Unassociated Document
As
filed with the Securities and Exchange Commission on March 9, 2006 Registration
No. 333 - [__________]
|
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
SB-2
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
___________
Advaxis,
Inc.
(Name
of small business issuer in our
charter)
|
|
Colorado
(State
or other jurisdiction
of
incorporation or organization)
|
2836
(Primary
Standard Industrial
Classification
Code Number)
|
841521955
(I.R.S.
Employer
Identification
No.)
|
|
Technology
Center of New Jersey
675
Route 1
Suite
119
North
Brunswick, NJ 08902
(Address,
including zip code, and telephone number, including area code,
of
registrant’s principal place of business)
___________________________
Mr.
Roni Appel, Chief Executive Officer
Technology
Center of New Jersey
675
Route 1
Suite
119
North
Brunswick, NJ 08902
(Name,
address, including zip code, and telephone number, including area
code, of
registrant’s agent for service)
___________________________
Copies
to:
|
|
Gary
A. Schonwald, Esq.
Reitler
Brown & Rosenblatt LLC
800
Third Avenue
21st
Floor
New
York, New York 10022
(212)
209-3050 / (212) 371-5500 (Telecopy)
|
|
Approximate
date of commencement of proposed sale to the public.
From time to time after this Registration Statement becomes
effective.
If
the only securities being registered on this form are being offered
pursuant to dividend or reinvestment plans, please check the following
box. o
If
any of the Securities being registered on this Form are to be offered
on a
delayed or continuous basis pursuant to Rule 415 under the Securities
Act
of 1933, as amended, check the following box: S
If
this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check
the
following box and list the Securities Act Registration Statement
number of
the earlier effective Registration Statement for the same offering:
o
If
this Form is a post-effective amendment filed pursuant to Rule
462(c)
under the Securities Act, please check the following box and list
the
Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering: o
If
this Form is a post-effective amendment filed pursuant to Rule
462(d)
under the Securities Act, check the following box and list the
Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering: o
If
delivery of the prospectus is expected to be made pursuant to Rule
434,
please check the following box: o
|
CALCULATION
OF REGISTRATION FEE
|
Title
of each class of
securities
to be registered
|
|
Amount
to be
Registered
|
|
Proposed
maximum
offering
price
per
unit
|
|
Proposed
maximum
aggregate
offering
price
|
|
Amount
of
registration
fee
|
|
| |
|
|
|
|
|
|
|
|
|
|
common
stock par value $0.001 per share
|
|
|
43,341,513(a)
|
|
$
|
0.43(b)
|
|
$
|
18,636,851
|
|
$
|
1,994.14
|
|
|
common
stock par value $0.001 per share
|
|
|
4,200,000(c)
|
|
$
|
0.43(d)
|
|
$
|
1,806,000
|
|
$
|
193.24
|
|
|
common
stock par value $0.001 per share
|
|
|
300,000(e)
|
|
$
|
0.52(f)
|
|
$
|
156,000
|
|
$
|
16.69
|
|
|
TOTAL
|
|
|
47,841,513
|
|
|
|
|
|
|
|
$
|
2,204.07
|
|
|
(a)
|
Estimate
of shares which may be issued upon conversion of $3,000,000 principal
and
payment of $540,000 of interest on the Secured Convertible Debentures
at a
“Market Conversion Price” provided for in the Debenture which is
calculated for the purpose of the number of shares to be registered
at
one-third of the “Fixed Conversion Price” of $0.287 per
share.
|
|
(b)
|
150%
of the Fixed Conversion Price of
$.0287.
|
|
(c)
|
Shares
to be offered upon exercise of Warrant to purchase 4,200,000
shares
|
|
(d)
|
150%
of the exercise price of $0.287 per
share.
|
|
(e)
|
Shares
to be offered upon exercise of B Warrant to purchase 300,000
shares.
|
|
(f)
|
150%
of exercise price $0.3444 per
share.
|
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION SATEMENT ON SUCH DATE OR DATES AS
MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION8(A) MAY
DETERMINE.
TABLE
OF CONTENTS
|
Item
Description
|
|
Page
No.
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| |
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|
|
WHERE
YOU CAN FIND MORE INFORMATION ABOUT US
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2
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CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
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2
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PROSPECTUS
SUMMARY
|
|
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3
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THE
OFFERING
|
|
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6
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RISK
FACTORS
|
|
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8
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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23
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USE
OF PROCEEDS
|
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24
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MARKET
FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
|
|
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24
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DIVIDEND
POLICY
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|
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24
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DILUTION
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24
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CAPITALIZATION
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24
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS AND PLAN OF OPERATIONS
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27
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BUSINESS
|
|
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38
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MANAGEMENT
|
|
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55
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PRINCIPAL
AND MANAGEMENT STOCKHOLDERS
|
|
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65
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CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
|
|
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68
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SELLING
STOCKHOLDER
|
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69
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DESCRIPTION
OF CAPITAL STOCK OF THE COMPANY
|
|
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73
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SHARES
OF THE COMPANY ELIGIBLE FOR FUTURE SALE
|
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75
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PLAN
OF DISTRIBUTION
|
|
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76
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LEGAL
MATTERS
|
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78
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EXPERTS
|
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78
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ADDITIONAL
INFORMATION
|
|
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78
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FINANCIAL
STATEMENTS
|
|
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F-1
|
The
information in this prospectus is not complete and may be changed without
notice. The selling stockholder may not sell these securities until
the registration statement filed with the Securities and Exchange Commission
is
effective. This prospectus is not an offer to sell these securities, and
it is not soliciting offers to buy these securities, in any state where the
offer or sale of these securities is not permitted.
Subject
to completion
Dated
March 9, 2006
PRELIMINARY
PROSPECTUS
The
information in this prospectus is not complete and may be changed without
notice. The selling stockholder may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities, and it
is
not soliciting offers to buy these securities, in any state where the offer
or
sale of these securities is not permitted.
Advaxis,
Inc.
Common
Stock
This
is
an offering (the “Offering”) of the shares of Common Stock, $0.001 par value, of
Advaxis, Inc. (the “Company” or “Advaxis”), acquired by Cornell Capital Partners
LP (the “Selling Stockholder”):
| |
(i)
|
upon
conversion of outstanding principal payment of Secured Convertible
Debentures due February 1, 2009 (the “Debentures”) acquired from the
Company in a private placement (the “February 2006 Private Placement”) and
in payment of Debenture interest;
|
| |
(ii)
|
upon
exercise of Warrants expiring on or prior to February 1, 2011 with
an
exercise price of $0.287 per share (the “A Warrants”), issued in the
February 2006 Private Placement; and
|
| |
(iii)
|
upon
exercise of B Warrants expiring on or prior to February 1, 2011
with an
exercise price of $0.344 per share (the “B Warrants”) issued in the
February 2006 Private Placement.
|
All
of
the shares, when sold will be sold by the Selling Stockholder who may sell
the
shares of common stock from time to time at prevailing market prices.
We
will
not receive any proceeds from the sales by the Selling Stockholder, but we
will
receive the benefit of a reduction of indebtedness from the conversion of
the
Debentures and satisfaction of Debentures interest obligation and the receipt
of
funds, exercise of the A Warrants and the B Warrants held by the Selling
Stockholder, if exercised, if payment is made by means other than cashless
exercise.
Our
Common
Stock is quoted on the Over The Counter Bulletin Board, which is commonly
referred to as the “OTC Bulletin Board” maintained by various broker dealers,
under the symbol ADXS.
No
underwriter or person has been engaged to facilitate the sale of shares of
Common Stock in this offering. None of the proceeds from the sale of the
shares
by the Selling Stockholder will be placed in escrow, trust or any similar
account. There are no underwriting commissions involved in this offering.
We
have agreed to pay all the costs of this offering. Selling stockholder will
pay
no offering expenses.
This
offering is highly speculative and these securities involve a high degree
of
risk. You should purchase shares only if you can afford a complete loss.
See
“Risk Factors” beginning on page 8.
_________________________
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal offense.
The
date
of this prospectus is March 9,
2006.
WHERE
YOU CAN FIND MORE INFORMATION ABOUT US
We
file
reports, proxy statements, information statements and other information with
the
Securities and Exchange Commission (the “SEC”). You may read and copy this
information, for a copying fee, at the SEC’s Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for
more information in its public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services, and at
the
web site maintained by the SEC at http://www.sec.gov.
We
have
not authorized anyone to give any information or make any representation about
the Offering that differs from, or adds to, the information in this prospectus
or in its documents that are publicly filed with the SEC. Therefore, if anyone
does give you different or additional information, you should not rely on it.
The delivery of this prospectus does not mean that there have not been any
changes in our condition since the date of this prospectus. If you are in a
jurisdiction where it is unlawful to offer the securities offered by this
prospectus, or if you are a person to whom it is unlawful to direct such
activities, then the offer presented by this prospectus does not extend to
you.
This prospectus speaks only as of its date except where it indicates that
another date applies.
THIS
PROSPECTUS IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
Certain
information contained in this prospectus includes forward-looking statements
(as
defined in Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act) that reflect the Company’s current views with respect to future
events and financial performance. Certain factors, such as unanticipated
technological difficulties, the volatile and competitive biotechnological
environment for products, changes in domestic and foreign economic, market
and
regulatory conditions, the inherent uncertainty of financial estimates and
projections, the degree of success, if any, in concluding business partnerships
or licenses with viable pharmaceutical or biotechnological companies,
instabilities arising from terrorist actions and responses thereto, and other
considerations described as “Risk Factors” in this prospectus could cause actual
results to differ materially from those in the forward-looking statements.
We
assume no obligation to update the matters discussed in this
prospectus.
Please
read this prospectus carefully. It describes our business, our financial
condition and results of operations. We have prepared this prospectus so that
you will have the information necessary to make an informed investment
decision.
PROSPECTUS
SUMMARY
This
summary highlights some information from this prospectus, and it may not contain
all of the information that is important to you. You should read the following
summary together with the more detailed information regarding our company and
the common stock being sold in this offering, including “Risk Factors” and our
consolidated financial statements and related notes, included elsewhere in
this
prospectus.
General
We
are a
development stage biotechnology company utilizing multiple mechanisms of
immunity with the intent to develop cancer vaccines that are more effective
and
safer than existing vaccines. To that end, we have licensed rights from 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. We have obtained an exclusive 20-year license
from Penn to exploit the Listeria System, subject to meeting various royalty
and
other obligations (the “Penn License”).
We
have
focused our initial development efforts upon cancer vaccines targeting cervical,
breast, prostate, ovarian, lung and other cancers. Our lead products in
development are as follows:
|
Product
|
|
Indication
|
|
Stage
|
|
Lovaxin
C
|
|
Cervical
and head and neck cancers
|
|
Pre-clinical;
Phase I study in cervical cancer anticipated to commence in early
2006*
|
|
Lovaxin
B
|
|
Breast
cancer and melanoma
|
|
Pre-clinical;
Phase I study anticipated to commence in late 2006*
|
|
Lovaxin
P
|
|
Prostate
cancer
|
|
Pre-clinical;
Phase I study anticipated to commence in early 2007
|
|
Lovaxin
W
|
|
Wilms
tumor and leukemia
|
|
Pre-clinical
|
|
Lovaxin
T
|
|
Cancer
through control of telomerase
|
|
Pre-clincial
|
|
Lovaxin
H
|
|
Prophylactic
vaccine for HIV (AIDS)
|
|
Pre-clincial
|
*
Possible delays of up to six months may occur based on the production schedule
of Cobra Biomanufacturing PLC of material, vaccine stability testing and the
issuance of required regulatory approval.
See
“Business - Research and Development Programs”.
Since
our
formation, we have had a history of losses, which as of October 31, 2005
aggregated $3,420,546, and because of the long development period for new drugs,
we expect to continue to incur losses for several years. Our business plan
to
date has been realized by substantial outsourcing of virtually all major
functions of drug development including scaling up for manufacturing, research
and development, grant applications and others. The expenses of these outsourced
services account for most of our accumulated loss. We cannot predict when,
if
ever, any of our product candidates will become commercially viable or FDA
approved. Even if one or more of our products becomes commercially viable and
receives FDA approval, we are not certain that we will ever become a profitable
business.
Strategy
During
the next 12 to 24 months our strategic focus will be to achieve several
objectives. The foremost of these objectives are as follows:
|
|
· |
Initiate
and complete Phase I clinical study of Lovaxin C;
|
|
|
· |
Continue
the pre-clinical development of our product candidates, as well as
continue research to expand our technology platform;
and
|
|
|
· |
Initiate
strategic and development collaborations with biotechnology and
pharmaceutical companies.
|
There
are
many potential obstacles to the implementation of our proposed strategy. Among
the potential obstacles we may encounter with respect to the Phase I clinical
study of Lovaxin C are: difficulty in recruiting patients for the study; a
material, adverse medical result in a patient during the study; and extended
time for FDA approval of the IND (or foreign regulatory authority approval)
required to proceed with the test.
Among
the
potential obstacles which we may encounter with respect to continuing
preclinical development of our product candidates such as Lovaxin B or T are
ambiguous animal data not sufficient to establish a proof of concept;
insufficient or adverse preclinical data on future products; and unexpected
higher costs or preclinical studies.
Among
the
potential obstacles which we may encounter in establishing strategic
collaborations are a possible perception by desirable potential partners that
the stage of our development is too early, the need to demonstrate more human
safety or efficicacy data, or a possible perception that our technology is
high
risk for patients or to the environment.
History
of the Company
We
were
originally incorporated in the State of Colorado on June 5, 1987 under the
name
Great Expectations, Inc., 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 Securities Exchange of
1934 (the “Exchange Act’). Until November 2004, we
were a
shell company without any business. On November 12, 2004, we acquired Advaxis,
Inc., a Delaware corporation (“Advaxis”), pursuant to 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, 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. Our principal executive offices are located
at
212 Carnegie Center, Suite 206, Princeton, New Jersey 08540 and
our
telephone number is (201) 750-2347.
_______________
Recent
Developments
In
November 2004, we acquired 100% of the stock of Advaxis which was organized
in
2002 to develop the Listeria System under patents licensed from Penn, which
are
described above under “General” and later in this prospectus under
“Business.”
Pursuant
to the Share Exchange, (i) our existing stockholders entered into a Surrender
and Cancellation Agreement whereby they contributed to us 199 shares of every
200 shares of common stock beneficially owned by them so that their ownership
was reduced to 752,600 shares of common stock and (ii) we issued to them and
others an aggregate of 16,350,323 shares of common stock, warrants to purchase
584,885 shares of common stock and options to purchase 2,381,525 shares of
common stock. Upon the closing of the Share Exchange, the total number of shares
of our common stock outstanding was 20,069,333 shares on a fully-diluted basis.
The transaction is being accounted for as a recapitalization. The historical
financial statements of Advaxis are our financial statements for reporting
purposes.
On
same
date, we sold as the first tranche of a private placement offering (the
“November 2004 Private Placement”), for $2.925 million to accredited investors
an aggregate of 10,191,636 shares of common stock and warrants to purchase
10,191,636 shares of common stock. The sale was made in units at a price of
$25,000 per unit with each consisting of 87,108 shares of common stock and
warrants to purchase 87,108 shares of common stock at any time prior to the
fifth anniversary following the date of issuance of the warrant, at a price
equal to $0.40 per share of common stock. In consideration of the investment,
we
granted to each investor certain registration rights and anti-dilution rights.
Also, in November 2004, we converted approximately $618,000 aggregate principal
of promissory notes and accrued interest outstanding into 2,153,310 shares
and a
like number of warrants.
On
December 8, 2004, we completed a second tranche of the November 2004 Private
Placement, whereby we sold for an aggregate price of $200,000 eight units to
accredited investors consisting of 696,864 shares of common stock and 696,864
warrants.
