UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
(Mark
One)
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the
quarterly period ended January 31, 2008
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
For
the
transition period from to ________________ to ________________
Commission
file number 000
28489
ADVAXIS,
INC.
|
(Exact
name of small business issuer as specified in its
charter)
|
Delaware
|
|
841521955
|
(State
or other jurisdiction of incorporation or organization)
|
|
(IRS
Employer Identification No.)
|
The
Technology Centre of New Jersey, 675 Route 1, Suite 119, North
Brunswick,
NJ 08902
|
(Address
of principal executive
offices)
|
(732)
545-1590
|
(Issuer’s
telephone number)
|
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Check
whether the issuer (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 x
No
o
State
the
number of shares outstanding of each of the issuer’s classes of common equity,
as of March 7, 2008
108,169,830
shares outstanding of the Company’s Common Stock, par value $.001 per
share
Transitional
Small Business Disclosure Format (Check one): Yes o
No
x
Persons
who are to respond to the collection of information contained in this form
are
not required to respond unless the form displays a currently valid OMB control
number.
(A
Development Stage Company)
January
31, 2008
INDEX
|
Page
No.
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
|
6
|
|
|
|
8
|
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
|
|
11
|
|
|
|
12
|
ADVAXIS,
INC.
(A
Development Stage Company)
(Unaudited)
|
|
January
31, 2008
|
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash
|
|
$
|
2,826,873
|
|
Prepaid
expenses
|
|
|
147,873
|
|
Total Current Assets
|
|
|
2,974,746
|
|
|
|
|
|
|
Property
and Equipment (net of accumulated depreciation of $64,747)
|
|
|
114,617
|
|
Intangible
Assets (net of accumulated amortization of $164,990)
|
|
|
1,125,111
|
|
Other
Assets
|
|
|
3,876
|
|
Total Assets
|
|
$
|
4,218,350
|
|
LIABILITIES
& SHAREHOLDERS’ EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
801,340
|
|
Accrued
expenses
|
|
|
426,664
|
|
Deferred
revenue
|
|
|
52,597
|
|
Interest
payable
|
|
|
14,568
|
|
Notes
payable - current portion
|
|
|
66,850
|
|
Total
Current Liabilities
|
|
|
1,362,019
|
|
|
|
|
|
|
Notes
payable - net of current portion
|
|
|
16,098
|
|
Total
Liabilities
|
|
$
|
1,378,117
|
|
|
|
|
|
|
Shareholders’
Equity:
|
|
|
|
|
Preferred
stock,
$0.001 par value; 5,000,000 shares authorized; no shares issued and
oustanding |
|
|
- |
|
Common
Stock - $0.001 par value; authorized 500,000,000 shares, issued and
outstanding 107,957,977
|
|
|
107,957
|
|
Additional
Paid-In Capital
|
|
|
16,250,525
|
|
Deficit
accumulated during the development stage
|
|
|
(13,518,249
|
)
|
Total
Shareholders' Equity
|
|
$
|
2,840,233
|
|
Total Liabilities & Shareholders’ Equity
|
|
$
|
4,218,350
|
|
The
accompanying footnotes are an integral part of these financial
statements.
ADVAXIS,
INC.
