Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
(MARK
ONE)
S
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR
THE FISCAL YEAR ENDED - OCTOBER 31, 2007
OR
£
TRANSITION REPORT Under SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION
FILE NUMBER 000-28489
ADVAXIS,
INC.
(Name
of
Small Business Issuer in Its Charter)
Delaware
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
02-0563870
(I.R.S.
Employer Identification No.)
|
|
|
|
Technology
Centre of New Jersey
675
US Highway One, Suite B113
North
Brunswick, New Jersey
(Address
of Principal Executive Offices)
|
|
08902
(Zip
Code)
|
|
|
|
(732)
545-1590
(Issuer’s
Telephone Number)
|
|
|
|
|
|
Securities
registered under Section 12(b) of the Exchange Act:
|
|
Common
Stock - $.001 par value
The
Common Stock is listed on the Over-The-Counter Bulletin Board
(OTC:BB)
|
|
|
|
Securities
registered under Section 12(g) of the Exchange Act:
|
|
[None]
|
Check
whether the Registrant (1) filed all reports required to be filed by Section
13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been
subject to such filing requirements for the past 90 days. Yes S
No
£
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. £
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes £
No
S
State
issuer’s revenues for its most recent fiscal year. $154,201
The
aggregate market value of the voting common equity held by non-affiliates of
the
registrant as of December 31, 2007 was approximately $16,635,698 based upon
the
closing bid price of the registrant’s Common Stock on the Over the Counter
Bulletin Board, at December 31, 2007. (For purposes of determining this amount,
only directors, executive officers, and 10% or greater stockholders and their
respective affiliates have been deemed affiliates).
Registrant
107,957,977 shares of Common Stock, par value $0.001 per share, issued and
outstanding as of 12/31/07.
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.
Table
of
Contents
Form
10-KSB Index
PART
1
|
1
|
|
|
Item
1: Description of Business
|
1
|
Item
2: Description of Property.
|
33
|
Item
3: Legal Proceedings.
|
33
|
Item
4: Submission of Matters to a Vote of Security Holders.
|
34
|
|
|
PART
II
|
34
|
|
|
Item
5: Market For Common Equity, Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities.
|
34
|
Item
6: Management’s Discussion and Analysis or Plan of
Operation
|
34
|
Item
7: Financial Statements
|
47
|
Item
8: Changes In and Disagreements With Accountants on Accounting
and
Financial Disclosure
|
69
|
Item
8A: Controls And Procedures
|
69
|
Item
8 B: Other Information.
|
70
|
|
|
PART
III
|
70
|
|
|
Item
9: Directors, Executive Officers, Promoters, Control Persons and
Corporate
Governance; Compliance With Section 16(a) of the Exchange
Act.
|
|
Item
10: Executive Compensation
|
74
|
Item
11: Security Ownership of Certain Beneficial Owners and Management
and
Related Stockholder Matters.
|
82
|
Item
12: Certain Relationships and Related Transactions, and Director
Independence.
|
84
|
Item
13: Exhibits
|
86
|
Item
14: Principal Accountant Fees and Services
|
91
|
PART
1
FORWARD
LOOKING STATEMENTS
This
Annual Report on Form 10-KSB contains “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.
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 on 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 publicly-traded
“shell” company without any business until November 12, 2004 when 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. On June 6, 2006 our
shareholders approved the reincorporation of the company from the state of
Colorado to the state of Delaware by merging the Company into its wholly-owned
subsidiary. As used herein, the words “Company” and "Advaxis" refer
to the current Delaware corporation only unless the context references such
entity prior to the June 20, 2006 reincorporation into Delaware. Our principal
executive offices are located at Technology Centre of NJ, 675 US Highway One,
North Brunswick, NJ 08902 and our telephone number is (732)
545-1590.
On
July
28, 2005 we began trading on the Over-The-Counter Bulletin Board (OTC:BB) under
the ticker symbol ADXS.
Recent
Developments
On
October 17, 2007, pursuant to a Securities Purchase Agreement, we completed
a
private placement resulting in $7,384,235 in gross proceeds, pursuant to which
we sold 49,228,334 shares of common stock at a purchase price of $0.15 per
share
solely to institutional and accredited investors. Each investor received a
five-year warrant to purchase an amount of shares of common stock that equals
75% of the number of shares of common stock purchased by such investor in the
offering at a price of $0.20 (the “$0.20 Warrants”).
Concurrent
with the closing of the private placement, the Companysold for $1,996,666 to
CAMOFI Master LDC and CAMHZN Master LDC, affiliates of its financial advisor,
Centrecourt Asset Management (“Centrecourt”), an aggregate of
(i) 10,000,000 shares of Common Stock, (ii) 10,000,000 $0.20 Warrants,
and (iii) 5-year warrants to purchase an additional 3,333,333 shares of Common
Stock at a purchase price of $0.001 per share (the “$0.001 Warrants”). The
Company and the two purchasers agreed that the purchasers would be bound by
and
entitled to the benefits of the Securities Purchase Agreement as if they had
been signatories thereto. The $0.20 Warrants and $0.001 Warrants contain the
same terms, except for the exercise price. Both warrants provide that they
may
not be exercised if, following the exercise, the holder will be deemed to be
the
beneficial owner of more than 9.99% of the Company’s outstanding shares of
Common Stock. Pursuant to a consulting agreement dated August 1, 2007 with
Centrecourt with respect to the anticipated financing, in which Centrecourt
was
engaged to act as Registrant’s financial advisor, Registrant paid Centrecourt
$328,000 in cash and issued 2,483,333 $0.20 Warrants to Centrecourt, which
Centrecourt assigned to the two affiliates.
All
of
the $0.20 Warrants and $0.001 Warrants provide for adjustment of their exercise
prices upon the occurrence of certain events, such as payment of a stock
dividend, a stock split, a reverse split, a reclassification of shares, or
any
subsequent equity sale, rights offering, pro
rata
distribution, or any fundamental transaction such as a merger, sale of all
of
its assets, tender offer or exchange offer, or reclassification of its common
stock. If at any time after October 17, 2008 there is no effective registration
statement registering, or no current prospectus available for, the resale of
the
shares underlying the warrants by the holder of such warrants, then the warrants
may also be exercised at such time by means of a “cashless
exercise.”
In
connection with the private placement, we entered into a registration rights
agreement with the purchasers of the securities pursuant to which we agreed
to
file a registration statement with the Securities and Exchange Commission with
an effectiveness date within 90 days after the final closing of the offering.
The resale of 49,228,334 shares of common stock and 36,921,250 shares underlying
the warrants is being registered in the prospectus. The registration statement
is anticipated to be declared effective on January 16, 2008. See “Private
Placements.”
At
the
closing of this private placement, we exercised our right under an agreement
dated August 23, 2007 with YA Global Investments, L.P. f/k/a Cornell Capital
Partners, L.P. (“Yorkville”), to redeem the outstanding $1,700,000 principal
amount of our Secured Convertible Debentures due February 1, 2009 owned by
Yorkville, and to acquire from Yorkville warrants expiring February 1, 2011
to
purchase an aggregate of 4,500,000 shares of our common stock. We paid an
aggregate of (i) $2,289,999.01 to redeem the debentures at the principal
amount plus a 20% premium and accrued and unpaid interest, and
(ii) $600,000 to repurchase the warrants.
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.
We
are a
development stage biotechnology company with the intent to develop safe and
effective cancer vaccines that utilize multiple mechanisms of immunity. We
use
the Listeria
System
licensed from the University of Pennsylvania (Penn) 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. 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
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:
|
|
Indication
|
|
Stage
|
|
|
|
|
|
Lovaxin
C
|
|
Cervical
intraepithelial neoplasia (CIN), cervical cancer, head and neck
cancer.
|
|
Phase
I/II completed in the fiscal fourth quarter 2007. Phase II study
in CIN
anticipated to commence in 3rd
quarter fiscal 2008. The Gynecologic Oncology Group (GOG) of the
National
Cancer Institute has agreed to conduct a cervical cancer study timing
to
be determined.
|
|
|
|
|
|
Lovaxin
P
|
|
Prostate
cancer
|
|
Preclinical;
Phase I study anticipated to commence 2nd
quarter fiscal 2009
|
Lovaxin
B
|
|
Breast
cancer
|
|
Preclinical;
Phase I study anticipated to commence in mid fiscal
2009
|
|
|
|
|
|
See
“Item
1. Description of Business - Research and Development Programs”.
Since
our
formation, we have had a history of losses that as of October 31, 2007 have
aggregated $12,072,742, and because of the long development period for new
drugs, we expect to continue to incur losses for an extended period of time.
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, clinical studies 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
receives United States Food and Drug Administration, or FDA, approval or becomes
commercially viable 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:
|
·
|
Present
our completed Phase I/II clinical study of Lovaxin C which document
the
practicability of using this agent safely in the therapeutic treatment
of
cervical cancer;
|
|
|
|
|
·
|
Initiate
our Investigational New Drug Application (IND) with the FDA for our
Phase
II clinical study of Lovaxin C in the therapeutic treatment of
CIN;
|
|
·
|
Initiate
our Phase II clinical study of Lovaxin C in the therapeutic treatment
of
CIN;
|
|
·
|
Continue
the preclinical development work necessary to bring Lovaxin P into
clinical trials, and initiate that
trail;
|
|
·
|
Continue
the preclinical development work necessary to bring Lovaxin B into
clinical trials, and initiate that
trial;
|
|
·
|
Continue
the pre-clinical development of our product candidates, as well as
continue research to expand and enhance our technology platform;
and
|
|
·
|
Initiate
strategic and development collaborations with biotechnology and
pharmaceutical companies.
|
Complete
the Ongoing Phase I/II Clinical Study of Lovaxin C.
This
trial was conducted in Israel, Serbia and Mexico, and a total of 15 women with
end-stage cervical cancer were treated. Three different dose levels were tested
at 5 patients per dose, by administering the same dose twice to patients as
an
IV infusion at a 3 week interval. The study demonstrated Lovaxin C can be used
safely in end-stage metastatic cervical cancer. In the two lower dose groups
(a
total of 10 patients) drug related side effects consisted of fever, chills,
nausea and vomiting, comprising a flu like syndrome that is frequently
associated with immunotherapies and is believed to result from the release
of
immune cytokines as part of an innate immune response. In the lower two dose
levels symptoms were controlled with non-prescription analgesics and
antihistamines. In the highest dose level (5 patients) tested symptoms were
more
severe and dose limiting. Thus, safe doses were established as well as a dosage
ceiling, which is an objective of early stage human trials. In this trial of
terminal cancer patients who had previously failed chemotherapy, radiotherapy,
and surgery, 13 of 15 patients were evaluable for efficacy. Of these, 5 patients
progressed, 7 patients were stable, and 1 patient had an objective Partial
Response (PR) using commonly accepted RECIST criterion of response. 4 patients
benefitted from Lovaxin C therapy. In the stable group, 3 patients experienced
a
reduction of their tumor burden by approximately 20%. The PR patient, who was
diagnosed in 2004 and who had failed two courses of chemotherapy and a course
of
radiotherapy in 2004, upon demonstrating a response to Lovaxin C was given
additional chemotherapy and surgery, and is currently tumor free, with an
unimpaired performance status (ECOG=0, Karnofsky =100), and all laboratory
values within normal limits.
Based
upon the safety demonstrated in our phase I/II trial in advanced cervical
cancer, we will be undertaking a phase II trial in stage 2/3 Cervical
Intraepithelial Neoplasia (CIN). Stage 3 CIN is carcinoma in
situ,
and is
a non-invasive form of cervical cancer. Stages 1 and 2 CIN are commonly called
cervical dysplasia. Thus CIN is the name of the disease that can increase in
severity to become invasive cervical cancer. While CIN frequently regresses
spontaneously, over 250,000 surgical procedures are performed in the US annually
to prevent progression from CIN to invasive cancer. This indication is
characterized by young, otherwise healthy, women with strong immune systems
and
minimal disease. The company feels this will be a very responsive population
to
Lovaxin C and represent a significant market. While surgery is very effective,
the removal of portions of the cervix can cause a condition termed “incompetent
cervix” which complicates full term pregnancy, and surgery does not confer any
protection against recurrence of the disease. If Lovaxin C is a safe and
effective treatment for CIN it will have the same therapeutic effect as surgery
without the complications associated with removing tissue, and might provide
a
long lived immune response that confers protection against future
recurrence.
Phase
I/II studies will demonstrate therapeutic efficacy, as well as optimize the
dosage and dosing regimen, the tests and assessments to be performed in phase
III, to characterize the responding patient population, and to understand all
factors possible for the purpose of defining and conducting a definitive test
of
the safety and efficacy of Lovaxin C for regulatory approval. Thereafter, and
assuming that the results of this Phase II study are favorable, we intend to
conduct Phase III clinical studies to demonstrate safety, efficacy and the
potency of the investigational immunotherapy. 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, to minimize regulatory risks during this clinical
development process.
The
Gynecologic Oncology Group (GOG), a collaborative treatment group associated
with the National Cancer Institute, or NCI, has agreed to conduct the field
work
for an additional Phase II study in cervical cancer at its own expense (an
estimated value of about $1,500,000 to $2,000,000). We estimate that we will
conduct lab work valued at $250,000 in support of this study. The timing for
this trial is to be determined.
Finally,
we are pursuing grant monies and an investigation team to research Lovaxin
C
effectiveness in treatment of head and neck cancer. The timing of this Phase
II
study is as yet unknown.
Following
Phase III studies, we intend to prepare and file a Biologics License Application
(BLA) with the FDA. Prior to submission of the BLA, depending upon the data,
we
intend to possibly seek a Special Protocol Assessment and/or a Fast Track
designation from the FDA, which shortens the internal FDA review process. As
we
accrue clinical data demonstrating the safety, efficacy and potency of Lovaxin
C
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
immunotherapy.
We
intend
to continue to devote a portion of our resources to the continued pre-clinical
development and optimization 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
may
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 Penn and UCLA. See “Business - Partnerships and Agreements - University
of Pennsylvania.”
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 1,399,790 new cases of cancer were expected to be
diagnosed in 2006, and 564,830 Americans were expected to die from the disease.
The NIH estimates the overall cost for cancer in the year 2005 at $209.9
billion: $74.06 billion for direct medical costs, $17.5 billion for indirect
morbidity costs (loss of productivity due to illness) and, $118.4 billion for
indirect mortality costs (cost of lost productivity due to premature death).
(Source: cancer facts & figures 2006, American Cancer Society). The
incidence rate of cervical cancer and CIN in the US is about 250,000 patients
per year, with 800,000 cases in the top 7 pharmaceutical markets, worldwide
(including the US).
Head
and
neck cancers is diagnosed in 49,000 Americans annually, 136,000 in the top
7
pharmaceutical markets, combined.
Prostate
cancer is diagnosed in 253,000 Americans annually, 410,000 in the top 7
markets.
Breast
cancer is diagnosed in 222,000 Americans, annually, 450,000 in the top 7
markets.
Immune
System and Normal Antigen Processing
Living
creatures, including humans, are continually confronted with potentially
infectious agents. The immune system has evolved multiple mechanisms that allow
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 and will
eliminate them.
Innate
Immunity:
Innate
immunity is the first step in the recognition of a foreign antigen by
lymphocytes is antigen processing by Antigen Processing Cells (APC). APCs are
phagocytic cells that ingest particulate material, infectious agents and
cellular debris. This non-specific ingestion Phagocytosis by these cells results
in their activation and the release of soluble mediators called cytokines that
assist the immune response.
Exogenous
pathway of Adaptive Immunity (Class II pathway):
Proteins
and foreign molecules ingested by APC are broken down inside
digestive vacuoles into small pieces, called peptides, and the pieces are
combined with proteins called Class 2 MHC (for Major Histocompatibility Complex)
in a part of the cell called the endoplasmic reticulum. The MHC-peptide, termed
and MHC-2 complex from the Class 2 (or exogenous) pathway, is then pushed out
to
the cell surface where it interacts with certain classes of lymphocytes (CD4+)
such as helper T-cells that produce induce a proliferation of stimulate B-cells,
which produce antibodies, or helper T cells that assist in the maturation of
cytotoxic T-lymphocytes. This system is called the exogenous pathway, since
it
is the prototypical response to an exogenous antigen like bacteria.
Endogenous
pathway of Adaptive Immunity (Class I pathway):
There
exists another pathway, called the endogenous pathway. In this system, when
one
of the body's cells begins to create unusual proteins (as happens in most viral
infections and in cancer cells), the protein is broken up into peptides in
the
cytoplasm and directed into the endoplasmic reticulum, where it is incorporated
into an MHC-1 protein and trafficed to the cell surface. This signal then calls
effector cells of the cellular immune system, especially CD8+ cytotoxic
T-lymphocytes, to come and kill the cell. The endogenous pathway is primarily
for elimination of virus-infected or cancerous cells.
In
clinical cancer, the body does not always recognize the cancer cells as foreign.
Listeria
based
vaccines are unique for many reasons, one of which is that unlike viral vectors,
DNA or peptide antigens or other vaccines, Listeria
stimulates all of the above mechanisms of immune action. Our technology allows
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
utilizing a number of biologic characteristics of the Listeria
bacteria
and Advaxis proprietary antigen-fusion protein technology to stimulate multiple
therapeutic immune mechanisms simultaneously in an integrated and coordinated
manner.
Mechanism
of Action
Listeria
is a
bacterium well known to medical science because it can cause an infection in
humans. Listeria
is a
pathogen that causes food poisoning, typically in people who are either
immunocompromised or who eat a large quantity of the microbe as can occur in
spoiled dairy products. It is not laterally transmitted from person to person,
and is a common microbe in our environment. Most people ingest Listeria
without
being aware of it, but in high quantities or in immune suppressed people
Listeria
can
cause various clinical conditions, including sepsis, meningitis and placental
infections in pregnant women. Fortunately, many common antibiotics can kill
and
sterilize Listeria.
Because
Listeria
is a
live bacterium it stimulates the innate immune system, thereby priming the
adaptive immune system to better respond to the specific antigens that the
Listeria
carries,
which viruses and other vectors do not do. This is a non-specific stimulation
of
the overall immune system that results when certain classes of pathogens such
as
bacteria (but not viruses) are detected. It provides some level of immune
protection and also serves to prime the elements of adaptive immunity to respond
in a stronger way to the specific antigenic stimulus. Listeria
stimulates a strong innate response which engenders a strong adaptive
response.
When
Listeria
enters
the body, it is seen as foreign by the antigen processing cells and ingested
into cellular compartments called phagolysosomes, whose destructive enzymes
kill
most of the bacteria. A certain percentage of these bacteria, however, are
able
to break out of the phagolysosomes 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 move to its cell surface so it can push into neighboring cells and
spread.
Figs
1-7.
When Listeria enters the body, it is seen as foreign by the antigen processing
cells and ingested into cellular compartments called vacuolesor lysosomes,
whose
destructive enzymes kill most of the bacteria, fragments of which are then
presented to the immune system via the exogenous pathway.
Figs
8-10
A certain percentage of bacteria are able to break out of the lysosomes and
enter into the cytoplasm of the cell, where they are safe from lysosomal
destruction. The bacteria multiply in the cell, and the Listeria
is able
to migrate into neighboring cells and spread without entering the extracellular
space. Antigen produced by these bacteria enter the Class I pathway and directly
stimulate a cytotoxic T cell response.
It
is the
details of Listeria
intracellular activity that are important for understanding Advaxis technology.
Inside the lysosome, Listeria
produces
listeriolysin-O (“LLO”), a protein that digests a hole in the membrane of the
lysosome that allows the bacteria to escape into the cytoplasm. Once in the
cytoplasm, however, LLO is also capable of digesting a hole in the outer cell
membrane. This would destroy the host cell, and spill the bacteria back out
into
the intercellular space where it would be exposed to more immune cell attacks
and destruction. To prevent this, the body has evolved a mechanism for
recognizing enzymes with this capability based upon their amino acid sequence.
The sequence of approximately 30 amino acids in LLO and similar molecules is
called the PEST sequence (for the predominant amino acids it contains) and
it is
used by normal cells to force the termination of proteins that need only have
a
short life in the cytoplasm. This PEST sequence serves as a routing tag that
tells the cells to route the LLO in the cytoplasm and to the proteosome for
digestion, which terminates its action and provides fragments that then go
to
the endoplasmic reticulum, where it is processed just like a protein antigen
in
the endogenous pathway to generate MHC-1 complexes.
This
mechanism is used by Listeria
to its
benefit because the actions of LLO enable the bacteria to avoid digestion in
the
lysosome and escape to the cytosol where they can multiply and spread and then
be neutralized so that it does not kill the host cell. Advaxis is co-opting
this
mechanism by creating a protein that is comprised of the cancer antigen fused
to
a non-hemolytic portion of the LLO molecule that contains the PEST sequence.
This serves to route the molecule for accelerated proteolytic degradation which
accelerates both the rate of antigen breakdown and the amount of antigen
fragments available for incorporation in to MHC-1 complexes; thus increasing
the
stimulus to activate cytotoxic T cells against a tumor specific
antigen.
Other
mechanisms that Advaxis vaccines employ include Listeria’s
ability to increase the synthesis of myeloid cells such as Antigen Presenting
Cells (APC) and T cells, and to stimulate the maturation of immature myeloid
cells to increase the number of available activated immune cells that underlie
a
cancer killing response. Immature myeloid cells actually inhibit the immune
system and Listeria
removes
this inhibition. Also, Listeria
and LLO
both stimulate the synthesis, release, and expression of various chemicals
which
stimulate a therapeutic immune response. These chemicals are called cytokines,
chemokines and co-stimulatory molecules. By doing this, not only are immune
cells activated to kill cancers and clear them from the body, but local
environments within tumors is created that support and facilitate a therapeutic
response. Finally, in a manner that appears to be unique to Advaxis vaccines,
our proprietary antigen-LLO fusion proteins, when delivered by Listeria
do not
stimulate cells caused regulatory T cells (Tregs) which are known to inhibit
a
therapeutic anticancer response. This does not occur when Listeria
is
engineered to deliver only a tumor specific antigen. The ability to reduce
the
effect of Tregs is currently under clinical investigation by other companies
and
is believed to be a significant mechanism of achieving a therapeutic
response.
Thus,
Listeria
vaccines
stimulate every immune pathway simultaneously. It has long been recognized
that
cytotoxic T lymphocytes (CTL) are the elements of the immune system that kill
and clear cancer cells. The amplified CTL response to Listeria
vaccines
are arguably the strongest stimulator of CTL yet developed. The strength of
this
response is reflected in the data.
Also,
many investigators have shown that LLO has adjuvant effects which result in
the
release of a variety of chemicals with in the body, and within the tumor, termed
cytokines, chemokines and co-stimulatory molecules. These agents facilitate
the
tumor killing effects of activated T cells by creating a local tumor environment
that is most conducive for these actions to occur. Taken together, this is
why
it is believed that live Listeria
which
secrete LLO and escape from the phagocytotic vacuole exerts such profound
immuno-stimulatory effects, while ingested Listeria
that are
digested within the vacuole and do not escape don’t show these
effects.
Thus,
what makes Advaxis live Listeria
vaccines
so effective are a combination of effects that stimulate multiple arms of the
immune system simultaneously in a manner that generates an integrated
physiologic response conducive to the killing and clearing of tumor cells.
These
mechanisms include:
|
1.
|
Very
strong innate immune response
|
|
|
|
|
2.
|
Stimulates
inordinately strong killer T cell response
|
|
|
|
|
3.
|
Stimulates
helper T cells
|
|
|
|
|
4.
|
Stimulates
release of and/or up-regulates immuno-stimulatory cytokines, chemokines,
co-stimulatory molecules
|
|
|
|
|
5.
|
Adjuvant
activity creates a local tumor environment that supports anti-tumor
efficacy
|
|
|
|
|
6.
|
Minimizes
inhibitory T cells (T regs) and inhibitory cytokines and shifts to
Th-17
pathway
|
|
|
|
|
|
Stimulates
the development and maturation of all Antigen Presenting Cells and
effector T cells & reduces immature myeloid
cells
|
Research
and Development Program
Overview
We
use
genetically engineered Listeria
monocytogenes as a therapeutic agent. We start with an attenuated strain
of Listeria,
and
then add to this bacterium 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.
We
can
use different tumor antigens (or other antigens: e.g. allergy or infectious
disease) 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:
|
|
Indication
|
|
Stage
|
|
|
|
|
|
Lovaxin
C
|
|
Cervical
intraepithelial neoplasia (CIN), cervical cancer, head and neck
cancer
|
|
Phase
I/II completed in the fiscal fourth quarter 2007. Phase II study
in CIN
anticipated to commence in the 3rd
quarter fiscal 2008. The Gynecologic Oncology Group (GOG) of the
National
Cancer Institute has agreed to conduct a cervical cancer study timing
to
be determined.
|
|
|
|
|
|
Lovaxin
P
|
|
Prostate
cancer
|
|
Preclinical;
Phase I study anticipated to commence in the 2nd
quarter fiscal 2009
|
|
|
|
|
|
Lovaxin
B
|
|
Breast
cancer
|
|
Preclinical;
Phase I study anticipated to commence in mid fiscal 2009.
|
Partnerships
and Agreements
University
of Pennsylvania
On
July
1, 2002 (effective date) we entered into a 20-year exclusive worldwide license,
with the University of Pennsylvania (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. This agreement has been amended from time to time and has
been
amended and restated as of February 13, 2007.
This
license, unless sooner terminated in accordance with its terms, terminates
upon
the later (a) expiration of the last to expire Penn patent rights; or (b) twenty
years after the effective date. The license provides us with the exclusive
commercial rights to the patent portfolio developed at Penn as of the effective
date, in connection with Dr. Paterson and requires us to raise capital, pay
various milestone, legal, filing and licensing payments to commercialize the
technology. In exchange for the license, Penn received shares of our common
stock which currently represents approximately 5.9% of our common stock
outstanding on a fully-diluted basis. In addition, Penn is entitled to receive
a
non-refundable initial license fee, license fees, royalty payments and milestone
payments based on net sales and percentages of sublicense fees and certain
commercial milestones, as follows: Under the licensing agreement, Penn is
entitled to receive 1.5% royalties on net sales in all countries.
Notwithstanding these royalty rates, we have agreed to pay Penn a total of
$525,000 over a three-year period as an advance minimum royalty after the first
commercial sale of a product under each license (which payments we are not
expecting to begin paying within the next five years). In addition, under the
license, executed on February 13, 2007 we are obligated to pay an
annual maintenance fee on December 31, in 2008, 2009, 2010, 2011 and 2012 and
each December 31st thereafter for the remainder of the term of the agreement
of
$50,000, $70,000, $100,000, $100,000 and $100,000, respectively until the first
commercial sale of a Penn licensed product. Under the amended and restated
agreement during fiscal 2007 we paid a total of $157,134 in license payments
in
addition to the $215,700 previously paid or a total of $372,834 in Penn license
payments. Under the agreement prior to the amendment and restatement we were
required to pay $660,000 to Penn upon receiving financing or on certain dates
on
or before December 15, 2007, whichever is earlier. Overall the amended and
restated agreement payment terms reflect lower near term requirements but were
more than offset by higher longer term milestone payments for the initiation
of
a phase III clinical trial and the regulatory approval for the first Penn
Licensed Product. We are responsible for filing new patents and maintaining
and defending the existing patents licensed to use and 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. In
addition, $1,000,000 will be due upon the date of first commercial sale of
a
product in each of the secondary strategic fields sold. Therefore, the total
potential amount of milestone payments is $3,500,000 in the cancer
field.
As
a
result of our payment obligations under the license assuming we have net sales
in the aggregate amount of $100 million from our cancer products, our total
payments to Penn over the next ten years could reach an aggregate of $5,420,000.
If over the next 10 years our net sales total an aggregate amount of only $10
million from our cancer products, total payments to Penn could reach be
$4,445,000.
This
license also grants us exclusive negotiation and exclusive options until June
17, 2009 to obtain exclusive licenses to new inventions on therapeutic vaccines
developed by Drs’ Paterson and Fred Frankel and their lab. Each option is
granted to us at no cost and provides a six month exercise period from the
date
of disclosure. Once exercised we have a 90 day period to negotiate in good
faith
a comprehensive license agreement at licensing fees up to $10,000. We exercised
the option under this agreement resulting in approximately 28 patent
applications. The license fees, legal expense, and other filing expenses for
such applications are expected to cost approximately $400,000.
Strategically
we continue to enter into sponsored research agreements with Dr. Paterson and
Penn to generate new intellectual property and to exploit all existing
intellectual property covered by the license.
Penn
is
not involved in management of our company or in our decisions with respect
to
exploitation of the patent portfolio.
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 written over 140
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 trusts totaling approximately $560,000 dollars per
year and the program director of training grants totaling approximately $1.6
million 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 on January 28,
2005 with an initial term expiring 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. We are currently in our fourth renewal period. 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, as of October 17, 2007,Dr.