On
January 4, 2005, we completed a third and final tranche of the November 2004
Private Placement, whereby we sold for an aggregate price of $128,000 to
accredited investors, 445,993 shares of common stock and a like number of
warrants.
The
aggregate proceeds from the November 2004 Private Placement was
$3,253,000.
Pursuant
to the terms of an investment banking agreement, dated March 19, 2004, by and
between us and Sunrise Securities, Corp. (the “Placement Agent”), we issued to
the Placement Agent and its designees an aggregate of 2,283,445 shares of common
stock and warrants to purchase up to an aggregate of 2,666,900 shares of common
stock. The shares were issued as part consideration for the services of the
Placement Agent, as our placement agent in the Private Placement. In addition,
we paid the Placement Agent a total cash fee of $50,530.
On
January 12, 2005, we completed a second private sale whereby we sold for
$1,100,000 to a single investor 3,832,752 shares of common stock and five-year
warrants to purchase 3,832,752 shares of our common stock at an exercise price
of $0.40 per share.
Pursuant
to the terms of a certain Registration Rights Agreement, dated as of November
12, 2004 and as of January 12, 2005, with certain stockholders, we issued on
June 9, 2005 an aggregate of 409,401 shares (the “Penalty Shares”) to such
stockholders.
On
February 2, 2006, we sold to the Selling Stockholder our $3,000,000 Debenture
due February 1, 2009 convertible into shares of our common stock for $2,760,000
after deducting a commission of $240,000 and other placement fees of $20,000
and
issued warrants to purchase $4,500,000 shares of common stock. See “February
2006 Private Placement.”
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.
SUMMARY
CONSOLIDATED FINANCIAL DATA OF ADVAXIS
On
November 12, 2004, we acquired Advaxis, Inc., a Delaware corporation through
the
Share Exchange. The transaction was accounted for as a recapitalization. The
historical financial statements of Advaxis will be our financial statements
for
reporting purposes. Advaxis, Inc has changed its fiscal year to October 31st
and
as a result is providing herein its audited financial statements for the years
ended December 31, 2002 and 2003 and for the ten months ended October 31,
2004.
The
following condensed statement of operations data for the period from March
1,
2002 (inception) to October 31, 2005, the year ended December 31, 2003, the
ten
months ended October 31, 2004 and the selected balance sheet data at October
31,
2005 are derived from Advaxis’ financial statements and the related notes,
audited by Goldstein Golub Kessler LLP (except where noted), Certified Public
Accountants, 1185 Avenue of the Americas, Suite 500, New York, NY 10036-2602,
Advaxis’ independent registered public accounting firm. The financial statements
and the related notes as of October 31, 2005 and for the year ended December
31,
2003 and the ten months ended October 31, 2004 are included elsewhere herein.
The results of operations for any interim period are not necessarily indicative
of results to be expected for the entire year. The following data should be
read
in conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations and Plan of Operations” and our financial statements
and the related notes included elsewhere in this prospectus.
| |
|
Year
ended
December
31,
|
|
Ten
Months Ended
October
31,
|
|
12
Months Ended
October
31,
|
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2003
|
|
2003
|
|
2004
|
|
2004
|
|
2005
|
|
| |
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
$
|
4,000
|
|
$
|
3,600
|
|
$
|
116,406
|
|
$
|
116,806
|
|
$
|
552,868
|
|
|
Total
operating expenses
|
|
$
|
897,076
|
|
|
821,725
|
|
|
650,310
|
|
$
|
715,754
|
|
|
2,395,328
|
|
|
Interest
expense (income)
|
|
|
17,190
|
|
|
7,288
|
|
|
4,229
|
|
|
13,132
|
|
|
(36,671
|
)
|
|
Other
income
|
|
|
521
|
|
|
106
|
|
|
57
|
|
|
72
|
|
|
—
|
|
|
Provision
for income taxes
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(909,745
|
)
|
|
(825,907
|
)
|
|
(538,076
|
)
|
$
|
(655,892
|
)
|
$
|
(1,805,789
|
)
|
|
Loss
per Share Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share
|
|
$
|
(0.06
|
)
|
$
|
(0.05
|
)
|
$
|
(0.04
|
)
|
$
|
(0.04
|
)
|
$
|
(0.05
|
)
|
| |
|
December
31,
|
|
October
31
|
|
October
31,
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
| |
|
2003
|
|
2004
|
|
2005
|
|
|
Cash
and cash equivalents
|
|
$
|
47,160
|
|
$
|
32,279
|
|
$
|
2,075,206
|
|
|
Intangible
assets
|
|
$
|
277,243
|
|
$
|
469,803
|
|
$
|
751,088
|
|
|
Total
assets
|
|
$
|
324,403
|
|
$
|
502,083
|
|
$
|
2,904,039
|
|
|
Total
liabilities
|
|
$
|
1,131,138
|
|
$
|
1,841,579
|
|
$
|
1,152,465
|
|
|
Stockholders’
equity (deficiency)
|
|
$
|
(806,735
|
)
|
$
|
(1,339,496
|
)
|
$
|
1,751,575
|
|
THE
OFFERING
|
Common
stock offered by Selling Stockholder
|
__
(1)
|
|
Common
stock outstanding as of December 31, 2005
|
37,
768,932 shares
(2)
|
|
Use
of proceeds
|
We
will not receive any proceeds from the sale of the common stock,
but we
will receive funds from the exercise of warrants by selling stockholders,
if exercised for cash.
|
|
“OTC
Bulletin Board Quote” as of March 2, 2006.
|
$.26
|
| (1) |
An
aggregate of (i) 43,341,513 shares if acquired at an assumed Market
Conversion Price of $0.0956 per share (the “Fixed Conversion Price” of
$0.287 per share is to be used only if it is higher than the Market
Conversion Price) by the Selling Stockholder upon conversion of the
Debenture and in payment of potential maximum interest of $540,000
for the
three year term of the Debenture and (ii) 4,500,000 shares acquired
upon
exercise of Warrants. However, the Selling Stockholder has agreed
that
conversion, share payment for interest and exercise of the Warrants
will
only be made to the extent that the holdings of our common stock
by the
Selling Stockholder and its affiliates will not result in the selling
stockholder and its affiliates owning in the aggregate more than 4.9%
of our then outstanding shares of common
stock.
|
| (2) |
The
number of shares of common stock outstanding as of December 31, 2005
listed above excludes, in addition tot the shares
offered,
|
| · |
20,509,220
shares issuable upon exercise of the warrants with exercise prices
ranging
from $0.1952 to $0.40 per share;
|
| · |
4,842,539
additional shares of common stock issuable upon exercise of
options;
|
| · |
Commitments
to issue stock, options or warrants.
|
ADDITIONAL
INFORMATION
In
this
prospectus, the terms “we”, “us”, and “our” refer to Advaxis,
Inc., a Colorado corporation, and its consolidated subsidiary, Advaxis,
as appropriate in the context, and, unless the context otherwise requires,
“common stock” refers to the common stock, par value $0.001 per share,
of
Advaxis,
Inc.
RISK
FACTORS
An
investment in the common stock is highly speculative, involves a high degree
of
risk, and should be made only by investors who can afford a complete loss.
You
should carefully consider, together with the other matters referred to in this
prospectus, the following risk factors before you decide whether to buy our
common stock.
Risks
Specific to Us
We
are a development stage company.
We
are a
development stage company with a history of losses and can provide no assurance
as to future operating results. As a result of losses which will continue
throughout our development stage, we may exhaust our financial resources and
be
unable to complete the development of our production. Our deficit will continue
to grow during our drug development period.
We
have
sustained losses from operations in each fiscal year since our inception and
losses are expected to continue, due to the substantial investment in research
and development, for the next several years. At October 31, 2005, we had an
accumulated deficit of ($3,464,430)
and
stockholders’ equity of $2,904,039.
We
expect to spend substantial additional sums on the continued research and
development of proprietary products and technologies with no certainty that
losses will not increase or that we will ever become profitable as a result
of
these expenditures.
We
will require substantial additional financing in order to meet our business
objectives.
Although
we believe that the net proceeds received from private placements (i) in
November 2004 of the Units of shares of our common stock and of our warrants,
and (ii) in February 2006 of our $3,000,000 Debenture will be sufficient to
finance our currently planned operations for the near-term (approximately 12
to
24 months), such amounts will not be sufficient to meet our longer-term cash
requirements or cash requirements for the commercialization of certain products
currently in development. We will be required to find additional equity or
debt
securities or enter into other financial arrangements, including relationships
with corporate and other partners, in order to raise substantial additional
capital during the five to ten year period of product development and the United
States Food and Drug Administration (“FDA”) testing through Phase III testing.
Depending upon market conditions, we may not be successful in raising sufficient
additional capital for our long-term requirements. If we fail to raise
sufficient additional financing we will not be able to develop our product
candidates, we will be required to reduce staff, reduce or eliminate research
and development, slow the development of our product candidates and outsource
or
eliminate several business functions. Even if we are successful in raising
such
additional financing, we may not be able to successfully complete planned
clinical trials, development, and marketing of all, or of any, of our product
candidates. In such event, our business, prospects, financial condition and
results of operations could be materially adversely affected. We may be required
to reduce our staff, discontinue certain research or development programs of
our
future products, and cease to operate. We may not be able to conduct clinical
trial in Lovaxin C. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations and Plan of Operations”.
Our
limited operating history does not afford investors a sufficient history on
which to base an investment decision.
We
commenced our Listeria System vaccine development business in February 2002
and
have existed as a development stage company since such time. Prior thereto
we
conducted no business. Accordingly, we have a limited operating history.
Investors must consider the risks and difficulties we have encountered in the
rapidly evolving vaccine and therapeutic biopharmaceutical industry. Such risks
include the following:
|
|
· |
competition
from companies that have substantially greater assets and financial
resources than we have;
|
|
|
· |
need
for acceptance of products;
|
|
|
· |
ability
to anticipate and adapt to a competitive market and rapid technological
developments;
|
|
|
· |
amount
and timing of operating costs and capital expenditures relating to
expansion of our business, operations and
infrastructure;
|
|
|
· |
need
to rely on multiple levels of outside funding due to the length of
the
product development cycles and governmental approved protocols associated
with the pharmaceutical industry;
and
|
|
|
· |
dependence
upon key personnel including key independent consultants and
advisors.
|
We
cannot
be certain that our strategy will be successful or that we will successfully
address these risks. In the event that we do not successfully address these
risks, our business, prospects, financial condition and results of operations
could be materially and adversely affected. We may be required to reduce our
staff, discontinue certain research or development programs of our future
products, and cease to operate. We may not be able to conduct clinical trials
in
Lovaxin C.
We
can provide no assurance of the successful and timely development of new
products.
Our
products are at various stages of research and development. Further development
and extensive testing will be required to determine their technical feasibility
and commercial viability. Our success will depend on our ability to achieve
scientific and technological advances and to translate such advances into
reliable, commercially competitive products on a timely basis. Vaccine products
that we may develop are not likely to be commercially available until the second
part of this decade. The proposed development schedules for our products may
be
affected by a variety of factors, including technological difficulties,
proprietary technology of others, and changes in governmental regulation, many
of which will not be within our control. Any delay in the development,
introduction or marketing of our products could result either in such products
being marketed at a time when their cost and performance characteristics would
not be competitive in the marketplace or in the shortening of their commercial
lives. In light of the long-term nature of our projects, the unproven technology
involved and the other factors described elsewhere in “Risk Factors”, there can
be no assurance that we will be able to complete successfully the development
or
marketing of any new products. See “Business - Research and Development
Program”.
Our
research and development expenses are subject to
uncertainty.
Factors
affecting our research and development (or R&D) expenses include, but are
not limited to:
|
|
· |
The
number of and the outcome of clinical studies we are planning to
conduct.
For example, our R&D expenses may increase based on the number of
late-stage clinical studies which we may be required to
conduct;
|
|
|
· |
The
number of products entering into development from late-stage research.
For
example, there is no guarantee that internal research efforts will
succeed
in generating sufficient data for us to make a positive development
decision or that an external candidate will be available on terms
acceptable to us. Some promising candidates may not yield sufficiently
positive pre-clinical results to meet our stringent development
criteria;
|
|
|
· |
In-licensing
activities, including the timing and amount of related development
funding
or milestone payments. For example, we may enter into agreements
requiring
us to pay a significant up-front fee for the purchase of in-process
research and development which we may record as an R&D
expense;
|
|
|
· |
As
part of our strategy, we invest in R&D. R&D as a percent of future
potential revenues can fluctuate with the changes in future levels
of
revenue. Lower revenues can lead to more limited spending on R&D
efforts; and
|
|
|
· |
Future
levels of revenue.
|
We
are subject to numerous risks inherent in conducting clinical
trials.
We
must
outsource our clinical trials and are in the process of negotiating with third
parties to conduct such trials. There is no assurance that we will successfully
conclude agreements for the conduct of our clinical trials. Delay in concluding
such agreements would delay the commencement of the Phase 1 Trial of Lovaxin
C.
Agreements
with clinical investigators and medical institutions for clinical testing and
with other third parties for data management services place substantial
responsibilities on these parties, which could result in delays in, or
termination of, our clinical trials if these parties fail to perform as
expected. For example, if any of our clinical trial sites fail to comply with
FDA-approved good clinical practices, we may be unable to use the data gathered
at those sites. If these clinical investigators, medical institutions or other
third parties do not carry out their contractual duties or obligations or fail
to meet expected deadlines, or if the quality or accuracy of the clinical data
they obtain is compromised due to their failure to adhere to our clinical
protocols or for other reasons, our clinical trials may be extended, delayed
or
terminated, and we may be unable to obtain regulatory approval for or
successfully commercialize Lovaxin C.
We
or
regulators may suspend or terminate our clinical trials for a number of reasons.
We may voluntarily suspend or terminate our clinical trials if at any time
we
believe that they present an unacceptable risk to the patients enrolled in
our
clinical trials. In addition, regulatory agencies may order the temporary or
permanent discontinuation of our clinical trials at any time if they believe
that the clinical trials are not being conducted in accordance with applicable
regulatory requirements or that they present an unacceptable safety risk to
the
patients enrolled in our clinical trials.
Our
clinical trial operations are subject to regulatory inspections at any time.
If
regulatory inspectors conclude that we or our clinical trial sites are not
in
compliance with applicable regulatory requirements for conducting clinical
trials, we may receive reports of observations or warning letters detailing
deficiencies, and we will be required to implement corrective actions. If
regulatory agencies deem our responses to be inadequate, or are dissatisfied
with the corrective actions we or our clinical trial sites have implemented,
our
clinical trials may be temporarily or permanently discontinued, we may be fined,
we or our investigators may be precluded from conducting any ongoing or any
future clinical trials, the government may refuse to approve our marketing
applications or allow us to manufacture or market our products, and we may
be
criminally prosecuted.
The
successful development of biopharmaceuticals is highly
uncertain.
Successful
development of biopharmaceuticals is highly uncertain and is dependent on
numerous factors, many of which are beyond our control. Products that appear
promising in the early phases of development may fail to reach the market for
several reasons including:
|
|
· |
Pre-clinical
study results that may show the product to be less effective than
desired
(e.g., the study failed to meet its primary objectives) or to have
harmful
or problematic side effects;
|
|
|
· |
Failure
to receive the necessary regulatory approvals or a delay in receiving
such
approvals. Among other things, such delays may be caused by slow
enrollment in clinical studies, length of time to achieve study endpoints,
additional time requirements for data analysis or BLA preparation,
discussions with the FDA, an FDA request for additional pre-clinical
or
clinical data, or unexpected safety or manufacturing
issues.
|
|
|
· |
Manufacturing
costs, pricing or reimbursement issues, or other factors that make
the
product uneconomical; and
|
|
|
· |
The
proprietary rights of others and their competing products and technologies
that may prevent the product from being
commercialized.
|
Success
in pre-clinical and early clinical studies does not ensure that large-scale
clinical studies will be successful. Clinical results are frequently susceptible
to varying interpretations that may delay, limit or prevent regulatory
approvals. The length of time necessary to complete clinical studies and to
submit an application for marketing approval for a final decision by a
regulatory authority varies significantly from one product to the next, and
may
be difficult to predict.
