99%
|
Level
Counter, LLC
c/o
Sunrise Securities Corp.
641
Lexington Ave-25fl
New
York, NY 10022
|
|
1,835,491
(9)
|
|
4.99%
|
Marilyn
Adler
c/o
Sunrise Securities Corp.
641
Lexington Ave-25fl
New
York, NY 10022
|
|
1,835,491
(10)
|
|
4.99%
|
Nathan
Low
c/o
Sunrise Securities Corp.
641
Lexington Ave-25fl
New
York, NY 10022
|
|
3,346,311
(11)
|
|
9.10%
|
Amnon
Mandelbaum
c/o
Sunrise Securities Corp.
641
Lexington Ave-25fl
New
York, NY 10022
|
|
2,932,803
(12)
|
|
7.97%
|
Emigrant
Capital Corp.
6
East 43 Street, 8th Fl.
New
York, NY 10017
|
|
1,838,783
(13)
|
|
4.99%
|
Harvest
Advaxis LLC
30052
Aventura, Suite C
Rancho
Santa Margarita, CA 92688
|
|
(14)
|
|
|
All
Directors and Officers as a Group (6 people)
|
|
13,215,699
|
|
35.07%
|
_____________________________________
*
Based
on 37,686,427 shares of common stock outstanding as of October 31,
2005.
(1) |
Director
or former director
|
(2)
|
Officer
or former officer
|
(3)
|
Reflects
469,338 shares of Common Stock, 1,356,236 options to purchase shares
of
common stock and 368,815 warrants to purchase shares of Common
Stock.
|
(4)
|
Reflects
14,449 warrants to purchase shares of Common stock and 2,382,666
shares of
Common Stock owned by Mr. Appel and 1,114,344 options to purchase
shares
of Common Stock but does not reflect 58,580 warrants to purchase
shares of
Common Stock because such warrants are not under the current
circumstances, exercisable within the next 60 days. Also reflects
355,528
shares of common stock and 149,480 options and warrants to
purchase shares
of Common Stock beneficially owned by Carmel Ventures, Inc.
of which Mr.
Appel is a controlling person but does not reflect 355,538
warrants to
purchase shares of common stock owned by Carmel Ventures, Inc.
because
such warrants are not under the current circumstances exercisable
within
the next 60 days.
|
(5) |
Reflects
125,772 shares of common stock and 122,751 options and warrants to
purchase shares of Common Stock owned by Mr. Flamm but does not reflect
125,722 warrants to purchase shares of Common Stock because such
warrants
are not under the current circumstances, exercisable within the next
60
days. Also reflects 2,621,325 shares of Common Stock and 45,141 warrants
to purchase shares of Common Stock beneficially owned by Flamm Family
Partners LP of which Mr. Flamm is a
partner.
|
(6) |
Reflects
options to purchase shares of Common
Stock.
|
(6a) |
Reflects
56,349 options to purchase shares of common stock, 36,551 warrants
to
purchase shares of common stock and 2,820,576 shares of common stock
but
does not reflect 147,716 warrants to purchase shares of common stock
because such warrants are not under the current circumstances, exercisable
within the next 60 days.
|
(7) |
Reflects195,586
options and warrants to purchase shares of common stock and 111,015
shares
of common stock.
|
(8) |
Reflects
1,742,160 shares of common stock held by Sunrise Equity Partners,
LP
("SEP") and warrants to purchase 93,331 shares of common stock, but
does
not include warrants to purchase 1,648,829 shares of common stock
issuable
upon exercise of warrants held by SEP because such warrants are not,
under
the current circumstances, exercisable within the next 60 days. The
General Partner of SEP is Level Counter, LLC ("LC"), the managers
of which
are Nathan Low, Marilyn Adler and Amnon Mandelbaum (the
"Managers"). Decisions regarding voting and disposition require
the unanimous vote of all three managers. The 1,835,491 shares
of common stock beneficially held by SEP also does not
include: (1) 1,124,253 shares of common stock directly owned by
Nathan Low or warrants directly owned by Mr. Low to purchase up to
761,971
shares of common stock; (2) 1,094,020 shares of directly owned by
Amnon
Mandelbaum or warrants directly owned by Mr. Mandelbaum to purchase
up to
672,539 shares of common stock, and (3) shares of common stock held
by limited partners of SEP or LC who may have a direct or indirect
pecuniary interest, but have no authority to vote or dispose of the
shares
of common stock held by SEP. Does not reflect the 34,843 shares of
common
stock issuable as penalty shares.
|
(9) |
Reflects
1,742,160 shares of common stock held by SEP and warrants to purchase
93,331 shares of common stock, but does not include warrants to purchase
1,648,829 shares of common stock issuable upon exercise of such warrants
held by SEP because such warrants are not, under the circumstances,
exercisable within the next 60 days. LC is the general partner of
SEP and
as such, is deemed to have beneficial ownership of the securities
held by
SEP for purposes of calculating percentage interest. Does not reflect
the
34,843 shares of common stock issuable to SEP as penalty
shares.