(A
Development Stage Company)
(Unaudited)
|
|
3
Months
Ended
January
31,
|
|
3
Months
Ended
January
31,
|
|
Period
from
March
1, 2002 (Inception) to
January
31,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
Revenue
|
|
$
|
22,403
|
|
$
|
146,307
|
|
$
|
1,281,839
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
& Development Expenses
|
|
|
682,163
|
|
|
494,107
|
|
|
6,058,307
|
|
General
& Administrative Expenses
|
|
|
772,590
|
|
|
845,072
|
|
|
7,745,477
|
|
Total
Operating expenses
|
|
|
1,454,752
|
|
|
1,339,179
|
|
|
13,803,784
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(1,432,350
|
)
|
|
(1,192,872
|
)
|
|
(12,521,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (expense):
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(1,987
|
)
|
|
(153,355
|
)
|
|
(1,075,207
|
)
|
Other
Income
|
|
|
32,714
|
|
|
26,326
|
|
|
232,542
|
|
Gain
on note retirement
|
|
|
-
|
|
|
-
|
|
|
1,532,477
|
|
Net
changes in fair value of common stock warrant
liability and embedded derivative liability
|
|
|
-
|
|
|
1,282,871
|
|
|
(1,642,232
|
)
|
Net
loss
|
|
|
(1,401,623
|
)
|
|
(37,030
|
)
|
|
(13,474,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
attributable to preferred shares
|
|
|
-
|
|
|
-
|
|
|
43,884
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss applicable to Common Stock
|
|
|
(1,401,623
|
)
|
$
|
(37,030
|
)
|
$
|
(13,518,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share, basic and diluted
|
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding basic and diluted
|
|
|
107,957,977
|
|
|
41,168,537
|
|
|
|
|
The
accompanying footnotes are an integral part of these financial
statements.
ADVAXIS,
INC.
(A
Development Stage Company)
(Unaudited)
|
|
3
Months ended
January
31,
|
|
3
Months ended
January
31,
|
|
Period
from
March
1, 2002 (Inception)
to
January
31,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,401,623
|
)
|
$
|
(37,030
|
)
|
$
|
(13,474,365
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Non-cash
charges to consultants and employees for options and stock
|
|
|
51,889
|
|
|
392,439
|
|
|
1,549,755
|
|
Amortization
of deferred financing costs
|
|
|
-
|
|
|
29,606
|
|
|
260,000
|
|
Non-cash
interest expense
|
|
|
1,007
|
|
|
82,399
|
|
|
511,285
|
|
Loss
(Gain) on change in value of warrants and embedded
derivative
|
|
|
-
|
|
|
(1,282,871
|
)
|
|
1,642,232
|
|
Value
of penalty shares issued
|
|
|
-
|
|
|
-
|
|
|
117,498
|
|
Depreciation
expense
|
|
|
8,794
|
|
|
6,334
|
|
|
64,747
|
|
Amortization
expense of intangibles
|
|
|
15,858
|
|
|
13,241
|
|
|
168,161
|
|
Gain
on note retirement
|
|
|
-
|
|
|
-
|
|
|
(1,532,477
|
)
|
Decrease
(Increase) in prepaid expenses
|
|
|
52,044
|
|
|
21,382
|
|
|
(147,873
|
)
|
Decrease
(Increase) in other assets
|
|
|
-
|
|
|
724
|
|
|
(3,876
|
)
|
Increase
in accounts payable
|
|
|
14,043
|
|
|
3,447
|
|
|
1,238,546
|
|
Increase
in accrued expenses
|
|
|
121,641
|
|
|
6,047
|
|
|
410,475
|
|
Increase
in interest payable
|
|
|
-
|
|
|
40,518
|
|
|
18,291
|
|
Increase
(Decrease) in deferred revenue
|
|
|
52,597
|
|
|
(12,456
|
)
|
|
52,597
|
|
Net
cash used in operating activities
|
|
|
(1,088,750
|
)
|
|
(736,220
|
)
|
|
(9,125,003
|
)
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Cash
paid on acquisition of Great Expectations
|
|
|
-
|
|
|
-
|
|
|
(44,940
|
)
|
Purchase
of property and equipment
|
|
|
(6,969
|
)
|
|
(29,400
|
)
|
|
(133,784
|
)
|
Cost
of intangible assets
|
|
|
(42,834
|
)
|
|
(16,674
|
)
|
|
(1,368,223
|
)
|
Net
cash used in Investing Activities
|
|
|
(49,803
|
)
|
|
(46,074
|
)
|
|
(1,546,947
|
)
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from convertible secured debenture
|
|
|
|
|
|
|
|
|
960,000
|
|
Cash
paid for deferred financing costs
|
|
|
|
|
|
-
|
|
|
(260,000
|
)
|
Principal
Payments on notes payable
|
|
|
(3,546
|
)
|