We
must comply with significant government regulations.
The
research and development, manufacture and marketing of human therapeutic and
diagnostic products are subject to regulation, primarily by the FDA in the
United States and by comparable authorities in other countries. These national
agencies and other federal, state, local and foreign entities regulate, among
other things, research and development activities (including testing in animals
and in humans) and the testing, manufacturing, handling, labeling, storage,
record keeping, approval, advertising and promotion of the products that we
are
developing. Noncompliance with applicable requirements can result in various
adverse consequences, including, delay in approving or refusal to approve
product licenses or other applications, suspension or termination of clinical
investigations, revocation of approvals previously granted, fines, criminal
prosecution, recall or seizure of products, injunctions against shipping
products and total or partial suspension of production and/or refusal to allow
a
company to enter into governmental supply contracts.
The
process of obtaining requisite FDA approval has historically been costly and
time consuming. Current FDA requirements for a new human drug or biological
product to be marketed in the United States include: (1) the successful
conclusion of pre-clinical laboratory and animal tests, if appropriate, to
gain
preliminary information on the product’s safety; (2) filing with the FDA of an
Investigational New Drug Application (“INDA”), to conduct human clinical trials
for drugs or biologics; (3) the successful completion of adequate and
well-controlled human clinical investigations to establish the safety and
efficacy of the product for its recommended use; and (4) filing by a Company
and
acceptance and approval by the FDA of a New Drug Application ("NDA") for a
drug
product or a Biological License Application ("BLA") for a biological product
to
allow commercial distribution of the drug or biologic. A delay in one or more
of
the procedural steps outlined above could be harmful to us in terms of getting
our product candidates through clinical testing and to market.
We
can provide no assurance that the Advaxis products will obtain regulatory
approval or that the results of clinical studies will be
favorable.
We
received in February 2006 permission from the appropriate governmental agencies
in Israel, Mexico and Belgrade to conduct in those countries Phase I clinical
testing of Lovaxin C, our Listeria based cancer vaccine which targets cervical
cancer in women. However, the testing, marketing and manufacturing of any
product for sale or distribution in the United States will require 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 or Belgrade
and whether any such approval will ultimately be granted. Pre-clinical and
clinical trials may reveal that one or more products is ineffective or unsafe,
in which event further development of such products could be seriously delayed
or terminated. Moreover, obtaining approval for certain products may require
the
testing on human subjects of substances whose effects on humans are not fully
understood or documented. Delays in obtaining FDA or any other necessary
regulatory approvals of any proposed product and failure to receive such
approvals would have an adverse effect on the product’s potential commercial
success and on our business, prospects, financial condition and results of
operations. In addition, it is possible that a product may be found to be
ineffective or unsafe due to conditions or facts which arise after development
has been completed and regulatory approvals have been obtained. In this event,
we may be required to withdraw such product from the market. To the extent
that
our success will depend on any regulatory approvals from governmental
authorities outside of the United States which perform roles similar to that
of
the FDA, uncertainties similar to those stated above will also exist. See
“Business - Governmental Regulation”.
We
rely upon patents to protect our technology. We may be unable to protect our
intellectual property rights and we may be liable for infringing the
intellectual property rights of others.
Our
ability to compete effectively will depend on our ability to maintain the
proprietary nature of our technologies, including the Listeria System, and
the
proprietary technology of others with which we have entered into licensing
agreements. We have licensed eight patents and 12 patent applications from
Penn.
Further, we rely on a combination of trade secrets and nondisclosure, and other
contractual agreements and technical measures to protect our rights in the
technology. We depend upon confidentiality agreements with our officers,
employees, consultants, and subcontractors to maintain the proprietary nature
of
the technology. These measures may not afford us sufficient or complete
protection, and others may independently develop technology similar to ours,
otherwise avoid the confidentiality agreements, or produce patents that would
materially and adversely affect our business, prospects, financial condition,
and results of operations. Such competitive events, technologies and patents
may
limit our ability to raise funds, prevent other companies from collaborating
with us, and in certain cases prevent us from further developing our technology
due to third party patent blocking right.
We
believe that our technology and the technology licensed from Penn do not
infringe the rights of others; however, we cannot assure you that the technology
licensed from Penn will not, in the future be found to infringe upon the rights
of others. We have become aware of a public company, Cerus Corporation, which
has issued a press release claiming to have a proprietary Listeria-based
approach to a cancer vaccine. We believe that through our exclusive license
with
Penn of U.S. Patent Nos. 5,830,702, 6,051,237 and 6,565,852, we have the
earliest known and dominant patent position for the use of recombinant Listeria
monocytogenes expressing proteins or tumor antigens as a vaccine for the
treatment of infectious diseases and tumors. Based on searches of publicly
available databases, we do not believe that Cerus or The University of
California Berkeley (which is where Cerus’ consulting scientist works) or any
other third party owns any published Listeria patents or has any issued patent
claims that might materially negatively affect our freedom to operate our
business (as currently contemplated to be operated) in the field of Listeria
monocytogenes. We had received written notice from the European Patent Office
that Cerus has filed an opposition against European Patent Application Number
0790835 (EP 835 Patent) which was granted by the European Patent Office and
which is assigned to The Trustees of the University of Pennsylvania and
exclusively licensed to us. We are defending against Cerus’ allegations in the
Opposition that the EP 835 Patent, which claims a vaccine for inducing a tumor
specific antigen with a recombinant live Listeria, is deficient because of
(i)
insufficient disclosure in the specifications of the granted claims, (ii) the
inclusion of additional subject matter in the granted claims, and (iii) a lack
of inventive steps of the granted claims of the EP 835 Patent. We believe that
Cerus’allegations in the opposition have no basis and we plan to vigorously
defend the claims.
The
opposition is in the early stages and, as yet, we are unable to evaluate the
merits, if any, to the opposition proceeding. If the European Patent Office
rules that the allegations are correct in whole or in part, and such ruling
is
upheld on appeal, our patent position in Europe may be eroded to the degree
that
the claims of the patent are narrowed or not allowed. The likely result of
this
decision will be increased competition for us in the European market for
recombinant live Listeria based vaccines. Regardless of the outcome of the
opposition proceeding, we believe that our freedom to operate in Europe, or
any
other territory, for recombinant live Listeria based vaccine products will
not
be diminished.
For
more
information about Cerus Corporation and its claims with respect to
listeria-based technology, you should visit their web site at www.cerus.com
or to
view its publicly filed documents, www.sec.gov.
Others
may assert infringement claims against us, and should we be found to infringe
upon their patents, or otherwise impermissibly utilize their intellectual
property, our ability to continue to use our technology or the licensed
technology could be materially restricted or prohibited. If this event occurs,
we may be required to obtain licenses from the holders of our intellectual
property, enter into royalty agreements or redesign our products so as not
to
utilize this intellectual property, each of which may prove to be uneconomical
or otherwise impossible. Licenses or royalty agreements required in order for
us
to use this technology may not be available on acceptable terms, or at all.
These claims could result in litigation, which could materially adversely affect
our business, prospects, financial condition and results of operations. Such
competitive events, technologies and patents may limit our ability to raise
funds, prevent other companies from collaborating with us, and in certain cases
prevent us from further developing our technology due to third party patent
blocking right. See “Business—Patents and Licenses”.
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 on the patents of others, potentially causing increased
costs and delays in product development and introduction or preclude the
development, manufacture, or sale of planned products. Some of our licenses
provide for limited periods of exclusivity that require minimum license fees
and
payments and/or may be extended only with the consent of the licensor. We can
provide no assurance that we will be able to meet these minimum license fees
in
the future or that these third parties will grant extensions on any or all
such
licenses. This same restriction may be contained in licenses obtained in the
future. Additionally, we can provide no assurance that the patents underlying
any licenses will be valid and enforceable. Furthermore, we call to your
attention that in 2001 an issue arose regarding the inventorship of U.S. Patent
6,565,852 and U.S. Patent Application No. 09/537,642 of Penn. These patent
rights are included in the patent rights licensed by us from Penn. It is
contemplated by GlaxoSmithKline Biologicals PLC (“GSK”), Penn and us that the
issue will be resolved through: (1) a correction of inventorship to add certain
GSK inventors, (2) where necessary and appropriate, an assignment of GSK’s
possible rights under these patent rights to Penn, and (3) a sublicense from
us
to GSK. To date, this arrangement has not been finalized and we cannot assure
that this issue will ultimately be resolved in the manner described above.
See
“Business - Patents and Licenses”. To the extent any products developed by us
are based on licensed technology, royalty payments on the licenses will reduce
our gross profit from such product sales and may render the sales of such
products uneconomical. See “Business - Corporate Partnerships and
Agreements”.
We
have no manufacturing, sales, marketing or distribution capability and we must
rely upon third parties for such.
We
do not
intend to create facilities to manufacture our products and therefore are
dependent upon third parties to do so. We currently have an exclusive Long
Term
Vaccine Supply Agreement with Cobra Manufacturing for the manufacture and supply
of large quantities of our vaccines for trial and commercial purposes, but
subject to possible future price fluctuation and termination by either party
upon notice. 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, and therefore it 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 pre-clinical
or
clinical development programs related to this collaboration could be delayed
or
terminated. Also, our collaborators may pursue existing or other
development-stage products or alternative technologies in preference to those
being developed in collaboration with us. Finally, if we fail to make required
milestone or royalty payments to our collaborators or to observe other
obligations in our agreements with them, our collaborators may have the right
to
terminate those agreements.
We
may incur substantial liabilities from any product liability claims if our
insurance coverage for those claims is inadequate.
We
face
an inherent risk of product liability exposure related to the testing of our
product candidates in human clinical trials, and will face an even greater
risk
if the product candidates are sold commercially. An individual may bring a
liability claim against us if one of the product candidates causes, or merely
appears to have caused, an injury. If we cannot successfully defend ourselves
against the product liability claim, we will incur substantial liabilities.
Regardless of merit or eventual outcome, liability claims may result in:
| · |
decreased
demand for our product candidates,
|
| · |
injury
to our reputation,
|
| · |
withdrawal
of clinical trial participants,
|
| · |
costs
of related litigation,
|
| · |
substantial
monetary awards to patients or other claimants,
|
| · |
the
inability to commercialize product candidates,
and
|
| · |
increased
difficulty in raising required additional funds in the private and
public
capital markets.
|
We
currently do not have product liability insurance. We intend to obtain insurance
coverage and to expand such coverage to include the sale of commercial products
if marketing approval is obtained for any of our product candidates. However,
insurance coverage is increasingly expensive. We may not be able to maintain
insurance coverage at a reasonable cost and we may not be able to obtain
insurance coverage that will be adequate to satisfy any liability that may
arise.
We
may incur significant costs complying with environmental laws and regulations.
We
will
use hazardous materials, including chemicals and biological agents and compounds
that could be dangerous to human health and safety or the environment. As
appropriate, we will store these materials and wastes resulting from their
use
at our or our outsourced laboratory facility pending their ultimate use or
disposal. We will contract with a third party to properly dispose of these
materials and wastes. We will be subject to a variety of federal, state and
local laws and regulations governing the use, generation, manufacture, storage,
handling and disposal of these materials and wastes. We may also incur
significant costs complying with environmental laws and regulations adopted
in
the future.
If
we use biological and hazardous materials in a manner that causes injury, we
may
be liable for damages.
Our
research and development and manufacturing activities will involve the use
of
biological and hazardous materials. Although we believe our safety procedures
for handling and disposing of these materials will comply with federal, state
and local laws and regulations, we cannot entirely eliminate the risk of
accidental injury or contamination from the use, storage, handling or disposal
of these materials. We do not carry specific biological or hazardous waste
insurance coverage, workers compensation or property and casualty and general
liability insurance policies which include coverage for damages and fines
arising from biological or hazardous waste exposure or contamination.
Accordingly, in the event of contamination or injury, we could be held liable
for damages or penalized with fines in an amount exceeding our resources, and
our clinical trials or regulatory approvals could be suspended or terminated.
We
need to attract and retain highly skilled personnel; we may be unable to
effectively manage growth with our limited resources.
At
the
date of this prospectus, we have three employees. We intend to expand our
operations and staff materially. Our new employees will include a number of
key
managerial, technical, financial, research and development and operations
personnel who will not have been fully integrated into our operations. We expect
the expansion of our business to place a significant strain on our limited
managerial, operational and financial resources. We will be required to expand
our operational and financial systems significantly and to expand, train and
manage our work force in order to manage the expansion of our operations. Our
failure to fully integrate our new employees into our operations could have
a
material adverse effect on our business, prospects, financial condition and
results of operations. Our ability to attract and retain highly skilled
personnel is critical to our operations and expansion. We face competition
for
these types of personnel from other technology companies and more established
organizations, many of which have significantly larger operations and greater
financial, technical, human and other resources than we have. We may not be
successful in attracting and retaining qualified personnel on a timely basis,
on
competitive terms, or at all. If we are not successful in attracting and
retaining these personnel, our business, prospects, financial condition and
results of operations will be materially adversely affected. In such
circumstances we may be unable to conduct certain research and development
programs, unable to adequately manage our clinical trials of Lovaxin C and
other
products, and unable to adequately address the management needs of the Company.
See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations”, “Business - Strategy”, and
“Business--Employees.”
We
depend upon our senior management and key consultants and their loss or
unavailability could put us at a competitive disadvantage.
We
depend
upon the efforts and abilities of our senior executive, as well as the services
of several key consultants, including Yvonne Paterson, Ph.D. The loss or
unavailability of the services of any of these individuals for any significant
period of time could have a material adverse effect on our business, prospects,
financial condition and results of operations. We have not obtained, do not
own,
nor are we the beneficiary of, key-person life insurance. See
“Management—Employment Agreements”.
Risks
Related to the Biotechnology / Biopharmaceutical Industry
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. We may be unable
to
compete with more substantial enterprises.
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. Competition
in the biopharmaceutical industry is based significantly on scientific and
technological factors. These factors include the availability of patent and
other protection for technology and products, the ability to commercialize
technological developments and the ability to obtain governmental approval
for
testing, manufacturing and marketing. We compete with specialized
biopharmaceutical firms in the United States, Europe and elsewhere, as well
as a
growing number of large pharmaceutical companies that are applying biotechnology
to their operations. Many biopharmaceutical companies have focused their
development efforts in the human therapeutics area, including cancer. Many
major
pharmaceutical companies have developed or acquired internal biotechnology
capabilities or made commercial arrangements with other biopharmaceutical
companies. These companies, as well as academic institutions and governmental
agencies and private research organizations, also compete with us in recruiting
and retaining highly qualified scientific personnel and consultants. Our ability
to compete successfully with other companies in the pharmaceutical field will
also depend to a considerable degree on the continuing availability of capital
to us.