However, LC disclaims beneficial interest in such shares except to
the
extent of its pecuniary interest therein.
|
(10) |
Reflects
1,742,160 shares of common stock held by SEP and warrants to purchase
93,331 shares of common stock, but does not include warrants to purchase
1,648,829 shares of common stock issuable upon exercise of such warrants
held by SEP because such warrants are not, under the circumstances,
exercisable within the next 60 days. Does not reflect the 34,843
shares of
common stock issuable to SEP as penalty shares. Ms.
Adler is a manager of LC, the general partner of SEP, and as such,
is
deemed to have beneficial ownership of the securities held by SEP
for
purposes of calculating percentage interest. However, Ms. Adler disclaims
beneficial interest in such shares except to the extent of her pecuniary
interest therein.
|
(11) |
Reflects
1,742,160 shares of common stock held by SEP and warrants to purchase
93,331 shares of common stock, but does not include warrants to purchase
1,648,829 shares of common stock issuable upon exercise of such warrants
held by SEP because such warrants are not, under the circumstances,
exercisable within the next 60 days. Does not reflect the 34,843
shares of
common stock issuable to SEP as Penalty Shares. Mr.
Low is a manager of LC, the general partner of SEP, and as such,
is deemed
to have beneficial ownership of the securities held by SEP for purposes
of
calculating percentage interest. However, Mr. Low disclaims beneficial
interest in such shares except to the extent of his pecuniary interest
therein. Also reflects 1,124,253 shares of common stock owned by
Mr. Low
but does not reflect warrants to purchase 761,971 shares of common
stock
issuable upon exercise of such warrants because such warrants are
not,
under the circumstances, exercisable within the next 60 days nor
does it
reflect 37,725 shares of common stock issuable to Mr. Low as Penalty
Shares. Also includes 383,275 shares of common stock held by Sunrise
Securities Corp., a corporation of which Mr. Low is sole stockholder
and
director, but does not include warrants to purchase 348,432 shares
of
common stock held by Sunrise Securities Corp. because such warrants
are
not, under the circumstances, exercisable within the next 60 days
nor does
it reflect 14,634 shares of common stock issuable to Sunrise Securities
Corp. as penalty shares. Mr. Low’s beneficial ownership does not include
shares of common stock held by Sunrise Foundation Trust, a charitable
trust of which Mr. Low is a trustee. Mr. Low disclaims beneficial
ownership of such shares of common stock held by Sunrise Foundation
Trust.
|
(12) |
Reflects
1,742,160 shares of common stock held by SEP and warrants to purchase
93,331 shares of common stock, but does not include warrants to purchase
1,648,829 shares of common stock issuable upon exercise of such warrants
held by SEP because such warrants are not, under the circumstances,
exercisable within the next 60 days. Does not reflect the 34,843
shares of
common stock issuable to SEP as Penalty Shares. Mr.
Mandelbaum is a manager of LC, the general partner of SEP, and as
such, is
deemed to have beneficial ownership of the securities held by SEP
for
purposes of calculating percentage interest. However, Mr. Mandelbaum
disclaims beneficial interest in such shares except to the extent
of his
pecuniary interest therein. Also reflects 1,094,020 shares of common
stock
owned by Mr. Mandelbaum but does not reflect warrants to purchase
672,539
shares of common stock issuable upon exercise of such warrants because
such warrants are not, under the circumstances, exercisable within
the
next 60 days nor does it reflect 35,332 shares of common stock issuable
to
Mr. Mandelbaum as penalty hares.
|
(13) |
Reflects
1,742,160 shares of common stock held by Emigrant Capital Corp.