Paterson receives $7,000 per month. Upon the closing of an additional of $9
million in equity capital, Dr. Paterson’s rates shall increase to $9,000 per
month. In addition, on February 1, 2005, Dr. Paterson received options to
purchase 400,000 shares of our common stock at an exercise price of $0.287
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, 2006 through October, 2007 she
earned and accrued $40,000 in fees and on October 24, 2007 she was paid $40,000
for these fees, she holds options to purchase a total of 569,048 shares of
Common Stock of which 456,548 are options exercisable within 60 days of October
31, 2007.
Sponsored
Research Agreement.
We
entered into a sponsored research agreement on December 6, 2006 with Penn and
Dr. Paterson under which we are obligated to pay $159,598 per year for a total
period of 2 years covering the development of potential vaccine candidate based
on our Listeria technology as well as other basic research
projects.
We
intend
to enter into additional sponsored research agreements with Penn in the future
with respect to research and development on our product 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.
Dr.
Paterson is also the chairman of our Scientific Advisory Board.
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 was
extended upon the agreement of both parties. It provides that he will provide
to
us for three days per month during the term of the agreement assistance on
our
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 pay Dr. Filer $2,000 per month. In addition, Dr. Filer
received options to purchase 40,000 shares of common stock which are
currently vested. As of October 1, 2007 we entered into a new two year agreement
at a monthly fee of $5,000 including 1,500,000 $0.20 Warrants as consideration
for his assistance in the raise on October 17, 20070 as well a his advisory
services and assistance. This agreement is cancelable within 90 days
notice.
Freemind
Group LLC (“Freemind”)
We
have
entered into an agreement with Freemind to develop and manage our grant writing
strategy and application program. With Advaxis to 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 in the past to file grant applications with NIH
covering the use of Lovaxin C for cervical dysplasia. We have paid Freemind
as
of October 31, 2007, fees aggregating $23,500.
University
of California
On
March
14, 2004 we 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 paid 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 involves 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 to manufacture expired in
December 2005 upon the delivery and completion of stability testing of the
GMP
material for the Phase I trial. Cobra has agreed to surrender the right to
$300,000 of its existing fees for manufacturing in exchange for future royalties
from the sales of Lovaxin C at the rate of 1.5% of net sales, with royalty
payments not to exceed $1,950,000.
In
November 2005, in order to secure production of Lovaxin C on a
long-term basis as well as 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. This 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.
In
May
2007 we entered into a research and development consulting service agreement
for
manufacturing work in the amount of $94,500 plus consumables. As of October
31,
2007 we’ve paid $85,657 excluding consumables.
In
October, 2007 we entered into a production agreement with Cobra to manufacture
our phase II clinical materials using a new methodology now required by the
UK,
and likely to be required by other regulatory bodies in the future. The contract
is for $576,450 plus consumables and as of October 31, 2007 we have paid
$194,408 excluding consumables.
LVEP
Management, LLC
The
Company 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 served as Chief Executive Officer, Chief
Financial Officer and Secretary of the Company and was compensated by consulting
fees paid to LVEP. LVEP is owned by the estate of Scott Flamm (deceased January
2006) previously, one of our directors and a principal shareholder. Pursuant
to
an amendment dated December 15, 2006 (“effective date”) Mr. Appel resigned as
President and Chief Executive Officer and Secretary of the Company on the
effective date, but remains as a board member and was a consultant to the
company until December 15, 2007. The term of the agreement as amended is 24
months from effective date. Mr. Appel will devote 50% of his time over the
first
12 months of the consulting period. Also as a consultant, he will be paid at
a
rate of $22,500 per month in addition to benefits as provided to other company
officers. He will receive severance payments over an additional 12 months at
a
rate of $10,416.67 per month and shall be reimbursed for family health care.
All
his stock options became fully vested on the effective date and are exercisable
over the term. Also, Mr. Appel was issued 1,000,000 shares of our common stock
on January 2, 2007. He received a $250,000 bonus with $100,000 paid on January
3, 2007 and the remainder was paid in October, 2007.
Pharm-Olam
International Ltd. (“POI”)
In
April
2005, we entered into a consulting agreement with Pharm-Olam International
Ltd.
(POI), based on which POI is to execute and manage our Phase I/II clinical
trial
in Lovaxin C with POI to contractually receive in consideration $430,000 plus
reimbursement of certain expenses of $181,060. On December 13, 2006 we approved
a change order reflecting the changes to the protocol the cost of which is
estimated at $92,000 for a total contractual obligation of $522,000
excluding certain pass through expenses. As of October 31, 2007 we’ve paid
$294,800 toward the $522,000 portion of the agreement and this agreement is
still ongoing. In February 2007 we entered into a change order agreement for
a
pre-clinical toxicology study for $79,920 and as of October 31, 2007 we’ve paid
$64,280.
The
Investor Relations Group, Inc (“IRG”)
We
entered into an agreement with IRG whereby IRG is to 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, IRG is
to be paid $10,000 per month plus out of pocket expenses, and 200,000 common
shares over a period of 18 months commencing October 1, 2005, provided the
agreement has not terminated. Through October 31, 2007 we issued 200,000 shares
per the agreement.
Biologics
Consulting Group, Inc. (“BCG”)
On
June
1, 2006 we entered into an agreement with BCG and on June 11, 2007 we entered
into an amendment No. 1 to provide biologics regulatory consulting services
to
the Company in support of the IND submission to the FDA. The tasks to be
performed under this Agreement will be agreed to in advance by the Company
and
BCG. The term of the amendment No. 1 is from June 1, 2007 to June 1, 2008.
This
is a time and material agreement.
MediVector,
Inc.(“MI”)
In
May
2007 we entered into a Master Service Agreement covering three projects to
serve
in clinical study planning, management and execution for our upcoming Phase
II
clinical study. The cost of the three projects are estimated to be approximately
$350,000 over the term. As of October 31, 2007 we’ve paid them $47,000. The term
of the projects is defined as the completion of the final study reports of
the
clinical trial.
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 on July 1, 2002 (effective date) we entered into a 20-year
exclusive worldwide license and a right to grant sublicenses pursuant to our
license agreement with Penn. Penn currently has 12 issued and 46 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 United
States e field of Listeria-based
therapy.
|
Patents
|
|
|
|
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.” Expires April 18,
2017.
|
|
|
|
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.” Expires November 8, 2014.
|
|
|
|
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, Attenuated Strains of Listeria and Their
Methods of Use.” Filed November 18, 1997. Expires November 18,
2017.
|
|
|
|
U.S.
Patent No. 6,504,020, issued January 7, 2003, Frankel et al. Divisional
Application No. 09/520,207 “Isolated Nucleic Acids Comprising Listeria DAL
And DAT Genes”. Filed March 7, 2000, Expires November 18,
2017.
|
|
|
|
U.S.
Patent No. 6,635,749, issued October 21, 2003, Frankel, et
al. Divisional U.S. Patent Application No. 10/136,253 for “Isolated
Nucleic Acids Comprising Listeria DAL and DAT Genes.” Filed May 1,
2002, Expires November 18,
2017.
|
|
U.S.
Patent No. 5,830,702, issued November 3, 1998, Portnoy, et al. Patent
Application No. 08/366,477, filed December 30, 1994 for “Live, Recombinant
Listeria SSP Vaccines and Productions of Cytotoxic T Cell Response”
Expires November 3, 2015.
|
|
|
|
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.
|
|
|
|
US
Patent No. 6,855,320 issued February 15, 2005, Paterson. Patent
Application No. 09/537,642 for “Fusion of Non-Hemolytic, Truncated Form of
Listeriolysin o to Antigens to Enhance Immunogenicity.” Filed March 29,
2000. Expires March 29, 2020.
|
|
|
|
US
Patent No. 7,135,188 issued November 14, 2006, Paterson, Patent
Application No. 10/441,851 for “Methods and compositions for immunotherapy
of cancer.” Filed May 20, 2003. Expires November 8,
2014.
|
Patent
Applications
|
U.S.
Patent Application No. 10/239,703 for “Compositions and Methods for
Enhancing Immunogenicity of Antigens.” Filed September 24, 2002, Paterson,
et al.
|
|
|
|
U.S.
Patent Application No. 20050048081, “Immunogenic Compositions Comprising
DAL/DAT Double Mutant, Auxotrophic Attenuated Strains Of Listeria
And
Their Methods Of Use,” Filed September 11, 2003, Frankel et
al.
|
|
|
|
U.S.
Patent Application No. 10/835,662, “Compositions and methods for enhancing
the immunogenicity of antigens,” Filed April 30, 2004, Paterson et al..
U.S. Patent Application No. 20060135457 Methods for constructing
antibiotic resistance free bacterial vaccines.Filed
June 22,
2006.
U.S.
Patent Application No. 20060104991 Methods for constructing antibiotic
resistance free bacterial vaccines Filed May 18, 2006.
|
|
|
|
U.S.
Patent Application No. 10/949,667, “Methods and compositions for
immunotherapy of cancer,” Filed September 24, 2004, Paterson et
al.
|
|
|
|
U.S.
Patent Application No. 11/223,945, “Listeria-based and LLO-based
vaccines,” Filed September 13, 2005, Paterson et al.
U.S.
Patent Application No. 11/727,889, “Compositions and Methods Comprising a
MAGE-B Antigen” Gravekamp, Paterson, Maciag. Filed March 28,
2007.
|
|
U.S.
Patent Application No. 11/798,177 “Compositions and Methods Comprising
KLK3 or SOLH1 Antigens” Filed May, 10,
2007.
|
|
U.S.
Patent Application No. 11/376,564, “Compositions and methods for enhancing
the immunogenicity of antigens,” Filed March 16, 2006, Paterson et
al.
|
|
|
|
U.S.
Patent Application No. 11/376,572, “Compositions and methods for enhancing
the immunogenicity of antigens,” Filed March 16, 2006, Paterson et
al.
|
|
|
|
U.S.
Patent Application No. 11/373,528, “Compositions and methods for Enhancing
Immunogenicity of Antigens, “Filed March 13, 2006,
|
|
|
|
U.S.
Patent Application No. 11/415,271, Methods and Compositions for Treatment
of Non-Hodgkin’s Lymphoma, “Filed May 2, 2006, Protein Vaccine
of.
|
|
|
|
U.S.
Patent Application No. 10/541,614 for “Enhancing the Immunogenicity of
Bioengineered Listeria Monocytogenes by Passing through Live Animal
Hosts.” Filed January 8, 2004.
|
|
U.S.
Patent Application No. 11/203,408 for “Methods for Constructing Anitbiotic
Resistance Free Vaccines.” Filed August 15, 2005.
|
|
|
|
U.S.
Patent Application No. 11/203,415 for “Methods for Constructing Anitbiotic
Resistance Free Vaccines.” Filed August 15, 2005.
U.S.
Patent Application No. 20070003567 for “Compositions and methods for
Enhancing Immunogenicity of Antigens”. Filed January 4, 2007.
U.S.
Patent Application No. 20060269561 for “Compositions and Methods For
Treatment of Non-Hodgkins Lymphoma”. Filed November 30, 2006.
U.S.
Patent Application No. 20060210540 for “Compositions and Methods for
enhancing the immunogenicity of Antigens” Filed September 21, 2006. Use of
Protein Vaccine using Act A or LLO terminal fragments.
U.S.
Patent Application No. 20050118184 for, “Compositions and methods for
Enhancing Immunogenicity of Antigens” Filed June 2,
2005.
|
|
|
International
|
Patents
|
|
|
|
Australian
Patent No. 730296, Patent Application No. 14108/99 for “Bacterial Vaccines
Comprising Auxotrophic, Attenuated Strains of Listeria Expressing
Heterologous Antigens.” Issued November 13, 1998. Frankel, et al. Expires
November 13, 2018.
|
|
|
|
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. Issued January 9,
2007.
|
|
|
|
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. Issued August 10, 2007
|
|
|
|
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.
|
|
|
|
Canadian
Patent Application No. 2,404,164 for “Compositions and Methods for
Enhancing Immunogenicity of Antigens.” Filed March 26, 2001. Paterson, et
al.
|
|
|
|
European
Patent Application No. 01928324.1 for “Compositions and Methods for
Enhancing Immunogenicity of Antigens.” Filed March 26, 2001. Paterson, et
al.
|
|
|
|
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.
|
|
|
|
Israel
Patent Application No. 151942 for “Compositions and Methods for Enhancing
Immunogenicity of Antigens.” Filed March 26, 2001, Paterson, et
al.
|
|
|
|
Japanese
Patent Application No. 2001-570290 for “Compositions and Methods for
Enhancing Immunogenicity of Antigens.” Filed March 26, 2001, Paterson, et
al.
|
|
|
|
PCT
International Patent Application No. PCT/US06/44681 for “Methods For
Producing, Growing, And Preserving Listeria
Vaccine Vectors.” Filed November 16, 2006, Rothman, et
al.
|
|
|
|
Canadian
Patent Application No. 2,581,331 for “Listeria-Based and LLO-Based
Vaccines.” Filed September 14, 2005. |
|
European
Patent Application No. 5811815.9 for “Listeria-Based and LLO-Based
Vaccines.” Filed September 14, 2005.
|
|
|
|
Japanese
Patent Application No. 2007-533537 for “Listeria-Based and LLO-Based
Vaccines.” Filed September 14, 2005.
|
|
|
|
PCT
International Patent Application No. PCT/US07/06292 “Compositions and
Methods for Enhancing the Immunogenicity of Antigens.” Filed March 13,
2007
|
|
|
|
Australian
Patent Application No. 20044204751 for “Enhancing the Immunogenicity of
Bioengineered Listeria Monocytogenes by Passing through Live Animal
Hosts.” Filed January 8, 2004.
|
|
|
|
Canadian
Patent Application No. 2512812 for “Enhancing the Immunogenicity of
Bioengineered Listeria Monocytogenes by Passing through Live Animal
Hosts.” Filed January 8, 2004
|
|
|
|
European
Patent Application No. 1594560 for “Enhancing the Immunogenicity of
Bioengineered Listeria Monocytogenes by Passing through Live Animal
Hosts.” Filed January 8, 2004
|
|
|
|
Hong
Kong Patent Application No. 6104227.1 for “Enhancing the Immunogenicity of
Bioengineered Listeria Monocytogenes by Passing through Live Animal
Hosts.” Filed January 8, 2004
|
|
|
|
Israeli
Patent Application No. 169553 for “Enhancing the Immunogenicity of
Bioengineered Listeria Monocytogenes by Passing through Live Animal
Hosts.” Filed January 8, 2004
|
|
|
|
Japanese
Patent Application No. 2006-500840 for “Enhancing the Immunogenicity of
Bioengineered Listeria Monocytogenes by Passing through Live Animal
Hosts.” Filed January 8, 2004
|
|
|
|
Australian
Patent No. 2005271247 for “Antibiotic Resistance Free DNA Vaccines.” Filed
August 15, 2005
|
|
|
|
Canadian
Patent Application No. 2577270 for “Antibiotic Resistance Free DNA
Vaccines.” Filed August 15, 2005
|
|
|
|
European
Patent Application No. 5810446.4 for “Antibiotic Resistance Free DNA
Vaccines.” Filed August 15, 2005
|
|
|
|
Japanese
Patent Application No. 2007-525862 for “Antibiotic Resistance Free DNA
Vaccines.” Filed August 15, 2005
|
|
|
|
Australian
Patent Application No. 2005271246 for “Methods for Constructing Antibiotic
Resistance Free Vaccines.” Filed August 15, 2005
|
|
|
|
Canadian
Patent Application No. 2,577,306 for “Methods for Constructing Antibiotic
Resistance Free Vaccines.” Filed August 15, 2005
|
|
|
|
European
Patent Application No. EP05808671.1 for “Methods for Constructing
Antibiotic Resistance Free Vaccines.” Filed August 15,
2005
|
|
|
|
Japanese
Patent Application No. 2007-525867 for “Methods for Constructing
Antibiotic Resistance Free Vaccines.” Filed August 15,
2005
|
|
|
|
PCT
International Patent Application.No. PCT/US06/43987 “LLO-Encoding
DNA/Nucleic Acid Vaccines and Methods Comprising Same.” Filed November 13,
2006
|
United
States
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 an option to license from Penn any new future
invention conceived by either Dr. Yvonne Paterson or by Dr. Fred Frankel in
the
vaccine area until June 17, 2009. We intend to expand our intellectual property
base by exercising this option and gaining access to 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. See “Item 1. Description
of Business -Partnerships and agreements -Penn.”
Our
approach to the 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 earliest
known and dominant patent position in the United States 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 in the field of
recombinant Listeria
monocytogenes.
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.
Cerus’ allegations in the Opposition are 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. This patent does not affect the manner in which Advaxis makes or uses
it’s vaccine products but would preclude Cerus from using certain methodologies
they require.
On
November 29, 2006, following oral proceedings, the Opposition Division of the
European Patent Office determined that the claims of the patent as granted
should be revoked due to lack of inventive step under European Patent Office
rules based on certain prior art publications. This decision has no material
effect upon our ability to conduct business as currently
contemplated.
As
of
November 20, 2007, Cerus spun its immunotherapy/listeria development effort
off
into a separate, privately financed company.
We
have
reviewed the formal written decision and filed an appeal on May 29, 2007. As
of
December 31, 2007 no ruling has been made. There is no assurance that we will
be
successful. If such ruling is upheld on appeal, our patent position in Europe
may be eroded. The likely result of this decision will be increased competition
for us in the European market for recombinant live Listeria
based
vaccines for tumor specific antigens. Regardless of the outcome, we believe
that
our freedom to operate in Europe, or any other territory, for recombinant live
Listeria
based
vaccine for tumor specific antigen products will not be diminished.
Lovaxin
has been registered as a trademark in Israel, Australia, South Korea, Hong
Kong
and Taiwan.
The
U.S.
trademark application for Lovaxin has been allowed by the United States Patent
and Trademark Office. Trademark applications in China and in the European Union
for Lovaxin are also pending. The Chinese application was recently published
for
opposition, and the European Union application has passed through the opposition
stage.
The
Canadian trademark application for Lovaxin has been opposed by Aventis Pharma
S.A. That opposition proceeding is pending.
In
2006,
Nycomed Pharma, of Sweden, claimed owner of the mark Levaxin, filed an
opposition to our CTM (European Union) application to register
Lovaxin. The opposition was refused solely on procedural
grounds. If our CTM application is ultimately granted,
Nycomed Pharma may file to cancel such registration of Lovaxin.
Nycomed Pharma has also demanded that we cease to use Lovaxin in
Sweden.
The
U.S.
trademark applications for Advaxis and for Advaxis and design, Serial Nos.
78/252527 and 78/252586, have been withdrawn. Oppositions to those applications
have been terminated in favor of Aventis, Inc.
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 typically
receive governmental and institutional approval. In the US Federal approval
is
obtained by submitting 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, and how 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 (Ethics Committee).
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 is convened by
the
institution where the protocol will be conducted and its role is to protect
the
rights of the participants in the clinical studies. It must approve the
protocols to be used, and then oversees the conduct of the study, including:
the
communications which the company or contract research organization conducting
the study at that specific site 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 prior to Federal approval
are
generally done in three stages known as Phase I through Phase III testing.
The
names of the phases are derived from the CFR 21 that regulates 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. Cancer drugs,
however, are a special case, as they are not given to normal healthy people.
Typically, cancer therapeutics are initially tested on very late stage cancer
patients.
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 three 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. It is during phase II that everything that goes into a phase III
test is determined.
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 six
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”) or Biologics License Application (BLA).
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 or BLA
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
preclinical and clinical studies, information about the drug’s composition, and
the sponsor’s plans for producing, packaging, labeling and testing 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 Good Manufacturing Practices (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 and Phase II 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., Biomira, Inc., Cellgenesis Inc., Biovest International, Cell
Genesys, Inc., Cerus Corporation, Dendreon Corporation, Epimmune, Inc., Genzyme
Corp., Progenics Pharmaceuticals, Inc., and Vical Incorporated 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 preclinical 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 “Item 1. Description
of Business - Research and Development Programs” and “Item 1. Description of
Business - Competition”.
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, we have earlier priority filing dates of certain applications and a
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 in the field of
recombinant Listeria
monocytogenes.
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.
Cerus’ allegations in the Opposition are 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.
On
November 29, 2006, following oral proceedings, the Opposition Division of the
European Patent Office determined that the claims of the patent as granted
should be revoked due to lack of inventive step under European Patent Office
rules based on certain prior art publications. This decision has no material
effect upon our ability to conduct business as currently contemplated, as this
patent does not affect the manner in which Advaxis makes or uses it’s vaccine
products but would preclude Cerus from using certain methodologies they
require.
We
have
reviewed the formal written decision and filed an appeal on May 29, 2007. As
of
December 31, 2007 no ruling has been made. There is no assurance that we will
be
successful. If such ruling is upheld on appeal, our patent position in Europe
may be eroded. The likely result of this decision will be increased competition
for us in the European market for recombinant live Listeria
based
vaccines for tumor specific antigens. Regardless of the outcome, we believe
that
our freedom to operate in Europe, or any other territory, for recombinant live
Listeria
based
vaccine for tumor specific antigen 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 it’s publicly filed documents.
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.;
Bennett Lorber, M.D. and David Weiner, Ph.D.
Dr.
Yvonne Paterson.
For a
description of our relationship with Dr. Paterson, please see
above.
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.
Lorber 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.
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
October 31, 2007, we employ nine employees, all of whom are on a full-time
basis. Of these nine employees eight employees hold the following degrees:
1
MD/PhD, 4 PhD’s 1 MS & 2 BS and five serve in the research and one serves in
the clinical development area and three serve in the general and administration
area.
Our
Chairman and Chief Executive Officer, Mr. Tom Moore joined our company on
December 15, 2006. Mr. Roni Appel previously served as our President and Chief
Executive Officer during the fiscal year 2006 resigned from this position on
December 15, 2006. Mr. Appel still serves as a board of director member and
remains as consultant to the company until December 15, 2007.
Dr. John
Rothman our Vice President of Clinical and Officer joined the company on March
7, 2005. Fred Cobb our Vice President, Finance and Principal Financial Officer
joined the company on February 20, 2006. Doctor Vafa Shahabi our Director of
Research and Development joined the company on March 1, 2005. Two of our Senior
Scientists joined the company from Doctor Paterson’s lab at Penn.
We
anticipate increasing the number of employees in the clinical area and the
research and development area to support clinical requirements, and in the
general and administrative and business development areas over the next two
years.
Compensation
of Officers and Directors
The
aggregate compensation paid to our directors and executive officers, including
stock based compensation option value and other compensation for the twelve
months ended October 31, 2005, 2006 and 2007 was approximately $715,583,
$970,669 and $2,071,941, respectively. This amount has no amounts set aside
or
accrued to provide pension, severance, retirement, or similar benefits or
expenses, and 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. With
the
exception of Mr. Berman who receives $2,000 a month in company stock at a set
price of $0.50 per share, none of our directors so far has received any
compensation for his services as a director other than stock options and
reimbursement of expenses.
Compensation
Committee Interlocks And Insider Participation
There
were no interlocking relationships between us and other entities that might
affect the determination of the compensation of its directors and executive
officers.
RISK
FACTORS
Risks
Specific to Us
We
are a development stage company.
We
are an
early stage 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 five to ten or more years. At October 31, 2007,
we
had an accumulated deficit of $12,072,742 and stockholders’ equity of
$4,267,979. We expect to spend substantial additional sums on the continued
research and development of proprietary products and technologies with no
certainty that our products will become commercially viable or 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 private placements including
our
October 2007 offering of shares of our common stock and warrants, will be
sufficient to finance our currently-planned operations through the third
fiscal Quarter 2008, they will not be sufficient to meet the full
fiscal year 2008 nor, our longer-term cash requirements or cash requirements
for
the commercialization of certain products currently in development. We will
be
required to sell additional equity or debt securities or enter into other
financial arrangements, including relationships with corporate and other
partners, to raise substantial additional capital during the five-to ten-year
period of product development and the 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 our
clinical trial for Lovaxin C. See “Management’s Discussion and Analysis and
Results 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 our next Lovaxin
C
clinical trial.
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. Immunotherapy
and
vaccine products that we may develop are not likely to be commercially available
until five to ten or more years. 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 “Item 1.
Description of Business - Research and Development Program.”.
Our
research and development expenses are subject to uncertainty.
Factors
affecting our research and development (R&D) expenses include, but are not
limited to:
|
·
|
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
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 manage and execute our next trial. We are not certain that we will
successfully conclude our recruitment for the completion of our next clinical
trials. Delay in concluding recruitment and such agreements would delay the
initiation of the Phase II 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 our
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:
|
·
|
Preclinical
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 preclinical
or
clinical data, or unexpected safety or manufacturing
issues.
|
|
·
|
Manufacturing
costs, formulation issues, 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 preclinical 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 preclinical 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, or 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, or NDA, for a
drug
product or a “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.
In
2007,
we completed a phase I/II trial of Lovaxin C that demonstrated both safe doses
and a dosage ceiling in end-state cervical cancer patients. Based in part upon
this work, we intend to open a U.S. IND in early 2008; however no assurances
can
be provided that such an IND will be granted by the FDA.
We
can provide no assurance that our products will obtain regulatory approval
or
that the results of clinical studies will be favorable.
We
received in February 2006 permission from the appropriate governmental agencies
in Israel, Mexico and Serbia to conduct in those countries Phase I clinical
testing of Lovaxin
C, our
Listeria-based cancer vaccine that targets cervical cancer in women. The study
was completed in the fourth fiscal quarter of 2007. However, the testing,
marketing and manufacturing of any product for sale or distribution in the
United States will require filing of an IND with and the approval of the FDA.
We
cannot predict with any certainty the amount of time necessary to obtain such
FDA approval or further approval, if any, from Israel, Mexico or Serbia 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 that perform roles similar to that
of
the FDA, uncertainties similar to those stated above will also exist. See “Item
1. Description of 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 twelve patents that have been issued
and
thirty-nine patents are pending 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 cases prevent us
from
further developing our technology due to third party patent blocking
rights.
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, we have earlier priority filing dates of certain applications and a
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 (with whom Cerus’ consulting scientist is affiliated) or any
other third party owns any published Listeria
patents
or has any issued patent claims that might, if we fail our Cerus appeal,
materially negatively affect our freedom to operate our business as currently
contemplated in the field of recombinant Listeria
monocytogenes.
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. Cerus’ allegations in the Opposition are that the EP 835 Patent, which
claims a vaccine for inducing a tumor specific antigen with a recombinant live
Listeria,
is
deficient because of insufficient disclosure in the specifications of the
granted claims, the inclusion of additional subject matter in the granted
claims, and a lack of inventive steps of the granted claims of the EP 835
Patent. We appealed this decision.
On
November 29, 2006, following oral proceedings, the Opposition Division of the
European Patent Office determined that the claims of the patent as granted
should be revoked due to lack of inventive step under European Patent Office
rules based on certain prior art publications. This decision has no material
effect upon our ability to conduct business as currently
contemplated.
We
have
reviewed the formal written decision and filed an appeal on May 29, 2007. As
of
December 31, 2007 no ruling has been made. There is no assurance that we will
be
successful. If such ruling is upheld on appeal, our patent position in Europe
may be eroded. The likely result of this decision will be increased competition
for us in the European market for recombinant live Listeria
based
vaccines for tumor specific antigens. Regardless of the outcome, we believe
that
our freedom to operate in Europe, or any other territory, for recombinant live
Listeria
based
vaccine for tumor specific antigen products will not be diminished.
As
of
November 20, 2007, Cerus spun it immunotherapy development efforts off into
a
privately financed company.
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 “Item 1. Description of 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, 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 us from Penn. GSK, Penn and we expect that the issue will be resolved through
a correction of inventorship to add certain GSK inventors, where necessary
and
appropriate, an assignment of GSK’s possible rights under these patent rights to
Penn, and 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. See “Item 1. Description of 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 “Item 1.
Description of Business -Partnerships and Agreements - Penn.”
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 immunotherapies and 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 proves 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 have insurance covering our clinical trial sites. We do not have
product liability insurance because we do not have products on the
market. 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 nine employees. We intend to expand our operations
and staff as needed. Our new employees may include 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 our management needs. See “Item 6. Management’s
Discussion and Analysis or Plan of Operations,” “Item 1. Description of Business
- Strategy,” and “Item 1. Description of 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 executives, 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 “Item 10.
Executive Compensation—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, as well as Cell Genesys
Inc., Antigenics, Inc., Avi BioPharma, Inc., Biomira, Inc., Biovest
International, Dendreon Corporation, Epimmune, Inc., Genzyme Corp., Progenics
Pharmaceuticals, Inc., Vical Incorporated, Xcyte Therapies, Inc. and other
firms
with more resources than we have are currently developing or testing immune
therapeutic agents in the same indications we are targeting.
We
expect
that our products under development and in clinical trials will address major
markets within the cancer sector with a superior technology that is both safer
and more effective than our competitors. 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 preclinical testing, clinical trials and
approval processes and supply commercial quantities to market is 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 “Item 1.
Description of Business - Research and Development Programs” and “Item 1.
Description of 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 net loss 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 or quoted on the Nasdaq Stock Market,
American Stock Exchange 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.