|
(1,063
|
)
|
|
(95,633
|
)
|
Proceeds
from notes payable
|
|
|
|
|
|
-
|
|
|
1,271,224
|
)
|
Net
proceeds of issuance of Preferred Stock
|
|
|
|
|
|
-
|
|
|
235,000
|
|
Payment
on cancellation of Warrants
|
|
|
|
|
|
|
|
|
(600,000
|
)
|
Proceeds
of issuance of Common Stock, net of issuance costs
|
|
|
(78,012
|
)
|
|
-
|
|
|
11,988,232
|
|
Net
cash (used in) provided by Financing Activities
|
|
|
(81,558
|
)
|
|
(1,063
|
)
|
|
13,498,823
|
|
Net
(Decrease) increase in cash
|
|
|
(1,215,111
|
)
|
|
(783,357
|
)
|
|
2,826,873
|
|
Cash
at beginning of period
|
|
|
4,041,984
|
|
|
2,761,166
|
|
|
-
|
|
Cash
at end of period
|
|
$
|
2,826,873
|
|
$
|
1,977,809
|
|
$
|
2,826,873
|
|
The
accompanying footnotes are an integral part of these financial
statements.
Supplemental
Schedule of Noncash Investing and Financing Activities
|
|
3
Months ended
January
31,
|
|
3
Months ended
January
31,
|
|
Period
from
March
1, 2002
(Inception)
to
January
31,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
Equipment
acquired under capital lease
|
|
$
|
—
|
|
$
|
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
|
|
|
|
|
$
|
$150,000
|
|
$
|
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
|
|
Allocation
of the original secured convertible debentures to warrants
|
|
|
—
|
|
|
—
|
|
$
|
214,950
|
|
Warrants
Issued in connection with issuance of common stock
|
|
|
—
|
|
|
—
|
|
|
1,505,550
|
|
The
accompanying footnotes are an integral part of these financial
statements.
ADVAXIS,
INC.
We
are a
development stage biotechnology company utilizing multiple mechanisms of
immunity with the intent to develop cancer vaccines that are more effective
and
safer than existing vaccines. To that end, we have licensed rights from the
University of Pennsylvania (“Penn”) to use a patented system to engineer a live
attenuated Listeria monocytogenes bacteria (the “Listeria System”) to secrete a
protein sequence containing a tumor-specific antigen. Using the Listeria System,
we believe we will force the body’s immune system to process and recognize the
antigen as if it were foreign, creating the immune response needed to attack
the
cancer. Our licensed Listeria System, developed at Penn over the past 10 years,
provides a scientific basis for believing that this therapeutic approach induces
a significant immune response to a tumor. Accordingly, we believe that the
Listeria System is a broadly enabling platform technology that can be applied
to
many types of cancers. In addition, we believe there may be useful applications
in infectious diseases and auto-immune disorders. The therapeutic approach
that
comprises the Listeria System is based upon the innovative work of Yvonne
Paterson, Ph.D., Professor of Microbiology at Penn, involving the creation
of
genetically engineered Listeria that stimulate the innate immune system and
induce an antigen-specific immune response involving humoral and cellular
components. On July 1, 2002 (effective date) we entered into an exclusive
20-year license from Penn to exploit the Listeria System, subject to meeting
various royalty and other obligations (the “Penn License”) which was amended and
restated on February 13, 2007. The First Amendment to the Amended and Restated
Patent License Agreement was entered into on March 26, 2007 to exercise its
option to license an additional Listeria-Based and LLO-Based Vaccine
patent/docket and have agreed to license 12 other patents/dockets.
We
have
focused our initial development efforts on five lead compounds. In February
2006
we commenced a Phase I/II clinical study of Lovaxin C, a vaccine with a
potential for treatment of cervical cancer. We completed this clinical study
in
the fourth fiscal quarter 2007 after dosing 15 patients with end-stage cervical
cancer conducted in Mexico, Serbia and Israel and met our trial objective.