(“Emigrant”) and warrants to purchase 16,623 shares of common stock, but
does not include warrants to purchase 1,645,537 shares of common
stock
issuable upon exercise of warrants held by Emigrant because such
warrants
are not, under the current circumstances, exercisable within the
next 60
days nor does it reflect 34,843 shares of common stock issuable to
Emigrant as penalty shares. Mr. Howard Milstein is the Chairman and
CEO
and Mr. John Hart is the President of
Emigrant.
|
(14) |
Does
not reflect warrants to purchase 3,832,753 shares of common stock
because
such warrants are not currently exercisable within the next 60 days.
Mr.
Robert Harvey is the manager of Harvest Advaxis LLC.
|
Consulting
Agreement with Carmel Ventures, Inc.
Carmel
Ventures, Inc. (“Carmel”) is owned by Roni Appel, our Chief Financial Officer,
director and a principal shareholder. Pursuant to a consulting agreement, dated
as of November 1, 2002, Carmel provided various consulting services to us
principally in management, business development and recruiting strategies.
Carmel has been paid consulting fees of $5,000 per month since November 1,
2002
which fees have accrued but not been paid. As of December 31, 2004, such accrued
fees amounted to $130,000 of which 30,000 was paid in cash. Carmel has assigned
$35,000 of such fees to Mr. Scott Flamm, one of our a former directors and
principal shareholders. Carmel and Mr. Flamm have converted the $65,000 and
$35,000 respectively into shares of common stock and warrants. In addition,
we
granted Carmel a bonus of $35,000 which was converted into Units in the Private
Placement and we granted Carmel options to purchase shares of our common stock
at the rate of 7,044 options per month since November 11, 2002. The total number
of options received by Carmel was 183,134. The exercise price of these options
is $0.35 per share. Carmel has assigned 91,567 of these options to Mr. Flamm.
The contract with Carmel was terminated as of December 31, 2004.
Consulting
Agreement with LVEP Management, LLC; Services of Roni Appel as Chief Executive
Officer and Chief Financial Officer
We
entered into a consulting agreement with LVEP Management, LLC (“LVEP”) which is
controlled by the estate of Scott Flamm, who, until his death on June 9, 2006,
was one of our directors and a principal shareholder. LVEP employed Mr. Flamm
and Mr. Roni Appel, our President and Chief Executive Officer and our Chief
Financial Officer, and a director and a principal shareholder of the Company.
Pursuant to the consulting agreement, dated as of January 19, 2005, and amended
on April 15, 2005, and further amended on October 31, 2005, LVEP is to provide
various financial and strategic consulting services to us.
Under
the
October 31, 2005 amendment the initial term of the consulting agreement was
extended until December 31, 2007 and thereafter the term of the agreement shall
be automatically extended for one year periods unless we notify LVEP at least
60
days prior to the end of term of our intent not to extend. In addition, the
Consulting Agreement may be terminated by us for any reason upon 60 days prior
notice or by Consultant upon 45 days prior notice, Upon such notice all
compensation and bonuses payable under the Consulting Agreement shall continue
until the later to occur of the end of the term or twelve (12) months from
such
termination. In consideration for providing the consulting services, under
the
Consulting Agreement as amended LVEP shall receive compensation of $250,000
per
year payable at the rate of $20,833.33 per month for the term of the agreement
plus reimbursement of approved expenses in connection with providing the
consulting services. LVEP intends to pay all such compensation to Mr. Appel.
The
Consultant will receive a bonus payment at the end of 2005 not to exceed
$75,000. In subsequent years the bonus shall equal 40% of the base consulting
compensation. At the election of the Company or of Consultant up to 100% of
the
bonus may be paid in common stock of the Company .Additionally, LVEP shall
receive additional options to purchase common stock of the Company bringing
options held LVEP (including the existing 3%) to 5% of the outstanding shares
and options of the Company as of December 31, 2005. The incremental options
vest
monthly over four years commencing in April, 2005. LVEP has assigned such
options to Mr. Appel.
Amended
and Restated Employment Agreement with J. Todd Derbin
J.
Todd
Derbin has served as Chairman and a director since January 1, 2006. Prior
thereto he served as President and Chief Executive Officer since December 20,
2004. On October 31, 2005 we entered into a Termination of Employment Agreement
effective December 31, 2005 pursuant to which Mr. Derbin’s employment by the
Company ended on December 31, 2005. Pursuant to such agreement Mr. Derbin’s
salary was paid until the end of 2005 at the rate of $225,000 plus a bonus
for
2005 equal to $5,000 in shares of Common Stock of the Company priced at $0.287
per share. Following his resignation Mr. Derbin shall service as a consultant
to
the Company for a fee of $6,250 per month for 6 months ending June 30, 2006.