We
are
aware of certain products under development or manufactured by competitors
that
are used for the prevention, diagnosis, or treatment of certain diseases we
have
targeted for product development. Various companies are developing
biopharmaceutical products that potentially directly compete with our product
candidates even though their approach to such treatment is different. Several
companies, such as Cerus Corporation, in particular, Dandreon Corporation and
CancerVax Corporation, are attempting to develop cancer vaccines which would
be
directly competitive with our product candidates. In addition, numerous other
companies, many of which have greater financial resources than we do, are
actively engaged in the research and development of cancer vaccines, and are
in
Stage II and Stage III Testing of such products. Such companies include:
Antigenics, Inc.; Avi BioPharma, Inc.; Biomira, Inc.; GlaxoSmithKline
Biologicals PLC; Dendreon Corporation; Epimmune, Inc.; Genzyme Corp.; Progenics
Pharmaceuticals, Inc.; Vical Incorporated; CancerVax Corporation; Genitope
Corporation; and Xcyte Therapies, Inc.
We
expect
that our products under development and in clinical trials will address major
markets within the cancer sector. Our competition will be determined in part
by
the potential indications for which drugs are developed and ultimately approved
by regulatory authorities. Additionally, the timing of market introduction
of
some of our potential products or of competitors’ products may be an important
competitive factor. Accordingly, the relative speed with which we can develop
products, complete pre-clinical testing, clinical trials and approval processes
and supply commercial quantities to market are expected to be important
competitive factors. We expect that competition among products approved for
sale
will be based on various factors, including product efficacy, safety,
reliability, availability, price and patent position. See “Business - Research
and Development Programs” and “Business - Competition”.
Risks
Related to the Securities Markets and Investments in our Common
Stock
The
price of our common stock may be volatile.
The
trading price of our common stock may fluctuate substantially. The price of
the
common stock that will prevail in the market after the sale of the shares of
common stock by the Selling Stockholder may be higher or lower than the price
you have paid, depending on many factors, some of which are beyond our control
and may not be related to our operating performance. These fluctuations could
cause you to lose part or all of your investment in our common stock. Those
factors that could cause fluctuations include, but are not limited to, the
following:
| · |
price
and volume fluctuations in the overall stock market from time to
time;
|
| · |
fluctuations
in stock market prices and trading volumes of similar companies;
|
| · |
actual
or anticipated changes in our earnings or fluctuations in our operating
results or in the expectations of securities analysts;
|
| · |
general
economic conditions and trends;
|
| · |
major
catastrophic events;
|
| · |
sales
of large blocks of our stock;
|
| · |
departures
of key personnel;
|
| · |
changes
in the regulatory status of our product candidates, including results
of
our clinical trials;
|
| · |
events
affecting Penn or any future collaborators;
|
| · |
announcements
of new products or technologies, commercial relationships or other
events
by us or our competitors;
|
| · |
regulatory
developments in the United States and other countries;
|
| · |
failure
of our common stock to be listed or quoted on the Nasdaq Small Cap
Market,
American Stock Exchange, OTC Bulletin Board or other national market
system;
|
| · |
changes
in accounting principles; and
|
| · |
discussion
of us or our stock price by the financial and scientific press and
in
online investor communities.
|
In
the
past, following periods of volatility in the market price of a company’s
securities, securities class action litigation has often been brought against
that company. Due to the potential volatility of our stock price, we may
therefore be the target of securities litigation in the future. Securities
litigation could result in substantial costs and divert management’s attention
and resources from our business.
If
additional authorized shares of our common stock available for issuance or
shares eligible for future sale were introduced into the market, it could hurt
our stock price.
We
are
authorized to issue 500,000,000 shares of common stock. As of December 31,
2005,
there were an aggregate of 37,768,932 shares of our common stock issued and
outstanding. In addition, 4,842,539 shares of our common stock may be issued
upon the exercise of currently outstanding stock options and 20,509,220 shares
of common stock may be issued upon the exercise of current outstanding warrants.
There are also at least 16,834,495 shares of our common stock issuable upon
conversion of the principal and payment of interest on our 6% Secured
Convertible Debentures due February 1, 2009 (a minimum of 12,334,495 shares
at
the Fixed Conversion Price of $0.287 per share and 4,500,000 shares issuable
upon exercise of Warrants issued to Cornell Capital LP (“Cornell”). Conversion
and payment effected at a lower conversion price is permitted if the Market
Conversion Price as defined (see “February 2006 Private Placement”) is less than
the Fixed Conversion Price, and will result in the issuance of a greater number
of shares upon conversion and payment of the shares which may be issued upon
conversion, payment and exercise of a total of 47,841,513 shares which
are registered based on an assumed conversion price of $.0956 per
share pursuant to the Registration Statement of which this prospectus is
part under the Securities Act of 1933, as amended, for reoffering after
conversion, payment or exercise. Conversion at a lower price will
result in additional shares being issued.
The
following table sets forth the number of shares of our common stock issued
and
available for resale pursuant to the prospectus by Cornell if conversion was
at
the Fixed Conversion Price of $0.287 or at assumed Market Conversion Prices
of
$0.25, $0.20, $0.15, and $0.10 respectively
|
Conversion
Price
|
Number
of Shares Issuable
on
Conversion of Debentures
|
Percentage
of Issued
and
Outstanding (1)
|
|
$0.287
|
10,452,961
|
21.7%
|
|
$0.25
|
12,000,000
|
24.1%
|
|
$0.20
|
15,000,000
|
28.4%
|
|
$0.15
|
20,000,000
|
34.6%
|
|
$0.10
|
30,000,000
|
44.3%
|
| (1) |
Assumes
37,768,932 shares outstanding immediately prior to
conversion.
|
However,
Cornell has agreed that conversions, payments and exercises will not result
in
its holdings and those of its affiliates of shares of our common stock amounting
at the time of each conversion payment or exercise into more than 4.9% of our
outstanding shares of common stock.
We
have
recently registered for reoffering: 36,690,056 outstanding shares of common
stock and 19,630,588 shares which may be acquired upon exercise of certain
other
options and warrants. We are unable to estimate the amount, timing or nature
of
future sales of outstanding common stock. Sales of substantial amounts of the
common stock in the public market by these holders or perceptions that such
sales may take place may lower the common stock’s market price.
The
Company must account for certain derivative instruments issued on its common
stock as liabilities.
The
Company has outstanding debentures convertible into a variable number of
common
shares. In accordance with the provisions of EITF OO-19 Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled
in, a
Company’s Own Stock, the
existence of a variable share settled instrument will require the Company
to
account for outstanding warrants as well as warrants issued in the future
as
liabilities at fair value, with changes in fair value recorded in operations
each period.
Our
common stock is considered to
be “penny
stock”.
Our
common stock may be deemed to be “penny stock” as that term is defined in Rule
3a51-1, promulgated under the Securities and Exchange Act of 1934, as amended
(the “Exchange Act”). Penny stocks are stocks:
|
|
· |
with
a price of less than $5.00 per share;
|
|
|
· |
that
are not traded on a “recognized” national exchange;
|
|
|
· |
whose
prices are not quoted on the NASDAQ automated quotation system; or
|
|
|
· |
of
issuers with net tangible assets less than $2,000,000 (if the issuer
has
been in continuous operation for at least three years) or $5,000,000
(if
in continuous operation for less than three years), or with average
revenue of less than $6,000,000 for the last three years.
|
Section
15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder require
broker-dealers dealing in penny stocks to provide potential investors with
a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any transaction
in a
“penny stock” for the investor’s account. We urge potential investors to obtain
and read this disclosure document 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:
|
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· |
obtain
from the investor information about his or her financial situation,
investment experience and investment objectives;
|
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|
· |
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;
|
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|
· |
provide
the investor with a written statement setting forth the basis on
which the
broker-dealer made his or her determination; and
|
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|
· |
receive
a signed and dated copy of the statement from the investor, confirming
that it accurately reflects the investor’s financial situation, investment
experience and investment objectives.
|
Compliance
with these requirements may make it harder for investors in our common stock
to
resell their shares to third parties. Accordingly, our common stock should
only
be purchased by investors, who understand that such investment is a long-term
and illiquid investment, and are capable of and prepared to bear the risk of
holding the common stock for an indefinite period of time.
We
may incur increased costs as a result of recently enacted and proposed changes
in laws and regulations relating to corporate governance matters.
Recently
enacted and proposed changes in the laws and regulations affecting public
companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules
adopted or proposed by the SEC and by the Nasdaq Stock Market, will result
in
increased costs to us as we evaluate the implications of these laws and
regulations and respond to their requirements. These laws and regulations could
make it more difficult or more costly for us to obtain certain types of
insurance, including director and officer liability insurance, and we may be
forced to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. The impact of these events
could also make it more difficult for us to attract and retain qualified persons
to serve on our Board of Directors, our board committees or as executive
officers. We are continuously evaluating and monitoring developments with
respect to these laws and regulations and cannot predict or estimate the amount
or timing of additional costs we may incur to respond to their requirements.
A
limited public trading market may cause volatility in the price of our common
stock.
Our
common stock is quoted on the OTC Bulletin Board under the symbol ADXS. The
quotation of our common stock on the OTC Bulleting Board does not assure that
a
meaningful, consistent and liquid trading market currently exists, and in recent
years such market has experienced extreme price and volume fluctuations that
have particularly affected the market prices of many smaller companies like
us.
Our common stock is thus subject to this volatility. Sales of substantial
amounts of common stock, or the perception that such sales might occur, could
adversely affect prevailing market prices of our common stock and our stock
price may decline substantially in a short time and our shareholders could
suffer losses or be unable to liquidate their holdings.
There
is no assurance of an established public trading market.
A
regular
trading market for our common stock may not be sustained in the future. The
NASD
has enacted recent changes that limit quotation on the OTC Bulletin Board to
securities of issuers that are current in their reports filed with the SEC.
The
effect on the OTC Bulletin Board of these rule changes and other proposed
changes cannot be determined at this time. The OTC Bulletin Board is an
inter-dealer, over-the-counter market that provides significantly less liquidity
than the NASDAQ Stock Market. Quotes for stocks included on the OTC Bulletin
Board are not listed in the financial sections of newspapers as are those for
the NASDAQ Stock Market. Therefore, prices for securities traded solely on
the
OTC Bulletin Board may be difficult to obtain and holders of common stock may
be
unable to resell their securities at or near their original offering price
or at
any price. Market prices for our common stock will be influenced by a number
of
factors, including:
|
|
· |
The
issuance of new equity securities pursuant to a future
offering;
|
|
|
· |
Changes
in interest rates;
|
|
|
· |
Competitive
developments, including announcements by competitors of new products
or
services or significant contracts, acquisitions, strategic partnerships,
joint ventures or capital
commitments;
|
|
|
· |
Variations
in quarterly operating results;
|
|
|
· |
Change
in financial estimates by securities
analysts;
|
|
|
· |
The
depth and liquidity of the market for our common
stock;
|
|
|
· |
Investor
perceptions of our company and the technologies industries generally;
and
|
|
|
· |
General
economic and other national
conditions.
|
We
have
applied to have our common stock quoted on the OTC Bulletin Board. In addition
we are subject to a covenant to use our best efforts to apply to be listed
on
the American Stock Exchange or quoted on the Nasdaq National Stock Market.
We
cannot assure you that we will be successful in obtaining approval for such
applications.
We
may not be able to achieve secondary trading of our stock in certain states
because our common stock is not nationally traded.
Because
our common stock is not approved for trading on the Nasdaq National Market
or
listed for trading on a national securities exchange, our common stock is
subject to the securities laws of the various states and jurisdictions of the
United States in addition to federal securities law. This regulation covers
any
primary offering we might attempt and all secondary trading by our stockholders.
While we intend to take appropriate steps to register our common stock or
qualify for exemptions for our common stock, in all of the states and
jurisdictions of the United States, if we fail to do so the investors in those
jurisdictions where we have not taken such steps may not be allowed to purchase
our stock or those who presently hold our stock may not be able to resell their
shares without substantial effort and expense. These restrictions and potential
costs could be significant burdens on our stockholders.
Our
executive officers, directors and principal stockholders control our business
and may make decisions that are not in our best interest.
Our
officers, directors and principal stockholders, and their affiliates, in the
aggregate, beneficially own approximately 63.79% of the outstanding shares
of
our common stock on a fully diluted basis. As a result, such persons, acting
together, have the ability to substantially influence all 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.
The
Selling Stockholder hereunder have the right to register securities for resale
that they hold pursuant to registration rights agreements. We expect to continue
to incur product development and selling, general and administrative costs,
and
in order to satisfy our funding requirements, we will need to sell additional
equity securities, which may be subject to similar registration rights;
provided, that the Selling stockholder consent to such 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 December
31,
2005 we had 37,686,427 shares of our common stock issued and outstanding,
excluding shares issuable upon exercise of our outstanding warrants and options
and conversion of the Debenture. As of December 31, 2005, we had outstanding
4,842,539 options to purchase shares of our common stock at a weighted exercise
price of $0.23 per share and outstanding warrants to purchase 20,509,220 shares
of our common stock, with exercise prices ranging from $0.1952 to $0.40 per
share. In addition we have reserved 12,334,495 shares of common stock for an
issuance upon conversion of principal of and payment of interest on our
Debenture at the Fixed Conversion Price of $0.287 per share (larger amounts
if
the Market Conversion Price is applicable rather than the Fixed Conversion
Price) and 4,200,000 shares upon exercise A Warrants at a price of $0.287 and
300,000 shares upon exercise B Warrants at a price of $0.344 per share. Pursuant
to our 2004 Stock Option Plan, 2,381,525 shares of common stock are reserved
for
issuance under the plan. Pursuant to our 2005 Stock Option Plan, which is
subject to shareholder approval, 5,600,000 shares of common stock are reserved
for issuance under the plan. To the extent the shares of common stock are issued
or options and warrants are exercised, holders of our common stock will
experience dilution. In addition, in the event of any future financing of equity
securities or securities convertible into or exchangeable for, common stock,
holders of our common stock may experience dilution.
Shares
eligible for future sale may adversely affect the market.
From
time
to time, certain of our stockholders may be eligible to sell all or some of
their shares of common stock by means of ordinary brokerage transactions in
the
open market pursuant to Rule 144 (“Rule 144”) promulgated under the Securities
Act of 1933, as amended (the “Securities Act of 1933”), subject to certain
limitations. In general, pursuant to Rule 144, a stockholder (or stockholders
whose shares are aggregated) who has satisfied a one-year holding period may,
under certain circumstances, sell within any three-month period a number of
securities which does not exceed the greater of 1% of the then outstanding
shares of common stock or the average weekly trading volume of the class during
the four calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of securities, without any limitations, by a
non-affiliate of our company who has satisfied a two-year holding period.
Any substantial
sale of our common stock pursuant to Rule 144 or pursuant to any resale
prospectus may have an adverse effect on the market price of our
securities.
An
aggregate of 47,841,513 shares are being registered under the Securities Act
by
means of the registration statement of which this prospectus is a part for
reoffering by the Selling Stockholder upon conversion of principal and interest
on Debentures and exercise of the warrants, subject to its agreement not to
acquire shares if it would result in it and its affiliates owning more than
4.9%
of our then outstanding shares. An aggregate of 56,730,045 shares of common
stock recently have been registered with the SEC in a registration statement
(SEC file # 333-122504; as post-effectively amended on January 5, 2006) of
which
18,961,113 shares
are to be offered for resale upon exercise of warrants. These shares would
otherwise be eligible for future sale under Rule 144 after passage of the
minimum one year holding period for holders who are not officers, directors
or
affiliates of the Company. The registration and subsequent sales of such shares
of common stock will likely have an adverse effect on the market price of our
common stock when it commences to trade.
Our
Articles of Incorporation provide for the authorization of 5,000,000 shares
of
“blank check” preferred stock. Pursuant to our Articles of Incorporation, our
Board of Directors is authorized to issue such “blank check” preferred stock
with rights that are superior to the rights of stockholders of our common stock,
at a purchase price then approved by our Board of Directors, which purchase
price may be substantially lower than the market price of shares of our common
stock, without stockholder approval. We 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.