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 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.
A
limited public trading market may cause volatility in the price of our common
stock.
Our
common stock began trading on the OTC:BB on July 28, 2005 and is quoted under
the symbol ADXS.OB. The quotation of our common stock on the OTC: BB 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. Our stock is
thinly traded due to the limited number of shares available for trading on
the
market thus causing large swings in price.
There
is no assurance of an established public trading market.
A
regular
trading market for our common stock may not be sustained in the future. The
effect on the OTC:BB of these rule changes and other proposed changes cannot
be
determined at this time. The OTC:BB 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:BB 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:BB 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.
|
Our
common stock is quoted on the OTC:BB. 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
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.
If
we fail to remain current on our reporting requirements, we could be removed
from the OTC:BB, which would limit the ability of broker-dealers to sell our
securities and the ability of stockholders to sell their securities in the
secondary market.
Companies
trading on the OTC:BB, such as us, must be reporting issuers under Section
12 of
the Exchange Act, as amended, and must be current in their reports under Section
13, in order to maintain price quotation privileges on the OTC:BB. If we fail
to
remain current on our reporting requirements, we could be removed from the
OTC:BB. As a result, the market liquidity for our securities could be severely
adversely affected by limiting the ability of broker-dealers to sell our
securities and the ability of stockholders to sell their securities in the
secondary market.
We
may be exposed to potential risks resulting from new requirements under
Section 404 of the Sarbanes-Oxley Act of 2002.
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we will be required,
beginning with our year ending October 31, 2008, to include in our annual
report our assessment of the effectiveness of our internal control over
financial reporting for fiscal years ending on or after December 15, 2007.
Furthermore, our independent registered public accounting firm will be required
to attest to whether our assessment of the effectiveness of our internal control
over financial reporting is fairly stated in all material respects and
separately report on whether it believes we have maintained, in all material
respects, effective internal control over financial reporting for fiscal years
ending on or after December 15, 2008. We have not yet completed our assessment
of the effectiveness of our internal control over financial reporting. We expect
to incur additional expenses and diversion of management’s time as a result of
performing the system and process evaluation, testing and remediation required
in order to comply with the management certification and auditor attestation
requirements.
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, as of October 31, 2007, 14.7% 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 matters
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.
We
expect
to continue to incur product development and selling, general and administrative
costs, and to satisfy our funding requirements, we will need to sell additional
equity securities, which may be subject to 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, 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 October 31,
2007, we had 107,957,977 shares of our common stock issued and outstanding,
excluding shares issuable upon exercise of our outstanding warrants and options.
As of October 31, 2007, we had outstanding 8,512,841 options to purchase shares
of our common stock at a weighted exercise price of $0.22 per share and
outstanding warrants to purchase 84,380,437 shares of our common stock, with
exercise prices ranging from $0.195 to $0.274 per share along with 3,333,333
warrants purchased for $0.149 with an exercise price of $0.001 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,
5,600,000 shares of common stock are reserved for issuance under the plan.
In
addition, we have granted 1,001,399 options as non-plan options. 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.
Sales
of
a significant number of shares of our common stock in the public market could
harm the market price of our common stock. The Company’s most recent prospectus
covered 109,482,917 issued and outstanding shares of our common stock, which
represents approximately 101.4% of our outstanding shares of our common stock
as
of October 17, 2007. As additional shares of our common stock become available
for resale in the public market pursuant to this offering, and otherwise, the
supply of our common stock will increase, which could decrease its price. Some
or all of the shares of common stock may be offered from time to time in the
open market pursuant to Rule 144, and these sales may have a depressive effect
on the market for our shares of common stock. In general, a person who has
held
restricted shares for a period of one year may, upon filing with the SEC a
notification on Form 144, sell into the market common stock in an amount equal
to the greater of 1% of the outstanding shares or the average weekly number
of
shares sold in the last four weeks prior to such sale. Such sales may be
repeated once each three months, and any of the restricted shares may be sold
by
a non-affiliate after they have been held two years.
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
Certification of Incorporation provide for the authorization of 5,000,000 shares
of “blank check” preferred stock. Pursuant to our Certificate 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. Such issuances can dilute the tangible
net
book value of shares of our common stock.
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.
Our
corporate offices are currently located at a biotech industrial park located
at
675 Rt. 1, Suite B113, North Brunswick, NJ 08902. We have entered into a lease
effective June 1, 2005: and certain lease amendments as of November 15, 2005
and
a second Lease Amendment as of March 15, 2006 and a third lease amendment as
of
October 1, 2006 with the New Jersey Economic Development Authority (NJEDA)
which
will continue on a monthly basis at for two research and development Laboratory
units (total of 1,600 s.f.) and two offices (total of 250 s.f.). Our facility
will be sufficient for our near term purposes and the facility offers additional
space for our foreseeable future. Our monthly payment on this facility is
approximately $6,000 per month. The term of the lease expires on May 31, 2008
and upon mutual consent, this lease may be renewed for one year. NJEDA billed
the company for a one time Milestone Rent based on raising greater than $1MM
but
less than $5MM equity raise. The company paid $2,500 for this milestone for
the
conversion of the debenture into the equity. In the event that our facility
should, for any reason, become unavailable, we believe that alternative
facilities are available at competitive rates.
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 earliest
known and dominant patent position in the United States 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 in the field of
recombinant Listeria
monocytogenes.
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.
Cerus’ allegations in the Opposition are 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. This patent does not affect the manner in which Advaxis makes or uses
it’s vaccine products but would preclude Cerus from using certain metholodies
they require.
On
November 29, 2006, following oral proceedings, the Opposition Division of the
European Patent Office determined that the claims of the patent as granted
should be revoked due to lack of inventive step under European Patent Office
rules based on certain prior art publications. This decision has no material
effect upon our ability to conduct business as currently
contemplated.
As
of
November 20, 2007, Cerus spun its immunotherapy/listeria development effort
off
into a separate, privately financed company.
We
have
reviewed the formal written decision and filed an appeal on May 29, 2007. As
of
December 31, 2007 no ruling has been made. There is no assurance that we will
be
successful. If such ruling is upheld on appeal, our patent position in Europe
may be eroded. The likely result of this decision will be increased competition
for us in the European market for recombinant live Listeria
based
vaccines for tumor specific antigens. Regardless of the outcome, we believe
that
our freedom to operate in Europe, or any other territory, for recombinant live
Listeria
based
vaccine for tumor specific antigen products will not be diminished.
As
of the
date hereof, 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.
NONE
PART
II
Since
July 28, 2005, our Common Stock has quoted on the 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 OTC:BB. As of December 31,
2007
there were approximately 132 stockholders of record and the closing sale price
of Advaxis common stock $0.17 per share as reported by the OTC:BB.
|
|
Fiscal
2007
|
|
Fiscal
2006
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
First
Quarter November 1-January 31
|
|
$
|
0.21
|
|
$
|
0.14
|
|
$
|
0.27
|
|
$
|
0.16
|
|
Second
Quarter February 1- April 30
|
|
$
|
0.54
|
|
$
|
0.15
|
|
$
|
0.37
|
|
$
|
0.21
|
|
Third
Quarter May 1 -July 31
|
|
$
|
0.36
|
|
$
|
0.24
|
|
$
|
0.30
|
|
$
|
0.17
|
|
Fourth
Quarter August 1, - October 31
|
|
$
|
0.27
|
|
$
|
0.10
|
|
$
|
0.25
|
|
$
|
0.13
|
|
Item
5(a)
Equity
Compensation Plan (1)
Plan
Category
|
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
|
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|
Equity
compensation plans approved by security holders
|
|
|
7,511,442(2
|
)
|
$
|
0.22
|
|
|
470,083
|
|
Equity
compensation plans not approved by security holders
|
|
|
1,001,399(3
|
)
|
$
|
0.143
|
|
|
-
|
|
Total
|
|
|
8,512,841
|
|
|
|
|
|
470,083
|
|
(1) As
of
October 31, 2007
(2) The
Company’s 2004 and 2005 Stock Option Plan
(3) Options
granted outside of plans
Item
6: Management’s Discussion and Analysis or Plan of
Operation
This
Management’s Discussion and Analysis or Plan of Operation and other portions of
this Annual Report contain forward-looking information that involves 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 Annual
Report under the heading “Risk Factors”. This Management’s Discussion and
Analysis or Plan of Operation 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 enable 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 four lead compounds and completed
a
Phase I/II clinical study of Lovaxin C, a potential cervical cancer vaccine,
in
the fourth fiscal quarter 2007. See “Item 1. Description of 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 on January 1, 1997
and reinstated on June 18, 1998 under the name Great Expectations and
Associates, Inc. In 1999, we became a reporting company under the Exchange
Act,
as amended. We were a publicly-traded “shell” company without any business until
November 12, 2004, when we acquired Advaxis through the Share Exchange, as
a
result of which Advaxis become our wholly-owned subsidiary and our sole
operating company. We then changed our name to Advaxis. On March 29, 2006,
we
merged into Advaxis (the subsidiary) and thereby changed our state of
incorporation from the state of Colorado to the state of Delaware. 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 (the “Three Tranche
Private Placement”) we effected a private placement to “accredited investors”,
as defined in Rule 501(a) of Regulation D under the Securities Act of an
aggregate of 11,334,495 shares of our common stock and warrants to purchase
an
aggregate of 11,334,495 additional shares for net proceeds of approximately
$3,253,000.
On
November 12, 2004, $595,000 of our promissory notes plus accrued interest was
converted 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 effected a private placement to an accredited investor
for
approximately $1,100,000 of 3,832,753 shares of our common stock and warrants
to
purchase 3,832,753 additional shares.
On
February 2, 2006 we sold to Cornell Capital Partners (“Cornell”), $3,000,000
principal amount of our Secured Convertible Debentures due February 1, 2009
($1,500,000 on February 2, 2006 and $1,500,000 on March 8, 2006) bearing
interest at 6% per annum payable at maturity and issued it warrants to purchase
4,500,000 shares or our common stock. The net proceeds were approximately
$2,740,000.
A
substantial part of our efforts in 2007 consisted of obtaining additional
financing in order to continue our research and development efforts. This
included taking the following actions:
On
August
24, 2007, we issued and sold an aggregate of $600,000 principal amount
promissory notes bearing interest at a rate of 12% per annum and warrants to
purchase an aggregate of 150,000 shares of our common stock to three investors
including Thomas Moore, our Chief Executive Officer. Mr. Moore invested $400,000
and received warrants for the purchase of 100,000 shares of Common Stock. The
promissory note and accrued but unpaid interest thereon are convertible at
the
option of the holder into shares of our common stock upon the closing by the
Company of a sale of its equity securities aggregating $3,000,000 or more in
gross proceeds to the Company at a conversion rate which shall be the greater
of
a price at which such equity securities were sold or the price per share of
the
last reported trade of our common stock on the market on which the common stock
is then listed, as quoted by Bloomberg LP. At any time prior to conversion,
we
have the right to prepay the promissory notes and accrued but unpaid interest
thereon.
On
October 17, 2007, we effected a private placement to accredited investors for
approximately 49,228,334 shares of common stock and warrants to purchase
36,921,250 additional shares. Concurrent with the closing of the private
placement, we sold for $1,996,667 to CAMOFI Master LDC and CAMHZN Master LDC
an
aggregate of (i) 10,000,000 shares of Common Stock, (ii) 10,000,000 $0.20
Warrants, and (iii) 5-year warrants to purchase an additional 3,333,333 shares
of Common Stock at a purchase price of $0.001per share. Both warrants provide
that they may not be exercised if, following the exercise, the holder will
be
deemed to be the beneficial owner of more than 9.99% of Registrant’s outstanding
shares of Common Stock.
Pursuant
to an advisory agreement dated August 1, 2007 with Centrecourt, Centrecourt
provided various strategic advisory services to the Company in consideration
thereof. The Company paid Centrecourt $328,000 in cash and issued 2,483,333
$0.20 Warrants to Centrecourt, which Centrecourt assigned to the two
affiliates.
At
the
closing of the private placement, we exercised our right under an agreement
dated August 23, 2007 with YA Global Investments, L.P. f/k/a Cornell Capital
Partners, L.P. (“Yorkville”), to redeem the outstanding $1,700,000 principal
amount of our Secured Convertible Debentures due February 1, 2009 owned by
Yorkville, and to acquire from Yorkville warrants expiring February 1, 2011
to
purchase an aggregate of 4,500,000 shares of Common Stock. We paid an aggregate
of (i) $2,289,999 to redeem the debentures at the principal amount plus a
20% premium and accrued and unpaid interest, and (ii) $600,000 to
repurchase the warrants.
Plan
of Operations
We
intend
to use a significant portion of the proceeds of the sales described above to
conduct a Phase II clinical trial in cervical intraepithelial neoplasia (CIN)
using Lovaxin C, one of our lead product candidates in development using our
Listeria
System.
We also have used the funds to further expand our clinical, research and
development teams to further develop the product candidates and to expand our
manufacturing capabilities and 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 described under “Item 1. Description of Business -
Strategy” and as follows:
|
·
|
Present
our completed Phase I/II clinical study of Lovaxin C which document
the
practicability of using this agent safely in the therapeutic treatment
of
cervical cancer;
|
|
·
|
Initiate
our Investigational New Drug Application (IND) with the FDA for our
Phase
II clinical study of Lovaxin C in the therapeutic treatment of
CIN;
|
|
·
|
Initiate
our Phase II clinical study of Lovaxin C in the therapeutic treatment
of
cervical intraepithelial neoplasia;
|
|
·
|
Continue
the development work necessary to bring Lovaxin P in the therapeutic
treatment of prostate cancer into clinical trials, and initiate that
trial;
|
|
·
|
Continue
the development work necessary to bring Lovaxin B in the therapeutic
treatment of breast cancer into clinical trials, and initiate that
trial;
|
|
·
|
Continue
the pre-clinical development of other product candidates, as well
as
continue research to expand our technology platform;
and
|
|
·
|
Initiate
strategic and development collaborations with biotechnology and
pharmaceutical companies.
|
The
annual cost to maintain our current staff, overhead and preclinical expense
is
estimated to be in the range of $2.5 to $3.0 million in fiscal year 2008. We
estimate the cost of our current phase II clinical study in therapeutic
treatment of CIN to be in the range of $3.0 to $4.0 million for the 12 to 24
month period. Therefore we anticipate our current cash will be adequate to
meet
our needs through the third fiscal quarter but not over the entire 2008 fiscal
year. Our phase II Lovaxin C clinical study is estimated to commence in mid
fiscal 2008. We hope to commence the work in prostate and breast cancer in
fiscal 2009. The timing and estimated costs of these projects are difficult
to
predict. In fiscal 2008 our anticipated needs for equipment, personnel and
space
should not be significant. We do plan on adding a few key employees in
fiscal 2008 to address our growing clinical, regulatory and reporting
needs.
Overall
given the clinical stage of our business our financial needs are driven in
large
part by the outcomes of clinical trials and preclinical findings. The cost
of
these clinical trial projects is significant. As a result we will be required
to raise additional debt or equity in the near future. If the clinical
outcomes are successful and the value of the Company increases it is more than
likely we will attempt to accelerate the timing of the required financing and,
conversely if the trial or trials aren’t successful we may slow our spending and
the timing of additional financing will be deferred. While we will attempt
to
attract a corporate partnership and grants we have not assumed the receipt
of
any additional financial resources in our cash planning.
For
more
information about Penn and commitments see “Item 1. Description of Business -
Partnerships and agreements - University of Pennsylvania.”
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 12 months ended October 31, 2008.
Revenues.
We do
not anticipate that we will record any material revenues during at least the
twelve months ending October 31, 2008. When we recognize revenues, we anticipate
that they will be principally grants and licensing fees.
Expenses.
We
recorded operating expenses for the years ended October 31, 2005, 2006 and
2007
of $2,395,328, $3,481,226 and $4,757,190, respectively.
The
preparation of financial statements in accordance with GAAP involves the use
of
estimates and assumptions that affect the recorded amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results may differ
substantially from these estimates. Significant estimates include the fair
value
and recoverability of the carrying value of intangible assets (trade marks,
patents and licenses) the fair value of options, the fair value of embedded
conversion features, warrants, recognition of on-going clinical trial, 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 estimates
and judgment. We amortize trademark, license 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, licenses 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.
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 an arrangement exists, services
have been rendered, the contract price is fixed or determinable, and
collectability 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
straight-line 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 years ended October 31, 2005, 2006 and 2007, we recorded research and
development expenses of $1,175,536, $1,404,164 and $2,128,096, respectively.
Such expenses were principally comprised of manufacturing scale up and process
development, license fees, sponsored research, clinical trial and consulting
expenses. We recognize research and development expenses as
incurred.
Commencing
with the year ending October 31, 2008, 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 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 uncertainties of those projects are as follows:
Lovaxin
C - Phase I/II & II trial Summary Information (Cervical Cancer & CIN
)
|
· |
Cost
incurred to date: approximately
$2,350,000
|
|
· |
Estimated
future costs: $150,000 Phase I and $3,000,000 - $4,000,000 Phase
II
|
|
· |
Anticipated
completion date of Phase II: Fiscal year
2009
|
|
· |
the
FDA (or relevant foreign regulatory authority) may not approve the
study
|
|
· |
One
or more serious adverse events in patients enrolled in the
trial
|
|
· |
difficulty
in recruiting patients
|
|
· |
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
P - Pre Clinical and Phase I Trial Summary Information (Prostate
Cancer)
|
·
|
Cost
incurred to date: $150,000
|
|
·
|
Estimated
future costs: $1,500,000
|
|
·
|
Anticipated
completion dates: fourth quarter of fiscal 2009 or
beyond
|
|
·
|
Risks
and uncertainties:
|
|
· |
Obtaining
favorable animal data
|
|
· |
Proving
low toxicity in animals
|
|
· |
Manufacturing
scale up to GMP level
|
|
· |
FDA
(or foreign regulatory authority) may not approve the
study
|
|
· |
The
occurrence of a severe or life threatening adverse event in a
patient
|
Lovaxin
B - Phase I trial Summary Information (Breast Cancer)
|
·
|
Cost
incurred to date: $450,000
|
|
·
|
Estimated
future costs: $2,000,000
|
|
·
|
Anticipate
completion dates: Fiscal 2010 or
beyond
|
|
·
|
Risks
and uncertainties: See Lovaxin in P (above)
|
|
·
|
Commencement
of material cash flows:
|
|
· |
Unknown
at this stage, dependent upon a licensing deal or to a marketing
collaboration subject to regulatory approval to market and sell the
product.
|
General
and Administrative Expenses.
During
the years ended October 31, 2005, 2006 and 2007, we recorded general and
administrative expenses of $1,219,792, $2,077,062 and $2,629,094, respectively.
General and administrative costs primarily include the salaries and expenses
for
executive, consultants, 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. For the year ending
October 31, 2008 and beyond, we anticipate that our general and administrative
costs will increase significantly due to the increased compliance requirements,
including, without limitation, legal, accounting, and insurance expenses, to
comply with periodic reporting and other regulations applicable to public
companies.
Other
Income (Expense).
During
the years ended October 31, 2005, 2006 and 2007 we recorded interest expense
($7,307), ($437,299) and ($607,193), respectively. Interest expense, relates
primarily to our then outstanding secured convertible debenture commencing
at
the closing dates of our Two Tranche Private Placement on February 2 and March
8, 2006 extinguished on October 17, 2007. During the years ended October 31,
2005, 2006 and 2007 we recorded interest income of $43,978, $90,899 and $63,407,
respectively, earned on investments. As of October 17, 2007, the extinguishment
date, the changes due to the fair market value of common stock warrants and
embedded derivative was recorded as a $1,159,846 gain compared to a $(2,802,078)
loss recorded as of October 31, 2006. Due to the eliminations of the convertible
debenture, we also recorded a gain on extinguishment of the Debenture of
$1,212,510 in addition to $319,967 gain on retirement of a note with Penn
totaling $1,532,477. For fiscal 2008, we anticipate minimal interest expense
and
increased interest income due to the elimination of the convertible debenture
and additional cash investment.
Recently
Issued Accounting Pronouncements.
In
July
2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncertainty in
Income Taxes (an interpretation of FASB Statement No. 109)” (“FIN 48”). FIN 48
clarifies the accounting for uncertainty in tax positions and requires that
companies recognize in their financial statements the impact of a tax position,
if that position is more likely than not of being sustained on audit, based
on
the technical merits of the position. The Company will be required to adopt
the
provisions of FIN 48 beginning in fiscal 2008, with the cumulative effect of
the
change in accounting principle recorded as an adjustment to opening retained
earnings as well as requiring additional disclosures. The Company does not
expect the adoption of FIN 48 to have a material impact on its financial
reporting.
In
September 2006, the FASB issued SFAS No. 157, Fair
Value Measurement.
This
statement does not require any new fair value measurement, but it provides
guidance on how to measure fair value under other accounting pronouncements.
SFAS No. 157 also establishes a fair value hierarchy to classify the
source of information used in fair value measurements. The hierarchy prioritizes
the inputs to valuation techniques used to measure fair value into three broad
categories. This standard is effective for the Company beginning in fiscal
2009
. The Company is currently evaluating the impact of this pronouncement on its
financial statements.
In
February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities.
SFAS No. 159 permits companies to choose to measure certain financial
instruments and certain other items at fair value. The election to measure
the
financial instrument at fair value is made on an instrument-by-instrument basis
for the entire instrument, with few exceptions, and is irreversible.
SFAS No. 159 is effective for the Company beginning in the fiscal year
ending October 31, 2009. The Company is currently evaluating the impact of
this
pronouncement on its financial statements.
Year
Ended October 31, 2007 Compared to the Year Ended October 31,
2006
Revenue.
Our
revenue decreased by $277,760, or 64%, from $431,961 for the year ended October
31, 2006 to $154,201 for the year ended October 31, 2007 primarily due to the
completion of the HER-2 SBIR, FUSION and FLAIR grants in fiscal 2006 partially
offset by a new grant and the continuation of a State of New Jersey
grant.
Research
and Development Expenses.
Research
and development expenses increased by $723,932, or 52%, from $1,404,164 for
the
twelve months ended October 31, 2006 to $2,128,096 for the twelve months ended
October 31, 2007. This increase was principally attributable to the
following:
·
|
Clinical
trial expenses decreased $20,132, or 5%, from $421,915 to $401,783
due to
the higher start-up expenses of our clinical trial in March 2006
partially
offset by the lower expenses incurred at the end of the trial in
fiscal
2007.
|
|
|
·
|
Wages,
salaries and related lab costs increased by $183,650, or 31%, from
$600,329 to $783,979 principally due to adding one research and
development staff at the end of fiscal 2006 and a higher bonus payment
in
fiscal 2007.
|
|
|
·
|
IND/NDA
and developmental consulting expenses increased $130,466 or 293%
from
$44,494 to $174,960 primarily due to costs related to the preparation
to
file an IND and establishing the Phase II clinical trial
protocol.
|
|
|
·
|
Subcontracted
expenses increased by $51,220, or 21%, from $249,315 to $300,535
reflecting the additional subcontract work performed by Dr. Paterson,
pursuant to certain grants.
|
|
|
·
|
Manufacturing
expenses increased $327,625, or 1253%, from $26,155 to $353,780;
primarily
the result of the fiscal 2007 manufacturing program in anticipation
of the
Lovaxin C Phase II clinical trial planned in fiscal
2008.
|
|
|
·
|
Toxicology
study expenses increased $30,722, or 92%, from $33,558 to $64,280;
principally as a result of the initiation of additional toxicology
studies
by Pharm Olam in connection with our Lovaxin C clinical trial in
anticipation of our IND filing in fiscal
2008.
|
General
and Administrative Expenses.
General
and administrative expenses increased by $552,032, or 27%, from $2,077,062
for
the year ended October 31, 2006 to $2,629,094 for the year ended October 31,
2007, primarily attributable to the following:
·
|
Wages,
option expense and benefits increased by $453,409 or 119% from $382,526
to
$835,935 primarily due to hiring a CEO in fiscal 2007 previously
filled by
a consultant (LVEP) these costs did not occur in the fiscal
2006.
|
|
|
·
|
All
other costs increased by $84,319 or 24% from $354,042 to $438,361
primarily due to higher depreciation expense, insurance, accounting
and
other operating costs.
|
|
|
·
|
Consulting
fees and related expenses decreased by $86,813, or 104%, from $885,349
for
the twelve months ended October 31, 2006 to $798,536 for the same
period
in 2007 arising from a lower bonus expense and consulting fees primarily
for LVEP (prior Chief Executive Officer) and consultants partially
offset
by a $251,269 increase in option expense due to accelerated vesting
of the
previous CEO options (LVEP).
|
|
|
·
|
A
decrease in legal fees and public relations expenses of $23,666,
or 5%,
from $441,621 for the twelve-months ended October 31, 2006 to $417,955
for
the same period in 2007, primarily as a result of lower legal
costs.
|
|
|
·
|
Conference
expenses increased by $124,779 or 922% from $13,527 to $138,306 due
to
increased fund raising activities and communication
efforts.
|
Other
Income (expense).
Other
Income (expense) improved by $5,297,014 from ($3,148,478) recorded as expense
for the twelve months ended October 31, 2006 to $2,148,536 recorded as income
for the twelve months ended October 31, 2007. The breakdown is as
follows:
·
|
Interest
income earned on investments decreased by $27,492 in fiscal year
2007 from
$90,899 in fiscal year 2006 to $63,407 in 2007.
|
|
|
·
|
Gain
on Note Retirements in the fiscal year 2007 totaled $1,532,477 compared
to
no gain recorded in fiscal 2006. There were two gains; the first
was a
gain due to the amendment and restatement of a license agreement
that
involved a note with Penn of $319,967 which was forgiven as well
as a gain
recorded on the early extinguishment of the Debentures with Cornell
Partners of $1,212,510. In the case of the debentures, the reacquisition
price was less than the net carrying value and therefore a gain on
extinguishment was recorded.
|
|
|
·
|
Change
in fair value of common stock warrants & embedded derivatives recorded
in fiscal 2007 improved by $3,961,924 from an expense recorded in
fiscal
2006 of ($2,802,078) to income of $1,159,846 in fiscal year 2007.
This
change primarily resulted from this early extinguishment of the debenture
on October 17, 2007 and a decrease in fair value as recorded in fiscal
2007 compared to fiscal 2006.
|
|
|
·
|
Interest
expense increased by $169,894, or 39% from fiscal year 2006 of ($437,299)
to ($607,193) for fiscal year 2007. Interest expense, relates primarily
to
our then outstanding secured convertible debenture that commenced
at the
closing dates of February 2 and March 8, 2006 and were extinguished
on
October 17, 2007.
|
No
provision for income taxes was made for the year ended October 31, 2006 or
2007
due to significant tax losses during and prior to such periods.
Year
Ended October 31, 2006 Compared to the Year Ended October 31,
2005
Revenue.
Our
revenue decreased by $120,907, or 22%, from $552,868 for the year ended October
31, 2005 to $431,961 for the year ended October 31, 2006 primarily due to the
decrease in the FLAIR grant money received by the Company.
Research
and Development Expenses. Research
and development expenses increased by $228,628, or 19%, from $1,175,536 for
the
twelve months ended October 31, 2005 to $1,404,164 for the twelve months ended
October 31, 2006. This increase was principally attributable to the
following:
|
·
|
Clinical
trial expenses increased $328,389, or 351%, from $93,525 to $421,915
due
to the start-up of our clinical trial in March
2006.
|
|
·
|
Wages,
salaries and related lab costs increased by $409,542, or 215%, from
$190,804 to $600,329 principally due to our expanded research and
development staffing in early 2006.
|
|
·
|
Subcontracted
expenses increased by $107,949, or 76.3%, from $141,366 to $249,315
reflecting the additional subcontract work performed by Dr. Paterson
at
Penn, pursuant to certain grants.
|
|
·
|
Manufacturing
expenses decreased $383,387, or 93.6%, from $409,542 to $26,155;
the
result of the fiscal 2005 manufacturing program in anticipation of
the
Lovaxin C for toxicology and clinical trials required in early
2006.
|
|
·
|
Toxicology
study expenses decreased $259,548, or 88.6%, from $293,105 to $33,558;
principally as a result of the initiation in the earlier period of
toxicology studies by Pharm Olam in connection with our Lovaxin C
product
candidates in anticipation of the clinical studies in 2006.
|
General
and Administrative Expenses.