The
objective of this trial was to establish a range of safe doses up to a maximally
tolerated dose, which was achieved.
Based
upon the outcome of our phase I/II trial in advanced cervical cancer, we plan
on
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. We intend to begin this
trial in the fourth fiscal quarter of 2008.
The
accompanying unaudited interim consolidated financial statements include all
adjustments (consisting only of those of a normal recurring nature) necessary
for a fair statement of the results of the interim period. These interim
Financial Statements should be read in conjunction with the Company’s Financial
Statements and Notes for the year ended October 31, 2007 filed on Form 10-KSB.
We believe these financial statements reflect all adjustments (consisting only
of normal, recurring adjustments) that are necessary for a fair presentation
of
our financial position and results of operations for the periods presented.
Results of operations for the interim periods presented are not necessarily
indicative of results to be expected for the year.
The
preparation of financial statements in conformity with U.S. Generally Accepted
Accounting Principles requires management to make estimates and assumptions
that
affect the reported amounts and the disclosure of contingent amounts in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
The
accompanying financial statements have been prepared assuming that 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.
Since
our
inception until January 31, 2008, the Company has reported accumulated net
losses of $13,518,249 and recurring negative cash flows from operations. In
order to maintain sufficient cash and investments to fund future operations,
we
are seeking to raise additional capital in fiscal year 2008 through various
financing alternatives. If additional capital were raised through the sale
of
equity or convertible debt securities, the issuance of such securities would
result in additional dilution to our existing stockholders. We believe that
the
offering proceeds for the October 17, 2007 raise will be sufficient to sustain
our plan of operations for the next six months. However, the company cannot
provide assurances that our plans will not change, or that changed circumstances
will not result in the depletion of capital resources more rapidly than
anticipated. If we are unable to obtain additional sources of financing or
generate sufficient cash flows from sufficient capital, it could create a
material adverse effect on future operating prospects of the
Company.
Since
inception through January 31, 2008, all of the Company’s revenue has been from
grants. For the three month period ended January 31, 2008, all of the revenue
was received from the New Jersey Commission on Science and
Technology.
Intangible
assets primarily consist of legal and filing costs associated with obtaining
trademarks, patents and licenses. The license and patent costs capitalized
primarily represent the value assigned to the Company’s 20-year exclusive
worldwide license agreement with Penn which are amortized on a straight-line
basis over their remaining useful lives which are estimated to be twenty years
from the effective date of Penn Agreement dated July 1, 2002. The value of
the
license and patents are 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 patents
and
the rights to exploit the majority of the 46 pending patents subject to
finalization of the Second Amendment to the Amended and Restated Agreement.
The
Company exercised its option under the Second Amended and Restated Patent
License Agreement to license a majority of these pending patents for a fee
of
$311,000 but has not finalized this Agreement. As of the date of this filing
we
are negotiating in a period of good faith on the form of payment. As of January
31, 2008, all gross capitalized costs associated with the licenses and patents
filed and granted as well as and costs associated with patents pending are
$1,199,387 (excluding the Second Amendment) as shown under license and patents
on the table below. Out of the $1,199,387 capitalized cost the cost of the
patents and licenses issued is estimated to be $458,983 and cost of the patents
pending or in process of filing is estimated to be $740,404. The expirations
of
the existing patents range from 2014 to 2020. Capitalized costs associated
with
patent applications that are abandoned without future value are charged to
expense when the determination is made not to pursue the application. No patent
applications without value were abandoned and charged to expense in the current
or prior year. Amortization expense for licensed technology and capitalized
patent cost is included in general and administrative expense.