However, we have agreed not to issue without the consent of the Debentureholder
any shares of preferred stock or common stock at a price less than the closing
bid price of a share of our common stock as long as there is outstanding at
least $500,000 principal amount of the Debenture.
The
conversion of the Debentures could encourage short sales by third parties,
which
could contribute to the future decline of our stock price and materially dilute
existing stockholders' equity and voting rights.
The
conversion of the Debentures into common stock has the potential to cause
significant downward pressure on the price of our common stock. This is
particularly the case if the shares being placed into the market following
conversion exceed the market's ability to absorb the increased number of shares.
Such an event could place further downward pressure on the price of our common
stock, presenting an opportunity to short sellers and others to contribute
to
the future decline of our stock price. If there are significant short sales
of
our stock, the price decline that would result from this activity will cause
the
share price to decline more so, which, in turn, may cause long holders of the
stock to sell their shares thereby contributing to sales of stock in the market.
If there is an imbalance on the sell side of the market for the stock, our
stock
price will decline. If this occurs, the number of shares of our common stock
that is issuable upon conversion of the Debentures issued in February 2006
will
increase, which will materially dilute existing stockholders' equity and voting
rights.
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.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These statements include, but are not limited to:
|
|
· |
statements
as to the anticipated timing of clinical studies and other business
developments;
|
|
|
· |
statements
as to the development of new
products;
|
|
|
· |
expectations
as to the adequacy of our cash balances to support our operations
for
specified periods of time and as to the nature and level of cash
expenditures; and
|
|
|
· |
expectations
as to the market opportunities for our products, as well as our ability
to
take advantage of those
opportunities.
|
These
statements may be found in the sections of this prospectus entitled “Prospectus
Summary,” “Risk Factors”, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations and Plan of Operations”, and “Business,” as
well as in this prospectus generally. Actual results could differ materially
from those anticipated in these forward-looking statements as a result of
various factors, including all the risks discussed in “Risk Factors” and
elsewhere in this prospectus.
In
addition, statements that use the terms “can,” “continue,” “could,” “may,”
“potential,” “predicts,” “should,” “will,” “believe,” “expect,” “plan,”
“intend,” “estimate,” “anticipate,” “scheduled” and similar expressions are
intended to identify forward-looking statements. All forward-looking statements
in this prospectus reflect our current views about future events and are based
on assumptions and are subject to risks and uncertainties that could cause
our
actual results to differ materially from future results expressed or implied
by
the forward-looking statements. Many of these factors are beyond our ability
to
control or predict. Forward-looking statements do not guarantee future
performance and involve risks and uncertainties. Actual results will differ,
and
may differ materially, from projected results as a result of certain risks
and
uncertainties. The risks and uncertainties include, without limitation, those
described under “Risk Factors” and those detailed from time to time in our
filings with the SEC, and include, among others, the following:
|
|
· |
Our
limited operating history and ability to continue as a going
concern;
|
|
|
· |
Our
ability to successfully develop and commercialize products based
on our
therapies and the Listeria System;
|
|
|
· |
A
lengthy approval process and the uncertainty of FDA and other government
regulatory requirements may have a material adverse effect on our
ability
to commercialize our applications;
|
|
|
· |
Clinical
trials may fail to demonstrate the safety and effectiveness of our
applications or therapies, which could have a material adverse effect
on
our ability to obtain government regulatory
approval;
|
|
|
· |
The
degree and nature of our
competition;
|
|
|
· |
Our
ability to employ and retain qualified employees;
and
|
|
|
· |
The
other factors referenced in this prospectus, including, without
limitation, under the section entitled “Risk Factors”, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations
and Plan of Operations”, and
Business”.
|
These
risks are not exhaustive. Other sections of this prospectus may include
additional factors which could adversely impact our business and financial
performance. Moreover, we operate in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible
for our management to predict all risk factors, nor can we assess the impact
of
all factors on our business or the extent to which any factor, or combination
of
factors, may cause actual results to differ materially from those contained
in
any forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction
of
actual results. These forward-looking statements are made only as of the date
of
this prospectus. Except for our ongoing obligation to disclose material
information as required by federal securities laws, we do not intend to update
you concerning any future revisions to any forward-looking statements to reflect
events or circumstances occurring after the date of this
prospectus.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of the shares of common
stock by
the
Selling Stockholder. We will receive funds from the exercise of warrants held
by
Selling Stockholder if exercised for cash and the benefit of a reduction of
our
indebtedness of principal and to the extent the Selling Stockholder acquires
shares for reoffering through the conversion of the Debentures.
MARKET
FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Prior
to
July 28, 2005, there was no record of any quotes in the Pink Sheets or OTC
Bulletin Board. The following table sets forth the high bid and low asked price
for the common stock of the Company in the Over-the-Counter Bulletin Board
as
reported by the NASD.
|
Period
|
High
Bid
|
Low
Asked
|
|
7/29
- 9/30/05
|
$1.25
|
$0.15
|
|
10/1
- 12/31/05
|
$0.24
|
$0.20
|
|
1/1
- 2/28/06
|
$0.26
|
$0.18
|
At
February 15, 2006, there were approximately 200 holders of our common stock.
DIVIDEND
POLICY
We
have
not declared nor paid any cash dividend on our common
stock,
and we
currently intend to retain future earnings, if any, to finance the expansion
of
our business, and we do not expect to pay any cash dividends in the foreseeable
future. The decision whether to pay cash dividends on our common
stock will be made by our Board of Directors, in its discretion, and will depend
on our financial condition, operating results, capital requirements and other
factors that our Board of Directors considers significant.
DILUTION
We
are
only registering under this prospectus shares of common stock to be outstanding
upon conversion of Debentures and exercise of five year warrants issued in
the
February 2006 Private Placement and held by the Selling Stockholder. As such,
purchasers of shares of common stock sold under this prospectus shall not
experience any immediate dilution as a result of or upon such
purchase.
CAPITALIZATION
The
following table sets forth as of October 31, 2005, our actual capitalization
giving retroactive effect to the issuance in February 2006 of our Secured
Convertible Debentures. This table should be read in conjunction with the
information contained in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations and Plan of Operations” and the consolidated
financial statements and the notes thereto included elsewhere in this
prospectus.
| |
|
October
31, 2005
|
|
|
Indebtedness
|
|
|
|
|
Secured
Convertible Debenture due 2/01/09
|
|
$
|
3,000,000
|
|
|
Notes
Payable*
|
|
|
490,577
|
|
|
Total
indebtedness
|
|
$
|
3,490,577
|
|
|
Stockholders’
equity (deficit):
|
|
|
|
|
|
Preferred
Stock, authorized 5,000,000
|
|
|
|
|
|
outstanding
0 and 0
|
|
|
—
|
|
|
Common
Stock, par value $.001
|
|
|
|
|
|
authorized
500,000,000
|
|
|
|
|
|
outstanding
37,686,427
|
|
|
37,686
|
|
|
Additional
paid in capital
|
|
|
5,178,319
|
|
|
Deficit
accumulated during development
|
|
|
(3,464,430
|
)
|
|
Stockholders’
Equity
|
|
|
1,751,571
|
|
| |
|
|
|
|
|
Total
capitalization
|
|
$
|
5,242,148
|
|
*
Not
including short term payables.
SUMMARY
CONSOLIDATED FINANCIAL DATA OF ADVAXIS
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
October 31st
and as a
result is providing herein its audited financial statements for the year ended
December 31, 2003, the ten months ended October 31, 2004 and for the twelve
months ended October 31, 2005.
The
following condensed statement of operations data for the year ended December
31,
2003, the
ten
months ended October 31, 2004 and
the
year ended October 31, 2005 are
derived from Advaxis’ financial statements and the related notes, audited by
Goldstein Golub Kessler LLP, Certified Public Accountants, 1185 Avenue of the
Americas, Suite 500, New York, NY 10036-2602, Advaxis’ independent registered
public accounting firm. The financial statements and the related notes as of
October 31, 2005 and for the year ended December 31, 2003, the
ten
months ended October 31, 2004 and year ended October 31, 2005, are included
elsewhere herein. The selected unaudited statement of operations data for the
ten months ended October 31, 2003, and the unaudited
selected statement of operations data for the twelve months
ended
October 31, 2004, are derived from Advaxis’ unaudited financial statements,
which have been prepared on a basis consistent with Advaxis’ audited financial
statements and, in the opinion of management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation
of
Advaxis’ financial position and results of operations. The results of operations
for any interim period are not necessarily indicative of results to be expected
for the entire year. The following data should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations” and our financial statements and the related
notes included elsewhere in this prospectus.
| |
|
Year
ended December 31,
|
|
Ten
Months Ended
October
31,
|
|
12
Months
Ended
October
31,
|
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
| |
|
2003
|
|
2003
|
|
2004
|
|
2004
|
|
2005
|
|
| |
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
$
|
4,000
|
|
$
|
3,600
|
|
$
|
116,406
|
|
$
|
116,806
|
|
$
|
552,868
|
|
|
Total
operating expenses
|
|
$
|
897,076
|
|
|
821,725
|
|
|
650,310
|
|
$
|
715,754
|
|
|
2,395,328
|
|
|
Interest
expense (income)
|
|
|
17,190
|
|
|
7,288
|
|
|
4,229
|
|
|
13,132
|
|
|
(36,671
|
)
|
|
Other
income
|
|
|
521
|
|
|
106
|
|
|
57
|
|
|
72
|
|
|
—
|
|
|
Provision
for income taxes
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(909,745
|
)
|
|
(825,907
|
)
|
|
(538,076
|
)
|
$
|
(655,892)
|
)
|
$
|
(1,805,789
|
)
|
|
Loss
per Share Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share
|
|
$
|
(0.06
|
)
|
$
|
(0.05
|
)
|
$
|
(0.04
|
)
|
$
|
(0.04
|
)
|
$
|
(0.05
|
)
|
|
Balance
Sheet Data:
|
|
December
31,
|
|
October
31,
|
|
October
31,
|
|
| |
|
2003
|
|
2004
|
|
2005
|
|
|
Cash
and cash equivalents
|
|
$
|
47,160
|
|
$
|
32,279
|
|
$
|
2,075,206
|
|
|
Intangible
assets
|
|
$
|
277,243
|
|
$
|
469,803
|
|
$
|
751,088
|
|
|
Total
assets
|
|
$
|
324,403
|
|
$
|
502,083
|
|
$
|
2,904,039
|
|
|
Total
liabilities
|
|
$
|
1,131,138
|
|
$
|
1,841,579
|
|
$
|
1,152,465
|
|
|
Stockholders’
equity (deficiency)
|
|
$
|
(806,735
|
)
|
$
|
(1,339,496
|
)
|
$
|
1,751,575
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS AND PLAN OF OPERATIONS
This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations and other portions of this prospectus contain
forward-looking information that involve risks and uncertainties. Our actual
results could differ materially from those anticipated by the forward-looking
information. Factors that may cause such differences include, but are not
limited to, availability and cost of financial resources, product demand, market
acceptance and other factors discussed in this prospectus under the heading
“Risk Factors”. This Management’s Discussion and Analysis of Financial Condition
and Results of Operations and Plan of Operations should be read in conjunction
with our financial statements and the related notes included elsewhere in this
prospectus.
Overview
We
are a
biotechnology company utilizing multiple mechanisms of immunity with the intent
to develop cancer vaccines that are more effective and safer than existing
vaccines. We believe that by using our licensed Listeria System to engineer
a
live attenuated Listeria monocytogenes bacteria to secrete a protein sequence
containing a tumor-specific antigen, we will force the body’s immune system to
process and recognize the antigen as if it were foreign, creating the immune
response needed to attack the cancer. The licensed Listeria System, developed
at
the University of Pennsylvania (“Penn”) over the past 10 years, provides a
scientific basis for believing that this therapeutic approach induces a
significant immune response to the tumor. Accordingly, we believe that the
Listeria System is a broadly enabling platform technology that can be applied
in
many cancers, infectious diseases and auto-immune disorders.
Our
therapeutic approach is based upon, and we have obtained an exclusive license
with respect to, the innovative work of Yvonne Paterson, Ph.D., Professor of
Microbiology at Penn involving the creation of genetically engineered Listeria
that stimulate the innate immune system and induce an antigen-specific immune
response involving humoral and cellular components.
We
have
focused our initial development efforts on six lead compounds and anticipate
commencing a Phase I clinical study of Lovaxin C, a potential cervical and
neck
cancer vaccine, in the quarter ended April 30, 2006. See “Business - Research
and Development Program”.
We
were
originally incorporated in the state of Colorado on June 5, 1987 under the
name
Great Expectations, Inc. We were administratively dissolved January 1, 1997
and
reinstated June 18, 1998 under the name Great Expectations and Associates,
Inc.
In 1999, we became a reporting company under the Securities Exchange Act of
1934, as amended. We were a publicly-traded “shell” company in November 2004
without any business. On November 12, 2004, we acquired Advaxis through the
Share Exchange, as a result of which Advaxis become our wholly-owned subsidiary
and our sole operating company. For financial reporting purposes, we have
treated the Share Exchange as a recapitalization. As a result of the foregoing
as well as the fact that the Share Exchange is treated as a recapitalization
of
Advaxis rather than as a business combination, the historical financial
statements of Advaxis became our historical financial statements after the
Share
Exchange.
On
November
12, 2004, December 8, 2004 and January 4, 2005,
we
closed three tranches of a private offering of an aggregate of 11,334,495 shares
of our common stock and warrants to purchase an aggregate of 11,334,495 shares
of our common stock for aggregate net proceeds of approximately $3,253,000.
Such
offering was solely to “accredited investors”, as defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, through the Placement Agent.
See
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations - Liquidity and Capital
Resources”.
On
November 12, 2004 the holders of our promissory notes converted $595,000
principal plus accrued interest outstanding into an aggregate of 2,136,441
shares of our common stock and warrants to purchase 2,223,549 shares of our
common stock.
On
January
12, 2005, we
closed
a private offering of 3,832,753 shares of our common stock and warrants to
purchase 3,832,753 shares of our common stock resulting in aggregate net
proceeds of approximately $1,100,000. Such offering was to a single “accredited
investor”, as defined in Rule 501(a) of Regulation D under the Securities Act of
1933. See “Management’s Discussion and Analysis of Financial Condition and
Results of Operations and Plan of Operations - Liquidity and Capital
Resources”.
On
February 2, 2006 we sold to the Selling Stockholder, our $3,000,000 Secured
Convertible Debentures due February 1, 2009 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 after deducting commission and certain related
fees were approximately 2,740,000. The value of the warrants will be charged
as
interest expense over the three year term of the Debentures.
In
accounting for the convertible debentures and the warrants described above
and
all outstanding warrants, the Company considered the guidance contained in
EITF
00-19, “Accounting for Derivative Financial Instruments Indexed To, and
Potentially Settled In, a Company’s Own Common Stock,” and SFAS 133 “Accounting
for Derivative Instruments and Hedging Activities.” In accordance with the
guidance provided in EITF 00-19, the Company determined that the conversion
feature of the Debentures represents an embedded derivative since the debenture
is convertible into a variable number of shares upon conversion formula and
the
conversion clause allowing cash or shares of common stock in payment to the
debenture holders. Accordingly, the convertible debentures are not considered
to
be “conventional” convertible debt under EITF 00-19 and thus the embedded
conversion feature must be bifurcated from the debt host and accounted for
as a
derivative liability. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations and Plan of Operations” for additional
information as to the accounting treatment.