General
and administrative expenses increased by $857,270, or 70.3%, from $1,219,792
for
the year ended October 31, 2005 to $2,077,062 for the year ended October 31,
2006, primarily attributable to the following:
|
·
|
Consulting
fees and related expenses increased by $580,197, or 190%, from $305,153
for the twelve months ended October 31, 2005 to $885,349 for the
same
period in 2006 arising from a higher bonus expense, stock expense,
consulting fees and the fair value of options primarily for the Chief
Executive Officer(s) and
consultants.
|
|
·
|
An
increase in legal fees and public relations expenses of $391,611,
or 364%,
from $107,370 for the twelve-months ended October 31, 2005 to $498,611
for
the same period in 2006, primarily as a result of an increase in
the costs
arising from being publicly held.
|
|
·
|
A
decrease in offering and analyst expenses of $132,498 incurred in
fiscal
2005 while none were incurred in 2006.
|
Other
Income (expense). Other
Income (expense) increased by ($3,185,149) from income of $36,671 for the twelve
months ended October 31, 2005 to ($3,148,478) recorded as expense for the twelve
months ended October 31, 2006. During the years ended October 31, 2005 and
2006
we recorded interest expense of ($7,307), and ($437,299) respectively. Interest
expense, relates primarily to our outstanding secured convertible debenture
commencing at the closing dates on February 2 and March 8, 2006. Interest earned
on investments amounted to $43,978 and $90,899, respectively. In the year ended
October 31, 2006 there is a net change of ($2,802,078) in fair value of common
stock warrants and embedded derivative liabilities in expense (non-cash item)
as
of October 31, 2006 compared to the original value for the secured convertible
debenture.
No
provision for income taxes was made for the year ended October 31, 2005 or
2006
due to significant tax losses during and prior to such periods.
Liquidity
and capital resources
At
October 31, 2005, 2006 and 2007, our cash was $2,075,206, $2,761,166 and
$4,041,984 we had working capital of $1,365,742, $1,254,651 and $3,069,172,
respectively.
To
date,
our principal source of liquidity has been cash provided by private placements
of our securities. Some of these offerings have been structured so as to be
exempt from the prospectus delivery requirements under the Securities Act.
Principal uses of our cash have been to support research and development,
clinical study, financing and working capital. We anticipate these uses will
continue to be our principal uses in the future.
On
November 12, 2004, we acquired Advaxis, Inc., a Delaware corporation through
the
Share Exchange. The transaction was accounted for as a recapitalization.
Accordingly, the historical financial statements of Advaxis are our financial
statements for reporting purposes. Advaxis, Inc has changed its fiscal year
to
the year ended October 31st and as a result is providing herein its audited
financial statements for the years ended October 31, 2006 and 2007.
Although
we believe that the net proceeds received by us from the October 17, 2007
private placement will be sufficient to finance our currently planned operations
through the third fiscal quarter 2008 , they will not be sufficient to meet
the
full fiscal year 2008 nor 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 sell 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 accompanying financial statements have been prepared assuming
the
Company will continue as a going concern, The Company has suffered losses that
raise substantial doubt about its ability to continue as a going concern, The
financial statement do not include any adjustments that might result from the
outcome of this uncertainty.
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
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 a closing of the first
tranche of the Three Tranche 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
outstanding convertible promissory notes including accrued interest, were
converted into units on the same terms as those upon which the Units sold,
accordingly, an aggregate of 2,136,441 shares of common stock and
additional warrants to purchase 2,136,441 shares of common
stock.
On
December 8, 2004, we sold to accredited investors at the closing of the second
tranche 8 units for an aggregate purchase price of $200,000 and the investors
received an aggregate of 696,864 shares of common stock and
additional warrants to purchase 696,864 shares of Common
Stock.
On
January 4, 2005, we sold to accredited investors at a third tranche 5.12 Units
for an aggregate purchase price of $128,000, 445,993 shares of common stock
and
additional warrants to purchase 445,993 shares of Common Stock were
issued.
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 securities were issued along with a cash fee of
$50,530 in consideration for the services of Sunrise, as our placement agent
in
the Private Placement.
On
January 12, 2005, we sold an accredited investor at a closing the third tranche
44 units for an aggregate purchase price of $1,100,000 and therefore an
aggregate of 3,832,752 shares of common stock and warrants to purchase 3,832,752
shares of common stock.
Pursuant
to a Securities Purchase Agreement dated February 2, 2006 and March 8, 2006
we
sold to Cornell $3,000,000 principal amount of our 6% Secured Convertible
Debentures due February 1, 2009 (the “Debentures”) at face amount (before
commissions and related fees of $260,000), along with five year A Warrants
to
purchase 4,200,000 shares of common stock at the price of $0.287 per share
and
five year B Warrants to purchase 300,000 shares of common stock at a price
of
$0.3444 per share.
The
6%
per annum interest due at maturity was charged to expense. The
investment-banking fee paid to Yorkville Advisors in connection with the
Debentures in the amount of $240,000 was charged, in view its relationship
with
Cornell, as additional interest expense over the three-year term of the
Debentures. The remaining transaction fees of $20,000 was
capitalized.
The
Company calculated the fair value of the embedded conversion of the Company’s
above mentioned warrants to be recorded as a warrant liability at the end of
the
fiscal year 2006. As a result of this calculation at the end of October 31,
2006
included in the Statement of Operations for the Company is a $2,802,078 non-cash
expense in the establishment of the liabilities related to the warrants and
embedded conversion feature for the entire year. Upon full satisfaction of
the
Debentures (whether though its repayment or conversion to equity), the fair
value of the remaining warrants on that date will be reclassified to
equity.
On
October 17, 2007, pursuant to a Securities Purchase Agreement, we completed
a
private placement resulting in $7,384,235 in gross proceeds, pursuant to which
we sold 49,228,334 shares of common stock at a purchase price of $0.15 per
share
solely to institutional and accredited investors and warrants to purchase
36,921,250 additional shares at a purchase price of $0.20 per share. Each
investor received a five-year warrant to purchase an amount of shares of common
stock that equals 75% of the number of shares of common stock purchased by
such
investor in the offering. Concurrent with the closing of the private placement,
we sold for $1,996,666 to CAMOFI Master LDC and CAMHZN Master LDC an aggregate
of (i) 10,000,000 shares of Common Stock, (ii) 10,000,000 $0.20 Warrants, and
(iii) 5-year warrants to purchase an additional 3,333,333 shares of Common
Stock
at a purchase price of $0.001 per share. Both warrants provide that they may
not
be exercised if, following the exercise, the holder will be deemed to be the
beneficial owner of more than 9.99% of Registrant’s outstanding shares of Common
Stock.
Pursuant
to an advisory agreement dated August 1, 2007 with Centrecourt, Centrecourt
provided various strategic advisory services to the Company in consideration
thereof. Registrant paid Centrecourt $328,000 in cash and issued 2,483,333
$0.20
Warrants to Centrecourt, which Centrecourt assigned to the two
affiliates.
At
the
closing of the private placement, we exercised our right under an agreement
dated August 23, 2007 with YA Global Investments, L.P. f/k/a Cornell Capital
Partners, L.P. (“Yorkville”), to redeem the outstanding $1,700,000 principal
amount of our Secured Convertible Debentures due February 1, 2009 owned by
Yorkville, and to acquire from Yorkville warrants expiring February 1, 2011
to
purchase an aggregate of 4,500,000 shares of Common Stock. We paid an aggregate
of (i) $2,289,999 to redeem the debentures at the principal amount plus a
20% premium and accrued and unpaid interest, and (ii) $600,000 to
repurchase the warrants. As a result the Company recorded a gain on retirement
in October 2007 of $1,221,510. As of October 17, 2007 after giving the effect
of
interest, amortization, fair value changes of the common stock warrants and
the
embedded derivative the net carrying value of the deferred commissions asset
was
$63,728, embedded derivative liability was $1,640,207, common stock warrant
liability was $729,840 and the discount on the value of the note of
$217,537.
We
are
party to a license agreement, dated July 1, 2002 (effective date), as amended
and restated, between Advaxis and The Trustees of the University of
Pennsylvania.
For
more
information about Penn and commitments see “Item 1. Description of Business -
Partnerships and agreements - University of Pennsylvania.”
For
a
description of material employment agreements to which we are party, see “Item
12. Certain Relationships and Related Party Transactions”.
Critical
Accounting Policies
The
preparation of financial statements in accordance with GAAP involves the use
of
estimates and assumptions that affect the recorded amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results may differ
substantially from these estimates. Significant estimates include the fair
value
and recoverability of carrying value of intangible asset (trademarks, patents
and licenses) the fair value of options, the fair value of embedded conversions
features, warrants, recognition of on-going clinical trial, and related
disclosures 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, license 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. 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.
Intangible
assets consist of trademarks, patents, and licenses which are amortized on
a
straight-line basis over their remaining useful lives, which are estimated
to be
twenty years Capitalized license costs represent the value assigned to the
Company’s 20 year exclusive worldwide license with the University of
Pennsylvania. The value of the license is based on management’s assessment
regarding the ultimate recoverability of the amounts paid and the potential
for
alternative future uses. This license includes the exclusive right to exploit
12
issued and 46 pending patents. As of October 31, 2007, capitalized costs
associated with patents filed and granted are estimated to be $440,000 and
the
estimated costs associated with patents pending are estimated to be $719,000.
The expirations of the existing patents range from 2014 to 2020. Capitalized
costs associated with patent applications that are abandoned are charged to
expense when the determination is made not to pursue the application.
Amortization expense for licensed technology and capitalized patent cost is
included in general and administrative cost. There have been no patent
applications abandoned and charged to expense in the current or prior year
that
were material in value.
Accounting
for Warrants and Convertible Securities
The
Company evaluates whether warrants issued should be accounted for as liabilities
or equity based on the provisions of EITF 00-19, Accounting
for Derivative Financial Instruments Indexed to, and potentially Settled in,
a
Company’s Own Stock.
The
EITF lists conditions under which warrants are required to be classified as
liabilities, including the existence of registration rights where significant
penalties could be required to be paid to the holder of the instrument in the
event the issuer fails to register the shares under a preset time frame, or
where the registration statement fails to remain effective for a preset time
period. Warrants accounted for as liabilities are required to be recorded at
fair value, with changes in fair value recorded in operations.
For
convertible debt instruments, the Company determines whether the conversion
feature must be bifurcated and accounted for as a derivative liability in
accordance with the provisions of EITF 00-19. The first step of the analysis
is
to determine whether the debt instrument is a conventional convertible
instrument, in which case the embedded conversion option would qualify for
equity classification and would not be bifurcated from the debt instrument.
If
the debt does not meet the definition of a conventional convertible instrument,
the Company will analyze whether the conversion feature should be accounted
for
as a liability or equity under the provisions of EITF 00-19. The most common
reason a debt instrument would not be considered to be a conventional
convertible instrument is where the conversion price is variable. If the
conversion feature does qualify for equity classification, the Company will
assess whether there is a beneficial conversion feature that must be accounted
for under the provisions of EITF 98-5, Accounting
for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios,
and
EITF 00-27, Application
of Issue No. 98-5 to Certain Convertible Instruments.
In
February 2006, the FASB issued Statement No. 155, Accounting
for Certain Hybrid Financial Instruments, an amendment of FASB Statements No.
133 and 140.
Among
other matters, that statement provides that where a company is required to
bifurcate a derivative from its host contract, the company may irrevocably
elect
to initially and subsequently measure that hybrid financial instrument in its
entirety at fair value, with changes in fair value recognized in operations.
The
statement is effective for financial instruments issued after the beginning
of
an entity’s first fiscal year that begins after September 15, 2006. Earlier
adoption is permitted as of the beginning of an entity’s fiscal year, provided
the entity has not yet issued financial statements, including financial
statements [or]
any
interim period for that fiscal year.
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.
Off-Balance
Sheet Arrangement
The
Company is obligated under a non-cancelable operating lease for laboratory
and
office space expiring in May 31, 2008 with aggregate future minimum payments
due
amounting to $40,348.
Item
7: Financial
Statements
FINANCIAL
STATEMENTS
INDEX
|
|
Page
|
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
47
|
|
|
|
Balance
Sheet as of October 31, 2007
|
|
49
|
|
|
|
Statements
of Operations for the years ended October 31, 2006 and 2007 and the
period
from
|
|
|
March
1, 2002 (Inception) to October 31, 2007
|
|
50
|
|
|
|
Statements
of Stockholders’ Equity (Deficiency) for the Period from March 1, 2002
(Inception) to
|
|
|
October
31, 2007
|
|
51
|
|
|
|
Statements
of Cash Flows for the years ended October 31, 2006 and 2007 and the
period
from
|
|
|
March
1, 2002 (Inception) to October 31, 2007
|
|
52
|
|
|
|
Notes
to the Financial Statements
|
|
54
|
Report
of Independent Registered Public Accounting Firm
To
the
Board of Directors and Shareholders
Advaxis,
Inc.
We
have
audited the balance sheet of Advaxis, Inc. (a development stage company) as
of
October 31, 2007, and the related statements of operations, shareholders ’
equity (deficiency) and cash flows for the year then ended and the amounts
included in the cumulative columns in the statements of operations and cash
flows for the year then ended. 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 audit.
We
conducted our audit 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 audit 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,
2007 and the results of its operations and its cash flows for year then ended
and the amounts included in the cumulative columns in the statement of
operations and cash flows for the year then ended, in conformity with U.S.
generally accepted accounting principles.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations that
raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
MCGLADREY
& PULLEN LLP
New
York,
NY
January
15, 2008
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders of
Advaxis,
Inc.
We
have
audited the accompanying statements of operations, shareholders' equity
(deficiency), and cash flows of Advaxis, Inc. (a development stage company)
for
the year ended October 31, 2006 and the period included in the cumulative
columns from March 1, 2002 (inception) to October 31, 2006. 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 audit.
We
conducted our audit 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 audit provides a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the results of operations and cash flows of Advaxis, Inc.
for
the year ended October 31, 2006 and the period from March 1, 2002 (inception)
to
October 31, 2006 in conformity with United States generally accepted accounting
principles.
As
disclosed in Note 2, the Company changed its method of accounting for
stock-based compensation, effective November 1, 2005.
GOLDSTEIN
GOLUB KESSLER LLP
New
York,
New York
December
11, 2006
(A
Development Stage Company)
Balance
Sheet
|
|
October
31, 2007
|
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash
|
|
$
|
4,041,984
|
|
Prepaid
expenses
|
|
|
199,917
|
|
Total Current Assets
|
|
|
4,241,901
|
|
|
|
|
|
|
Property
and Equipment (net of accumulated depreciation of $55,953)
|
|
|
116,442
|
|
Intangible
Assets (net of accumulated amortization of $149,132)
|
|
|
1,098,135
|
|
Other
Assets
|
|
|
3,876
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
5,460,354
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
787,297
|
|
Accrued
expenses
|
|
|
305,023
|
|
Notes
payable - current portion
|
|
|
80,409
|
|
Total
Current Liabilities
|
|
|
1,172,729
|
|
|
|
|
|
|
Notes
payable - net of current portion
|
|
|
19,646
|
|
Total
Liabilities
|
|
$
|
1,192,375
|
|
|
|
|
|
|
Shareholders’
Equity
|
|
|
|
|
Preferred
stock, $0.001 par value; 5,000,000 shares authorized; no shares issued
and
outstanding
|
|
|
-
|
|
Common
Stock - $0.001 par value; authorized 500,000,000 shares, issued and
outstanding 107,957,777
|
|
|
107,957
|
|
Additional
Paid-In Capital
|
|
|
16,276,648
|
|
Deficit
accumulated during the development stage
|
|
|
(12,116,626
|
)
|
Total
Shareholders' Equity
|
|
|
4,267,979
|
|
TOTAL
LIABILITIES & SHAREHOLDERS’ EQUITY
|
|
$
|
5,460,354
|
|
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
October
31,
|
|
Year
Ended
October
31,
|
|
Period
from
March
1, 2002 (Inception) to
October
31,
|
|
|
|
2006
|
|
2007
|
|
2007
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
431,961
|
|
$
|
154,201
|
|
$
|
1,259,436
|
|
Research
& Development Expenses
|
|
|
1,404,164
|
|
|
2,128,096
|
|
|
5,376,144
|
|
General
& Administrative Expenses
|
|
|
2,077,062
|
|
|
2,629,094
|
|
|
6,972,887
|
|
Total
Operating expenses
|
|
|
3,481,226
|
|
|
4,757,190
|
|
|
12,349,031
|
|
Loss
from Operations
|
|
|
(3,049,265
|
)
|
|
(4,602,989
|
)
|
|
(11,089,595
|
)
|
Other
Income (expense):
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(437,299
|
)
|
|
(607,193
|
)
|
|
(1,073,220
|
)
|
Other
Income
|
|
|
90,899
|
|
|
63,406
|
|
|
199,828
|
|
Gain
on note retirement
|
|
|
-
|
|
|
1,532,477
|
|
|
1,532,477
|
|
Net
changes in fair value of common stock warrant liability and embedded
derivative liability
|
|
|
(2,802,078
|
)
|
|
1,159,846
|
|
|
(1,642,232
|
)
|
Net
loss
|
|
|
(6,197,744
|
)
|
|
(2,454,453
|
)
|
|
(12,072,742
|
)
|
Dividends
attributable to preferred shares
|
|
|
|
|
|
|
|
|
43,884
|
|
Net
loss applicable to Common Stock
|
|
$
|
(6,197,744
|
)
|
$
|
(2,454,453
|
)
|
$
|
(12,116,626
|
)
|
Net
loss per share, basic and diluted
|
|
$
|
(0.16
|
)
|
$
|
(0.05
|
)
|
|
|
|
Weighted
average number of shares outstanding basic and diluted
|
|
|
38,646,769
|
|
|
46,682,291
|
|
|
|
|
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, 2007
|
|
Preferred
Stock
|
|
Common
Stock
|
|
|
|
Deficit
Accumulated
|
|
|
|
|
|
Number
of Shares of Outstanding
|
|
Amount
|
|
Number
of shares of outstanding
|
|
Amount
|
|
Additional
Paid-in Capital
|
|
During
the Development Stage
|
|
Shareholders’
Equity (Deficiency)
|
|
Preferred
stock issued
|
|
|
3,418
|
|
$
|
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 re-capitalization on Nov. 12, 2004
|
|
|
(3,481
|
)
|
|
(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
|
|
|
15,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,969
|
|
Options
granted to consultants and professionals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,484
|
|
|
|
|
|
8,484
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(909,745
|
)
|
|
(909,745
|
)
|
Retroactive
restatement to reflect re-capitalization on Nov. 12, 2004
|
|
|
(232
|
)
|
|
(15,969
|
)
|
|
|
|
|
|
|
|
15,969
|
|
|
|
|
|
|
|
Balance
at December 31, 2003
|
|
|
|
|
|
|
|
|
15,597,723
|
|
$
|
15,598
|
|
$
|
254,348
|
|
$
|
(1,076,681
|
)
|
$
|
(806,735
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
dividend on preferred stock
|
|
|
638
|
|
|
43,884
|
|
|
|
|
|
|
|
|
|
|
|
(43,884
|
)
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(538,076
|
)
|
|
(538,076
|
)
|
Options
granted to consultants and professionals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,315
|
|
|
|
|
|
5,315
|
|
Retroactive
restatement to reflect re-capitalization on Nov. 12, 2004
|
|
|
(638
|
)
|
|
(43,884
|
)
|
|
|
|
|
|
|
|
43,884
|
|
|
|
|
|
|
|
Balance
at October 31, 2004
|
|
|
|
|
|
|
|
|
15,597,723
|
|
$
|
15,598
|
|
$
|
303,547
|
|
$
|
(1,658,641
|
)
|
$
|
(1,339,496
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued to Placement Agent on re-capitalization
|
|
|
|
|
|
|
|
|
752,600
|
|
|
753
|
|
|
(753
|
)
|
|
|
|
|
|
|
Effect
of re-capitalization
|
|
|
|
|
|
|
|
|
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 re- capitalization on Nov. 12, 2004 including cash paid
of
$44,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(88,824
|
)
|
|
|
|
|
(88,824
|
)
|
Balance
at October 31, 2005
|
|
|
|
|
|
|
|
|
37,686,428
|
|
$
|
37,686
|
|
$
|
5,178,319
|
|
$
|
(3,464,430
|
)
|
$
|
1,751,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
granted to consultants and professionals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172,831
|
|
|
|
|
|
172,831
|
|
Options
granted to employees and directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,667
|
|
|
|
|
|
71,667
|
|
Conversion
of debenture to Common Stock
|
|
|
|
|
|
|
|
|
1,766,902
|
|
|
1,767
|
|
|
298,233
|
|
|
|
|
|
300,000
|
|
Issuance
of Common Stock to employees and directors
|
|
|
|
|
|
|
|
|
229,422
|
|
|
229
|
|
|
54,629
|
|
|
|
|
|
54,858
|
|
Issuance
of common stock to consultants
|
|
|
|
|
|
|
|
|
556,240
|
|
|
557
|
|
|
139,114
|
|
|
|
|
|
139,674
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,197,744
|
)
|
|
(6,197,744
|
)
|
Balance
at October 31, 2006
|
|
|
|
|
|
|
|
|
40,238,992
|
|
|
40,239
|
|
|
5,914,793
|
|
|
(9,662,173
|
)
|
|
(3,707,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued
|
|
|
|
|
|
|
|
|
55,226,334
|
|
|
55,228
|
|
|
8,725,674
|
|
|
|
|
|
8,780,902
|
|
Offering
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,243,535
|
)
|
|
|
|
|
(2,243,535
|
)
|
Options
granted to consultants and professionals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
268,577
|
|
|
|
|
|
268,577
|
|
Options
granted to employees and directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,501
|
|
|
|
|
|
222,501
|
|
Conversion
of debenture to Common Stock
|
|
|
|
|
|
|
|
|
10,974,202
|
|
|
10,974
|
|
|
1,593,026
|
|
|
|
|
|
1,600,000
|
|
Issuance
of Common Stock to employees and directors
|
|
|
|
|
|
|
|
|
446,417
|
|
|
416
|
|
|
73,384
|
|
|
|
|
|
73,800
|
|
Issuance
of common stock to consultants
|
|
|
|
|
|
|
|
|
1,100,001
|
|
|
1,100
|
|
|
220,678
|
|
|
|
|
|
221,778
|
|
Warrants
issued on conjunction with issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,505,550
|
|
|
|
|
|
1,505,550
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,454,453
|
)
|
|
(2,454,453
|
)
|
Balance
at October 31, 2007
|
|
|
|
|
|
|
|
|
107,957,977
|
|
$
|
107,957
|
|
$
|
16,276,648
|
|
$
|
(12,116,626
|
)
|
$
|
4,267,979
|
|
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
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
March
1
|
|
|
|
|
|
|
|
2002
|
|
|
|
Year
ended
|
|
Year
ended
|
|
(Inception)
to
|
|
|
|
October
31,
|
|
October
31,
|
|
October
31,
|
|
|
|
2006
|
|
2007
|
|
2007
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(6,197,744
|
)
|
$
|
(2,454,453
|
)
|
$
|
(12,072,742
|
)
|
Adjustments
to reconcile net loss
|
|
|
|
|
|
|
|
|
|
|
to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Non-cash
charges to consultants and employees for options and stock
|
|
|
439,027
|
|
|
786,656
|
|
|
1,497,866
|
|
Amortization
of deferred financing costs
|
|
|
82,313
|
|
|
177,687
|
|
|
260,000
|
|
Non-cash
interest expense
|
|
|
230,218
|
|
|
280,060
|
|
|
510,278
|
|
Loss
(Gain) on change in value of warrants and embedded
derivative
|
|
|
2,802,078
|
|
|
(1,159,846
|
)
|
|
1,642,232
|
|
Value
of penalty shares issued
|
|
|
-
|
|
|
-
|
|
|
117,498
|
|
Depreciation
expense
|
|
|
17,009
|
|
|
31,512
|
|
|
55,953
|
|
Amortization
expense of intangibles
|
|
|
45,068
|
|
|
54,577
|
|
|
152,303
|
|
Gain
on note retirement
|
|
|
-
|
|
|
(1,532,477
|
)
|
|
(1,532,477
|
)
|
(Increase)
decrease in prepaid expenses
|
|
|
(38,100
|
)
|
|
(161,817
|
)
|
|
(199,917
|
)
|
Decrease
(increase) in other assets
|
|
|
-
|
|
|
724
|
|
|
(3,876
|
)
|
Increase
in accounts payable
|
|
|
158,335
|
|
|
99,076
|
|
|
1,224,503
|
|
Increase
(decrease) in accrued expenses
|
|
|
522,467
|
|
|
(217,444
|
)
|
|
288,834
|
|
Increase
(Decrease) in interest payable
|
|
|
123,934
|
|
|
(117,951
|
)
|
|
18,291
|
|
(Decrease)
in Deferred Revenue
|
|
|
20,350
|
|
|
(20,350
|
)
|
|
-
|
|
Net
cash used in operating activities
|
|
|
(1,795,045
|
)
|
|
(4,234,046
|
)
|
|
(8,041,254
|
)
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Cash
paid on acquisition of Great Expectations
|
|
|
-
|
|
|
-
|
|
|
(44,940
|
)
|
Purchase
of property and equipment
|
|
|
(8,606
|
)
|
|
(37,632
|
)
|
|
(126,815
|
)
|
Cost
of intangible assets
|
|
|
(250,389
|
)
|
|
(358,336
|
)
|
|
(1,325,390
|
)
|
Net
cash used in Investing Activities
|
|
|
(258,995
|
)
|
|
(395,968
|
)
|
|
(1,497,145
|
)
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from (repayment of) convertible secured debenture
|
|
|
3,000,000
|
|
|
(2,040,000
|
)
|
|
960,000
|
|
Cash
paid for deferred financing costs
|
|
|
(260,000
|
)
|
|
-
|
|
|
(260,000
|
)
|
Proceeds
from notes payable
|
|
|
-
|
|
|
600,000
|
|
|
1,271,224
|
|
Payment
on notes payable
|
|
|
-
|
|
|
(92,087
|
)
|
|
(92,087
|
)
|
Net
proceeds of issuance of Preferred Stock
|
|
|
-
|
|
|
-
|
|
|
235,000
|
|
Payment
on cancellation of Warrants
|
|
|
-
|
|
|
(600,000
|
)
|
|
(600,000
|
)
|
Net
proceeds of issuance of Common Stock
|
|
|
-
|
|
|
8,042,917
|
|
|
12,066,244
|
|
Net
cash provided by Financing Activities
|
|
|
2,740,000
|
|
|
5,910,830
|
|
|
13,580,381
|
|
Net
increase in cash
|
|
|
685,960
|
|
|
1,280,818
|
|
|
4,041,984
|
|
Cash
at beginning of period
|
|
|
2,075,206
|
|
|
2,761,166
|
|
|
-
|
|
Cash
at end of period
|
|
$
|
2,761,166
|
|
|
4,041,984
|
|
$
|
4,041,984
|
|
The
accompanying notes and the report of independent registered public accounting
firm should be read in conjunction with the financial statements.
Supplemental
Schedule of Noncash Investing and
Financing Activities
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
March
1, 2002
|
|
|
|
Year
ended
|
|
Year
ended
|
|
(Inception)
to
|
|
|
|
October 31,
|
|
October
31,
|
|
October
31,
|
|
|
|
2006
|
|
2007
|
|
2007
|
|
Equipment
acquired under notes payable
|
|
$
|
-
|
|
$
|
45,580
|
|
$
|
45,580
|
|
Common
Stock issued to Founders
|
|
$
|
-
|
|
$
|
-
|
|
$
|
40
|
|
Notes
payable and accrued interest converted to Preferred Stock
|
|
$
|
-
|
|
$
|
-
|
|
$
|
15,969
|
|
Stock
dividend on Preferred Stock
|
|
$
|
-
|
|
$
|
-
|
|
$
|
43,884
|
|
Notes
payable and accrued interest converted to Common
Stock
|
|
$
|
300,000
|
|
$
|
1,600,000
|
|
$
|
2,513,158
|
|
Intangible
assets acquired with notes payable
|
|
$
|
-
|
|
$
|
-
|
|
$
|
360,000
|
|
Debt
discount in connection with recording the original value of the embedded
derivative liability
|
|
$
|
512,865
|
|
$
|
-
|
|
$
|
512,865
|
|
Allocation
of the original secured convertible debentures to warrants
|
|
$
|
214,950
|
|
$
|
-
|
|
$
|
214,950
|
|
Warrants
issued in connection with issuance of
Common Stock
|
|
$
|
-
|
|
$
|
1,505,550
|
|
$
|
1,505,550
|
|
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.
The
preparation of financial statements in accordance with GAAP involves the use
of
estimates and assumptions that affect the recorded amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results may differ
substantially from these estimates. Significant estimates include the fair
value
and recoverability of the carrying value of intangible assets (trade marks,
patents and licenses) the fair value of options, the fair value of embedded
conversion features, warrants, recognition of on-going clinical trial, 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.
As
shown
in the financial statements, the Company has incurred losses from operations.
These losses are expected to continue for an extended period of time. We believe
that the net proceeds received by us from the Private Placement and the private
offerings will not be sufficient to finance our currently planned operations
for
approximately the next 12 months and they will not 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 accompanying financial statements
have been prepared assuming the Company will continue as a going concern. The
Company has suffered losses that raise substantial doubt about its ability
to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
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
straight line method or another method if it better represents the timing and
pattern of performance. Since its inception and through October 31, 2007, all
of
the Company’s revenues have been from grants. For the year ended October 31,
2007 all of the Company’s revenues were received from two grants. For the year
ended October 31, 2006, all of the Company’s revenue was received from four
grants.