Under
the
amended and restated agreement we are billed actual patent expenses as they
are
passed through from Penn. The following is a summary of the intangibles assets
as of the following fiscal periods:
|
|
October
31, 2007
|
|
January 31, 2008
|
|
Increase/Decrease
|
|
Trademark
|
|
$
|
87,857
|
|
$
|
90,714
|
|
$
|
2,857
|
|
License
|
|
|
496,127
|
|
|
529,915
|
|
|
33,788
|
|
Patents
|
|
|
663,283
|
|
|
669,472
|
|
|
6,189
|
|
Total
intangibles
|
|
|
1,247,267
|
|
|
1,292,101
|
|
|
42,834
|
|
Accumulated
Amortization
|
|
|
(149,132
|
)
|
|
(164,990
|
)
|
|
(15,858
|
)
|
Intangible
Assets
|
|
$
|
1,098,135
|
|
$
|
1,125,111
|
|
$
|
26,976
|
|
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.
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, outstanding stock
options and convertible debt 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
|
|
As
of
January
31, 2007
|
|
As
of
January
31, 2008
|
|
Warrants
|
|
|
25,009,220
|
|
|
87,713,770
|
|
Stock
Options
|
|
|
8,126,123
|
|
|
8,512,841
|
|
Convertible
Debt (1)
|
|
|
17,317,487
|
|
|
|
|
Total
All
|
|
|
50,452,830
|
|
|
96,226,611
|
|
(1)
Conversion of the outstanding principal of $2,550,000 converted at 95% of the
January 31, 2007 closing price of $0.155 per share or $0.147 per
share.
|
Uncertain
Tax Provisions:
|
Effective
November 1, 2007 the Company adopted 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 adoption of
FIN
48
in the
first quarter of fiscal 2008 did not have an impact on the Company’s financial
condition or results of operations.
|
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
Company measured the fair value of the warrants and embedded conversion features
at each reporting date using the Black-Scholes-Merton 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 expense which
is recorded in other income (expense) in the Statement of Operations along
with
corresponding changes in fair value of the liability.
The
Company measured the fair value of the warrants on the date of each reporting
period until the debt was extinguished on October 17, 2007. Changes that
occurred in the January 31, 2007 reporting period resulted in a decrease in
the
fair value of the warrants of and embedded derivative of $1,282,871 recorded
in
the Statement of Operations as income to Net Change in Fair Value of Common
Stock Warrant and Embedded Derivative Liability.
The
Company has included in this Quarterly Report certain “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995 concerning the Company’s business, operations and financial condition.
“Forward-looking statements” consist of all non-historical information, and the
analysis of historical information, including the references in this Quarterly
Report to future revenues, collaborative agreements, future expense growth,
future credit exposure, earnings before interest, taxes, depreciation and
amortization, future profitability, anticipated cash resources, anticipated
capital expenditures, capital requirements, and the Company’s plans for future
periods. In addition, the words “could”, “expects”, “anticipates”, “objective”,
“plan”, “may affect”, “may depend”, “believes”, “estimates”, “projects” and
similar words and phrases are also intended to identify such forward-looking
statements.
Actual
results could differ materially from those projected in the Company’s
forward-looking statements due to numerous known and unknown risks and
uncertainties, including, among other things, unanticipated technological
difficulties, the length, scope and outcome of our clinical trial, costs related
to intellectual property, cost of manufacturing and higher consulting costs,
product demand, changes in domestic and foreign economic, market and regulatory
conditions, the inherent uncertainty of financial estimates and projections,
the
uncertainties involved in certain legal proceedings, instabilities arising
from
terrorist actions and responses thereto, and other considerations described
as
“Risk Factors” in other filings by the Company with the SEC. Such factors may
also cause substantial volatility in the market price of the Company’s Common
Stock. All such forward-looking statements are current only as of the date
on
which such statements were made. The Company does not undertake any obligation
to publicly update any forward-looking statement to reflect events or
circumstances after the date on which any
such
statement is made or to reflect the occurrence of unanticipated
events.
Plan
of Operations
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
Act 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 became 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, which was effected on June 20, 2006. 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.