Mr.
Derbin will continue to serve as Chairman and a member of the Board of directors
of the Company until at least September 30, 2006.
Sentinel
Consulting, Inc.
Sentinel
Consulting Inc. is owned by Robert Harvey, an observer to our Board and the
manager of Harvest Advaxis LLC, one of our principal stockholders. Sentinel
provided financial consulting, scientific validation and business strategy
advice to us. The term of the agreement was for six months commencing as of
September 5, 2004 with each party having the right to terminate it after four
months under the agreement. The agreement was terminated in August, 2005. We
have paid Sentinel $33,000 for services performed and we have the obligation
to
issue to them a warrant to purchase 191,638 shares of our common stock at an
exercise price of an $0.40 per share, plus 287,451 shares of our common stock,
a
retainer of $5,000, a video preparation fee of $10,000 and expenses of $6,000
in
connection with the preparation of a scientific review.
Item
13: Exhibits
EXHIBIT
NUMBER
|
|
DESCRIPTION
OF EXHIBIT
|
|
|
|
|
|
Exhibit
3.1
|
|
Amended
and Restated Articles of Incorporation. Incorporated by reference
to
Exhibit 4.2 to Report on Form S-8 filed with the SEC on December
1, 2005.
|
|
|
|
|
|
Exhibit
3.2
|
|
Amended
and Restated Bylaws. Incorporated by reference to Exhibit 3.1 to
Report on
Form 8K filed with the SEC on December 27, 2004.
|
|
|
|
|
|
Exhibit
4.1
|
|
Form
of Warrant issued to purchasers. Incorporated by reference to Exhibit
4.1
to Report on Form 8K filed with the SEC on November 18, 2004.
|
|
|
|
|
|
Exhibit
4.2
|
|
Form
of Warrant issued to Placement Agent. Incorporated by reference to
Exhibit
4.2 to Report on Form 8K filed with the SEC on November 18, 2004.
|
|
|
|
|
|
Exhibit
10.1
|
|
Share
and Exchange Agreement, dated as of August 25, 2004, by and among
the
Company, Advaxis and the shareholders of Advaxis. Incorporated by
reference to Exhibit 10.1 to Report on Form 8K filed with the SEC
on
November 18, 2004.
|
|
|
|
|
|
Exhibit
10.2
|
|
Form
of Securities Purchase Agreement, by and among the Company and the
purchasers listed as signatories thereto. Incorporated by reference
to
Exhibit 10.2 to Report on Form 8K filed with the SEC on November
18, 2004.
|
|
|
|
|
|
Exhibit
10.3
|
|
Form
of Registration Rights Agreement, by and among the Company and the
persons
listed as signatories thereto. Incorporated by reference to Exhibit
10.3
to Report on Form 8K filed with the SEC on November 18, 2004.
|
|
|
|
|
|
Exhibit
10.4
|
|
Form
of Standstill Agreement, by and among the Company and persons listed
on
Schedule 1 attached thereto. Incorporated by reference to Exhibit
10.4 to
Report on Form 8K filed with the SEC on November 18, 2004.
|
|
|
|
|
|
Exhibit
10.5
|
|
Amended
and Restated Employment Agreement, dated December 20, 2004, by and
between
the Company and J.Todd Derbin. Incorporated by reference to Exhibit
10.1
to Report on Form 8K filed with the SEC on December 23, 2004.
|
|
|
|
|
|
Exhibit
10.6
|
|
2004
Stock Option Plan of the Company. Incorporated by reference to Exhibit
4.1
to Report on Form S-8 filed with the SEC on December 1, 2005.