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 Deliverable.
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 (money market) that at
times
exceed federally insured limits.
Intangible
assets, which consist primarily of legal costs in obtaining trademarks, patents
and licenses and 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. Our cash flow projections
related to these underlying assets far exceed the book value recorded as of
October 31, 2007 for $1,098,135 net assets recorded on the balance sheet for
trademarks, patents and licenses related to Lovaxin C, B, P and other products
in research and development. However, if a competitor were to gain FDA approval
for a treatment before us or if future clinical trials fail to meet the targeted
endpoints, we would likely record an impairment related to these assets. In
addition, if an application is rejected or fails to be issued we would record
an
impairment of its estimated book value.
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, convertible debt and
other potential common stock outstanding during the period. Therefore, the
impact of the potential common stock resulting from warrants and outstanding
stock options are not included in the computation of diluted loss per share,
as
the effect would be anti-dilutive. The table sets forth the number of potential
shares of common stock that have been excluded from diluted net loss per
share
|
|
October
31, 2007
|
|
October
31, 2006
|
|
Warrants
|
|
|
87,713,770
|
|
|
25,009,220
|
|
Stock
Options
|
|
|
8,512,841
|
|
|
6,959,077
|
|
Convertible
Debt (1.)
|
|
|
-
|
|
|
14,210,526
|
|
Total
|
|
|
96,226,611
|
|
|
46,178,823
|
|
No
deferred income taxes are provided for the differences between the bases of
assets and liabilities for financial reporting and income tax
purposes.
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 principal 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
July
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48 “Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109” (“FIN48”), which provides criteria for
the recognition, measurement, presentation and disclosure of uncertain position
may be recognized only if it is “more likely than not” that the position is
sustainable based on its technical merits. The Company will adopt the provisions
of FIN 48 for fiscal year beginning November 1, 2007. We do not expect that
FIN
48 will have a material effect on our financial condition or results of
operations.
In
September 2006, the FASB issued SFAS No. 157, Fair
Value Measurement.
This
statement does not require any new fair value measurement, but it provides
guidance on how to measure fair value under other accounting pronouncements.
SFAS No. 157 also establishes a fair value hierarchy to classify the
source of information used in fair value measurements. The hierarchy prioritizes
the inputs to valuation techniques used to measure fair value into three broad
categories. This standard is effective for the Company beginning fiscal year
ending October 31, 2009. The Company is currently evaluating the impact of
this
pronouncement on its financial statements.
In
February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities.
SFAS No. 159 permits companies to choose to measure certain financial
instruments and certain other items at fair value. The election to measure
the
financial instrument at fair value is made on an instrument-by-instrument basis
for the entire instrument, with few exceptions, and is irreversible.
SFAS No. 159 is effective for the fiscal year ending October 31, 2009.
The Company is currently evaluating the impact of this pronouncement on its
financial statements.
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.
2.
SHARE-BASED COMPENSATION EXPENSE
Effective
November 1, 2005, the Company adopted the fair value based method of accounting
for share-based employee compensation under the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 123 (revised 2004),
Accounting
for Stock-Based Payment
(“SFAS
123(R)”) which requires the measurement and recognition of compensation expense
for all share-based payment awards made to employees and directors for employee
stock options based on estimated fair values. SFAS 123(R) supersedes the
Company’s previous accounting under the Accounting Principles Board Option No.
25, Accounting for Stock Issued to Employees” (“APB 25”) for periods beginning
in fiscal 2006.
The
Company adopted SFAS 123(R) using the modified prospective transition method,
which requires the application of the accounting standard as of November 1,
2005, the first day of the Company’s fiscal year 2006. In accordance with the
modified prospective transition method, the Company’s Financial Statements for
prior periods were not restated to reflect, and do not include the impact of
SFAS 123(R). Stock-based compensation expense for fiscal years ended October
31,
2007 and 2006 was $222,051 and $71,667 respectively which consists of
stock-based compensation expense related to employee and director stock options.
The
Company began recognizing expense in an amount equal to the fair value of
share-based payments (stock option awards) on their date of grant, over the
requisite service period of the awards (usually the vesting period). Under
the
modified prospective method, compensation expense for the Company is recognized
for all share based payments granted and vested on or after
November 1, 2005 and all awards granted to employees prior to November 1,
2005 that were unvested on that date but vested in the period over the requisite
service periods in the Company’s Statement of Operations. Prior to the adoption
of the fair value method, the Company accounted for stock-based compensation
to
employees under the intrinsic value method of accounting set forth in Accounting
Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees,
and
related interpretations. Therefore, compensation expense related to employee
stock options was not reflected in operating expenses in any period prior to
the
fiscal year of 2006 and prior period results have not been restated. Since
the
date of inception to October 31, 2005 had the Company adopted the fair value
based method of accounting for stock-based employee compensation under the
provisions of SFAS No. 123, Stock Option Expense would have totaled
$328,176 for the period March 1, 2002 (date of inception) to October 31, 2007,
and the effect on the Company’s net loss would have been as
follows:
|
|
March
1, 2002
(date
of inception) to
October
31, 2007
|
|
Net
Loss as reported
|
|
$
|
(12,072,742
|
)
|
Add:
Stock based option expense included in recorded net loss
|
|
|
89,217
|
|
Deduct
stock option compensation expense determined under fair value based
method
|
|
|
(328,176
|
)
|
Adjusted
Net Loss
|
|
$
|
(12,311,701
|
)
|
The
fair
value of each option granted from the Company’s stock option plans during the
years ended October 31, 2006 and 2007 was estimated on the date of grant using
the Black-Scholes option-pricing model. Using this model, fair value is
calculated based on assumptions with respect to (i) expected volatility of
the Company’s Common Stock price, (ii) the periods of time over which employees
and Board Directors are expected to hold their options prior to exercise
(expected lives), (iii) expected dividend yield on the Company’s Common
Stock, and (iv) risk-free interest rates, which are based on quoted U.S.
Treasury rates for securities with maturities approximating the options’
expected lives. Expected volatility for a development stage biotechnology
company is very difficult to estimate as such; the company considered several
factors in computing volatility. The company used their own historical
volatility in determining the volatility to be used. Expected lives are based
on
contractual terms given the early stage of the business, lack of intrinsic
value
and significant future dilution along typical of early stage biotech. The
expected dividend yield is zero as the Company has never paid dividends and
does
not currently anticipate paying any in the foreseeable future.
|
|
Year
Ended
|
|
Year
Ended
|
|
|
October
31, 2006
|
|
October
31, 2007
|
Expected
volatility
|
|
127.37%
|
|
119.0%
|
Expected
Life
|
|
7.7
years
|
|
7.0
years
|
Dividend
yield
|
|
0
|
|
0
|
Risk-free
interest rate
|
|
4.6%
|
|
4.3%
|
Stock-based
compensation expense recognized during the period is based on the value of
the
portion of share-based payment awards that vested during the period. Stock-based
compensation expense for the twelve months ended October 31, 2007 includes
compensation expense for share-based payment awards granted prior to, but not
yet vested as of October 31, 2006 based on the grant date fair value
estimated in accordance with the provisions of SFAS 123 and compensation expense
for the share-based payment awards granted subsequent to October 31, 2005 based
on the grant date fair value estimated in accordance with the provisions of
SFAS
123(R). Compensation expense for all share-based payment awards to be recognized
using the straight line method over the requisite service period. As stock-based
compensation expense for the twelve months of 2006 and 2007 is based on awards
granted and vested, it has been reduced for estimated forfeitures (4.4%). SFAS
123(R) requires forfeitures to be estimated at the time of grant and revised,
if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. In the Company’s pro forma information required under SFAS 123 for
the periods prior to fiscal 2006, the Company accounted for forfeitures as
they
occurred.
Warrant
Expense
On
or
about the October 17, 2007 the closing date of the private placement the
following transactions took place.
Pursuant
to the related Placement Agency Agreement with Carter Securities, LLC, the
Company paid the placement agent $354,439 in cash commissions and reimbursement
of expenses and issued to it 2,949,333 warrants exercisable at $0.20 per share
.
The fair value of the warrants is estimated to be $574,235. The fair value
of
the warrants was calculated using the black-scholes valuation model with the
following assumptions: 2,949,333 warrants, market price of common stock on
the
date of sale of $0.23 per share October 17, 2007,, exercise price of $0.20,
risk-free interest rate of 4.16%, expected volatility of 119% and expected
life
of 5 years. The value of the warrants and cash are included in APIC as a
reduction to net proceeds from the October 2007 private placement.
In
accordance with a consulting agreement with Centrecourt Asset Management they
were paid $328,000 in cash commissions and issued 2,483,333 warrants exercisable
at $0.20 per share. The fair value of the warrants is estimated to be $483,505.
The fair value of the warrants was calculated using the black-scholes valuation
model with the following assumptions: 2,483,333 warrants, market price of common
stock on the date of sale of $0.23 per share on October 17, 2007, an exercise
price of $0.20, risk-free interest rate of 4.16%, expected volatility of 119%
and expected life of 5 years. The value of the warrants and one half of the
cash
was included in APIC as a reduction to net proceeds from the October 2007
private placement. The other half of the cash was recorded as prepaid expense
for advisory consulting services to be amortized over the balance of the term
of
the one- year agreement.
In
accordance with a consulting agreement with BridgeVentures they were paid
$51,427 in cash commissions and issued 800,000 warrants exercisable at $0.20
per
share. The fair value of the warrants is estimated to be $155,760. The fair
value of the warrants was calculated using the black-scholes valuation model
with the following assumptions: 800,000 warrants, market price of common stock
on the date of sale of $0.23 per share on October 17, 2007, an exercise price
of
$0.20, risk-free interest rate of 4.16%, expected volatility of 119% and
expected life of 5 years. The value of the warrants and the cash was included
in
APIC as a reduction to net proceeds from the October 2007 private placement.
The
future consulting payments of cash will recorded as consulting expense for
advisory consulting services over the balance of the agreement.
In
accordance with a consulting agreement with Dr. Filer, he was issued 1,500,000
warrants exercisable at $0.20 per share. The fair value of the warrants is
estimated to be $292,050. The fair value of the warrants was calculated using
the black-scholes valuation model with the following assumptions: 1,500,000
warrants, market price of common stock on the date of sale of $0.23 per share
on
October 17, 2007, an exercise price of $0.20, risk-free interest rate of 4.16%,
expected volatility of 119% and expected life of 5 years. The value of the
warrants was included in APIC as a reduction to net proceeds from the October
2007 private placement. He receives a monthly fee of $5,000 for consulting
recorded as consulting expense for advisory consulting services over the balance
of the agreement.
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.
3.
INTANGIBLE ASSETS:
Intangible
assets consist of trademarks, patents, and licenses which are amortized on
a
straight-line basis over their remaining useful lives, which are estimated
to be
twenty years. Capitalized license costs represent the value assigned to the
Company’s 20 year exclusive worldwide license with the University of
Pennsylvania. The value of the license is based on management’s assessment
regarding the ultimate recoverability of the amounts paid and the potential
for
alternative future uses. This license includes the exclusive right to exploit
12
issued and 46 pending patents. As of October 31, 2007, capitalized costs
associated with patents filed and granted are estimated to be $440,000 and
the
estimated costs associated with patents pending are estimated to be $719,000.
The expirations of the existing patents issued range from 2014 to 2020.
Capitalized costs associated with patent applications that are abandoned are
charged to expense when the determination is made not to pursue the application.
Amortization expense for licensed technology and capitalized patent cost is
included in general and administrative cost. There have been no patent
applications abandoned and charged to expense in the current or prior year
that
were material in value.
Intangible
assets consist of the following at October 31, 2007.
Trademarks
|
|
$
|
87,857
|
|
Patents
|
|
|
663,283
|
|
License
|
|
|
496,127
|
|
Less:
Accumulated Amortization
|
|
|
(149,132
|
)
|
|
|
|
|
|
|
|
$
|
1,098,135
|
|
Estimated
amortization expense is as follows:
Year
ending October 31,
|
|
|
|
2008
|
|
$
|
58,000
|
|
2009
|
|
|
58,000
|
|
2010
|
|
|
58,000
|
|
2011
|
|
|
58,000
|
|
2012
|
|
|
58,000
|
|
Amortization
expense of intangibles amounted to $54,577 and $45,068 for the year ended
October 31, 2007 and 2006, respectively
4.
ACCRUED EXPENSES:
The
following table represents the major components of accrued
expenses:
Salaries
and other compensation
|
|
$
|
182,737
|
|
Consulting
|
|
|
84,619
|
|
Clinical
Research Organization
|
|
|
37,667
|
|
|
|
$
|
305,023
|
|
5.
NOTES PAYABLE:
Notes
payable consist of the following at October 31, 2007:
Two
notes payable with interest at 8% per annum, due on December 17,
2008. The
lender has served notice demanding repayment on the due date pursuant
to
the November 2004 recapitalization and financing agreement
|
|
$
|
65,577
|
|
Installment
purchase agreement on equipment with interest at 11.75% per
annum
|
|
|
34,478
|
|
Total
|
|
|
100,055
|
|
Less
current portion
|
|
|
(80,409
|
)
|
|
|
$
|
19,646
|
|
Secured
Convertible Debenture:
Pursuant
to a Securities Purchase Agreement dated February 2, 2006 ($1,500,000 principal
amount) and March 8, 2006 ($1,500,000 principal amount) we issued to Cornell
Capital Partners, LP (“Cornell”) $3,000,000 principal amount of the Company’s
Secured Convertible Debentures due February 1, 2009 (the “Debentures”) at face
amount, and five year Warrants to purchase 4,200,000 shares of Common Stock
at
the price of $0.287 per share and five year B Warrants to purchase 300,000
shares of Common Stock at a price of $0.3444 per share.
The
Debentures are convertible at a price equal to the lesser of (i) $0.287 per
share (“Fixed Conversion Price”), or (ii) 95% of the lowest volume weighted
average price of the Common Stock on the market on which the shares are listed
or traded during the 30 trading days immediately preceding the date of
conversion (“Market Conversion Price”). Interest is payable at maturity at the
rate of 6% per annum in cash or shares of Common Stock valued at the conversion
price then in effect.
Cornell
has agreed that (i) it will not convert the Debenture or exercise the Warrants
if the effect of such conversion or exercise would result in its and its
affiliates’ holdings of more than 4.9% of the outstanding shares of Common
Stock, (ii) neither it nor its affiliates will maintain a short position or
effect short sales of the Common Stock while the Debentures are outstanding,
and
(iii) no more than $300,000 principal amount of the Debenture may be converted
at the Market Conversion Price during a calendar month.
The
Company may call the Debentures for redemption at the Redemption Price at any
time or from time to time but not more than $500,000 principal amount may be
called during any 30 consecutive day period. The Redemption Price will be 120%
of the principal redeemed plus accrued interest. The Company has also granted
the holder an 18-month right of first refusal assuming the Debentures are still
outstanding with respect to the Company’s issuance or sale of shares of capital
stock, options, warrants or other convertible securities. Pursuant to
Registration Rights Agreement, the Company has registered at its expense under
the Securities Act of 1933, as amended (the “Act”) for reoffering by the holders
of the Debentures and of the Warrants and B Warrants shares of Common Stock
received upon conversion or exercise.
The
Company has granted the holders a first security interest on its assets as
security for payment of the Company’s obligations.
The
Company has also agreed that as long as there is outstanding at least $500,000
principal amount of Debentures it would not, without the consent of the
Debenture holder, issue or sell any securities at a price or warrants, options
or convertible securities with an exercise or conversion price less than the
bid
price, as defined, immediately prior to the issuance; grant a further security
interest in its assets or file a registration statement on Form
S-8.
In
the
event of a Debenture default the Debenture shall, at the holder’s election,
become immediately due and payable in cash or, at the holder’s option, may be
converted into shares of Common Stock. Events of default include failure to
pay
principal when due or interest within five days following due date; failure
to
cure breaches or defaults of covenants, agreements or warrants within 10 days
following written notice of such breach or default; the entry into a change
of
control transaction meaning (A) the acquisition of effective control of more
than 50% of the outstanding voting securities by an individual or group (not
including the holder or its affiliates), or (B) the replacement of more than
one-half of the Directors not approved by a majority of the Company’s directors
as of February 2, 2006 or by directors appointed by such directors or (C) the
Company entering into an agreement to effect any of the foregoing; bankruptcy
or
insolvency acts; breach or default which results in acceleration of the maturity
of other debentures, mortgages or credit facilities, indebtedness or factor
agreements involving outstanding principal of at least $100,000; breach of
the
Registration Rights Agreement as to the maintaining effectiveness of the
registration statement which results in an inability to sell shares by holder
for a designated period; failure to maintain the eligibility of the Common
Stock
to trade on at least the Over-the-Counter Bulletin Board, and failure to make
delivery within five trading days of certificates for shares to be issued upon
conversion or the date the Company publicly announces its intention not to
comply with requests for conversion in accordance with the Debenture
terms.
Debenture
Accounting
The
Company continued to measure the fair value of the warrants and embedded
conversion features at each reporting date using the Black-Scholes valuation
model based on the current assumptions at that point in time. This calculation
has resulted in a fair market value significantly different than the previous
reporting period. The increase or decrease in the fair market value of the
warrants and embedded conversion feature at each period results in a non-cash
income or loss to the other income or loss line item in the Statement of
Operations along with a corresponding change in liability.
The
Company was required to measure the fair value of the warrants calculated using
the Black-Scholes valuation model on the date of each reporting period until
the
debt is extinguished. On October 31, 2006 the fair value of the warrants was
calculated by using the Black-Scholes valuation model with the following
assumptions: (i) 4,200,000 warrants at market price of common stock on the
date
of sale of $0.20 per share, exercise price of $0.287 and (ii) 300,000 warrants
at the market price of common stock of $0.20 per share, exercise price of
$0.3444 both at risk-free interest rate of 4.56%, expected volatility of 122%
and expected life of 4.33 years. The fair value of the warrants was $714,600
or
an increase of $499,650 over the $214,950 recorded at inception. This increase
of the fair value of the warrants was charged to the Statements of Operations
as
expenses to Net Change in Fair Value of Common Stock Warrant and Embedded
Derivative Liability and credited to Balance Sheet: Common Stock Warrants
Liabilities. On October 17, 2007 the value of the warrants increased by $15,240
over the $714,600 fair value as of October 31, 2006 to a fair value of $729,840.
The Company purchased the warrants on October 17th
for
$600,000 and recorded a gain on extinguishment of $129,850.
Likewise
the Company is also required to measure the fair value of the embedded
conversion feature allocated to the Debentures liability based upon the
Black-Scholes valuation model on the date of each reporting period. On October
31, 2006 the fair value of this feature was based on the following assumptions:
(i) the market price convertible at the price equal to 95% of the lowest volume
weighted average price of the Common Stock on the market on which the shares
are
listed or traded during the 30 trading days immediately preceding the date
of
conversion or $0.141 on October 31, 2006, (ii) the conversion price of $0.20,
(iii) the risk free interest rate of 4.62%, (iv) expected volatility of 127.37%
and (v) expected life of 2.333 years. The fair value of the embedded conversion
feature was $2,815,293 or an increase of $2,302,428 over the $512,865 recorded
at inception. This increase of the fair value of the embedded conversion feature
was charged to the Statements of Operations expensed as Net Change in Fair
Value
of Common Stock Warrant and Embedded Derivative Liability and credited to
Balance Sheet was credited to the Embedded Derivative Liability. On October
17,
2007 the value of the embedded derivative decreased by $1,175,086 from the
$2,815,293 fair value as of October 31, 2006 to a fair value of $1,640,207.
The
Company purchased the Debenture on October 17th
for
$340,000 Premium over the principal but still recorded a gain on extinguishment
of $1,300,207.
The
Company was required to measure the fair value of the warrants and the embedded
conversion feature to be calculated using the Black-Scholes valuation model
on
the date of each reporting period until the debt is extinguished. The Company
allocated the proceeds from the sale of the Debentures between the relative
fair
values at the date of origination of the sale for the warrants, embedded
derivative and the debenture. The fair value of the warrants was calculated
by
using the Black-Scholes valuation model with the following assumptions: (i)
4,200,000 warrants at market price of common stock on the date of sale of $0.21
per share, exercise price of $0.287 and (ii) 300,000 warrants at the market
price of common stock of $0.21 per share, exercise price of $0.3444 both at
risk-free interest rate of 4.5%, expected volatility of 25% and expected life
of
five years. The initial fair value of the warrants of $214,950 was recorded
as a
reduction to the Debenture liability and will be amortized over the loan period
and charged to interest expense. The portion of the fair value of the warrants
charged to interest expense since inception to October 17, 2007 was $122,803
the
$92,147 balance partially offset gain on extinguishment.
The
fair
value of the embedded conversion feature allocated to the Debentures liability
was based on the Black-Scholes valuation model with the following
assumptions: (i) the market price convertible at the price equal to 95% of
the
lowest volume weighted average price of the Common Stock on the market on which
the shares are listed or traded during the 30 trading days immediately preceding
the date of conversion or $0.2293 on the date of origination (most beneficial
conversion rate), (ii) the conversion price of $0.287, (iii) the risk free
interest rate of 4.5%, (iv) expected volatility of 30% and (v) expected life
of
three years. The initial fair value of the embedded conversion feature of
$512,865 was recorded as a reduction to the Debenture liability and will be
amortized over the loan period and charged to interest expense. The portion
of
the fair value of the embedded conversion feature charged to interest expense
since inception to October 17, 2007 (extinguishment) was $387,477 the $125,388
balance partially offsetting the gain on extinguishments.
The
Company paid Yorkville Advisor, LLC a fee of 8% of the principal amount of
the
Debentures sold or $240,000 and structuring and due diligence fees of $15,000
and $5,000, respectively. The amount paid to Yorkville Advisor, LLC in
connection with the Debentures was capitalized and charged to interest expense
over the three-year term of the Debentures since Yorkville is related to the
holders of the Debentures by virtue of common ownership. The amount charged
as
interest since inception to October 17, 2007 was $196,272 however, the
balance was written off to interest due to early extinguishment of the debt
amounting to $260,000.
Debenture
Extinguishments
At
the
closing of this private placement, we exercised our right under an agreement
dated August 23, 2007 with YA Global Investments, L.P. f/k/a Cornell Capital
Partners, L.P. (“Yorkville”), to redeem the outstanding $1,700,000 principal
amount of our Secured Convertible Debentures due February 1, 2009 owned by
Yorkville, and to acquire from Yorkville warrants expiring February 1, 2011
to
purchase an aggregate of 4,500,000 shares of our common stock. We paid an
aggregate of (i) $2,289,999 to redeem the debentures at the principal
amount plus a 20% premium and accrued and unpaid interest, and
(ii) $600,000 to repurchase the warrants.
|
|
Principal
$
|
|
Discount
$
|
|
Interest
$
|
|
Warrant
Liability
$
|
|
Embedded
Derivative
Liability
$
|
|
Original
(Fiscal Year 2006)
|
|
|
3,000,000
|
|
|
(727,815
|
)(1)
|
|
-
|
|
|
-
|
|
|
-
|
|
Fiscal
year 2006
|
|
|
(300,000
|
)(2)
|
|
230,218
|
(3)
|
|
119,934
|
|
|
714,600
|
(4)
|
|
2,815,293
|
(4)
|
Book
Value at October 31,2006
|
|
|
2,700,000
|
|
|
(497,597
|
)
|
|
119,934
|
|
|
714,600
|
|
|
2,815,293
|
|
Fiscal
year 2007
|
|
|
(1,000,000
|
)(2)
|
|
280,062
|
(3)
|
|
130,065
|
|
|
15,240
|
(5)
|
|
(1,175,086
|
)(5)
|
Book
Value at October 31, 2007
|
|
|
1,700,000
|
|
|
(217,535
|
)
|
|
249,999
|
|
|
729,840
|
|
|
1,640,207
|
|
Cash
paid at October 17,0207
|
|
|
(1,700,000
|
)
|
|
-
|
|
|
(249,999
|
)
|
|
(600,000
|
)
|
|
(340,000
|
)
|
Gain
(Loss)
|
|
|
-
|
|
|
(
217,535
|
)
|
|
-
|
|
|
129,840
|
|
|
1,300,207
|
|
|
1. |
Embedded
derivative’s warrant value at origination of debenture
|
|
2. |
Principal
converted into common stock
|
|
3. |
Amortized
discount to interest expense
|
|
4.
|
Change
in Fair value of the Company’s common stock warrants from inception
expensed to the statement of
operations.
|
|
5. |
Change
in fair value for fiscal 2007 until
extinguishment
|
Total
gain on extinguishment is $1,212,512. The $1,300,000 principal was converted
into 8,741,105 shares of Advaxis, Inc. common stock at an average value of
$0.1487 per share.
As
of
October 31, 2007, the Company reported a net gain on extinguishment of
$1,212,512 resulting from the elimination of the warrant liability of $729,840
and the embedded derivative liability of $1,640,207 less the premium paid for
the early extinguishment of $340,000 and $600,000 paid for the elimination
of
all warrants and the write-off of the discount.
Penn
and
the Company entered into the amended and restated license agreement on February
13, 2007 that eliminated the $482,000 obligation under the prior agreement.
This
obligation was recorded in fiscal year 2005 as an intangible asset and as of
January 31, 2007 it remained as an intangible asset with the liabilities
recorded as: a notes payable-current portion $130,000, notes payable-net of
current portion $230,000 and the balance as accounts payable. As a result of
this transaction, $319,967 was recorded as a gain on note retirement and is
reflected in
other
income.
6.
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
and the shareholders approved the Company’s 2005 stock option plan on June
6, 2006, which allows for grants up to 5,600,000 shares of the Company's common
stock. Both the 2004 plan and the 2005 plan shall be administered and
interpreted by the Company's board of directors.
2004
Stock Option Plan
In
November 2004, our board of directors adopted and stockholders approved the
2004
Stock Option Plan (“2004 Plan”). The 2004 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, in addition to employees, to non-employee directors, and
consultants.
The
2004
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 to the extent vested at termination,
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 2004 Plan within ten years from the effective date
of
the 2004 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 2004 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 2004
Plan.
2005
Stock Option Plan
In
June 2006, our board of directors adopted and stockholders approved on June
6,
2006, the 2005 Stock Option Plan (“2005 Plan”).
The
2005
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
2005
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 2005 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 2005 Plan within ten years from the effective date
of
the 2005 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
2005
Plan cannot exercise these options more than ten years from the date of grant.
Options granted under the 2005 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 2005
Plan.
On
November 12, 2004, in connection with the recapitalization (see Note 9), the
options granted under the 2002 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 6 reflects the options on a post
recapitalization basis.
A
summary
of the grants, cancellations and expirations (none were exercised) of the
Company’s outstanding options for the periods starting with October 31, 2005
through October 31, 2007 is as follows:
|
|
Shares
|
|
Weighted
Average Exercise Price
|
|
Weighted
Average Remaining Contractual Life In Years
|
|
Aggregate
Intrinsic Value
|
|
Outstanding
as of October 31, 2005
|
|
|
4,842,539
|
|
$
|
0.27
|
|
|
8.4
|
|
|
6,867
|
|
Granted
|
|
|
2,233,179
|
|
$
|
0.22
|
|
|
|
|
|
12,000
|
|
Cancelled
or Expired
|
|
|
(116,641
|
)
|
$
|
0.37
|
|
|
|
|
|
|
|
Outstanding
as of October 31, 2006
|
|
|
6,959,077
|
|
$
|
0.25
|
|
|
8.1
|
|
|
18,867
|
|
Granted
|
|
|
2,910,001
|
|
$
|
0.15
|
|
|
|
|
|
|
|
Cancelled
or Expired
|
|
|
(1,356,237
|
)
|
|
0.22
|
|
|
|
|
|
|
|
Outstanding
as of October 31, 2007
|
|
|
8,512,841
|
|
$
|
0.22
|
|
|
7.8
|
|
$
|
167,572
|
|
Vested
& Exercisable at October 31, 2007
|
|
|
5,432,536
|
|
$
|
0.24
|
|
|
7.4
|
|
$
|
62,422
|
|
The
fair
value of options granted for the year ended October 31, 2007 amounted to
$408,810.