We
are a
biotechnology company utilizing multiple mechanisms of immunity with the intent
to develop cancer vaccines that are more effective and safer than existing
vaccines. We believe that by using our licensed Listeria System to engineer
a
live attenuated Listeria monocytogenes bacteria to secrete a protein sequence
containing a tumor-specific antigen, we will force the body’s immune system to
process and recognize
the
antigen as if it were foreign, creating the immune response needed to attack
the
cancer. The licensed Listeria System, developed at Penn over
the
past 10 years, provides a scientific basis for believing that this therapeutic
approach induces a significant immune response to the tumor. Accordingly, we
believe that the Listeria System is a broadly enabling platform technology
that
can be applied in many cancers, infectious diseases and auto-immune
disorders.
We
have
no customers. We are in the development stage and have focused our initial
development efforts on five lead compounds. In February 2006 we received
governmental approvals in Mexico, Israel and Serbia to commence in those
countries a Phase I clinical study of Lovaxin C, a vaccine with a potential
for
treatment of cervical and neck cancer. We completed this clinical study in
the
fourth fiscal quarter 2007. The study included 15 patients with advanced
cervical cancer and met our trial objectives.
Three
months ended January 31, 2008 Compared to the three months ended January 31,
2007
Revenue.
Our
revenue decreased by $123,904, or 85%, to $22,403 for the three months ended
January 31, 2008 (“Fiscal 2008 Quarter”) as compared with $146,307 for the three
months ended January 31, 2007 (“Fiscal 2007 Quarter”) primarily due to
the $133,850 of grant money received from the National Cancer
Institute in the fiscal 2007 Quarter as compared to the grant from the
State of New Jersey received in the Fiscal 2008 Quarter.
Research
and Development Expenses.
Research
and development expenses increased by $188,055, or 38%, to $682,162 for the
Fiscal 2008 Quarter as compared with $494,107 for the Fiscal 2007 Quarter,
principally attributable to the following:
·
|
Clinical
trial expenses decreased by $63,281, or 49%, to $66,621 from $129,902
due
to our higher clinical trial activity in the Fiscal 2007 Quarter
compared
to the close out phase in the Fiscal 2008 Quarter.
|
·
|
Wages,
options and lab costs increased by $28,720, or 11% to $283,858 from
$255,138 principally due to our expanded research & development
efforts and a wage increase on November 1, 2007.
|
·
|
Consulting
expenses increased by $23,799, or 152%, to $39,411 from $15,612,
primarily
reflecting the higher effort required to prepare the Investigational
New
Drug filing for the FDA in the Fiscal 2008 Quarter compared to the
same
period last year.
|
·
|
Subcontracted
research expenses decreased by $50,644, or 55%, to $41,225 from $91,869,
primarily reflecting the reduced subcontract work performed by Dr.
Paterson at Penn, pursuant to the NCI grants in the first quarter
Fiscal
2008 Quarter compared to the same period last year.
|
·
|
Manufacturing
expenses increased by $222,822, to $224,407 from $1,585; the result
of the
ongoing clinical supply program for our upcoming Phase II trial compared
to no manufacturing program in the Fiscal 2007 Quarter.
|
·
|
Toxicology
study expenses of $26,640, incurred in the Fiscal 2008 Quarter, are
a
result of an ongoing toxicology study by Pharm Olam in connection
with our
Lovaxin C product candidates in anticipation of clinical studies
in 2008,
no such expenses were incurred in the Fiscal 2007
Quarter.
|
We
anticipate a continued increase in R&D expenses as a result of expanded
development and commercialization efforts related to toxicology studies,
clinical trials, and product development, and expenses to be incurred in the
development of strategic and other relationships required ultimately if the
licensing, manufacture and distribution of our product candidates are
undertaken.
General
and Administrative Expenses.