To
date
we have been in the development stage. During the year ended December 31, 2003,
the ten months ended October 31, 2004 and the year ended October 31, 2005,
we
had no customers and focused our efforts on research and development related
to
our product candidates, capital raising and formation, and activities relating
to the Share Exchange. During these periods, our net loss was $909,745, $538,076
and $1,805,789, respectively. We had working capital as of October 31, 2005
of
$1,365,742 and working capital deficits as of December 31, 2003 and October
31,
2004 of $997,184, and $1,396,062 and an accumulated deficit of $3,464,430 as
of
October 31, 2005.
Plan
of Operations
We
intend
to use the proceeds of the Private Placement closed on November 12, 2004,
December 8, 2004 and January 4, 2005 and the proceeds of the offerings closed
in
January 2005 and February 2006 to conduct a Phase I clinical trial in cervical
cancer using Lovaxin C, one of our lead product candidates in development using
our Listeria System. We intend to expand our research and development team
and
further the development of the product candidates. We also intend to deploy
a
portion of the funds in expanding our manufacturing capabilities and in
strategic activities. Our corporate staff will be responsible for the general
and administrative activities.
During
the next 12 to 24 months, we anticipate that our strategic focus will be to
achieve several objectives. Our foremost objectives are as follows and are
further described under “Business - Strategy”:
| · |
Initiate
and complete phase I clinical study of Lovaxin C;
|
| · |
Continue
pre-clinical development of our
products;
|
| · |
Continue
research to expand our technology
platform.
|
Accounting
Policies; Impact of Growth
Below
is
a brief description of basic accounting principles which we have adopted in
determining our recognition of expenses, as well as a brief description of
the
effects that our management believes that our anticipated growth will have
on
our revenues and expenses in the future 12 months.
Revenues.
We do
not anticipate
that we will record any material revenues during at least the twelve months
ending October 31, 2006. When we recognize revenues, we anticipate that
the
revenue sources will be principally comprised of grants and licensing fees.
Expenses.
We
recorded operating expenses for the year ended December 31, 2003, the ten months
ended October 31, 2004 and the year ended October 31, 2005 of $897,076, $650,310
and $2,395,328, respectively.
The
preparation of financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenue and expenses,
and related disclosure of contingent assets and liabilities. On an on-going
basis, we evaluate our estimates, based on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances.
Actual results may differ from these estimates under different assumptions
or
conditions.
We
believe the following critical accounting policy involves significant estimate
and judgment. We amortize trademark and patent costs over their estimated useful
lives. We may be required to adjust these lives based on advances in science
and
competitor actions. We review the recorded amounts of trademarks and patents
at
each period end to determine if their carrying amount is still recoverable
based
on expectations regarding potential licensing of the intangibles or sales of
related products. Such an assessment, in the future, may result in a conclusion
that the assets are impaired, with a corresponding charge against
earnings.
Due
to
the limited nature of our operations, we do not identify any other accounting
policies involving estimates or assumptions that are material due to the levels
of subjectivity and judgment necessary to account for highly uncertain matters
or the susceptibility of such matters to change, and where the impact of the
estimates and assumptions on financial condition or operating performance is
material.
In
accordance with Securities and Exchange Commission Staff Accounting Bulletin
(SAB) No. 104, revenue from license fees and grants is recognized when the
following criteria are met; persuasive evidence of an arrangement exists,
services have been rendered, the contract price is fixed or determinable, and
collectibility is reasonably assured. In licensing arrangements, delivery does
not occur for revenue recognition purposes until the license term begins.
Nonrefundable upfront fees received in exchange for products delivered or
services performed that do not represent the culmination of a separate earnings
process will be deferred and recognized over the term of the agreement using
the
straightline method or another method if it better represents the timing and
pattern of performance.
For
revenue contracts that contain multiple elements, we will determine whether
the
contract includes multiple units of accounting in accordance with EITF No.
00-21, Revenue Arrangements with Multiple Deliverables. Under that guidance,
revenue arrangements with multiple deliverables are divided into separate units
of accounting if the delivered item has value to the customer on a standalone
basis and there is objective and reliable evidence of the fair value of the
undelivered item.
Research
and Development.
During
the year ended December 31, 2003, the ten months ended October 31, 2004, and
the
year ended October 31, 2005, we recorded research
and development expenses of $491,508, $125,942 and $1,175,536, respectively.
Such expenses were principally comprised of manufacturing scale up and process
development, license fees, sponsored research and consulting. We
recognize research and development expenses as incurred.
During
the year ending October 31, 2006 and beyond, we anticipate that our research
and
development expenses will increase as a result of our expanded development
and
commercialization efforts related to clinical trials, product development,
and
development of strategic and other relationships that will be required
ultimately for the licensing, manufacture and distribution of our product
candidates. We regard four of our product candidates as major research and
development projects. The timing, costs and risks of those projects are as
follows:
Lovaxin
C - Phase I trial Summary Information
|
|
· |
Cost
incurred through December 31, 2005: approximately
$1,000,000
|
|
|
· |
Estimated
future costs: $700,000
|
|
|
· |
Anticipated
completion date: second quarter of fiscal
2006
|
|
|
· |
Risks
and uncertainties:
|
| – |
the
FDA (or relevant foreign regulatory authority) may not approve the
study
|
| – |
any
adverse event in a patient in the
trial
|
| – |
difficulty
in recruiting patients
|
| – |
strong
side effects in patients in the
trial
|
|
|
· |
Commencement
of material cash flows:
|
| – |
Unknown
at this stage and dependent upon a licensing deal or pursuant to
a
marketing collaboration subject to regulatory approval to market
and sell
the product.
|
Lovaxin
B - Phase I trial Summary Information
|
|
· |
Cost
incurred through December 31, 2005:
$300,000
|
|
|
· |
Estimated
future costs: $1,800,000
|
|
|
· |
Anticipate
completion dates: second quarter of fiscal
2007
|
|
|
· |
Risks
and uncertainties:
|
| – |
Obtaining
favorable animal data
|
| – |
Proving
low toxicity in animals and
obtaining favorable animal data
|
| – |
Manufacturing
scale up to GMP level
|
| – |
FDA
(or foreign regulatory authority) may not approve the
study
|
| – |
The
occurrence of an adverse event in a
patient
|
|
|
· |
Commencement
of material cash flows:
|
| – |
Unknown
at this stage, upon a licensing deal or pursuant to a marketing
collaboration subject to regulatory approval to market and sell the
product.
|
Lovaxin
T - Phase I trial Summary Information
|
|
· |
Cost
incurred through December 31, 2005:
$100,000
|
|
|
· |
Estimated
future costs: $1,500,000
|
|
|
· |
Anticipate
completion dates: third quarter of fiscal
2007
|
|
|
· |
Risks
and uncertainties:
|
| – |
Obtaining
favorable animal data
|
| – |
Proving
low toxicity in animals and obtaining favorable animal
data
|
| – |
Manufacturing
scale up to GMP levels
|
| – |
FDA
(or foreign regulatory authority) may not approve the study
initiation
|
| – |
Adverse
event in a patient in the program
|
|
|
· |
Commencement
of material cash flows:
|
| – |
Unknown
at this stage and dependent upon a licensing deal or pursuant to
a
marketing collaboration subject to regulatory approval to market
and sell
the product.
|
Lovaxin
NY - Phase I trial Summary Information
|
|
· |
Cost
incurred through December 31, 2005:
$200,000
|
|
|
· |
Estimated
future costs: Unknown at this
stage.
|
|
|
· |
Anticipated
completion dates: Unknown at this
stage.
|
|
|
· |
Risks
and uncertainties:
|
| – |
Obtaining
favorable animal data
|
| – |
Proving
low toxicity in animals and obtaining favorable animal
data
|
| – |
Manufacturing
scale up to GMP levels
|
| – |
FDA
(or foreign regulatory authority) may not approve the
study
|
| – |
The
occurrence of an adverse event in a patient in the
program
|
|
|
· |
Commencement
of material cash flows:
|
| – |
Unknown
at this stage and dependent upon a licensing deal or pursuant to
a
marketing collaboration subject to regulatory approval to market
and sell
the product.
|
General
and Administrative Expenses.
During
the year ended December 31, 2003, the ten months ended October 31, 2004, and
the
year ended October 31, 2005, we
recorded general and administrative expenses of $405,568, $524,368 and
$1,219,792, respectively. General and administrative costs primarily include
the
salaries for executive, finance, facilities, insurances, accounting and legal
assistance, as well as other corporate and administrative functions that serve
to support Advaxis’ current and our future operations and provide an
infrastructure to support this anticipated future growth. During
the year ending October 31, 2006 and beyond, we anticipate that our
general
and administrative costs will increase due to the increased compliance
requirements, including, without limitation, legal, accounting, and insurance
expenses, to comply with periodic reporting and other regulations applicable
to
public companies.
Interest
Expense.
During
the year ended December 31, 2003 and the ten months ended October 31, 2004,
we
recorded interest expense of $17,190 and $4,229, respectively and for the year
ended October 31, 2005, we recorded interest income of $36,671. Interest
expense, relates primarily to our convertible promissory notes which have been
converted into Units at the initial closing of our Private Placement on November
12, 2004. Each Unit consisting of 87,108 shares of common stock and warrants
to
purchase 87,108 shares of common stock. Interest Income, relates primarily
to
our back cash deposits.
Recently
Issued Accounting Pronouncements. In
December 2004, the Financial Accounting Standards Board issued FASB Statement
No. 123 (revised 2004), share-based payment. This statement requires that
compensation cost relating to share based payment transactions be recognized
in
financial statements. The cost will be measured based on the fair value of
the
equity or liability instruments issued. At present, we are unable to determine
what effect, if any, the adoption of FASB Statement No. 123 (revised 2004)
will
have on our financial statements.
Results
of Operations
| |
Year
Ended October 31, 2005 Compared to the Year Ended October 31,
2004
|
Revenue.
Our
revenue increased by $436,462 from $116,406 for the year ended October 31,
2004
to $552,868 for the year ended October 31, 2005 due to the increase in grant
money received by the Company.
Research
and Development Expenses. Research
and development expenses increased by $1,034,916, or 736%, from $140,620 for
the
twelve months ended October 31, 2004 to $1,175,536 for the twelve months ended
October 31, 2005. This increase was principally attributable to the
following:
| · |
An
increase in our related manufacturing expenses of $416,842, from
$(7,300)
to $409,542; such increase reflects the delay in the manufacturing
program
during 2004 because of delays in funding, and the manufacturing of
Lovaxin
C in 2005 for toxicology and clinical
trials;
|
| · |
Expenses
related to toxicology studies of $293,105; reflecting the initiation
of
toxicology studies by Pharm Olam in connection with our Lovaxin C
product
candidates, and the payment of deferred license fees to Penn; none
were
incurred in the prior year.
|
| · |
Wages
and salaries related to our research and development program of $166,346,
reflecting the recruitment of our R&D management team in early 2005;
none were incurred in the prior
year.
|
| · |
Subcontracted
work of $141,366, reflecting the subcontract work performed by Dr.
Paterson at Penn pursuant to certain grants; none were incurred in
the
prior year.
|
General
and Administrative Expenses. General
and administrative expenses increased by $644,659 or 112% from $575,133 for
the
year ended October 31, 2004 to $1,219,792 for the year ended October 31, 2005.
This decrease is primarily attributable to the following:
| · |
employee
related expenses increased by $123,157, or 56.4%, from $218,482 for
the
twelve months ended October 31, 2004 to $341,639 for the twelve months
ended October 31, 2005 arising from a bonus to Mr. Derbin, then Chief
Executive Officer, in stock, an increase in his salary, and the cost
of
health insurance initiated in 2005;
|
| · |
offering
expenses were $117,498 for the twelve months ended October 31, 2005
arising from legal and banking expenses relating to the private placement
closed in November 2004. None were incurred for the twelve months
ended
October 31, 2004;
|
| · |
an
increase in professional fees from $231,686 for the twelve months
ended
October 31, 2004 to $460,691 for the twelve months ended October
31, 2005,
primarily as a result of an increase in legal fees, public relations
fees,
consulting fees and accounting fees.
|
Interest
Expenses. Interest
expense decreased by $5,825, or 44.4%, to $7,307 from $13,132 for the year
ended
October 31, 2004. The decrease results primarily from a reduction on interest
payable on certain notes which were converted on November 12, 2004.
Other
Income. Other
income increased by $43,907 to $43,978 from $71 for the twelve months ended
October 31, 2004. The increase results primarily from an increase in interest
paid to the company on cash deposits held by the Company.
No
provision for income taxes was made for the year ended October 31, 2004 or
2005
due to significant tax losses during and prior to such periods.
Ten
Months Ended October 31, 2004 Compared to the Ten Months Ended October 31,
2003
Revenue.
Our
revenue increased by $112,806 to $116,406 for the ten months ended October
31,
2004 from $3,600 for the ten months ended October 31, 2003 due to the increase
in grant money received by the Company in these periods.
Research
and Development Expenses. Research
and development expenses decreased by $320,382, or 71.8%, from $446,324 for
the
ten months ended October 31, 2003 to $125,942 for the ten months ended October
31, 2004. This decrease was principally attributable to the
following:
| · |
a
decrease in manufacturing expenses of $(8,504) to $228,452 from $219,948
for the earlier ten month period; such decrease reflects the delay
in the
manufacturing program during 2004 because of delays in
funding;
|
| · |
a
decrease of $110,164 in our license fees to $(54,082); as a result
of the
reclassification of license fees from an R&D expense to an investment;
|
| · |
a
decrease in our outside research fees from $97,306 to $38,382; such
decrease reflects the completion in the 2004 ten month period of
expenses
resulting from our sponsored research agreement with Penn;
and
|
| · |
development
consulting expenses increased 105.7% from $72,988 to $150,147; this
increase reflects primarily increased success fees due to DNA Bridges
in
connection with two NIH grants awarded to the Company in
2004
|
General
and Administrative Expenses. General
and administrative expenses increased by $148,965, or 39.7%, to $524,368 from
$375,403 for the ten months ended October 31, 2003. This decrease was
principally attributable to the following:
| · |
employee
related expenses increased by $34,790, or 22.5%, to $189,302 from
$154,512
for the ten months ended October 31, 2003 arising from a bonus to
Mr.
Derbin, the then Chief Executive Officer, in stock;
|
| · |
professional
fees increased by $14,368 to $218,514 from $204,145 for the ten months
ended October 31, 2003 principally due to (a) an increase in consulting
fees from $95,651 to $110,332, and (b) an increase in accounting
fees from
$350 to $23,070;
|
| · |
insurance
expense was increased by $8,028 to $9,929 from $1,901 for the ten
months
ended October 31, 2003; and
|
| · |
other
General and Administrative expenses increased by $66,701 to $81,545
from
$14,844 principally due to an increase in amortization expenses,
information technology and internet expenses, postage, telephone
and
travel expenses..
|
Interest
Expenses.
Interest
expense decreased by $4,059, or 49%, to $4,229 from $8,288 for the ten months
ended October 31, 2003. The decrease results primarily from a reduction in
interest payable on certain fees owed to Penn.
Other
Income.
Other
Income increased by $112,357, or 2,736%, to $116,463 from $4,106 for the ten
months ended October 31, 2003. The increase results primarily from an increase
in grants from $3,600 to $116,406.
Year
ended December 31, 2003 and the period from March 1, 2002 (inception) to
December 31, 2002
Revenue.
Our
revenue increased by $2,977, or 291%, to $4,000 for the year ended December
31,
2003 from $1,023 for the period from March 1, 2002 (inception) to December
31,
2002 due to the increase in grant money received by the Company in these
periods.