The
following table summarizes significant ranges of outstanding and exercisable
options as of October 31, 2007 (number outstanding and exercisable in
thousands):
|
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
|
Range
of
Exercise
Prices
|
|
Number
Outstanding
(000’s)
|
|
Weighted-
Average
Remaining
Contractual
Life (in Years)
|
|
Weighted-
Average
Exercise
Price
per
Share
|
|
Aggregate
Intrinsic
Value
|
|
Number
Exercisable
(000’s)
|
|
Weighted-
Average
Exercise
Price
per
Share
|
|
Aggregate
Intrinsic
Value
|
|
|
$
|
0.14-0.17
|
|
|
3,150
|
|
|
8.9
|
|
$
|
0.15
|
|
$
|
164,550
|
|
|
1,075
|
|
$
|
0.14
|
|
$
|
60,000
|
|
|
|
0.18-0.21
|
|
|
1,739
|
|
|
6.8
|
|
|
0.21
|
|
|
3,022
|
|
|
1,679
|
|
|
0.21
|
|
|
2,422
|
|
|
|
0.22-0.25
|
|
|
310
|
|
|
8.5
|
|
|
0.25
|
|
|
0
|
|
|
133
|
|
|
0.25
|
|
|
0
|
|
|
|
0.26-0.29
|
|
|
2,992
|
|
|
7.5
|
|
|
0.28
|
|
|
0
|
|
|
2,224
|
|
|
0.28
|
|
|
0
|
|
|
|
0.30-0.43
|
|
|
322
|
|
|
5.1
|
|
|
0.37
|
|
|
|
|
|
322
|
|
|
0.37
|
|
|
|
|
|
|
Total
|
|
|
8,513
|
|
|
7.8
|
|
$
|
0.22
|
|
$
|
167,572
|
|
|
5,433
|
|
$
|
0.24
|
|
$
|
62,422
|
|
The
aggregate intrinsic value in the preceding table represents the total pretax
intrinsic value, based on options with an exercise price less than the Company’s
closing stock price of $0.20 as of October 31, 2007, which would have been
received by the option holders had those option holders exercised their options
as of that date.
|
|
Number
of Shares
|
|
Weighted
Average Exercise Price at Grant Date
|
|
Weighted
Average Remaining Contractual Term
(in
years)
|
|
Non-vested
shares at October 31, 2006
|
|
|
3,203,167
|
|
$
|
0.25
|
|
|
9.0
|
|
Options
granted
|
|
|
2,910,001
|
|
$
|
0.15
|
|
|
8.9
|
|
Options
vested
|
|
|
(3,032,863
|
)
|
$
|
0.19
|
|
|
8.5
|
|
Non-vested
shares at October 31, 2007
|
|
|
3,080,305
|
|
$
|
0.19
|
|
|
8.5
|
|
As
of
October 31, 2007, there was approximately $472,000 of unrecognized compensation
cost related to non-vested stock option awards, which is expected to be
recognized over a remaining average vesting period of 2.2 years.
7.
COMMITMENTS AND CONTINGENCIES
:
Pursuant
to multiple consulting agreements and a licensing agreement, the Company is
contingently liable for the following:
Under
an
amended and restated 20-year exclusive worldwide (July 1, 2002 effective date)
license agreement, the Company is obligated to pay (a) $525,000 in aggregate,
divided over a three-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) On December 31, 2008 the Company is also obligated to pay annual license
maintenance fees of $50,000 increasing to a maximum of $100,000 per year until
the first commercial sale of a licensed product. (c) Upon the initiation of
a
phase III clinical trial and the regulatory approval for the first Licensor
product the Company is obligated to pay milestone payments of $400,000 and
$600,000, respectively. (d) 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 each
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 $3,500,000 in a cancer field. The milestone payments related to
first sales 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. In addition, the Licensor is entitled to receive a
non-refundable $157,134 payment of historical license costs. Under a licensing
agreement, the Licensor is also entitled to receive royalties of 1.5% on net
sales in all countries. In addition, we are obligated to reimburse the
Licensor for all attorneys fees, expenses, official fees and other charges
incurred in the preparation, prosecution and maintenance of the
patents licensed from the Licensor.
Also
pursuant to our restated and amended license agreement our option terms to
license from the Licensor any new future invention conceived by either Dr.
Paterson or Dr. Fred Frankel in the vaccine area were extend until June 17,
2009. 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 Licensor, and we will have access to those inventions under
license agreements to be negotiated. We recently exercised the option and have
entered into negotiations to license up to 18 inventions. The license fees,
legal expense, and other filing expenses for such 18 inventions are estimated
to
amount to $400,000 over a period of several years. With each patent the Licensor
can negotiate an initiation fee up to $10,000 for each license.
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.
We
entered into a sponsored research agreement on December 6, 2006 with Penn and
Dr. Paterson under which we are obligated to pay $159,598 per year for a total
period of 2 years covering the development of potential vaccine candidates
based
on our Listeria technology as well as other basic research
projects.
Pursuant
to a Clinical Research Service Agreement, the Company is obligated to pay
$522,000 to a vendor.
The
Company is obligated under a non-cancelable operating lease for laboratory
and
office space expiring in May 31, 2008 with aggregate future minimum payments
due
amounting to $40,348.
We
have
entered a consulting agreement with a biotech consultant. The Agreement
commenced on January 7, 2005 and has a six month term, which was extended upon
the agreement of both parties. The consultant provides three days per month
service during the term of the agreement with 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. As of October 1, 2007 we entered into a new two year
agreement at a monthly fee of $5,000 including 1,500,000 $0.20 Warrants as
consideration for his assistance in the raise on October 17, 20070 as well
a his
advisory services and assistance. This agreement is cancelable within 90 days
notice.
We
have
entered into an agreement with a consultant to develop and manage our grant
writing strategy and application program. Advaxis will pay a consultant
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 a fixed consulting
fees
based on the type of grants submitted, ranging from $5,000-$7,000 depending
on
the type of application submitted to the national SBIR and related NIH/NCI
programs.
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 license 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.
In
July
2003, we entered into an agreement with a biomanufacturing company for the
purpose of manufacturing our cervical cancer vaccine Lovaxin C. The agreement
expired in December 2005 upon the delivery and completion of stability testing
of the GMP material for the Phase I trial. The company 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 the company agreed to manufacture experimental
and
commercial supplies of our Listeria
cancer
vaccines. In May 2007 we entered into a research and development consulting
service agreement for manufacturing work in the amount of $94,500 plus
consumables. As of October 31, 2007 we’ve paid $85,657 excluding consumables. In
October, 2007 we entered into an additional production agreement to manufacture
our phase II clinical materials using a new methodology now required by the
UK,
and likely to be required by other regulatory bodies in the future. The contract
is for $576,450 plus consumables and as of October 31, 2007 we have paid
$194,408 excluding consumables.
The
Company 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 served as Chief Executive Officer, Chief
Financial Officer and Secretary of the Company and was compensated by consulting
fees paid to LVEP. LVEP is owned by the estate of Scott Flamm (deceased January
2006) previously, one of our directors and a principal shareholder. Pursuant
to
an amendment dated December 15, 2006 ("effective date") Mr. Appel resigned
as
President and Chief Executive Officer and Secretary of the Company on the
effective date, but remains as a board member and consultant to the company.
The
term of the agreement as amended is 24 months from effective date. Mr. Appel
will devote 50% of his time to the company over the first 12 months of the
consulting period. Also as a consultant, he will be paid at a rate of $22,500
per month in addition to benefits as provided to other company officers. He
will
receive severance payments over an additional 12 months at a rate of $10,416.67
per month and shall be reimbursed for family health care. All his stock options
vested fully on the effective date and are exercisable over the option contract
life. The Company recorded a charge to its statement of operations in fiscal
2007 for the effect of the modification of these options. Also, Mr. Appel was
issued 1,000,000 shares of our common stock in January 2007. He received a
$250,000 bonus of which $100,000 was paid on January 2, 2007 and the remainder
was paid in October 2007.
We
have
entered into a consulting agreement with a consultant, whereby he will assist
us
in the preparation and refinement of our marketing summary and presentation
materials and introduce us to predefined pharmaceutical and biotechnology
companies which may be interested in strategic partnerships. The consultant
will
receive a monthly cash fee of $1,500 and approved expenses, and in addition
success based compensation payable in cash and stock ranging from 5% to 4%
of
transaction proceeds, upon completion of a transaction with a strategic partner
introduced by the consultant. The agreement was terminated in December
2007.
We
entered into an agreement and an amendment No. 1with a consulting firm to
provide biologics regulatory consulting services to the Company in support
of
the IND submission to the FDA. The tasks to be performed under this Agreement
will be agreed to in advance by the Company and consulting firm. The term of
the
amendment is from June 1, 2007 to June 1, 2008. This is a time and material
agreement.
In
May
2007 we entered into a Master Service Agreement covering three projects to
serve
in clinical study planning, management and execution for our upcoming Phase
II
clinical study. The cost of the three projects are estimated to be approximately
$350,000 over the term. As of October 31, 2007 we’ve paid them $47,000. The term
of the projects is defined as the completion of the final study reports of
the
clinical trial.
Thomas
Moore agreed to terms with the Company whereby he was named CEO and
Chairman effective December 15, 2006 . He may also nominate one additional
Board Member of his choice subject to the By-Laws. Mr. Moore receives a salary
of $250,000 annually. His salary increased to $350,000 and he was granted
750,000 shares to be issued based on the terms of his employment agreement
and
the amount of the financial raise. He is eligible to receive an additional
grant
of 750,000 shares upon the raise of an additional $6,000,000. He received a
grant of 2,400,000 options at the price of $0.143 per share as of December
15,
2006 to vest monthly over 2 years. Mr. Moore is eligible to receive an
additional grant of 1,500,000 shares if the company stock is $0.40 per share
or
higher over 40 consecutive days. He will receive a health care plan at no cost
to him. In the event of a change of control and his termination by the company,
he will receive one year severance of $350,000.
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. Her current compensation is $115,000 per annum with a potential bonus
of
$20,000. In January 2006 she was paid a bonus in stock with a market value
of
$14,800. In addition, Dr. Shahabi received, commencing July 1 st
2006, a
$20,000 pay increase annually payable in shares to be issued every July 1
st
and
January 1 st
(limited
to conversion at $0.20 share as minimum). She was granted 150,000 options on
hire plus 250,000 options in fiscal year 2006. As of November 1, 2007 her base
annual compensation was increased to $135,000.
The
Company entered into an employment agreement with Dr. John Rothman, PhD 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 fiscal year 2006 he was
paid a bonus of $10,000 in cash plus $14,800 in company stock. In fiscal year
2007 he was paid a $45,000 bonus .Effective January 1, 2006 his salary increased
by $30,000 annually payable in stock to be issued every July 1 st
and
January 1 st
(limited
to conversion at $0.20 share as minimum). In addition, Dr. Rothman was granted
360,000 stock options per his employment agreement with 150,000 in March 2006
and 300,000 in February 2007. As of November 1, 2007 his base annual
compensation was increased to $250,000.
The
Company entered into an employment agreement with Fred Cobb to become Vice
President of Finance effective February 20, 2006 terminable on 30 days notice.
His compensation is $140,000 per annum. Upon meeting incentives to be set by
the
Company, he will receive a bonus of up to $28,000. In fiscal year 2007, he
was
paid a $28,000 bonus. In July 1, 2006 his salary increased by $20,000 annually
payable in stock to be issued every July 1 st
and
January 1 st
. In
addition, Mr. Cobb was granted 150,000 stock options per his employment
agreement and was granted an additional 150,000 options in March 2006 and
150,000 options February 2007. As of November 1, 2007 his base annual
compensation was increased to $180,000.
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.
Cerus’ allegations in the Opposition are 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. On November 29, 2006, following oral proceedings, the Opposition
Division of the European Patent Office determined that the claims of the patent
as granted should be revoked due to lack of inventive step under European Patent
Office rules based on certain prior art publications. This decision has no
material effect upon our ability to conduct business as currently contemplated.
We have reviewed the formal written decision and filed an appeal on May 29,
2007. As of December 31, 2007 no ruling has been made. There is no assurance
that we will be successful. If such ruling is upheld on appeal, our patent
position in Europe may be eroded. The likely result of this decision will be
increased competition for us in the European market for recombinant live
Listeria
based
vaccines for tumor specific antigens. Regardless of the outcome, we believe
that
our freedom to operate in Europe, or any other territory, for recombinant live
Listeria
based
vaccine for tumor specific antigen products will not be diminished.
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.
The
Company has a net operating loss carry forward of approximately $9,340,529
at
October 31, 2007 available to offset taxable income through 2027. Due
to
change in control provisions, the Company’s utilization of these losses may be
limited. The tax effects of loss carry forwards give rise to a deferred
tax asset and a related valuation allowance at October 31, 2007 as
follows:
Net
operating losses
|
|
$
|
3,736,212
|
|
Stock
based compensation
|
|
|
378,517
|
|
Less
valuation allowance
|
|
|
(4,114,729
|
)
|
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:
|
|
Year ended
October
31, 2005
|
|
Year ended
October
31, 2006
|
|
Period
from
March
1, 2002
(inception)
to
October
31, 2006
|
|
|
|
|
|
|
|
|
|
Provision
at federal statutory rate
|
|
|
34
|
%
|
|
34
|
%
|
|
34
|
%
|
Valuation
allowance
|
|
|
(34
|
)
|
|
(34
|
)
|
|
(34
|
)
|
|
|
|
-0-
|
%
|
|
-0-
|
%
|
|
-0-
|
%
|
9.
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. 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.
On
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.
Pursuant
to a Securities Purchase Agreement dated February 2, 2006 ($1,500,000 principal
amount) and March 8, 2006 ($1,500,000 principal amount) we issued to Cornell
Capital Partners, LP (“Cornell”) $3,000,000 principal amount of the Company’s
Secured Convertible Debentures due February 1, 2009 (the “Debentures”) at face
amount, and five year Warrants to purchase 4,200,000 shares of Common Stock
at
the price of $0.287 per share and five year B Warrants to purchase 300,000
shares of Common Stock at a price of $0.3444 per share.
The
Debentures are convertible at a price equal to the lesser of (i) $0.287 per
share (“Fixed Conversion Price”), or (ii) 95% of the lowest volume weighted
average price of the Common Stock on the market on which the shares are listed
or traded during the 30 trading days immediately preceding the date of
conversion (“Market Conversion Price”). Interest is payable at maturity at the
rate of 6% per annum in cash or shares of Common Stock valued at the conversion
price then in effect.
Cornell
has agreed that (i) it will not convert the Debenture or exercise the Warrants
if the effect of such conversion or exercise would result in its and its
affiliates’ holdings of more than 4.9% of the outstanding shares of Common
Stock, (ii) neither it nor its affiliates will maintain a short position
or
effect short sales of the Common Stock while the Debentures are outstanding,
and
(iii) no more than $300,000 principal amount of the Debenture may be converted
at the Market Conversion Price during a calendar month.
On
August
24, 2007, we issued and sold an aggregate of $600,000 principal amount
promissory notes bearing interest at a rate of 12% per annum and warrants
to
purchase an aggregate of 150,000 shares of our common stock to three investors
including Thomas Moore, our Chief Executive Officer. Mr. Moore invested
$400,000
and received warrants for the purchase of 100,000 shares of Common Stock.
The
promissory note and accrued but unpaid interest thereon are convertible
at the
option of the holder into shares of our common stock upon the closing by
the
Company of a sale of its equity securities aggregating $3,000,000 or more
in
gross proceeds to the Company at a conversion rate which shall be the greater
of
a price at which such equity securities were sold or the price per share
of the
last reported trade of our common stock on the market on which the common
stock
is then listed, as quoted by Bloomberg LP. At any time prior to conversion,
we
have the right to prepay the promissory notes and accrued but unpaid interest
thereon. Mr. Moore converted his $400,000 bridge investment into 2,666,667
shares of common stock and 2,000,000 $0.20 Warrants based on the terms
of the
Private Placement. He was paid $7,101 interest in cash.
On
October 17, 2007, pursuant to a Securities Purchase Agreement, we completed
a
private placement resulting in $7,384,235.10 in gross proceeds, pursuant
to
which we sold 49,228,334 shares of common stock at a purchase price of $0.15
per
share solely to institutional and accredited investors. Each investor received
a
five-year warrant to purchase an amount of shares of common stock that equals
75% of the number of shares of common stock purchased by such investor in
the
offering.
Concurrent
with the closing of the private placement, the Company sold for $1,996,700
to
CAMOFI Master LDC and CAMHZN Master LDC, affiliates of its financial advisor,
Centrecourt Asset Management (“Centrecourt”), an aggregate of
(i) 10,000,000 shares of Common Stock, (ii) 10,000,000 warrants
exercisable at $0.20 per share, and (iii) 5-year warrants to purchase an
additional 3,333,333 shares of Common Stock at a purchase price of $0.001
per
share (the “$0.001 Warrants”). The Company and the two purchasers agreed that
the purchasers would be bound by and entitled to the benefits of the Securities
Purchase Agreement as if they had been signatories thereto. The $0.20 Warrants
and $0.001 Warrants contain the same terms, except for the exercise price.
Both
warrants provide that they may not be exercised if, following the exercise,
the
holder will be deemed to be the beneficial owner of more than 9.99% of the
Company’s outstanding shares of Common Stock. Pursuant to a consulting agreement
dated August 1, 2007 with Centrecourt with respect to the anticipated financing,
in which Centrecourt was engaged to act as the Company’s financial advisor,
Registrant paid Centrecourt $328,000 in cash and issued 2,483,333 warrants
exercisable at $0.20 per share to Centrecourt, which Centrecourt assigned
to the
two affiliates.
All
of
the $0.20 Warrants and $0.001 Warrants provide for adjustment of their exercise
prices upon the occurrence of certain events, such as payment of a stock
dividend, a stock split, a reverse split, a reclassification of shares, or
any
subsequent equity sale, rights offering, pro
rata
distribution, or any fundamental transaction such as a merger, sale of all
of
its assets, tender offer or exchange offer, or reclassification of its common
stock. If at any time after October 17, 2008 there is no effective registration
statement registering, or no current prospectus available for, the resale
of the
shares underlying the warrants by the holder of such warrants, then the warrants
may also be exercised at such time by means of a “cashless
exercise.”
In
connection with the private placement, we entered into a registration rights
agreement with the purchasers of the securities pursuant to which we agreed
to
file a registration statement with the Securities and Exchange Commission
with
an effectiveness date within 90 days after the final closing of the offering.
The resale of 49,228,334 shares of common stock and 36,921,250 shares underlying
the warrants is being registered in its prospectus. The registration statement
is anticipated to be declared effective on January 18, 2008. See Item
1:“Description of Business - Recent Developments.”
At
the
closing of this private placement, we exercised our right under an agreement
dated August 23, 2007 with YA Global Investments, L.P. f/k/a Cornell Capital
Partners, L.P. (“Yorkville”), to redeem the outstanding $1,700,000 principal
amount of our Secured Convertible Debentures due February 1, 2009 owned by
Yorkville, and to acquire from Yorkville warrants expiring February 1, 2011
to
purchase an aggregate of 4,500,000 shares of our common stock. We paid an
aggregate of (i) $2,289,999 to redeem the debentures at the principal
amount plus a 20% premium and accrued and unpaid interest, and
(ii) $600,000 to repurchase the warrants.
NONE
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
8 B: Other Information.
PART
III
The
following are our executive officers and directors and their respective ages
and
positions as of October 31, 2007:
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Thomas
Moore (1)
|
|
56
|
|
Chief
Executive Officer and Chairman of the Board of
Directors
|
|
|
|
|
|
Dr.
James Patton (2)
|
|
50
|
|
Director
|
|
|
|
|
|
Roni
A. Appel (1) (4)
|
|
40
|
|
Director
|
|
|
|
|
|
Dr.
Thomas McKearn (3)
|
|
56
|
|
Director
|
|
|
|
|
|
Richard
Berman (2) (3) (4)
|
|
63
|
|
Director
|
|
|
|
|
|
Martin
R. Wade III
|
|
56
|
|
Director
|
|
|
|
|
|
Dr.
John Rothman
|
|
59
|
|
Vice
President, Clinical Development
|
|
|
|
|
|
Fred
Cobb
|
|
60
|
|
Vice
President, Finance and Principal Financial
Officer
|
(1) Member
of
the Nominating and Corporate Governance Committee
(2) Member
of
the Audit Committee
(3) Member
of
the Compensation Committee
(4) Member
of
the Finance Committee
Thomas
A. Moore. Effective
December 15, 2006, Thomas Moore was appointed our Chairman and Chief Executive
Officer. He is currently also a Director of El Dorado Inc., a
targeted marketer to unassimilated Hispanics; Medmeme, which conducts key
medical opinion leader profiling; MD Offices, an electronic medical records
provider; and Opt-e-scrip, Inc., which markets a clinical system to compare
multiple drugs in the same patient. He has also serves as Chairman of the Board
of Directors of Mayan Pigments, Inc., which has developed and patented Mayan
pigment technology. Previously, from June 2002 to June 2004 Mr. Moore was
President and Chief Executive Officer of Biopure Corporation, a developer of
oxygen therapeutics that are intravenously administered to deliver oxygen to
the
body’s tissues. From 1996 to November 2000 he was President and Chief Executive
Officer of Nelson Communications. Prior to 1996, Mr. Moore had a 23-year career
with the Procter & Gamble Company in multiple managerial positions,
including President of Health Care Products where he was responsible for
prescription and over-the-counter medications worldwide, and Group Vice
President of the Procter & Gamble Company.
Mr.
Moore
is subject to a five year injunction, which came about because of a civil action
captioned Securities & Exchange Commission v. Biopure Corp. et al., No.
05-11853-PBS (D. Mass.), filed on September 14, 2005, which alleged that Mr.
Moore made and approved misleading public statements about the status of FDA
regulatory proceedings concerning a product manufactured by his former employer,
Biopure Corp. Mr. Moore vigorously defended the action. On December 11, 2006,
the SEC and Mr. Moore jointly sought a continuance of all proceedings based
upon
a tentative agreement in principle to settle the SEC action. The SEC’s
Commissioners approved the terms of the settlement, and the Court formally
adopted the settlement.
Dr.
James Patton. Dr.
Patton, a Director since February 2002 served as Chairman of our Board of
Directors from November 2004 until December 31, 2005 and as Advaxis’ Chief
Executive Officer from February 2002 to November 2002. Since February 1999,
Dr.
Patton has been 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 also 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 been a Director since November 2004. He was President and Chief
Executive Officer from January 1, 2006 and Secretary and Chief Financial Officer
from November 2004, until he resigned as Chief Financial Officer on September
7,
2006 and as President, Chief Executive Officer and Secretary on December 15,
2006. He has provided consulting services to us through LVEP Management, LLC,
since January 19, 2005. From 1999 to 2004, he has been a partner and managing
director of LVEP Equity Partners (f/k/a LibertyView Equity Partners). From
1998
until 1999, he was a 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 July 2002. Prior
thereto he served as an Advaxis director since July 2002. He brings to us a
20
plus year experience in the translation of biotechnology science into
oncological products. 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 been
a Director since September 1, 2005. In the last five years, he served as a
professional director and/or officer of about a dozen public and private
companies. He is currently Chairman of Nexmed, a public biotech company,
National Investment Managers, and Secure Fortress Technology. Mr. Berman is
a
director of eight public companies: Dyadic International, Inc., Broadcaster,
Inc., Easy Link Services International, Inc., NexMed, Inc., National Investment
Managers, Advaxis, Inc., NeoStem, Inc., and Secure Fortress Technology Systems,
Inc. Previously, Mr. Berman worked at Goldman Sachs and 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.
Martin
R. Wade III.
Mr. Wade
was appointed to the Board on March 29, 2006. Since August 2001, he has been
Chief Executive Officer of International Microcomputer Software Inc. Since
May
2000, Mr. Wade has also been CEO of Bengal Capital Partners, LLC, a merger
and
acquisition firm. Mr. Wade currently serves as a Director of the following
publicly traded companies: International Microcomputer Software Inc., Alliance
One, Inc., Nexmed and Command Security Corp. He is a Director and the Chairman
of the Audit Committee of Command Security Corp. From April 2000 until December
2001, Mr. Wade served as Chief Executive Officer, Executive Vice President
and
Director of Digital Creative Development Corporation, an acquisition and
investment company. From June 1998 until April 2000, Mr. Wade was as Managing
Director of Investment Banking for Prudential Securities, Inc. Prior to joining
Prudential Securities, Inc. in 1998, Mr. Wade served in progressive management
roles with Bankers Trust Company, Lehman Brothers, CJ Lawrence, Morgan Grenfell,
Price Waterhouse Company and Salomon Brothers over a 23 year period. Mr. Wade
has been deeply involved in mergers and acquisitions, corporate finance and
investment banking throughout his career. Mr. Wade received a Master of Business
Administration in Finance from the University of Wyoming in 1975 and a Bachelor
of Science in Business Administration from West Virginia University in 1971.
From 1971 through 1975, Mr. Wade also served as a Captain in the United States
Air Force.
John
Rothman, Ph.D.
Dr.
Rothman joined us in March 2005 as Vice President of Clinical Development.
From
2002 to 2005, Dr. Rothman was Vice President and Chief Technology Officer of
Princeton Technology Partners. Prior to that he was involved in the development
of the first interferon at Schering Inc, was director of a variety of clinical
development sections at Hoffman LaRoche, and the Senior Director of Clinical
Data Management at Roche. While at Roche his work in Kaposi’s Sarcoma became the
clinical basis for the first filed BLA which involved the treatment of AIDS
patients with interferon.
Fredrick
D. Cobb.
Mr.
Cobb joined us in February 2006 as the Vice President of Finance and on
September 7, 2006 was appointed Principal Financial Officer (PFO) and Assistant
Secretary. He was the PFO and Corporate Controller for Metaphore Pharmaceuticals
Inc., a private company, from June 2004 to December 2005 and PFO and Corporate
Controller at the public company Emisphere Technologies, Inc. from 2001 until
2004 Prior thereto he served as Vice President and Chief Financial Officer
at
MetaMorphix, Inc from 1997 to 2000. Formerly Mr. Cobb served as Group Director
of Bristol Myers-Squibb Science and Technology Group, where he had a 12-year
career in senior financial roles. Mr. Cobb holds an M.S. in Accounting from
Seton Hall University in 1997 and a B.S. degree in Management from Cornell
University.
Board
of Directors and Officers
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, other than Mr. Berman
who since joining the Board received a fee of $2,000 per month payable in shares
of our common stock (at $0.50 per share), 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, currently nine. A director 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 subject to the terms of his employment
agreement 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 year ended October 31, 2007 our board of directors held seven meetings
and
during the year ended October 31, 2006, our board of directors held three
meetings and took action by written consent on three occasions.
Audit
Committee
Audit
Committee
The
Audit
Committee of the board of directors was established in November 2004. The
Committee now consists of Mr. Berman and Dr. Patton with Mr. Berman serving
as
the Audit Committee’s financial expert as defined under Item 401(e) of
Regulation S-B of the Securities Act of 1933. The Board of Directors has
determined that the audit committee financial expert is independent as defined
in (i) Rule 10A-3(b)(i)(ii) under the Securities Exchange Act of 1934 (the
"Exchange Act") and (ii) under Section 121 B(2)(a) of the AMEX Company Guide
(although our securities are not listed on the American Stock Exchange but
are
listed on the Over-The-Counter Bulletin Board (OTC:BB). The Audit Committee
held
four meetings during the year ended October 31, 2007.
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 suggesting 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
The
Compensation Committee of the board of directors was established in November
2004. The committee now consists of Mr. Berman and Dr. McKearn. The Compensation
Committee held two meetings during the year ended October 31, 2007. The
Compensation Committee determines the salaries, incentive compensation of our
officers subject to applicable employment agreements, and provides
recommendations for the salaries and incentive compensation of our other
employees and consultants.
The
Committee’s goal is to structure our compensation program to attract, motivate,
reward and retain the management talent required to achieve corporate objectives
and thereby increase stockholder value. Its policy is 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. Accordingly, the program seeks to provide 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 Stock Option Plans. The
Committee believes 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. The Compensation Committee
reserves the right to engage services of independent consultants to perform
analyses and to make recommendations to the committee relative to executive
compensation matters. None have been retained to date.
The
Compensation Committee will annually establish, subject to the approval of
the
board of directors and any applicable employment agreements, the salaries to
be
paid to our executive officers during the coming year.
In
setting salaries, the 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
The
Nominating and Corporate Governance Committee of the board of directors
established in November 2004. presently consists of Mr. Appel and Mr. Moore.
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
including review of possible conflicts and transactions with persons
affiliated with Directors or members of management; 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.
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 each person who owns 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 year ended October 31, 2007 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.
We
have
adopted a code of ethics that applies to our officers, employees and directors,
including our principal executive officers, principal financial officer and
principal accounting officer. 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 and a copy of our code is posted on our website at
www.advaxis.com.