General
and administrative expenses decreased by $72,482, or 9%, to $772,590 for the
Fiscal 2008 Quarter as compared with $845,072 for the Fiscal 2007 Quarter,
primarily attributable to the following:
·
|
Wages,
Options and benefit expenses increased by $138,158, or 84% to $301,814
from $163,656 due to the effect of hiring the Chief Executive Officer
(“CEO”)
midway
through the Fiscal 2007 Quarter compared to his employment for the
full
Fiscal 2008 Quarter. He also received an annual pay increase of $100,000
due to a successful milestone on October 17, 2007. Additionally there
were
other wage increases on November 1, 2007. An increase of option expense
of
$32,876 to $52,650, or 166% from $19,774 is primarily due to the
CEO’s
options granted as part of his employment agreement. In Fiscal 2008
Quarter the expense included three months of vesting versus one month
in
the Fiscal 2007 Quarter.
|
·
|
Consulting
fees and expenses decreased by $358,029, or 74%, to $125,646 from
$483,675. This decrease was primarily attributed to: (i) a decrease
of $159,909 in option expense recorded in the Fiscal 2007 Quarter
primarily due to an amendment of Mr. Appel’s (LVEP) consulting agreement
compared to no options recorded in the Fiscal Quarter 2008; (ii)
a
decrease of $204,852 primarily due to the issuance to Mr. Appel of
1,000,000 shares of common stock of the Company ($200,000) and (iii)
a
$41,667 decrease of Mr. Appel’s bonus recorded in the Fiscal 2007 Quarter
and none recorded in the Fiscal 2008 Quarter. These decreases in
expenses
were partially offset by the increase in other consulting expenses
due to
financial advisor fees of $48,399 recorded in the Fiscal 2008 Quarter
verses the fees for other consultants in the Fiscal 2007
Quarter.
|
·
|
Penalty expense
increased by $31,778 to $31,778. This expense was recorded in the
Fiscal
2008 Quarter due to the delay of effectiveness of the registration
statement on Form SB-2, File No. 333-147752.
|
·
|
An
increase in legal, accounting, professional and public relations
expenses
of $76,238, or 66%, to $191,205 from $114,967, primarily as a result
of
growth in the Company and additional cost of being a public
company.
|
·
|
Amortization
of intangibles and depreciation of fixed assets increased by $5,077,
or
26%, to $24,652 from $19,575 primarily due to an increase in fixed
assets
and intangibles in the Fiscal 2008 Quarter compared to the Fiscal
2007
Quarter.
|
·
|
Overall
occupancy and conference related expenses increased by $34,296 or
54% to
$97,495 from $63,199. Overall conference expense has increased by
$30,960
in the Fiscal 2008 Quarter due to the participation in several cancer
conferences. Additional expenses for publication material were partially
offset by lower director and officer’s insurance costs amounting to $8,728
for the Fiscal 2008 Quarter.
|
Other
Income (expense).
Other
Income (expense) decreased by $1,125,115 to $30,728 for Fiscal 2008 Quarter
from
income of $1,155,842 for the Fiscal 2007 Quarter. During the Fiscal 2007 and
the
Fiscal 2008 Quarters, we recorded interest expense of ($153,355) and ($1,987)
respectively, primarily related to interest accrued on our outstanding secured
convertible debenture issued on February 2 and March 8, 2006. Interest earned
on
investments for the Fiscal 2007 and Fiscal 2008 Quarters amounted to $26,326
and
$32,714, respectively. In the Fiscal 2007 Quarter there was a net change of
$1,282,871 in the fair value of common stock warrants and embedded derivative
liabilities recorded as income (non-cash item) compared to the fair values
as of
October 31, 2006 of the secured convertible debenture. There was no comparable
charge in Fiscal 2008 Quarter as the warrant and embedded derivative liability
was settled in October 2007.
No
provision for income taxes was made for either Fiscal Quarter due to significant
tax losses during and prior to such periods.