|
|
|
|
|
|
Exhibit
10.7
|
|
License
Agreement, dated as of June 17, 2002, by and between Advaxis and
The
Trustees of the University of Pennsylvania. Incorporated by reference
to
Exhibit 10.7 to Post-Effective Amendment No. 1 to Form SB-2 filed
with the
SEC on January 5, 2006.*
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|
|
|
|
|
Exhibit
10.8
|
|
Non-Exclusive
License and Bailment, dated as of March 17, 2004, between The Regents
of
the University of California and Advaxis, Inc. Incorporated by reference
to Exhibit 10.8 to Post-Effective Amendment No. 1 to Form SB-2 filed
with
the SEC on January 5, 2006.*
|
|
|
|
|
|
Exhibit
10.9
|
|
Consultancy
Agreement, dated as of January 19, 2005, by and between LVEP Management,
LLC. and the Company. Incorporated by reference to Exhibit 10.9 to
Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC on
January
5, 2006.*
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|
|
|
|
|
Exhibit
10.10
|
|
Government
Funding Agreement, dated as of April 5, 2004, by and between David
Carpi
and Advaxis, Inc. Incorporated by reference to Exhibit 10.10 to
Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC on
January
5, 2006.*
|
|
Exhibit
10.11
|
|
Amended
and Restated Consulting and Placement Agreement, dated as of May28,
2003,
by and between David Carpi and Advaxis, Inc., as amended. Incorporated
by
reference to Exhibit 10.11to Post-Effective Amendment No. 1 to Form
SB-2
filed with the SEC on January 5, 2006.*
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|
|
|
|
|
Exhibit
10.12
|
|
Consultancy
Agreement, dated as of January 22, 2005, by and between Dr. Yvonne
Paterson and Advaxis, Inc. Incorporated by reference to Exhibit 10.12
to
Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC on
January
5, 2006.*
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|
|
|
|
|
Exhibit
10.13
|
|
Consultancy
Agreement, dated as of March 15, 2003, by and between Dr. Joy A.
Cavagnaro
and Advaxis, Inc. Incorporated by reference to Exhibit 10.13 to
Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC on
January
5, 2006.*
|
|
|
|
|
|
Exhibit
10.14
|
|
Grant
Writing Agreement, dated June 19, 2003, by and between DNA Bridges,
Inc.
and Adavaxis, Inc. Incorporated by reference to Exhibit 10.14 to
Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC on
January
5, 2006.*
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|
|
|
|
|
Exhibit
10.15
|
|
Consulting
Agreement, dated as of July 2, 2004, by and between Sentinel Consulting
Corporation and Advaxis, Inc. Incorporated by reference to Exhibit
10.15
to Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC
on
January 5, 2006.*
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|
|
|
|
|
Exhibit
10.16
|
|
Agreement,
dated July 7, 2003, by and between Cobra Biomanufacturing PLC and
Advaxis,
Inc. Incorporated by reference to Exhibit 10.16 to Post-Effective
Amendment No. 1 to Form SB-2 filed with the SEC on January 5,
2006.*
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|
|
|
|
|
Exhibit
10.17
|
|
Securities
Purchase Agreement, dated as of January 12, 2005, by and between
the
Company and Harvest Advaxis LLC. Incorporated by reference to Exhibit
10.1
to Report on Form 8K filed with the SEC on January 18,
2005.*
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|
|
|
|
|
Exhibit
10.18
|
|
Registration
Rights Agreement, dated as of January 12, 2005, by and between the
Company
and Harvest Advaxis LLC. Incorporated by reference to Exhibit 10.2
to
Report on Form 8K filed with the SEC on January 18, 2005.
*
|
|
|
|
|
|
Exhibit
10.19
|
|
Letter
Agreement, dated as of January 12, 2005 by and between the Company
and
Robert T. Harvey. Incorporated by reference to Exhibit 10.3 to Report
on
Form 8K filed with the SEC on January 18, 2005. *
|
|
|
|
|
|
Exhibit
10.20
|
|
Consultancy
Agreement, dated as of January 15, 2005, by and between Dr. David
Filer
and the Company. Incorporated by reference to Exhibit 10.20 to
Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC on
January
5, 2006.*
|
|
|
|
|
|
Exhibit
10.21
|
|
Consultancy
Agreement, dated as of January 15, 2005, by and between Pharm-Olam
International Ltd. and the Company. Incorporated by reference to
Exhibit
10.21 to Post-Effective Amendment No. 1 to Form SB-2 filed with the
SEC on
January 5, 2006.*
|
|
|
|
|
|
Exhibit
10.22
|
|
Agreement,
dated February 1, 2004, by and between Strategic Growth International
Inc.