The
following table sets forth the information as to compensation paid to or earned
by a Chief Executive Officer during the twelve months ended October 31, 2006
and
2007 by our former and current executive management: It also provides similar
information for the other executive officers and employees, each of whom
received total compensation in excess of $100,000 for the year ended October
31,
2007:
Name
and Principal Position
|
|
Year
Ended October 31,
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Award(s) ($)
|
|
Option
Award(s) ($)
|
|
Non-Equity
Incentive Plan Compensation (#)
|
|
Nonqualified
Deferred Compensation Earnings
($)
|
|
All
Other Compensation
|
|
Total
($)
|
|
Thomas
Moore*
|
|
|
2007
|
|
$
|
220,769
|
(1)
|
$
|
-
|
(2)
|
$
|
172,500
|
(3)
|
$
|
129,813
|
(4)
|
$
|
|
|
|
-
|
|
$
|
23,976
|
(5)
|
$
|
547,058
|
|
CEO
and Chairman
|
|
|
2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
John Rothman
|
|
|
2007
|
|
$
|
173,923
|
|
$
|
45,000
|
(6)
|
$
|
35,508
|
(7)
|
$
|
23,128
|
(8)
|
|
-
|
|
|
-
|
|
$
|
27,497
|
(9)
|
$
|
305,057
|
|
VP
Clinical Development
|
|
|
2006
|
|
$
|
176,538
|
|
$
|
10,000
|
(10)
|
$
|
14,800
|
(11)
|
$
|
19,894
|
(12)
|
|
-
|
|
|
-
|
|
$
|
23,328
|
(13)
|
$
|
244,552
|
|
|
|
|
2005
|
|
|
-
|
|
$
|
126,867
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
126,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fred
Cobb
|
|
|
2007
|
|
$
|
144,731
|
|
$
|
28,000
|
(14)
|
$
|
16,360
|
(15)
|
$
|
13,863
|
(16)
|
|
-
|
|
|
-
|
|
$
|
9,358
|
(17)
|
$
|
212,311
|
|
VP
Finance
|
|
|
2006
|
|
$
|
97,298
|
|
|
-
|
|
$
|
|
|
$
|
4,592
|
(19)
|
|
-
|
|
|
-
|
|
$
|
1,292
|
(20)
|
$
|
103,181
|
|
|
|
|
2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Vafa Shahabi
|
|
|
2007
|
|
$
|
119,154
|
|
$
|
20,000
|
(21)
|
$
|
16,360
|
(22)
|
$
|
14,529
|
(23)
|
|
-
|
|
|
-
|
|
$
|
4,396
|
(24)
|
$
|
174,438
|
|
Director
Research &
|
|
|
2006
|
|
$
|
104,702
|
|
|
-
|
|
$
|
14,800
|
(25)
|
$
|
7,999
|
(26)
|
|
-
|
|
|
-
|
|
$
|
3,288
|
(27)
|
$
|
130,789
|
|
Development
|
|
|
2005
|
|
$
|
67,390
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
67,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roni
Appel
|
|
|
2007
|
|
$
|
229,167
|
(28)
|
$
|
250,000
|
(29)
|
$
|
200,000
|
(30)
|
$
|
251,269
|
(31)
|
|
-
|
|
|
-
|
|
$
|
35,590
|
(32)
|
$
|
966,026
|
|
Former
President, CEO,
|
|
|
2006
|
|
$
|
243,042
|
|
$
|
20,000
|
(33)
|
$
|
44,048
|
(34)
|
$
|
131,229
|
(35)
|
|
-
|
|
|
-
|
|
$
|
53,774
|
(36)
|
$
|
492,092
|
|
Secretary,
CFO and
|
|
|
2005
|
|
$
|
136,500
|
|
|
-
|
|
$
|
3,014
|
(37)
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
14,480
|
(38)
|
$
|
185,567
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Todd Derbin
|
|
|
2007
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Former
President and
|
|
|
2006
|
|
$
|
73,197
|
(39)
|
|
-
|
|
$
|
3,833
|
(40)
|
$
|
11,975
|
(41)
|
|
-
|
|
|
-
|
|
$
|
4,043
|
(42)
|
$
|
93,048
|
|
CEO
|
|
|
2005
|
|
$
|
225,000
|
|
|
-
|
|
$
|
45,000
|
(43)
|
|
117,429
|
(41)
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
387,429
|
|
*Thomas
Moore joined the Company on December 15, 2006 as CEO and Chairman therefore
no
compensation was earned in fiscal year 2006.
1.
|
In
fiscal year 2007 his base annual compensation was $250,000 and as
of
November 1, 2007 it was increased to $350,000 based on the closing
of the
raise milestone per his employment agreement (the
“agreement”).
|
2.
|
There
was no bonus provided in his agreement.
|
3.
|
Per
his agreement he also earned 750,000 shares of the Company’s common stock
valued at $0.23 per share (closing market price on October 17, 2007)
based
on the closing of the raise milestone. The stock has not yet been
issued.
|
4.
|
Per
his agreement he was also granted 2,400,000 options of the Company’s
common stock at a market price $0.143/share (December 15, 2006) vesting
monthly over a 24 month period of which 1,200,001 are based on the
grant
date fair value price of $0.1363 (valued using Black Sholes
model).
|
5.
|
Based
on the Company’s cost of his coverage for health care and the payment of
interest earned on his Bridge loan to the Company.
|
6.
|
Cash
bonus earned in fiscal year 2006 paid in fiscal year
2007.
|
7.
|
Compensation
paid in stock in lieu of cash. The calculation prorates $30,000 on
a
monthly basis divided by the average monthly stock price with the
minimum
set at $0.20/share. The value is based on the market price when the
shares
are issued.
|
8.
|
Based
on the vesting of options for three grants (810,000 granted) of the
Company’s common stock at a market price ranging from $0.287/share to
$0.165/share vesting monthly over a 4 year period based on the grant
date
fair value price ranging from $0.25 to $0.10 (valued using Black
Sholes
model).
|
9.
|
Based
on the Company’s cost of his coverage for health care and the 401K Company
match.
|
10.
|
Cash
bonus earned in fiscal year 2005 paid in fiscal year
2006.
|
11.
|
Compensation
in stock in lieu of cash. Earned 80,000 shares of common stock
in fiscal 2005 issued in fiscal 2006.
|
12.
|
Based
on the vesting of options for two grants (510,000 granted) of the
Company’s common stock at a market price ranging from $0.287/share to
$0.165/share vesting monthly over a 4 year period based on the grant
date
fair value price ranging from $0.25 to $0.10 (valued using Black
Sholes
model).
|
13.
|
Based
on the Company’s cost of his coverage for health care and the 401K Company
match.
|
14.
|
Cash
bonus earned in fiscal year 2006 paid in fiscal year
2007.
|
15.
|
Compensation
paid in stock in lieu of cash. The calculation prorates $20,000 on
a
monthly basis divided by the average monthly stock price with the
minimum
set at $0.20/share. The value is based on the market price when the
shares
are issued.
|
16.
|
Based
on the vesting of options for three grants (450,000 granted) of the
Company’s common stock at a market price ranging from $0.26/share to
$0.16/share vesting monthly over a 4 year period based on the grant
date
fair value price ranging from $0.25 to $0.154 (valued using Black
Sholes
model).
|
17.
|
Based
on the Company’s cost of the 401K Company match.
|
18.
|
Compensation
in stock in lieu of cash. The calculation prorates $20,000 on a monthly
basis divided by the average monthly stock price with the minimum
set at
$0.20/share. The program commenced in July 2006 therefore this amount
represents only a 4 months accrual but no stock was issued in Fiscal
2006.
|
19.
|
Based
on the vesting of options for two grants (300,000 granted) of the
Company’s common stock at a market price ranging from $0.26/share to
$0.16/share vesting monthly over a 4 year period based on the grant
date
fair value price ranging from $0.25 to $0.154 (valued using Black
Sholes
model).
|
20.
|
Based
on the Company’s cost of the 401K Company match.
|
21.
|
Cash
bonus earned in fiscal year 2006 paid in fiscal year
2007.
|
22.
|
Compensation
paid in stock in lieu of cash. The calculation prorates $20,000 on
a
monthly basis divided by the average monthly stock price with the
minimum
set at $0.20/share. The value is based on the market price when the
shares
are issued.
|
23.
|
Based
on the vesting of options for three grants (400,000 granted) of the
Company’s common stock at a market price ranging from $0.287/share to
$0.16/share vesting monthly over a 4 year period based on the grant
date
fair value price ranging from $0.23 to $0.10 (valued using Black
Sholes
model).
|
24.
|
Based
on the Company’s cost of the 401K Company match.
|
25.
|
Includes
compensation in stock in lieu of cash. Earned 80,000 shares of common
stock in fiscal 2005 issued in fiscal 2006.
|
26.
|
Based
on the vesting of options for three grants (400,000 granted) of the
Company’s common stock at a market price ranging from $0.287/share to
$0.16/share vesting monthly over a 4 year period based on the grant
date
fair value price ranging from $0.23 to $0.10 (valued using Black
Sholes
model).
|
27.
|
Based
on the Company’s cost of the 401K Company match.
|
28.
|
Mr.
Appel served as consultant (LVEP) in the capacity of Secretary and
CFO in
2004 and 2005. He was appointed President and CEO on January 1, 2006.
He
resigned his position of President, CEO and Secretary on December
15, 2006
and resigned from his CFO position on September 7, 2006. Pursuant
to the
consulting agreement, dated as of January 19, 2005, and amended on
April
15, 2005, October 31, 2005, and December 15, 2006, the consultant
continues as a director and consultant to the Company and over the
24
month term of the agreement, as amended, is to devote 50% of his
time to
perform consulting services over the first 12 months of the consulting
period and be paid at a annual rate of $250,000 with benefits. He
is to
receive severance payments over an additional 12 months of $10,416.67
per
month and be reimbursed for family health care. Mr. Appel’s compensation
was paid through our consulting agreement with LVEP.
|
29.
|
Represents
a 2006 cash bonus of $250,000 paid in calendar and fiscal year 2007
per
his amended consulting agreement dated December 15,
2006.
|
30.
|
Include
the 1,000,000 shares of common stock awarded on December 15, 2006
and
issued on January 3, 2007 per his amended consulting agreement dated
December 15, 2006.
|
31.
|
Based
on the vesting, accelerated vesting (as per his amended agreement
of
December 15, 2006) and changes in the fair value of options for two
grants: (i) 1,114,344 granted at $0.287/share and (ii) 1,173,179
granted
at $0.217/share of the Company’s common stock at the fair market value of
$0.1785/share and $0.1834/share, respectively using Black Sholes
model.
|
32.
|
Other:
reimbursements for payroll taxes, healthcare cost, workers compensation,
401K match and employment related cost.
|
33.
|
Represents
2005 bonus of $20,000 cash paid in 2006
|
34.
|
Represents
2005 bonus in stock 238,528 shares paid in 2006 at
$.185/share.
|
35.
|
Based
on the vesting for two grants: (i) 1,114,344 granted at $0.287/share
and
(ii) 1,173,179 granted at $0.217/share of the Company’s common stock at
the fair market value of $0.1790/share and $0.1806/share, respectively
using Black Sholes model.
|
36.
|
Based
on the Company’s cost of his coverage for health care, payroll taxes and
401K Company match.
|
37.
|
Assumed
company stock of 10,500 shares in lieu of bonus a
$0.287/share.
|
38.
|
Healthcare
and visa expenses
|
39.
|
Mr.
Derbin resigned as President and CEO on December 31, 2005 and as
a
Director September 7, 2006.
|
40.
|
His
2005 bonus of $3,850 was paid in 2006 by issuance of 17,422 shares
of
Company’s Common Stock based on $0.22 per share.
|
41.
|
Based
on the vesting of grants and its fair market value using the Black
Sholes
model. All vested options expired unused as of January 1,
2007.
|
42.
|
Health
care insurance
|
43.
|
His
2004 bonus of $45,000 was paid in 2005 by issuance of 156,974 shares
of
common stock valued at $0.287 per
share.
|
Director
Compensation Table 2007
This
table represents their compensation paid to our directors during the year end
of
October 31, 2007
Name
|
|
Year
|
|
Fees
Earned or Paid in Cash
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan Compensation
($)
|
|
Nonqualified
Deferred Compensation Earnings
($)
|
|
All
other Compensation
($)
|
|
Total
($)
|
|
Thomas
A. Moore
|
|
|
2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roni
A. Appel
|
|
|
2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
James Patton
|
|
|
2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
479
|
|
|
|
|
|
|
|
|
|
|
|
479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Thomas McKearn
|
|
|
2007
|
|
|
-
|
|
|
-
|
|
|
11,424
|
(1)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,424
|
|
|
|
|
2006
|
|
|
-
|
|
|
-
|
|
|
9,143
|
(1)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9,143
|
|
|
|
|
2005
|
|
|
-
|
|
|
-
|
|
|
4,242
|
(1)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin
R. Wade III
|
|
|
2007
|
|
|
-
|
|
|
-
|
|
|
11,424
|
(1)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,424
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
6,971
|
(1)
|
|
|
|
|
|
|
|
|
|
|
6,971
|
|
|
|
|
2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Berman
|
|
|
2007
|
|
|
-
|
|
|
8,640
|
(2)
|
|
10,000
|
(3)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
18,640
|
|
|
|
|
2006
|
|
|
|
|
|
11,680
|
(2)
|
|
10,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
21,680
|
|
|
|
|
2005
|
|
|
-
|
|
|
-
|
|
|
11,000
|
(3)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,000
|
|
|
1.
|
Based
on the vesting of 150,000 options of the Company’s common stock granted on
3/29/2006 at a market price of $0.261 share. Vests quarterly over
a three
year period at a fair value of $0.1434 share value Black Scholes
Model at
grant date. In 2005 and 2006 based on vesting of 150,000 options
of the
Company’s common stock granted on 10/1/2003 at a market price of $0.1952
share. Vests quarterly over a three year period at a fair value of
$0.14
per share (Black Scholes Model).
|
|
2.
|
Receives
$2,000 a month in shares of the Company’s stock valued at $0.50 share. The
value of the stock based on 4,000 shares times the average monthly
values.
|
|
3.
|
Based
on the vesting of 400,000 options of the Company’s common stock granted on
2/1/2005 at a exercise price of $0.287 share and the fair value of
$0.100/share. Vests quarterly over a four year period at a (value
is Black
Scholes model at grant date.)
|
Option
Grants In Recent Fiscal Years
The
following table sets forth each grant of stock options during the twelve month
period ended October 31, 2005, 2006 and 2007 to our current and former executive
officers under the 2004 and 2005 stock option plans as well as the non plan.
The
assumed 5% and 10% rates of stock price appreciation are provided in accordance
with rules of the SEC and do not represent our estimate or projection of our
common stock price. Actual gains, if any, on stock option exercises are
dependent on the future performance of our common stock, overall market
conditions and the option holders’ continued employment through the vesting
period. Unless the market price of our common stock appreciates over the option
term, no value will be realized from the option grants made to these executive
officers. The potential realizable values shown in the table are calculated
by
assuming that the estimated fair market value of our common stock on the date
of
grant increases by 5% and 10%, respectively, during each year of the option
term.
The
outstanding stock options described above became options for our common stock
upon the Share Exchange.
Name
|
|
Year
|
|
Number
Of Securities Underlying Options Granted
|
|
Percent
Of Total Options Granted To Employees In Fiscal
Period
|
|
Exercise Price
|
|
Expiration Date
|
|
Potential
Realizable Value At Assumed Annual Rates of Stock Price Appreciation
For Option
Term($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5%
|
|
10%
|
|
Thomas
Moore
|
|
|
2007
|
|
|
2,400,000
|
(1)
|
|
82
|
%
|
|
0.143
|
|
|
12/15/2016
|
|
$
|
215,756
|
|
$
|
545,919
|
|
CEO
Chairman
|
|
|
2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
John Rothman
|
|
|
2007
|
|
|
300,000
|
|
|
10
|
%
|
$
|
0.165
|
|
|
2/15/2017
|
|
$
|
31,119
|
|
$
|
78,738
|
|
Vice
President Clinical
|
|
|
2006
|
|
|
150,000
|
|
|
7
|
%
|
$
|
0.26
|
|
|
3/29/2016
|
|
$
|
24,528
|
|
$
|
62,167
|
|
|
|
|
2005
|
|
|
360,000
|
|
|
11
|
%
|
$
|
0.29
|
|
|
3/1/2015
|
|
$
|
64,988
|
|
$
|
164,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fred
Cobb
|
|
|
2007
|
|
|
150,000
|
|
|
5
|
%
|
$
|
0.165
|
|
|
2/15/2017
|
|
$
|
15,559
|
|
$
|
39,369
|
|
Vice
President Finance
|
|
|
2006
|
|
|
150,000
|
|
|
7
|
%
|
$
|
0.26
|
|
|
2/20/2016
|
|
$
|
19,811
|
|
$
|
50,212
|
|
|
|
|
2006
|
|
|
150,000
|
|
|
7
|
%
|
$
|
0.16
|
|
|
9/20/2006
|
|
$
|
15,094
|
|
$
|
38,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Vafa Shahabi
|
|
|
2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Director
of Research &
|
|
|
2006
|
|
|
100,000
|
|
|
5
|
%
|
$
|
0.24
|
|
|
7/1/2016
|
|
$
|
15,094
|
|
$
|
38,257
|
|
Development
|
|
|
2006
|
|
|
150,000
|
|
|
7
|
%
|
$
|
0.16
|
|
|
9/20/2016
|
|
$
|
15,094
|
|
$
|
38,257
|
|
|
|
|
2005
|
|
|
150,000
|
|
|
5
|
%
|
$
|
0.29
|
|
|
3/1/2015
|
|
$
|
22,641
|
|
$
|
57,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roni
Appel *
|
|
|
2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Secretary
and Chief
|
|
|
2006
|
|
|
1,173,179
|
(2)
|
|
53
|
%
|
$
|
0.217
|
|
|
12/31/2015
|
|
$
|
160,113
|
|
$
|
405,809
|
|
Executive
Officer
|
|
|
2005
|
|
|
1,114,344
|
(3)
|
|
34
|
%
|
$
|
0.29
|
|
|
3/31/2015
|
|
$
|
201,165
|
|
$
|
509,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Todd Derbin (4
)*
|
|
|
2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
President,
Chief Executive Officer,
|
|
|
2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
and
Director
|
|
|
2005
|
|
|
427,796
|
|
|
13
|
%
|
$
|
0.29
|
|
|
2/1/2015
|
|
$
|
78,034
|
|
$
|
197,753
|
|
(1)
|
As
of December 15, 2006, 2,400,000 options were granted per his employment
agreement.
|
|
|
(2)
|
As
of January 1, 2007, 1,356,237 previously granted and vested but
unexercised options were forfeited.
|
|
|
(3)
|
Reflects
a grant in January 2006 post fiscal year end increasing the number
of
options to 5% of the outstanding shares and options of the Company
as of
December 31, 2005.
|
|
|
(4)
|
As
of January 1, 2007 all options granted to Mr. Derbin expired
unexercised.
|
|
|
*
|
Resigned
|
Aggregate
Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
No
options were exercised by a current or past executive officer in the 12 months
ended October 31, 2005 and 2006 and 2007. The following table sets forth the
value of unexercised options with respect to each of the named executive and
former executive officers.
|
|
|
|
|
|
Number
Of Securities
Underlying
Unexercised Options
At
Fiscal
Year-End (1)
|
|
Value
Of Unexercised
In-The-Money
Options
At
Fiscal Year-End($) (2)
|
|
Name
|
|
|
Year
|
|
|
Shares
Acquired On Exercise
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
Moore
|
|
|
2007
|
|
|
0
|
|
|
1,000,000
|
(3)
|
|
57,000
|
|
$
|
1,400,000
|
|
$
|
79,800
|
|
CEO
and Chairman
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
0
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
John Rothman
|
|
|
2007
|
|
|
0
|
|
|
281,250
|
|
|
528,750
|
|
$
|
-
|
|
$
|
10,500
|
|
VP
Clinical Development
|
|
|
2006
|
|
|
0
|
|
|
135,000
|
|
|
375,000
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
2005
|
|
|
0
|
|
|
-
|
|
|
360,000
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fred
Cobb
|
|
|
2007
|
|
|
0
|
|
|
150,000
|
|
|
300,000
|
|
$
|
1,500
|
|
$
|
12,750
|
|
Vice
President Finance
|
|
|
2006
|
|
|
0
|
|
|
-
|
|
|
300,000
|
|
$
|
-
|
|
$
|
6,000
|
|
|
|
|
2005
|
|
|
0
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Vafa Shahabi
|
|
|
2007
|
|
|
0
|
|
|
162,500
|
|
|
237,500
|
|
$
|
1,500
|
|
$
|
4,500
|
|
Director
Research &
|
|
|
2006
|
|
|
0
|
|
|
56,250
|
|
|
343,750
|
|
$
|
-
|
|
$
|
6,000
|
|
Development
|
|
|
2005
|
|
|
0
|
|
|
-
|
|
|
150,000
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roni
Appel (4 )
|
|
|
2007
|
|
|
0
|
|
|
2,379,090
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Secretary,
Chief Financial
|
|
|
2006
|
|
|
0
|
|
|
997,045
|
|
|
1,382,045
|
|
$
|
-
|
|
$
|
-
|
|
Officer,
and Director
|
|
|
2005
|
|
|
0
|
|
|
254,075
|
|
|
951,835
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Todd Derbin
|
|
|
2007
|
|
|
0
|
|
|
-
|
|
|
-
|
|
$
|
0
|
|
$
|
0
|
|
President,
Chief Executive
|
|
|
2006
|
|
|
0
|
|
|
1,356,236
|
(5)
|
|
-
|
|
$
|
4,445
|
|
|
-
|
|
Officer,
and Director
|
|
|
2005
|
|
|
0
|
|
|
1,273,135
|
|
|
83,101
|
|
$
|
47,033
|
|
$
|
4,017
|
|
(1)
|
Certain
of the options are immediately exercisable 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
|
|
|
(2)
|
The
price at end of fiscal year ending October 31, 2007 and 2006 is based
on
the closing price of $0.20 per share for both dates. In 2005 the
price is
based on a price per share of $0.25, the highest-bid price on October
31,
2005 quoted on the OTC:BB.
|
(3)
|
As
of December 15, 2006 he was granted 2,400,000 options at a strike
price of
$0.143 vesting monthly over a 24 month period per his hiring
agreement.
|
(4)
|
As
of December 15, 2006 all Mr. Appel’s options become fully vested and are
exercisable until the end of the
contract.
|
(5)
|
As
of January 1, 2007 all these options were unexercised and
forfeited.
|
Board
of Directors Compensation
With
the
exception of Mr. Berman who receives $2,000 a month in shares of Common Stock
at
a set price of $0.50 per share (4,000 shares), none of our directors so far
has
received any compensation for his services as a director other than stock
options and reimbursement of expenses. Each director is granted options upon
joining the board and as the compensation Committee so directs.
2004
Stock Option Plan
In
November 2004, our board of directors adopted and stockholders approved the
2004
Stock Option Plan (“2004 Plan”). The 2004 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, in addition to employees, to non-employee directors, and
consultants.
The
2004
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 to the extent vested at termination,
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 2004 Plan within ten years from the effective date
of
the 2004 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 2004 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.
2005
Stock Option Plan
In
June
2006, our board of directors adopted and stockholders approved on June 6, 2006,
the 2005 Stock Option Plan (“2005 Plan”).
The
2005
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
2005
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 2005 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 2005 Plan within ten years from the effective date
of
the 2005 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
2005
Plan cannot exercise these options more than ten years from the date of grant.
Options granted under the 2005 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 2005
Plan.
Employment
Agreements
Thomas
A. Moore.
On
August 21, 2007, the Company and Mr. Moore executed an employment agreement
memorializing their oral agreement on December 15, 2006. It provides for him to
receive an annual salary of $250,000 which increased to $350,000 upon the sale
by the Company in October 2007 of its securities for gross proceeds of at least
$4,000,000 (the gross proceeds were $9,689,000) which pursuant to the terms
of
the agreement will entitle him to receive in event of termination of his
employment by the Company severance equal to a year’s salary at the then
compensation level. If the Company effects sales of securities during his term
for 10,000,000 (including the foregoing sale) the agreement provides that he
is
to be granted an additional 750,000 shares of our common stock. On December
15,
2006 the commencement date of his employment he was granted a five year option
to purchase 2,400,000 shares of our common stock a price of $0.143 per share
(market close 12/15/2006) which vest in equal monthly installments over a 24
month period ending December 2008). The agreement also provides for an award
to
him of 2,400,000 shares of common stock if during his term the “market price” as
defined of our common stock is at least $0.40 per share for 40 consecutive
days.
The agreement also provides for the grant of the options to be granted under
the
agreement and 100% vesting of all his options upon a sale or change of control
of the Company while he is employed.
Vafa
Shahabi, Ph.D.
Dr.
Shahabi 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 $115,000 per annum
with a potential bonus of $20,000. In addition, Dr. Shahabi was granted 150,000
options per her employment agreement, 100,000 in July 2006 and 150,000 in
September. In July 1, 2006 his salary increased by $20,000 annually payable
in
stock to issued every July 1st and January 1st. As
of
November 1, 2007 her base compensation was increased to $135,000.
Dr.
John Rothman.
The
Company entered into an employment agreement with Dr. 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 thereafter 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 fiscal year 2006 he was
paid a bonus of $10,000 in cash plus $14,800 in company stock. Effective January
1, 2006 his salary increased by $30,000 annually payable in stock to issued
every July 1st and January 1st (limited to conversion at $0.20 share as
minimum). In addition, Dr. Rothman was granted 360,000 stock options per his
employment agreement and was granted 150,000 options in March 2006. As
of
November 1, 2007 his base compensation was increased to $250,000.
Fredrick
D. Cobb.
The
Company entered into an employment agreement with Fred Cobb to become Vice
President of Finance effective February 20, 2006 terminable on 30 days notice.
His compensation of $140,000 per annum. Upon meeting incentives to be set by
the
Company, he will receive a bonus of up to $28,000. In July 1, 2006, his salary
increased by $20,000 annually payable in stock to issued every July 1st and
January 1 the number of shares are based on the lower of the average monthly
market price or $0.20 per share. Mr. Cobb was granted 150,000 stock options
per
his employment agreement and was granted 150,000 options in March 2006. As
of
November 1, 2007 his base compensation was increased to $180,000.
Roni
Appel.
Mr.
Appel served as our Chief Executive Officer and Chief Financial Officer (until
September 7, 2006) pursuant to the terms of the Consulting Agreement between
us
and LVEP Management LLC described under “Certain Relationships and Related
Party Transactions.”
J.
Todd Derbin.
Pursuant to his agreement dated December 31, 2005 to resign as our President
and
Chief Executive Officer, Mr. Derbin served following his resignation on December
31, 2005 as a consultant to the Company for a fee of $6,250 per month for 6
months ending June 30, 2006. Mr. Derbin continued to serve as Chairman and
a
member of the Board of directors of the Company until his resignation on
September 7, 2006.
PRINCIPAL
STOCKHOLDERS
|
·
|
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 and each person who
owns less
than 5% but is significant
nonetheless;
|
|
·
|
our
chief executive officer and each of our executive officers;
and
|
|
·
|
all
of our directors and executive officers as a
group.
|
As
used
in
the table below and
elsewhere in this the
term
beneficial
ownership
with
respect to a security consists of sole or shared voting power, including the
power to or direct the vote and/or sole or shared investment power, including
the power to dispose or direct the vote 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 October 31, 2007. Except as otherwise indicated, the stockholders
listed in the table have sole voting and investment powers with respect to
the
shares indicated.
This
table is based upon information supplied by our directors, officers, and
principal stockholders and Schedule 13Gs filed with the SEC. Unless otherwise
indicated in the footnotes to this table, and subject to community property
laws
where applicable, we believe each of the stockholders named in this table has
sole voting and investment power with respect to the shares indicated as
beneficially owned. Applicable percentages are based on 107,957,977 shares
of
common stock outstanding as of October 31, 2007, adjusted as required by the
rules promulgated by the SEC. Unless otherwise indicated, the address for each
of the individuals and entities listed in this table is the technology Centre
of
NJ,
675
Route One, Suite B113, North Brunswick, NJ 08902.
Name
and Address of Beneficial Owner
|
|
Number
of Shares of Registrant
Common
Stock Beneficially
Owned
as of October 31, 2007
|
|
Percentage
of Class
Beneficially
Owned*
|
|
|
|
|
4,616,668
|
(3)
|
|
4.2
|
|
|
|
|
|
|
|
|
|
J.
Todd Derbin(1)
|
|
|
974,090
|
(4)
|
|
0.9
|
|
|
|
|
|
|
|
|
|
Roni
Appel(1)(2)
|
|
|
6,355,378
|
(5)
|
|
5.8
|
|
|
|
|
|
|
|
|
|
Richard
Berman(1)
|
|
|
379,000
|
(6)
|
|
0.4
|
|
|
|
|
|
|
|
|
|
Dr.
James Patton(1)
|
|
|
3,145,666
|
(7)
|
|
2.9
|
|
|
|
|
|
|
|
|
|
Dr.
Thomas McKearn(1)
|
|
|
503,796
|
(8)
|
|
0.5
|
|
|
|
|
|
|
|
|
|
Martin
R. Wade III(1)
|
|
|
87,500
|
(9)
|
|
0.1
|
|
|
|
|
|
|
|
|
|
Dr.
John Rothman(2)
|
|
|
633,708
|
(10)
|
|
0.6
|
|
|
|
|
|
|
|
|
|
Fredrick
Cobb(2)
|
|
|
232,708
|
(11)
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Estate
of Scott Flamm(1)
|
|
|
3,114,867
|
(12)
|
|
2.9
|
|
|
|
|
|
|
|
|
|
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
|
(13)
|
|
5.9
|
|
|
|
|
|
|
|
|
|
Centrecourt
Asset Management
350
Madison Avenue
New
York, NY 10017
|
|
|
10,000,000
|
(14)
|
|
9.3
|
|
|
|
|
|
|
|
|
|
Platinum
Long Term Growth VII.