On
January 31, 2008, our cash balance was $2,826,873, and our working capital
was
$1,612,727, primarily the result of net proceeds of approximately $8,452,342
from the issuance of common stock in a private placement in October 2007 less
the cost of retiring outstanding debt and interest of approximately $2,889,999,
purchase of warrants $600,000 and the higher overall cost of development and
operations as a public company.
We
intend
to use our available cash and resources during the next 6 months following
January 31, 2008 to prepare our Phase II clinical trial in CIN using Lovaxin
C,
one of our lead product candidates in development using our Listeria System,
maintain our research and development team to assist in the further development
of Lovaxin B (our Listeria vaccine directed toward treatment of breast cancer),
and Lovaxin P (our Listeria vaccine directed toward treatment of prostate
cancer) as well as in the development of several additional Listeria based
vaccines for the treatment of cancer, and to enhance our manufacturing
capabilities and strategic activities.
Contingent
obligations
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 dendritic cells, macrophages and natural killer cells, that respond
to
pathogens non-specifically. This agreement has been amended from time to time
and was amended and restated on February 13, 2007. The First Amendment to
the Amended and Restated Patent License Agreement was entered into on March
26,
2007 to exercise its option to license an additional Listeria-Based and
LLO-Based Vaccine patent/docket and have agreed to license 12 other
patents/dockets.
This
license, unless sooner terminated in accordance with its terms, terminates
upon
the later of: (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: 1.5% royalties on net sales in all
countries; notwithstanding this royalty rate, 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 do
not
expect to begin within the next five years); an annual maintenance fee starting
on December 31, 2008, until the first commercial sale of a Penn licensed
product; a total of $157,134 in license payments in addition to the $215,700
previously paid, or a total of $372,834.
Furthermore,
upon the achievement of the first sale of a product in certain fields, Penn
shall be entitled to milestone payments, as follows: $2,500,000 shall be due
for
first commercial sale of the first product in the cancer field; and $1,000,000
shall 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 aggregate
$4,445,000.
This
license also grants us exclusive negotiation rights 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 laboratory.
Each
option is granted to us at no cost and provides a six-month exercise period
from
the date of disclosure. Under this option we have finalized the First Amendment
to the Amended and Restated Agreement for one docket and have negotiated
licenses for more 12 dockets, with each docket having the potential of more
than
one patent. These dockets represent a majority of our pending patents and
although we have agreed to a fee of $311,000 we are negotiating in good faith
the term of the form of payment and have not finalized the Second Amendment.
As
of the
end of the period covered by this report, based on an evaluation of the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e)
under the Securities Exchange Act of 1934), each of the Chief Executive Officer
and the Vice President of Finance, Principal Financial Officer of the Company,
has concluded that the Company’s disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company
in
its Exchange Act reports is recorded, processed, summarized and reported within
the applicable time periods specified by the rules and forms of the Securities
and Exchange Commission.
There
were no significant changes in the Company’s internal controls or in any other
factors that could significantly affect those controls subsequent to the date
of
the most recent evaluation of the Company’s internal controls by the Company,
including any corrective actions with regard to any significant deficiencies
or
material weaknesses.
On
February 1, 2008 we issued 211,853 shares of common stock in connection
with liquidated damages of $31,778 incurred due to the delay in
effectiveness of the registration statement on Form SB-2.
The
above
sales were exempt from registration under the Act by virtue of the provisions
of
Section 4(2) thereof.
|
31.1
|
Certification
of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.2
|
Certification
of Principal Financial Officer pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
|
No
Reports on Form 8-K were filed during the three months ended January 31, 2008
except as follows:
|
i.
|
Report
on Form 8-K filed November 27, 2007 relating to items:4.01 and
9.01.
|
In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
|
|
|
|
ADVAXIS,
INC.
Registrant
|
|
|
|
Date: March
17, 2008
|
By: |
/s/ Thomas
Moore |
|
Thomas
Moore
Chief
Executive Officer and Chairman of the Board
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Fredrick
Cobb |
|
Fredrick
Cobb
Vice
President Finance, Principal Financial Officer
|
|
|