and the Company. Incorporated by reference to Exhibit 10.22 to
Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC on
January
5, 2006.*
|
|
|
|
|
|
Exhibit
10.23
|
|
Letter
Agreement, dated February 10, 2005, by and between Richard Berman
and the
Company. Incorporated by reference to Exhibit 10.23 to Post-Effective
Amendment No. 1 to Form SB-2 filed with the SEC on January 5,
2006.*
|
|
|
|
|
|
Exhibit
10.24
|
|
Employment
Agreement, dated February 8, 2005, by and between Vafa Shahabi and
the
Company. Incorporated by reference to Exhibit 10.24 to Post-Effective
Amendment No. 1 to Form SB-2 filed with the SEC on January 5, 2006.*
|
|
|
|
|
|
Exhibit
10.25
|
|
Employment
Agreement, dated March 1, 2005, by and between John Rothman and the
Company. Incorporated by reference to Exhibit 10.25 to Post-Effective
Amendment No. 1 to Form SB-2 filed with the SEC on January 5,
2006.*
|
|
|
|
|
|
Exhibit
10.26
|
|
Clinical
Research Services Agreement, dated April 6, 2005, between Pharm-Olam
International Ltd. and the Company. Incorporated by reference to
Exhibit
10.26 to Post-Effective Amendment No. 1 to Form SB-2 filed with the
SEC on
January 5, 2006.*
|
|
|
|
|
|
Exhibit
10.27
|
|
Amendment
to Consultancy Agreement, dated as of April 4, 2005, between LVEP
Management LLC and the Company. Incorporated by reference to Exhibit
10.27
to Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC
on
January 5, 2006.*
|
|
|
|
|
|
Exhibit
10.28
|
|
Royalty
Agreement, dated as of May 11, 2003, by and between Cobra
Bio-Manufacturing PLC and the Company. Incorporated by reference
to
Exhibit 10.28 to Post-Effective Amendment No. 1 to Form SB-2 filed
with
the SEC on January 5, 2006.*
|
|
|
|
|
|
Exhibit
10.29
|
|
Resignation
Agreement between J. Todd Durbin and the Company, dated October 31,
2005. Incorporation by reference to Exhibit 10.1 to report on Form
8-K filed with the SEC on November 9, 2005. *
|
|
|
|
|
|
Exhibit
10.30
|
|
Second
Amendment to Consulting Agreement between the Company and LVEP Management
LLC, dated October 31, 2005. Incorporation by reference to Exhibit
10.2 to Report on Form 8-K filed with the SEC on November 9, 2005.
*
|
|
|
|
|
|
Exhibit
10.31
|
|
Letter
of Agreement between the Company and the Investor Relations Group
Inc.,
dated September 27, 2005. Incorporated by reference to Exhibit 10.31
to
Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC on
January
5, 2006.*
|
|
|
|
|
|
Exhibit
10.32
|
|
Consulting
Agreement between the Company and Freemind Group, LLC dated October
17,
2005. Incorporated by reference to Exhibit 10.32 to Post-Effective
Amendment No. 1 to Form SB-2 filed with the SEC on January 5,
2006.
|
|
|
|
|
|
Exhibit
10.33
|
|
Strategic
Collaboration and Long Term Vaccine Supply Agreement between the
Company
and Cobra Bio-Manufacturing PLC dated October 31, 2005. Incorporated
by
reference to Exhibit 10.33 to Post-Effective Amendment No. 1 to Form
SB-2
filed with the SEC on January 5, 2006.*
|
|
|
|
|
|
Exhibit
14.1
|
|
Code
of Ethics. Incorporated by reference to Exhibit 14.1 to Report on
Form 8K
filed with the SEC on November 18, 2004.
|
|
Exhibit
21.1
|
|
Advaxis,
Inc., a Delaware corporation. Incorporated by reference to Exhibit
21.1 to
Post-Effective Amendment No. 1 to Form SB-2 filed with the SEC on
January
5, 2006.
|
|
|
|
|
|
Exhibit
24.1
|
|
Power
of Attorney (Included on the signature page).
|
|
|
|
|
|
Exhibit
31.1
|
|
Rule 13a-14(a)/15d-14(a)
Certification by the Chief Executive Officer and Chief Financial
Officer
(filed herewith).
|
|
|
|
|
|
Exhibit
32.1
|
|
Certification
by the Chief Executive Officer and Chief Financial Officer pursuant
to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
______________
*
Confidential Treatment sought.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Princeton, Mercer County, State
of
New Jersey, on the 5th day of January, 2006.
|
|
|
|
ADVAXIS,
INC.
|
|
|
|
|
By: |
/s/ Roni
Appel |
|
Roni
Appel, Chief Financial Officer and Chief Executive
Officer |
|
|
POWER
OF ATTORNEY
KNOW
ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Roni Appel as his true and lawful attorney-in-fact
and
agent, with full power of substitution for him in any and all capacities, to
sign (1) any and all amendments to this report on Form KSB and (2) file the
same
with the Securities and Exchange Commission pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said, attorney-in-fact and agent all power and
authority to do and to perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and affirming
all
that said attorney-in-fact and agent, or his substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on
the
dates indicated:
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
/s/ Roni
Appel
Roni
Appel
|
|
Chief
Executive Officer and Director
(Principal
Executive Officer)
|
|
January
25, 2006
|
|
/s/ Roni
Appel
Roni
Appel
|
|
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
|
January
25, 2006
|
|
J.