Research
and Development Expenses. Research
and development expenses increased by $440,610, or 865.7%, to $491,508 for
the
year ended December 31, 2003 from $50,898 for the period from March 1, 2002
(inception) through December 31, 2002. This increase was principally
attributable to the increase of $33,838, or 53%, to $97,306 for the year ended
December 31, 2003 from $63,468 for the period from March 1, 2002 (inception)
through December 31, 2002 in research fees due to Penn relating to an increased
research program, the initiation of our manufacturing scale up program with
Cobra Biomanufacturing PLC in year 2003 as well as the hire of certain
pre-clinical and regulatory consultants in early 2003 such as Therrimune
Research Corporation, Dr. Bruce Mackler and AccessBio.
General
and Administrative Expenses. General
and administrative expenses increased by $288,565, or 246.6%, to $405,568 from
$117,003 for the period from March 31, 2002 (inception) through December 31,
2002. This increase is primarily attributable to a $316,457 increase in
professional fees from $96,231 for the period from March 1, 2002 (inception)
to
December 31, 2002 due to increased consulting and legal requirements and
increased consulting fees paid to financial advisors in 2003.
Other
Income. Other
Income was $521 for the year ended December 31, 2003 and none for the period
from March 1, 2002 (inception) to December 31, 2002 as a result of interest
paid
on cash deposits held by the Company.
Interest
Expenses. Interest
expenses amounted to $17,190 for the year ended December 31, 2003, primarily
from the interest attributable to notes issued during such later period. No
interest expense was incurred for the period from March 31, 2002 (inception)
through December 31, 2002.
No
provision for income taxes was made for the period from March 31, 2002
(inception) through December 31, 2002 or the year ended December 31, 2003 due
to
significant tax losses incurred.
Other
Income. Other
income increased by $112,357 from $4,106 to $116,463, for the ten months ended
December 31, 2003 resulting primarily from an increase in grants from $3,600
to
$116,406.
Liquidity
and capital resources
At
December 31, 2003, October 31, 2004 and October 31, 2005, our cash was $47,160,
$32,279 and $2,075,206, respectively, and we had a working capital deficit
of
$997,184 and $1,396,062 at December 31, 2003 and October 31, 2004, respectively,
and working capital of $1,365,742 at October 31, 2005.
To
date,
our principal sources of liquidity has been cash provided by private offerings
of our securities. These offerings have been structured so as to be exempt
from
the prospectus delivery requirements under the Securities Act of 1933. Our
principal uses of cash have been research and development and working capital.
We anticipate these uses will continue to be our principal uses of cash in
the
future.
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 year ended December 31, 2003, the ten months ended
October 31, 2004 and for the twelve months ended October 31, 2005.
Although
we believe that the net proceeds received by us from the November 2004 Private
Placement and the private offerings and our February 2006 Private Placement
will
be sufficient to finance our currently planned operations for approximately
the
next 12 to 24 months from October 31, 2005, we do not believe that these amounts
will be sufficient to meet our longer-term cash requirements or our cash
requirements for the commercialization of any of our existing or future product
candidates. We will be required to issue equity or debt securities or to enter
into other financial arrangements, including relationships with corporate and
other partners, in order to raise additional capital. Depending upon factors,
including market conditions, we may not be successful in raising sufficient
additional capital for our long-term requirements. In such event, our business,
prospects, financial condition and results of operations could be materially
adversely affected.
The
following factors, among others, could cause actual results to differ from
those
indicated in the above forward-looking statements: increased length and scope
of
our clinical trials, increased costs related to intellectual property related
expenses, increased cost of manufacturing and higher consulting costs. These
factors or additional risks and uncertainties not known to us or that we
currently deem immaterial may impair business operations and may cause our
actual results to differ materially from any forward-looking statement.
Although
we believe the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform them to actual results
or to make changes in our expectations.
We
expect
our future sources of liquidity to be primarily equity capital, including
convertible debt instruments, raised from investors, as well as licensing fees
and milestone payments in the event we enter into licensing agreements with
third parties, and research collaboration fees in the event we enter into
research collaborations with third parties.
On
November 12, 2004, we sold to accredited investors at an initial closing of
the
November 2004 Private Placement 117 Units at $25,000 per unit for an aggregate
purchase price of $2,925,000. Each Unit is comprised of (i) 87,108 shares of
our
common stock and (ii) a five-year warrant to purchase 87,108 shares of our
common stock at an exercise price of $0.40 per share. At the initial closing,
the accredited investors received an aggregate of 10,191,638 shares of common
stock and warrants to purchase 10,191,638 shares of common stock. In addition,
on November 12, 2004, $595,000 aggregate principal amount of convertible
promissory notes of Advaxis, including accrued interest, were converted into
units on the same terms as those upon which the Units sold. The holders of
these
notes received an aggregate of 2,136,441 shares of common stock and warrants
to
purchase 2,136,441 shares of common stock upon conversion of these notes plus
accrued interest thereon.
On
December 8, 2004, we sold to accredited investors as a second tranche of the
November 2004 Private Placement 8 units for an aggregate purchase price of
$200,000. At such closing, the accredited investors received an aggregate of
696,864 shares of common stock and warrants to purchase 696,864 shares of Common
Stock.
On
January 4, 2005, we sold to accredited investors as a third tranche of the
November 2004 Private Placement 5.12 Units for an aggregate purchase price
of
$128,000. At such closing, the accredited investors received an aggregate of
445,993 shares of common stock and warrants to purchase 445,993 shares of Common
Stock.
Pursuant
to the terms of a investment banking agreement, dated March 19, 2004, by and
between us and Sunrise Securities, Corp. (“Sunrise” or the “Placement Agent”),
we issued to the Placement Agent and its designees an aggregate of 2,283,445
shares of common stock and warrants to purchase up to an aggregate of 2,666,900
shares of common stock. The shares were issued as part consideration for the
services of Sunrise, as our placement agent in the Private Placement. In
addition, we paid Sunrise a total cash fee of $50,530.
On
January 12, 2005, we sold to one accredited investor at a closing of a
subsequent private placement offering 44 units for an aggregate purchase price
of $1,100,000. As with the November 2004 Private Placement, each Unit issued
and
sold in this subsequent private placement was sold at $25,000 per unit and
is
comprised of (i) 87,108 shares of our common stock, and (ii) a five-year warrant
to purchase 87,108 shares of our common stock at an exercise price of $0.40
per
share. At such closing, the accredited investor received an aggregate of
3,832,752 shares of common stock and warrants to purchase 3,832,752 shares
of
common stock.
Pursuant
to a Securities Purchase Agreement dated February 2, 2006 with Cornell Capital
Partners, LP (“Cornell” or the “Selling Stockholder”), we sold $3,000,000
principal amount of our 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 will be charged to expense over the
three-year term of the Debentures. The investment-banking fee paid to Yorkville
Advisors in connection with the Debentures in the amount of $240,000 will be
charged, in view of its relationship with Cornell, as additional interest
expense over the three-year term of the Debentures. The remaining transaction
fees of $20,000 will be capitalized.
In
accounting for the convertible debentures and the
warrants described above and all outstanding warrants, the Company considered
the guidance contained in EITF 00-19, "Accounting for Derivative Financial
Instruments Indexed To, and Potentially Settled In, a Company's Own Common
Stock," and SFAS 133 "Accounting for Derivative Instruments and Hedging
Activites." In accordance with the guidance provided in EITF 00-19, the Company
determined that the conversion feature of the Debentures represents and embedded
derivative since the debenture is convertible into a variable number of shares
upon conversion formula and the conversion clause allowing cash or shares of
common stock in payment to the debenture holders. Accordingly, the
convertible debentures are not considered to be "conventional" convertible
debt
under EITF 00-19 and thus the embedded conversion feature must be bifurcated
from the debt host and accounted for as a derivative liability.
The
Company anticipates calculating the fair value of
the embedded conversion of the Company's above mentioned warrants in addition
to
all the outstanding warrants to be recorded as a warrant liability at the end
of
the second quarter April 30, 2006. It is anticipated that the Statement or
Operations for the Company's second quarter a significant non-cash expense
in
the establishment of the liabilities related to the warrants and embeddded
conversion feature will be recorded. The fair value of the warrants will be
calculated using the Black-Scholes valuation model based on the market price
of
common stock on the date of grant, exercise price of warrants of each
outstanding warrant, risk-free interest rate, expected volatility of and
expected life. The Company is required to re-measure the fair value of the
warrants and the conversion feature at each reporting period until the potential
issuance upon exercise of all warrants does not exceed the authorized shares
of
the Company. Accordingly, the Company will measure the fair value of the
warrants at July 31, 2006 using the Black-Scholes valuation model based on
the
current assumptions at that point in time. This calculation may result in a
fair
market value different than the April period. The increase or decrease in the
fair market value of the warrants from April 30, 2006 may result in non-cash
other income or of loss or income and corresponding change in warrant
liability.
Upon
full satisfaction of the debenture (whether
through its repayment or conversion to equity,) the fair value of the
remaining warrants on that date will be reclassified to
equity.
We
are
party to a license agreement, dated June 17, 2002, as amended, between Advaxis
and The Trustees of the University of Pennsylvania, pursuant to which Advaxis
has agreed to pay $525,000, divided over a four-year period as a royalty after
the first commercial sale of our products covered by the license. Since the
first commercial sale of our products will occur only pursuant to obtaining
regulatory approval to market and sell our products, we do not anticipate the
obligation to make such payments in the next five years. Advaxis is also
obligated to pay annual license maintenance fees under this agreement ranging
from $25,000 to $125,000 per year after the first commercial sale of a product
under the license, as well as pay up to $482,000 to the licensor upon receiving
financing. The amount due is contingent upon the size of the financing.
For
a
description of material employment agreements to which we are party, see
“Certain Relationships and Related Party Transactions” and Management -
Employment Agreements”.
Critical
Accounting Policies
The
preparation of financial statements requires the Company to make estimates
and
judgments that affect the reported amounts of assets, liabilities, revenue
and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, the Company evaluates its estimates, based on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions.
The
Company believes the following critical accounting policy involves significant
estimate and judgment. The Company amortizes trademark and patent costs over
their estimated useful lives. The Company may be required to adjust these lives
based on advances in science and competitor actions. The Company reviews the
recorded amounts of trademarks and patents at each period end to determine
if
their carrying amount is still recoverable based on expectations regarding
potential licensing of the intangibles or sales of related products. Such an
assessment, in the future, may result in a conclusion that the assets are
impaired, with a corresponding charge against earnings.
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 for 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.
BUSINESS
General
We
are a
development stage biotechnology company utilizing multiple mechanisms of
immunity with the intent to develop cancer vaccines that are more effective
and
safer than existing vaccines. To that end, we have licensed rights from Penn
to
use the Listeria System to secrete a protein sequence containing a
tumor-specific antigen. Using the Listeria System, we believe we will force
the
body’s immune system to process and recognize the antigen as if it were foreign,
creating the immune response needed to attack the cancer. Our licensed Listeria
System, developed at Penn over the past 10 years, provides a scientific basis
for believing that this therapeutic approach induces a significant immune
response to a tumor. Accordingly, we believe that the Listeria System is a
broadly enabling platform technology that can be applied to many types of
cancers. In addition, we believe there may be useful applications in infectious
diseases and auto-immune disorders.
The
therapeutic approach that comprises the Listeria System is based upon the
innovative work of Yvonne Paterson, Ph.D., Professor of Microbiology at Penn,
involving the creation of genetically engineered Listeria that stimulate the
innate immune system and induce an antigen-specific immune response involving
humoral and cellular components. We have obtained the Penn License to exploit
the Listeria System.
We
have
focused our initial development efforts upon cancer vaccines targeting cervical,
breast, Prostate, ovarian, lung and other cancers. Our lead products in
development are as follows:
|
Product
|
|
Indication
|
|
Stage
|
|
Lovaxin
C
|
|
Cervical
and head and neck cancers
|
|
Pre-clinical;
Phase I study in cervical cancer anticipated to commence in early
2006*
|
|
Lovaxin
B
|
|
Breast
cancer and melanoma
|
|
Pre-clinical;
Phase I study anticipated to commence in late 2006*
|
|
Lovaxin
P
|
|
Prostate
cancer
|
|
Pre-clinical;
Phase I study anticipated to commence in early 2007
|
|
Lovaxin
W
|
|
Wilms
tumor and leukemia
|
|
Pre-clinical;
|
|
Lovaxin
T
|
|
Cancer
through control of telomerase
|
|
Pre-clincial
|
|
Lovaxin
H
|
|
Prophylactic
vaccine for HIV (AIDS)
|
|
Pre-clincial
|
*
Possible delays of up to six months may occur based on the production schedule
of Cobra Biomanufacturing PLC of material, vaccine stability testing and the
issuance of required regulatory approval. We have received permission from
Israel, Mexico and Belgrade government authorities to conduct the Lovaxin Phase
I study in each of those countries.
See
“Business - Research and Development Programs”.
Since
our
formation, we have had a history of losses which as of October 31, 2005
aggregate $3,420,546, and because of the long development period for new drugs,
we expect to continue to incur losses for several years. Our business plan
to
date has been realized by substantial outsourcing of virtually all major
functions of drug development including scaling up for manufacturing, research
and development, grant applications and others. The expenses of these outsourced
services account for most of our accumulated loss. We cannot predict when,
if
ever, any of our product candidates will become commercially viable or FDA
approved. Even if one or more of our products becomes commercially viable and
receives FDA approval, we are not certain that we will ever become a profitable
business.
Strategy
During
the next 12 to 24 months our strategic focus will be to achieve several
objectives. The foremost of these objectives are as follows:
|
|
· |
Initiate
and complete Phase I clinical study of Lovaxin C;
|
|
|
· |
Continue
the pre-clinical development of our product candidates, as well as
continue research to expand our technology platform;
and
|
|
|
· |
Initiate
strategic and development collaborations with biotechnology and
pharmaceutical companies.
|
There
are
many potential obstacles to the implementation of our proposed strategy. Among
the potential obstacles we may encounter with respect to the Phase I clinical
study of Lovaxin C are: difficulty in recruiting patients for the study; a
material, adverse medical result in a patient during the study; and extended
time for FDA approval of the IND (or foreign regulatory authority approval)
required to proceed with the test.
Among
the
potential obstacles which we may encounter with respect to continuing
preclinical development of our product candidates such as Lovaxin B or T are
ambiguous animal data not sufficient to establish a proof of concept;
insufficient or adverse preclinical data on future products; and unexpected
higher costs or preclinical studies.
Among
the
potential obstacles which we may encounter in establishing strategic
collaborations are: we may be perceived by desirable potential partners as
too
early stage; we may need to demonstrate more human safety or efficicacy data;
or
our technology may be perceived as a high risk for patents or to the
environment.
Initiate
and Complete Phase I Clinical Study of Lovaxin C.
We have
had several meetings with the FDA and the Recombinant Advisory Committee of
the
National Institutes of Health (the “NIH”) and have designed a Phase I clinical
study, which is primarily a study of the safety of Lovaxin C. We received in
February 2006 approval from applicable regulatory authorities in Israel, Mexico
and Serbia to conduct in those countries Phase I clinical studies of the safety
of Lovaxin C. (The Israeli approval is subject to the approval of the ethics
committee of Hadassah Hospital in Jerusalem where the study is to be conducted).
We anticipate that each of the studies will be conducted on 20 to 30 patients
with advanced cervical cancer and that they will be completed by late 2006.
No
representation can be made as to the results or whether additional studies
will
be permitted or that the FDA will approve the conduct of a Phase I clinical
study for the vaccine’s safety.
We
have
demonstrated that the therapeutic response works in concept. In preparation
for
the commencement of our Phase I study of Lovaxin C, we have done the
following:
| · |
optimized
the Listeria strain to be used;
|
| · |
identified
and contracted with a manufacturing partner for material manufactured
in
accordance with “good manufacturing practices” or “GMP” as established by
the FDA;
|
| · |
identified
a principal investigator for the
trial;
|
| · |
written
a protocol; and
|
| · |
commenced
preparing an investigational new drug application, or IND, with an
external consulting group.
|
Following
the completion of the Phase I study and assuming that the results of this study
are favorable, we intend to prepare Phase II clinical studies to demonstrate
sufficient induction of immunity and therapeutic efficacy, as well as to
optimize the dosage and dosing regimen for the final vaccine formulation.