152
West 57th Street, 54th Floor
New
York, NY 10019
|
|
|
6,666,667
|
(15)
|
|
6.2
|
|
|
|
|
|
|
|
|
|
Casterigg
Master Investments, Ltd.
Sandell
Asset Management Corp.
40
W. 57 th
Street
26
th
Floor
New
York, NY 10019
|
|
|
6,633,333
|
(16)
|
|
9.99
|
|
|
|
|
|
|
|
|
|
All
Directors and Officers as a Group (8 people)
|
|
|
15,954,424
|
(17)
|
|
14.7
|
|
*
Based
on 107,957,977 shares of common stock outstanding as of October 31,
2007.
(1)
|
Director,
except for Mr. Derbin who served as a Director until his resignation
on
September 6, 2006 and Mr. Flamm served as a Director until his death
in
January 2006
|
(2)
|
Officer,
Mr. Appel ceased to be an officer on December 15, 2006
|
(3)
|
Represents
2,666,667 shares, and 1,200,001 options exercisable within 60 days
of
October 31, 2007 and 750,000 shares authorized but not issued as of
this date owned by Mr. Moore but does not reflect 2,100,000 warrants
because such warrants are not exercisable within 60 days due to the
ownership in 4.99% restriction under the current circumstances,
exercisable within the 60 Day Period.
|
(4)
|
Reflects
469,982 shares, and 504,108 warrants to purchase shares. Mr. Derbin
resigned from the board effective September 6, 2006.
|
(5)
|
Represents
3,976,288 shares, and 2,379,090 options owned by Mr. Appel (Includes
91,567 transferred from Carmel.) but does not reflect 675,897 warrants
because such warrants are not exercisable within 60 days due to the
ownership in 4.99% restriction under the current circumstances,
exercisable within the 60 Day Period. (The 675,897 includes 576,071
warrants transferred from Carmel.) Per the Third Amended LVEP Consulting
agreement dated December 15, 2006 Mr. Appel was issued 1,000,000
shares
and all his previously granted options unvested became fully vested
and
exercisable for the remainder of their term.
|
(6)
|
Reflects
92,000 shares issued, 12,000 shares earned not issued and 275,000
options
exercisable within 60 days of October 31, 2007.
|
(7)
|
Reflects
2,820,576 shares, and 73,253 options exercisable within 60 days of
October
31, 2007 and 251,837 warrants.
|
(8)
|
Reflects
179,290 shares, 170,263 options exercisable within 60 days of October
31,
2007 and 154,243 warrants.
|
(9)
|
Reflects
options exercisable within 60 days of October 31, 2007.
|
(10)
|
Reflects
275,775 shares issued, 44,808 shares earned but not issued and 313,125
options exercisable within 60 days of October 31, 2007.
|
(11)
|
Reflects
90,336 shares issued, 29,872 shares earned but not issued and 112,500
options exercisable within 60 days of October 31, 2007.
|
(12)
|
Reflects
125,772 shares, 91,567 options and 214,489 warrants owned by the
estate
and 2,621,325 shares beneficially owned by Flamm Family Partners
LP, of
which the estate is a partner and reflects 61,714 warrants. It excludes
98,664 shares and 143,796 warrants owned by an immediate family
member.
|
(13)
|
Shares
only
|
(14)
|
Reflects
an aggregate of 10,000,000 shares owned by CAMOFI Master COC and
CAMHZN
Master LDC, but does not include 15,816,666 warrants. Centrecourt
Asset
Management, LLC is the investment manager of such purchaser. All
warrants
provide they may not be exercised if following the exercise, the
holder
will be deemed to be the beneficial owner of more than 9.99% of our
outstanding shares of common stock. Based on information set forth
in a
Schedule 13G filed with the SEC on October 17, 2007 by Richard
Smithline reporting sole power to vote or direct the vote over 25,839,769
shares and the sole power to dispose or to direct the disposition
of
25,839,769 shares (comprised of 8,023,103 shares of Common Stock
and
12,653,332 shares of Common Stock underlying Warrants held by CAMOFI,
of
which Mr. Smithline is a director and 2,000,000 shares of Common
Stock and
3,163,334 shares of Common Stock underlying Warrants held by CAMHZN
Master
LDC, of which Mr. Smithline is a director). Centrecourt: 25,839,769
shares
(comprised of 8,023,103 shares of Common Stock and 12,653,332 shares
of
Common Stock underlying Warrants held by CAMOFI, of which Centrecourt
is
the investment manager and 2,000,000 shares of Common Stock and 3,163,334
shares of Common Stock underlying Warrants held by CAMHZN Master
LDC, of
which Centrecourt is the investment manager). CAMOFI Master LDC has
the
sole power to vote of direct the vote over 20,676,435 shares (comprised
of
8,023,103 shares of Common Stock and 12,653,332 shares of Common
Stock
underlying Warrants). Percent of Class: Mr. Smithline, Centrecourt
and
CAMOFI are 9.99%, 9.99% and 9.99%, respectively. Pursuant to the
terms of
the Warrant Agreements, Advaxis, Inc. has agreed that the number
of shares
of Common Stock that may be acquired by the holder of any Warrants
upon
any conversion thereof (or otherwise in respect thereof) shall be
limited
to the extent necessary to insure that, following such conversion
(or
other issuance), the total number of shares of Common Stock then
beneficially owned by such a holder does not exceed 9.99% of the
total
number issued and outstanding shares of Common Stock. If not for
the 9.99%
restriction described above, the ownership percentages held by each
Mr.
Smithline, Centrecourt and CAMOFI would be 21.3%, 21.3% and 17.5%,
respectively.
|
(15)
|
Reflects
6,666,667 shares and but excludes 5,000,000 warrants. All warrants
provide
they may not be exercised if following the exercise, the holder will
be
deemed to be the beneficial owner of more than 4.99% of our outstanding
shares of common stock.
|
(16)
|
Reflects
6,633,333 shares but excludes 4,975,000 warrants. All warrants provide
they may not be exercised if following the exercise, the holder will
be
deemed to be the beneficial owner of more than 4.99% of our outstanding
shares of common stock. Based on information set forth in a Schedule
13G
filed with the SEC on October 12, 2007 by Casterigg Master Investments
Ltd. reporting sole power to vote or direct the vote over 6,666,667
shares
and the sole power to dispose or to direct the disposition of 6,666,667
shares or 6.18% of class. As of the date of this filing, each of
Castlerigg Master Investments Ltd., Sandell Asset Management Corp.,
Castlerigg International Limited, Castlerigg International holdings
Limited and Thomas E. Sandell may be deemed the beneficial owner
of the
6,666,667 shares of Common Stock held by Castlerigg Master Investments
Ltd. In addition to the 6,666,667 shares of Common Stock beneficially
owned by Castlerigg Master Investments Ltd., Casterigg Master Investments
Ltd. Holds warrants to purchase 5,000,000 shares of Common Stock
of the
Company. However, pursuant to the terms of the warrants, Castlerigg
Master
Investments cannon exercise any of these warrants until such time
as
Castlerigg Master Investments Ltd. Would not beneficially own, after
any
exercise, more than 4.99% of the outstanding Common Stock (the
“Blocker”).
|
(17)
|
Includes
an aggregate of 4,610,732 options, 406,079 warrants and 836,681earned
but
not issued shares.
|
Item
12:
Certain
Relationships and Related Transactions, and Director Independence.
Our
policy is to enter into transactions with related parties on terms that, on
the
whole, are no more favorable, or no less favorable, than those available from
unaffiliated third parties. Based on our experience in the business sectors
in
which we operate and the terms of our transactions with unaffiliated third
parties, we believe that all of the transactions described below met this policy
standard at the time they occurred.
The
Company 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 served as Chief Executive Officer,
Chief
Financial Officer and Secretary of the Company and was compensated by consulting
fees paid to LVEP. LVEP is owned by the estate of Scott Flamm (deceased January
2006) previously, one of our directors and a principal shareholder. Pursuant
to
an amendment dated December 15, 2006 (“effective date”) Mr. Appel resigned as
President and Chief Executive Officer and Secretary of the Company on the
effective date, but remains as a board member and consultant to the company.
The
term of the agreement as amended is 24 months from effective date. Mr. Appel
will devote 50% of his time over the first 12 months of the consulting period.
Also as a consultant, he will be paid at a rate of $22,500 per month in addition
to benefits as provided to other company officers. He will receive severance
payments over an additional 12 months at a rate of $10,416.67 per month and
shall be reimbursed for family health care. All his stock options became
fully
vested on the effective date and are exercisable over the option term. Also,
Mr.
Appel was issued 1,000,000 shares of our common stock. He received a $250,000
bonus $100,000 paid on January 3, 2007 and the remainder paid in October
2007.
J.
Todd
Derbin has served as Chairman and a director since January 1, 2006. Prior
thereto he served as President and Chief Executive Officer from December
20,
2004 to January 1, 2006. 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 served as a consultant
to the Company for a fee of $6,250 per month for 6 months ending June 30,
2006.
Mr. Derbin ceased serving as Chairman and Member of the Board of Directors
on
September 1, 2006.
On
August
24, 2007, we issued and sold an aggregate of $600,000 principal amount
promissory notes bearing interest at a rate of 12% per annum and warrants
to
purchase an aggregate of 150,000 shares of our common stock to three investors
including Thomas Moore, our Chief Executive Officer. Mr. Moore invested $400,000
and received warrants for the purchase of 100,000 shares of Common Stock.
The
promissory note and accrued but unpaid interest thereon are convertible at
the
option of the holder into shares of our common stock upon the closing by
the
Company of a sale of its equity securities aggregating $3,000,000 or more
in
gross proceeds to the Company at a conversion rate which shall be the greater
of
a price at which such equity securities were sold or the price per share
of the
last reported trade of our common stock on the market on which the common
stock
is then listed, as quoted by Bloomberg LP. At any time prior to conversion,
we
have the right to prepay the promissory notes and accrued but unpaid interest
thereon. Mr. Moore converted his $400,000 bridge investment into 2,665,667
shares of common stock and 2,000,000 $0.20 warrants based on the terms of
the
private placement. He was paid $7,101.37 interest in cash.
On
October 17, 2007, we effected a private placement to accredited investors
for
approximately 49,228,334 shares of common stock and warrants to purchase
36,921,250 additional shares. Concurrent with the closing of the private
placement, we sold for $1,996,667 to CAMOFI Master LDC and CAMHZN Master
LDC an
aggregate of (i) 10,000,000 shares of Common Stock, (ii) 10,000,000 $0.20
Warrants, and (iii) 5-year warrants to purchase an additional 3,333,333 shares
of Common Stock at a purchase price of $0.001/share. Both warrants provide
that
they may not be exercised if, following the exercise, the holder will be
deemed
to be the beneficial owner of more than 9.99% of Registrant’s outstanding shares
of Common Stock.
Pursuant
to an advisory agreement dated August 1, 2007 with Centrecourt, Centrecourt
provided various strategic advisory services to the Company in consideration
thereof. The Company paid Centrecourt $328,000 in cash and issued 2,483,333
$0.20 Warrants to Centrecourt, which Centrecourt assigned to the two
affiliates.
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
See
Index
of Exhibits below. The Exhibits are filed with or incorporated by reference
in
this report.
EXHIBIT
NUMBER
|
|
DESCRIPTION
OF EXHIBIT
|
Exhibit
2.1
|
|
Agreement
Plan and Merger of Advaxis, Inc. (a Colorado corporation) and Advaxis,
Inc. (a Delaware corporation). Incorporated by reference to Annex
B to DEF
14A Proxy Statement filed with the SEC on May 15, 2006.
|
Exhibit
3.1(i)
|
|
Amended
and Restated Articles of Incorporation. Incorporated by reference
to Annex
C to DEF 14A Proxy Statement filed with the SEC on May 15, 2006.
|
Exhibit
3.1(ii)
|
|
Amended
and Restated Bylaws. Incorporated by reference to Exhibit 10.4
to
Quarterly Report Form 10-QSB filed with the SEC on December 15,
2006.
|
Exhibit
4.1
|
|
Form
of common stock certificate. Incorporated by reference to Exhibit
4.1 to
Current Report on Form 8-K filed with the SEC on October 23,
2007.
|
Exhibit
4.2
|
|
Form
of warrant to purchase shares of Registrant’s common stock at the price of
$0.20 per share (the “$0.20 Warrant”). Incorporated by reference to
Exhibit 4.2 to Current Report on Form 8-K filed with the SEC on
October
23, 2007.
|
Exhibit
4.3
|
|
Form
of warrant to purchase shares of Registrant’s common stock at the price of
$0.001 per share (the “$.001 Warrant”). Incorporated by reference to
Exhibit 4.3 to Current Report on Form 8-K filed with the SEC on
October
23, 2007.
|
Exhibit
4.4
|
|
Form
of warrant issued in the August 2007 financing. Incorporated by
reference
to Exhibit 10.1 to Current Report on Form 8-K field with the SEC
on August
27, 2007.
|
Exhibit
4.5
|
|
Form
of note issued in the August 2007 financing. Incorporated by reference
to
Exhibit 10.2 to Current Report on Form 8-K field with the SEC on
August
27, 2007.
|
Exhibit
4.6
|
|
Form
of warrant issued in the November 2004 Private Placement . Incorporated
by
reference to Exhibit 3.1 to Current Report on Form 8-K filed with
the SEC
on November 18, 2004.
|
Exhibit
10.1
|
|
Securities
Purchase Agreement between Registrant and the purchasers in the
private
placement (the “SPA”), dated as of October 17, 2007, and Disclosure
Schedules thereto. Incorporated by reference to Exhibit 10.1 to
Current
Report on Form 8-K filed with the SEC on October 23,
2007.
|
Exhibit
10.2
|
|
Securities
Purchase Agreement dated February 2, 2006 between Company and Cornell
Capital Partners, LP. Incorporated by reference to Exhibit 10.09
to Report
on Form 8K filed with the SEC on February 8, 2006.
|
Exhibit
10.3
|
|
Registration
Rights Agreement between Registrant and the parties to the SPA,
dated as
of October 17, 2007. Incorporated by reference to Exhibit 10.2
to Current
Report on Form 8-K filed with the SEC on October 23,
2007.
|
Exhibit
10.4
|
|
Placement
Agency Agreement between Registrant and Carter Securities, LLC,
dated as
of October 17, 2007. Incorporated by reference to Exhibit 10.3
to Current
Report on Form 8-K filed with the SEC on October 23,
2007.
|
Exhibit
10.5
|
|
Engagement
Letter between Registrant and Carter Securities, LLC, dated August
15,
2007. Incorporated by reference to Exhibit 10.3(a) to Current Report
on
Form 8-K filed with the SEC on October 23, 2007.
|
Exhibit
10.6
|
|
Agreement
between Registrant and YA Global Investments, L.P. f/k/a Cornell
Capital
Partners, L.P., dated August 23, 2007. Incorporated by reference
to
Exhibit 10.4 to Current Report on Form 8-K filed with the SEC on
October
23, 2007.
|
Exhibit
10.7
|
|
Memorandum
of Agreement between Registrant and CAMHZN Master LDC and CAMOFI
Master
LDC, purchasers of the Units consisting of Common Stock, $0.20
Warrants,
and $0.001 Warrants, dated October 17, 2007. Incorporated by reference
to
Exhibit 10.5 to Current Report on Form 8-K filed with the SEC on
October
23, 2007.
|
Exhibit
10.8
|
|
Advisory
Agreement between Registrant and Centrecourt Asset Management LLC,
dated
August 1, 2007. Incorporated by reference to Exhibit 10.6 to Current
Report on Form 8-K filed with the SEC on October 23,
2007.
|
Exhibit
10.9
|
|
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 Current Report on Form 8K filed with
the SEC
on November 18, 2004.
|
Exhibit
10.10
|
|
Security
Agreement dated February 2, 2006 between Company and Cornell Capital
Partners, L.P. Incorporated by reference to Exhibit 10.06 to Current
Report on Form 8-K filed with the SEC on February 8,
2006.
|
Exhibit
10.11
|
|
Investor
Registration Rights Agreement dated February 2, 2006 between Company
and
Cornell Capital Partners, LP. Incorporated by reference to Exhibit
10.05
to Current Report on Form 8-K filed with the SEC on February 8,
2006.
|
Exhibit
10.12
|
|
Form
of Securities Purchase Agreement related to the November 2004 Private
Placement, by and among the Company and the purchasers listed as
signatories thereto. Incorporated by reference to Exhibit 10.2
to Current
Report on Form 8-K filed with the SEC on November 18,
2004.
|
Exhibit
10.13
|
|
Form
of Registration Rights Agreement related to the November 2004 Private
Placement, by and among the Company and the persons listed as signatories
thereto. Incorporated by reference to Exhibit 10.3 to Current Report
on
Form 8-K filed with the SEC on November 18, 2004.
|
Exhibit
10.14
|
|
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 Current Report on Form 8-K filed with the SEC on December 23,
2004.
|
Exhibit
10.15
|
|
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
10.16
|
|
2005
Stock Option Plan of the Company. Incorporated by reference to
Annex A to
DEF 14A Proxy Statement filed with the SEC on May 15, 2006.
|
Exhibit
10.17
|
|
License
Agreement, between University of Pennsylvania and the Company dated
as of
June 17, 2002, as Amended and Restated on February 13, 2007. Incorporated
by reference to Exhibit 10.11 to Report on From 10-QSB filed with
the SEC
on February 13, 2007.
|
Exhibit
10.18
|
|
Sponsored
Research Agreement dated November 1, 2006 by and between University
of
Pennsylvania (Dr. Paterson Principal Investigator) and the Company.
Incorporated by reference to Exhibit 10.44 to Quarterly Report
on 10-QSB
filed with the SEC on February 13, 2007.
|
Exhibit
10.19
|
|
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 filed on January 5,
2006 to
Registration Statement on Form SB-2 (File No.
333-122504).
|
Exhibit
10.20
|
|
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 filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.21(a)
|
|
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 filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.21(b)
|
|
Second
Amendment dated October, 31, 2005 to Consultancy Agreement between
LVEP
Management LLC and the Company. Incorporated by reference to Exhibit
10.2
to Current Report on Form 8-K filed with the SEC on November 9,
2005.
|
Exhibit
10.21(c)
|
|
Third
Amendment dated December 15, 2006 to Consultancy Agreement between
LVEP
Management LLC and the Company. Incorporated by reference to Exhibit
9.01
to Current Report on Form 8-K filed with the SEC on December 15,
2006.
|
Exhibit
10.22
|
|
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 filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.23
|
|
Amended
and Restated Consulting and Placement Agreement, dated as of May
28, 2003,
by and between David Carpi and Advaxis, Inc., as amended. Incorporated
by
reference to Exhibit 10.11 to Post-Effective Amendment filed on
January 5,
2006 to Registration Statement on Form SB-2 (File No.
333-122504).
|
Exhibit
10.23(i)
|
|
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 filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.24
|
|
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 filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.25
|
|
Grant
Writing Agreement, dated June 19, 2003, by and between DNA Bridges,
Inc.
and Advaxis, Inc. Incorporated by reference to Exhibit 10.14 to
Post-Effective Amendment filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.26
|
|
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 filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.27
|
|
Agreement,
dated July 7, 2003, by and between Cobra Biomanufacturing PLC and
Advaxis,
Inc. Incorporated by reference to Exhibit 10.16 to the amendment
filed on
June 9, 2005 to Registration Statement on Form SB-2 (File No.
333-122504).
|
Exhibit
10.28
|
|
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 Current Report on Form 8-K filed with the SEC on January 18,
2005.
|
Exhibit
10.28(i)
|
|
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
Current Report on Form 8-K filed with the SEC on January 18,
2005.
|
Exhibit
10.28(ii)
|
|
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
Current
Report on Form 8-K filed with the SEC on January 18,
2005.
|
Exhibit
10.29
|
|
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 filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.30
|
|
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 filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.31
|
|
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 filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.32
|
|
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 filed on January 5, 2006 to Registration Statement on
Form SB-2
(File No. 333-122504).
|
Exhibit
10.33
|
|
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 filed on January 5, 2006 to Registration Statement on
Form SB-2
(File No. 333-122504).
|
Exhibit
10.34
|
|
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 filed on January 5, 2006 to Registration Statement on
Form SB-2
(File No. 333-122504).
|
Exhibit
10.35
|
|
Clinical
Research Services Agreement, dated April 6, 2005, between Pharm-Olam
International Ltd. and the Company. Incorporated by reference to
Exhibit
10.26 to the amendment filed on June 9, 2005 to Registration Statement
on
Form SB-2 (File No. 333-122504).
|
Exhibit
10.36
|
|
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 filed on January 5, 2006
to
Registration Statement on Form SB-2 (File No.
333-122504).
|
Exhibit
10.37
|
|
Letter
Agreement between the Company and Investors Relations Group Inc.,
dated
September 27, 2005. Incorporated by reference to Exhibit 10.31
to
Post-Effective Amendment filed on January 5, 2006 to Registration
Statement on Form SB-2 (File No. 333-122504).
|
Exhibit
10.38
|
|
Consultancy
Agreement between the Company and Freemind Group LLC, dated October
17,
2005. Incorporated by reference to Exhibit 10.32 to Post-Effective
Amendment filed on January 5, 2006 to Registration Statement on
Form SB-2
(File No. 333-122504).
|
Exhibit
10.39
|
|
Employment
Agreement dated August 21, 2007 between the Company and Thomas
A. Moore.
Incorporated by reference to Exhibit 10.3 to Current Report on
Form 8-K
filed with the SEC on August 27,
2007.
|
Exhibit
10.40
|
|
Employment
Agreement dated February 9, 2006 between the Company and Frederick
D.
Cobb. Filed on March 9, 2006 with the initial filing of the Registration
Statement on Form SB-2 (File No. 333-132298)
|
Exhibit
10.41
|
|
Resignation
Agreement between J. Todd Derbin and the Company dated October
31, 2005.
Incorporated by reference to Exhibit 10.1 report to Form 8-K filed
with
the SEC on November 9, 2005.
|
Exhibit
10.42
|
|
Consulting
Agreement dated June 1, 2006 between the Company and Biologics Consulting
Group Inc. Incorporated by reference to Exhibit 10.40 to Quarterly
Report
on Form 10-QSB field with the SEC on February 13, 2007.
|
Exhibit
10.42(i)**
|
|
Consulting
Agreement dated June 1, 2006 between the Company and Biologics
Consulting
Group Inc. Amended on June 1, 2007.
|
Exhibit
10.43
|
|
Third
Lease Amendment Agreement dated October 1, 2006 by and between
the New
Jersey Economic Development Authority and the Company. Incorporated
by
reference to Exhibit 10.43 to Quarterly Report on Form 10-QSB filed
with
the SEC on February 13, 2007.
|
Exhibit
10.43(i)**
|
|
Fourth
Lease Amendment Agreement dated October 1, 2006 by and between
the New
Jersey Economic Development Authority and the Company on October
1,
2007.
|
Exhibit
10.44**
|
|
Master
Contract Service Agreement between the Company and MediVector,
Inc. dated
May 20, 2007.
|
Exhibit
10.45**
|
|
Letter
Agreement, dated November 28, 2007, between Crystal Research Associates,
LLC and the Company.
|
Exhibit
10.46**
|
|
Service
Schedule, dated September 21, 2007, to the Strategic Collaboration
and
Long Term Vaccine Supply Agreement, dated October 31, 2005, between
the
Company and Cobra Biomanufacturing Plc.
|
Exhibit
10.47**
|
|
Service
Schedule, dated May 22, 2007, to the Strategic Collaboration and
Long Term
Vaccine Supply Agreement, dated October 31, 2005, between the Company
and
Cobra Biomanufacturing Plc.
|
Exhibit
10.48**
|
|
Consulting
Agreement, dated May 1, 2007 between the Company and Bridge Ventures,
Inc.
|
Exhibit
10.49**
|
|
Consulting
Agreement, dated August 1, 2007 between the Company and Dr.
Filer.
|
Exhibit
14.1
|
|
Code
of Ethics. Incorporated by reference to Exhibit 14.1 to Current
Report on
Form 8-K filed with the SEC on November 18, 2004.
|
Exhibit
23.1**
|
|
Consent
of McGladrey & Pullen, LLP.
|
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 (filed
herewith).
|
Exhibit
31.2**
|
|
Rule 13a-14(a)/15d-14(a)
Certification by the Principal Financial Officer (filed
herewith).
|
Exhibit
32.1**
|
|
Certification
by the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith).
|
Exhibit
32.2**
|
|
Certification
by the Principal 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 granted
**
Filed
herewith
McGladrey
& Pullen, LLP (“M&P”) have billed and anticipate billing the Company as
follows for the year ended October 31, 2007. As we have previously disclosed,
a
majority of the partners of Goldstein Golub Kessler LLP (“GGK”) became partners
of M&P. As a result, GGK resigned as auditors of the Company effective
November 28, 2007 and M&P were appointed as auditors for the Company’s
annual financial statements for the year ended October 31, 2007. M&P and GGK
billed the Company as follows for the years ended October 31, 2007 and
2006:
|
|
Fiscal
Year 2007
|
|
Fiscal
year 2006
|
|
Audit
Fees-McGladrey and Pullen LLP
|
|
$
|
35,000
|
|
$
|
0
|
|
Audit
Fees-Goldstein Golub Kessler LLP
|
|
$
|
22,653
|
|
$
|
35,000
|
|
Audit-Related
Fees- Goldstein Golub Kessler LLP
|
|
|
7,300
|
|
|
20,855
|
|
Total
|
|
$
|
64,953
|
|
$
|
55,855
|
|
Audit
Fees: The Company recorded fees of $57,653 and $35,000, respectively, for
M&P and GGK in connection with its audit of the Company’s financial
statements for the fiscal years ended October 31, 2007 and 2006 and its review
of the Company’s interim financial statements included in the Company’s
Quarterly Reports on Form 10-Q for the periods ended January 31, April 30,
and
July 31.
Audit-Related
Fees: The Company recorded fees of $7,300 and $20,855 respectively, to GGK
to
perform audit-related services for the fiscal years ended October 31, 2007
and
2006, primarily for review of comments to the Securities and Exchange Commission
in its review of securities registration documents and the Company’s replies and
for assistance with private placement memorandums and other document
reviews.
Tax
Fees:
Preparation of the corporate tax returns were not performed by GGK.
All
Other
Fees: No fees were classified outside the recorded Audit and Audit Related
fees.
The
Audit
Committee will pre-approve all auditing services and the terms thereof (which
may include providing comfort letters in connection with securities
underwriting) and non-audit services (other than non-audit services prohibited
under Section 10A(g) of the Exchange Act or the applicable rules of the SEC
or
the Public Company Accounting Oversight Board) to be provided to us by the
independent auditor; provided, however, the pre-approval requirement is waived
with respect to the provisions of non-audit services for us if the "de minimus"
provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied. This
authority to pre-approve non-audit services may be delegated to one or more
members of the Audit Committee, who shall present all decisions to pre-approve
an activity to the full Audit Committee at its first meeting following such
decision. The Audit Committee may review and approve the scope and staffing
of
the
independent auditors' annual audit plan.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
duly caused this Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized, in North Brunswick, Middlesex County, State of New
Jersey, on the 16 day of January, 2008.
|
|
|
|
ADVAXIS,
INC.
|
|
|
|
|
By:
|
/s/
Thomas Moore
|
|
Thomas
Moore, Chief Executive Officer and Chairman of the
Board
|
|
|
POWER
OF ATTORNEY
If
not
filed herewith, filed as an exhibit to the document referred to by letters
as
follows:
KNOW
ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Thomas Moore as his true and lawful attorney-in-fact
and agent, with full power of substitution for him in any and all capacities
(1), to sign any and all amendments to this report on Form 10-KSB and (2) to
file the same with the Securities and Exchange Commission pursuant to Rule
462(b) under the Securities Exchange Act of 1934, 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 Exchange Act of 1934, as amended, this
report has been signed by the following persons on behalf of the registrant
and
in the capacities and on the dates indicated:
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
/s/
Thomas Moore
|
|
Chief
Executive Officer and Chairman of the Board
|
|
January
16, 2008
|
|
Thomas
Moore
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Fredrick
Cobb
|
|
Vice
President, Finance
|
|
January
16, 2008
|
|
Fredrick
Cobb
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Roni
Appel
|
|
Director
|
|
January
16, 2008
|
|
Roni
Appel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Thomas McKearn
|
|
Director
|
|
January
16, 2008
|
|
Thomas
McKearn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
James Patton
|
|
Director
|
|
January
16, 2008
|
|
James
Patton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Richard Berman
|
|
Director
|
|
January
16, 2008
|
|
Richard
Berman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Martin Wade III
|
|
Director
|
|
January
16, 2008
|
|
Martin
Wade
|
|
|
|
|
|