Todd Derbin
|
|
Director
|
|
January
25, 2006
|
|
Thomas
McKearn
|
|
Director
|
|
January
25, 2006
|
|
James
Patton
|
|
Director
|
|
January
25, 2006
|
|
Richard
Berman
|
|
Director
|
|
January
25, 2006
|
|
*
By: /s/ Roni Appel
Roni
Appel
Attorney-in-fact
Index
of Exhibits
EXHIBIT
NUMBER
|
|
DESCRIPTION
OF EXHIBIT
|
|
|
|
|
|
Exhibit
3.1
|
|
Amended
and Restated Articles of Incorporation. Incorporated by reference
to
Exhibit 4.2 to Report on Form S-8 filed with the SEC on December
1, 2005.
|
|
|
|
|
|
Exhibit
3.2
|
|
Amended
and Restated Bylaws. Incorporated by reference to Exhibit 3.1 to
Report on
Form 8K filed with the SEC on December 27, 2004.
|
|
|
|
|
|
Exhibit
4.1
|
|
Form
of Warrant issued to purchasers. Incorporated by reference to Exhibit
4.1
to Report on Form 8K filed with the SEC on November 18, 2004.
|
|
|
|
|
|
Exhibit
4.2
|
|
Form
of Warrant issued to Placement Agent. Incorporated by reference
to Exhibit
4.2 to Report on Form 8K filed with the SEC on November 18, 2004.
|
|
|
|
|
|
Exhibit
10.1
|
|
Share
and Exchange Agreement, dated as of August 25, 2004, by and among
the
Company, Advaxis and the shareholders of Advaxis. Incorporated
by
reference to Exhibit 10.1 to Report on Form 8K filed with the SEC
on
November 18, 2004.
|
|
|
|
|
|
Exhibit
10.2
|
|
Form
of Securities Purchase Agreement, by and among the Company and
the
purchasers listed as signatories thereto. Incorporated by reference
to
Exhibit 10.2 to Report on Form 8K filed with the SEC on November
18, 2004.
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Exhibit
10.3
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Form
of Registration Rights Agreement, by and among the Company and
the persons
listed as signatories thereto. Incorporated by reference to Exhibit
10.3
to Report on Form 8K filed with the SEC on November 18, 2004.
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Exhibit
10.4
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Form
of Standstill Agreement, by and among the Company and persons listed
on
Schedule 1 attached thereto. Incorporated by reference to Exhibit
10.4 to
Report on Form 8K filed with the SEC on November 18, 2004.
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Exhibit
10.5
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Amended
and Restated Employment Agreement, dated December 20, 2004, by
and between
the Company and J.Todd Derbin. Incorporated by reference to Exhibit
10.1
to Report on Form 8K filed with the SEC on December 23, 2004.
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Exhibit
10.6
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2004
Stock Option Plan of the Company. Incorporated by reference to
Exhibit 4.1
to Report on Form S-8 filed with the SEC on December 1, 2005.
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Exhibit
10.7
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License
Agreement, dated as of June 17, 2002, by and between Advaxis
and The
Trustees of the University of Pennsylvania. (1)
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Exhibit
10.8
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Non-Exclusive
License and Bailment, dated as of March 17, 2004, between The
Regents of
the University of California and Advaxis, Inc. (1)
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Exhibit
10.9
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Consultancy
Agreement, dated as of January 19, 2005, by and between LVEP
Management,
LLC. and the Company. (1)
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Exhibit
10.10
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Government
Funding Agreement, dated as of April 5, 2004, by and between
David Carpi
and Advaxis, Inc. (1)
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Exhibit
10.11
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Amended
and Restated Consulting and Placement Agreement, dated as of
May28, 2003,
by and between David Carpi and Advaxis, Inc., as amended.
(1)
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Exhibit
10.12
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Consultancy
Agreement, dated as of January 22, 2005, by and between Dr. Yvonne
Paterson and Advaxis, Inc. (1)
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Exhibit
10.13
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Consultancy
Agreement, dated as of March 15, 2003, by and between Dr. Joy
A. Cavagnaro
and Advaxis, Inc. (1)
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Exhibit
10.14
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Grant
Writing Agreement, dated June 19, 2003, by and between DNA Bridges,
Inc.
and Adavaxis, Inc. (1)
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Exhibit
10.15
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Consulting
Agreement, dated as of July 2, 2004, by and between Sentinel
Consulting
Corporation and Advaxis, Inc. (1)
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Exhibit
10.16
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Agreement,
dated July 7, 2003, by and between Cobra Biomanufacturing PLC
and Advaxis,
Inc. (1)
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Exhibit
10.17
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Securities
Purchase Agreement, dated as of January 12, 2005, by and between
the
Company and Harvest Advaxis LLC. Incorporated by reference to
Exhibit 10.1
to Report on Form 8K filed with the SEC on January 18,
2005.
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Exhibit
10.18
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Registration
Rights Agreement, dated as of January 12, 2005, by and between
the Company
and Harvest Advaxis LLC. Incorporated by reference to Exhibit
10.2 to
Report on Form 8K filed with the SEC on January 18, 2005.
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Exhibit
10.19
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Letter
Agreement, dated as of January 12, 2005 by and between the Company
and
Robert T. Harvey. Incorporated by reference to Exhibit 10.3 to
Report on
Form 8K filed with the SEC on January 18, 2005.
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Exhibit
10.20
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Consultancy
Agreement, dated as of January 15, 2005, by and between Dr. David
Filer
and the Company. (1)
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Exhibit
10.21
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Consultancy
Agreement, dated as of January 15, 2005, by and between Pharm-Olam
International Ltd. and the Company. (1)
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Exhibit
10.22
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Agreement,
dated February 1, 2004, by and between Strategic Growth International
Inc.
and the Company. (1)
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Exhibit
10.23
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Letter
Agreement, dated February 10, 2005, by and between Richard Berman
and the
Company. (1)
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Exhibit
10.24
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Employment
Agreement, dated February 8, 2005, by and between Vafa Shahabi
and the
Company. (1)
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Exhibit
10.25
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Employment
Agreement, dated March 1, 2005, by and between John Rothman and
the
Company. (1)
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Exhibit
10.26
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Clinical
Research Services Agreement, dated April 6, 2005, between Pharm-Olam
International Ltd. and the Company. (2)
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Exhibit
10.27
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Amendment
to Consultancy Agreement, dated as of April 4, 2005, between
LVEP
Management LLC and the Company (filed herewith).
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Exhibit
10.28
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Royalty
Agreement, dated as of May 11, 2003, by and between Cobra
Bio-Manufacturing PLC and the Company (2).
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Exhibit
10.29
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Resignation
Agreement between J. Todd Durbin and the Company, dated October
31,
2005. Incorporation by reference from report on Form 8-K filed
with the SEC on November 9, 2005.
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Exhibit
10.30
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Second
Amendment to Consulting Agreement between the Company and LVEP
Management
LLC, dated October 31, 2005. Incorporation by reference to Exhibit
10.2 to Report on Form 8-K filed with the SEC on November 9,
2005.
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Exhibit
10.31
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Letter
of Agreement between the Company and the Investor Relations Group
Inc.,
dated September 27, 2005. (3)
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Exhibit
10.32
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Consulting
Agreement between the Company and Freemind Group, LLC dated October
17,
2005. (3)
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Exhibit
10.33
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Strategic
Collaboration and Long Term Vaccine Supply Agreement between
the Company
and Cobra Bio-Manufacturing PLC dated October 31, 2005.
(3)
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Exhibit
14.1
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Code
of Ethics. Incorporated by reference to Exhibit 14.1 to Report
on Form 8K
filed with the SEC on November 18, 2004.
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Exhibit
24.1
|
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Power
of Attorney (Included on the signature page).
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Exhibit
31.1
|
|
Rule 13a-14(a)/15d-14(a)
Certification by the Chief Executive Officer and Chief Financial
Officer
(filed herewith).
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Exhibit
32.1
|
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Certification
by the Chief Executive Officer and Chief Financial Officer pursuant
to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith).
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______________
*
Confidential Treatment sought.
(1)
Incorporated by reference to Amendment No. 1 Form
SB-2 filed with the SEC on April 8, 2005.
(2)
Incorporated by reference to Amendment No. 4
Form SB-2 filed with the SEC on June 9, 2005.
(3)
Incorporated by reference to Post-Effective
Amendment No. 1 Form SB-2 filed with the SEC on January 5,
2006.