Thereafter, and assuming that the results of this study are favorable, we intend
to conduct Phase III clinical studies to demonstrate safety, efficacy and the
potency of the investigational vaccine. Such studies are expected to occur
in
the next five to ten years. Throughout this process, we will be meeting with
the
FDA prior to and at the conclusion of each phase to reach a consensus before
initiating any studies, in order to minimize regulatory risks during this
clinical development process.
At
the
conclusion of the Phase III studies, we intend to prepare and file a
BLA with
the
FDA. Prior to submission of the BLA, we intend to seek Fast Track designation
from the FDA, which shortens the internal FDA review process for the BLA to
six
months. As we accrue clinical data demonstrating the safety, efficacy and
potency of the product in Phase I and II clinical studies we will also explore
other regulatory approval options with the FDA that could expedite the licensure
of the final vaccine.
Continue
Pre-Clinical Development of Our Products, as well as Continued Research to
Expand Our Technology Platform. We
intend
to continue to devote a substantial portion of our resources to the continued
pre-clinical development of our product candidates as well as the continued
research to expand our technology platform. Specifically, we intend to focus
upon research relating to combining our Listeria System with new and additional
tumor antigens which, if successful may lead to additional cancer vaccines
and
other therapeutic products. These activities will require significant financial
resources, as well as areas of expertise beyond those readily available. In
order to provide additional resources and capital, we may enter into research,
collaborative, or commercial partnerships, joint ventures, or other arrangements
with competitive or complementary companies, including major international
pharmaceutical companies, or with universities, such as its relationship with
Penn and UCLA. See “Business - Partnerships and Agreements - Penn”.
Background
Cancer
Despite
tremendous advances in science, cancer remains a major health problem, and
for
many it continues to be the most feared of diseases. Although age-adjusted
mortality rates for all cancer fell during the 1990’s, particularly for the
major cancer sites (lung, colorectal, breast, and prostate), mortality rates
are
still increasing in certain sites such as liver and non-Hodgkin’s lymphoma. The
American Cancer Society estimates that more than eight million Americans were
treated for cancer in 1999. According to 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 1,400,000 new cases of cancer are expected to be
diagnosed, and 565,000 Americans are expected to die from the disease in year
2006.
Since
1990, nearly 15 million new cases have been diagnosed. The NIH estimates the
overall cost for cancer in the year 2000 at $180.3 billion: $60 billion for
direct medical costs, $15 billion for indirect morbidity costs (loss of
productivity due to illness) and, $105.2 billion for indirect mortality costs
(cost of lost productivity due to premature death). (Source: cancer facts &
figures 2001, American Cancer Society).
Immune
System and Normal Antigen Processing
Living
creatures, including humans, are continually confronted with potentially
infectious agents. The immune system has developed multiple mechanisms that
allows the body to recognize these agents as foreign, and to target a variety
of
immunological responses, including innate, antibody, and cellular immunity,
that
mobilize the body’s natural defenses against these foreign agents that will
eliminate them. In this regard, there are a host of cells involved in the
recognition of and response to antigens, substances, typically proteins, that
are recognized by the body’s immune system and generate an immune response.
Antigens are frequently found on the outside of invading cells like bacteria,
but can also be found on the body’s own cells when they are either infected by a
virus or transformed into a cancer cell.
1
2006,
American Cancer Society Inc, Surveilence Research, see
http://www.cancer.org/downloads/stt/CAFF06EsCsMcLd.pdf
The
combination of the antibody (also called humoral) system and the cell mediated
system results in the immune response. Different disorders need a different
mix
of responses to eliminate the problem, e.g., a streptococcal infection is
typically attacked primarily by the humoral system, and a cancer cell is
typically attacked by the cell mediated system.
The
first
step in recognizing a foreign antigen is antigen processing. When cells involved
in the recognition and response encounter an antigen that they do not recognize,
they ingest the antigen. The antigen is then cut into small pieces and the
pieces are combined with proteins called “MHCs” and pushed out to the cell
surface. On the cell surface, the antigen is then able to interact with certain
classes of cells created by the immune system that produce the specialized
cells
needed to help in the production of antibodies and the induction of cytotoxic
lymphocytes, primarily with antibodies. This system is called the exogenous
pathway, since it is the prototypical response to an exogenous antigen like
a
bacteria.
There
exists another pathway, called the endogenous pathway. In this system, when
one
of the body’s cells begins to create unusual proteins, the protein is processed
and expelled to the surface cell and is the cytoplasm into fragments. These
are
directed into the endoplasmic reticulum, where they bind major
Historocompatibility complex proteins, and then traffic to the cell surface.
This signal then calls immune cells to come to the site of the infection and
kill the cell. The endogenous pathway is used by the body to eliminate cells
that are creating unusual proteins (e.g., cancer cells or cells infected with
a
virus).
In
clinical cancer, the body does not recognize the cancer cells as foreign. Our
technology forces the body to recognize tumor-associated or tumor-specific
antigens as foreign, thus creating the immune response needed to attack the
cancer. It does this by combining elements of the endogenous and exogenous
pathways utilizing a number of biologic characteristics of the Listeria
bacteria.
Mechanism
of Action
Listeria
is a bacteria well known to medical science because it can cause an infection
in
humans. When Listeria enters the body, it is seen as foreign by the antigen
processing cells and ingested into cellular compartments called lysosomes,
whose
destructive enzymes kill most of the bacteria. A certain percentage of these
bacteria, however, are able to break out of the lysosomes and enter into the
cytoplasm of the cell, where they are relatively safe from the immune system.
The bacteria multiply in the cell, and the Listeria is able to force the cell
to
move the bacteria to its cell surface so it can push into neighboring cells
and
spread. In this way, Listeria can cause various clinical conditions, including
sepsis, meningitis and placental infections in pregnant women.
Listeria
produces a substance known as listeriolysin (“LLO”), a protein that cuts a hole
in the membrane of the lysosome and allows the bacteria to escape into the
relatively safe cytoplasm. Once in the cytoplasm, however, LLO is also capable
of cutting a hole in the cell membrane. This would destroy the cell, and spill
the bacteria back out into the space between the cells, where it would be
exposed to more immune cell attacks and destruction. To prevent this, LLO has
a
sequence of approximately 30 amino acids attached to it known as the PEST
sequence.
This PEST sequence is used by normal cells to force the rapid turnover of
proteins that need only have a short life in the cytoplasm. Listeria has evolved
the ability to utilize this PEST sequence itself as a routing tag that tells
the
cells to grab the LLO in the cytoplasm and pull it into the endoplasmic
reticulum, where it is processed just like a protein antigen in the endogenous
pathway. The benefit for the Listeria is that the LLO is neutralized and the
bacteria can continue to prosper inside the cell; the benefit provided by our
technology is that we now have a path into the antigen processing system that
causes an immune response of the tumor-specific antigen.
2 PEST
is a part of the LLO protein that is believed to faciliate rapid degradation
of
LLO in the cytoplasm. It appears to facilitate movement of the protein into
the
endoplasmic reticulum of the cell. In Advaxis’ application, the PEST sequence
enhances the cell-mediated response to an attached antigen, presumably by
preferential movement of the antigen sequence in to the intracellular protein
processing system of antigen processing cells such as macrophages and dendritic
cells.
Research
and Development Program
Overview
We
use
genetically engineered Listeria monocytogenes as a therapeutic agent. We start
with an attenuated Listeria, and then add to this bacteria a plasmid that
encodes a protein sequence that includes a portion of the LLO molecule
(including the PEST sequence) and the tumor antigen of interest. This protein
is
secreted by the Listeria inside the antigen processing cells, which then results
in the immune response as discussed above.
We
can
use different tumor antigens (or other antigens) in this system. By varying
the
antigen, we create different therapeutic agents. Our lead agent, Lovaxin C,
uses
a human papillomavirus derived antigen that is present in cervical cancers.
Lovaxin B uses her2/neu, an antigen found in many breast cancer and melanoma
cells, to induce an immune response that should be useful in treating these
conditions. The table below shows a list of potential products and their current
status:
|
Product
|
|
Indication
|
|
Stage
|
|
Lovaxin
C
|
|
Cervical
and head and neck cancers
|
|
Pre-clinical;
Phase I study in cervical cancer anticipated to commence in
2006*
|
|
Lovaxin
B
|
|
Breast
cancer and melanoma
|
|
Pre-clinical;
Phase I study anticipated to commence in late 2006**
|
|
Lovaxin
P
|
|
Prostate
cancer
|
|
Pre-clinical;
Phase I study anticipated to commence in early 2007
|
|
Lovaxin
W
|
|
Wilms
tumor and leukemia
|
|
Pre-clinical;
|
|
Lovaxin
T
|
|
Cancer
through control of telomerase
|
|
Pre-clincial
|
|
Lovaxin
H
|
|
Prophylactic
vaccine for HIV (AIDS)
|
|
Pre-clincial
|
*
We have
received approval from the appropriate authorities in Israel, Mexico and
Belgrade to conduct a preclinical Phase I study of the Lovaxin C product in
each
of those countries. We may await the results before determining whether to
proceed with an IND with the FDA.
**
Possible delays of up to six months may occur based on the production schedule
of Cobra Biomanufacturing PLC of material, vaccine stability testing and the
issuance of required regulatory approval.
Partnerships
and Agreements
Penn
We
have
entered into a 20-year exclusive worldwide license, with the right to grant
sublicenses, with Penn with respect to the innovative work of Yvonne Paterson,
Ph.D., Professor of Microbiology in the area of innate immunity, or the immune
response attributable to immune cells, including dentritic cells, macrophages
and natural killer cells, that respond to pathogens non-specifically. The
license provides us with the exclusive rights to the patent portfolio developed
at Penn in connection with Dr. Paterson and requires us to raise capital, pay
various milestone and licensing payments and commercialize the technology.
In
exchange for the license, Penn received shares of our common stock currently
representing approximately 10.68% of our common stock on a fully-diluted basis.
In addition, Penn is entitled to receive a non-refundable license initial fee,
license fees, royalty payments and milestone payments based on net sales and
percentages of sublicense fees and certain commercial milestones, as follows:
Under a licensing agreement, Penn is entitled to receive royalties in the
following amounts: 1.5% on net sales in countries with pending or issued
patents; and 1.0% on net sales in countries without pending or issued patents.
Notwithstanding these royalty rates, we have agreed to pay $525,000 divided
over
a four-year period as a minimum royalty after the first commercial sale of
a
product under the license (which we anticipate will not occur prior to January
2011). We are also obligated to pay up to $660,000 (which amount is already
reflected as an obligation on our balance sheet) to Penn upon receiving
financing or on certain dates on or before December 15, 2007, whichever is
earlier. After the 6th anniversary of the licensing agreement, we shall pay
Penn
annual license maintenance fees of $125,000 per year. In addition, we are
obligated to reimburse Penn for all attorneys fees, expenses, official fees
and other charges incurred in the preparation, prosecution and
maintenance of the patents licensed from Penn.
Furthermore,
upon the achievement of the first sale of a product in certain fields, Penn
shall be entitled to certain milestone payments, as follows: $2,500,000 shall
be
due for first commercial sale of the first product in the cancer field (of
which
$1,000,000 shall be paid within forty-five (45) days of the date of the first
commercial sale, $1,000,000 shall be paid on the first anniversary of the first
commercial sale; and $500,000 shall be paid on the second anniversary of the
date of the first commercial sale). In addition, $1,000,000 shall be due and
payable within forty-five (45) days following the date of the first commercial
sale of a product in any of the following fields (a) Infectious Disease, (b)
Allergy, (c) Autoimmune Disease, and (d) any other therapeutic indications
for
which licensed products are developed. Therefore, the maximum total potential
amount of milestone payments is $6,500,000.
As
a
result of the abovementioned payments, we may pay Penn significant amounts.
If
over the next 10 years we have net sales in the aggregate amount of $100 million
from our cancer products, our total payments to Penn shall be $5,535,000. If
over the next 10 years our net sales total an aggregate amount of $10 million
from our cancer products, our total payments to Penn shall be $4,560,000.
However,
Penn is not involved in management of our company or in exploitation of the
patent portfolio. Based on the agreements with Penn, we will be responsible
for
filing new patents and maintaining the existing patents.
Dr.
Yvonne Paterson
Dr.
Paterson is a Professor in the Department of Microbiology at Penn and the
inventor of our licensed technology. She has been an invited speaker at national
and international health field conferences and leading academic institutions.
She has served on many federal advisory boards, such as the NIH expert panel
to
review primate centers, the Office of AIDS Research Planning Fiscal Workshop,
and the Allergy and Immunology NIH Study Section. She has been Section Editor
of
the Journal of Immunology since 1994. She has written over 115 publications
in
immunology (including a recently published book) with emphasis during the last
several years on the areas of HIV, AIDS and cancer research. Her instruction
and
mentorship has trained over 30 post-doctoral and doctoral students in the fields
of Biochemistry and Immunology, many of whom are research leaders in academia
and industry.
Dr.
Paterson is currently the principal investigator on grants from the federal
government and charitable foundations totaling approximately $1.8 million
dollars per year. Her research interests are broad, but her laboratory has
been
focused for the past ten years on developing novel approaches for prophylactic
vaccines against infectious disease and immunotherapeutic approaches to cancer.
The approach of the laboratory is based on a long-standing interest in the
properties of proteins that render them immunogenic and how such immunogenicity
may be modulated within the body.
Consulting
Agreement.
We
entered into a renewed consulting agreement with Dr. Paterson in January 2005
which expires on January 31, 2006 with automatic renewals for up to six
additional periods of six months each pursuant to which we have had access
to
Dr. Paterson’s consulting services for one full day per week. Dr. Paterson has
advised us on an exclusive basis on various issues related to our technology,
manufacturing issues, establishing our lab, knowledge transfer, and our
long-term research and development program. Pursuant to the agreement, Dr.
Paterson has received options to purchase 169,048 shares of our common stock
subject to vesting. Dr. Paterson is to receive $3,000 per month throughout
the
term of the Agreement; provided, that upon the closing of an additional $3
million in equity capital, Dr. Paterson shall receive $5,000 per month;
provided, further, that upon the closing of an additional $6 million in equity
capital, Dr. Paterson shall receive $7,000 per month; and provided, further,
that upon the closing of an additional of $9 million in equity capital, Dr.
Paterson shall receive $9,000 per month. In addition, subject to the adoption
of
a new stock option plan by our stockholders, Dr. Paterson shall receive options
to purchase 400,000 shares of common stock at an exercise price of $0.28 per
share with 40,000 fully vested when granted and the remaining 360,000 options
vesting equally over 48 months; provided that Dr. Paterson remains a consultant
over the four year period. Since February 1, 2005, Dr. Paterson has been paid
$3,000 per month, and granted options to purchase a total of 169,048 shares
of
common stock. We intend to grant options to purchase an additional 400,000
shares of common stock upon adoption of a new stock option plan by the
Company.
Sponsored
Research Agreement.
We paid
under a sponsored research agreement which terminated on June 30, 2005 with
Penn and Dr. Paterson approximately $199,000 to sponsor her continued research
in this area.
We
have
entered into another sponsored research agreement with Penn and Dr. Paterson
under which we are obligated to pay $118,755 for sponsored research covering
the
development of a potential vaccine candidate based on our Listeria technology.
We
intend
to enter into additional sponsored research agreements with Penn in the future
with respect to research and development on our produce candidates.
We
believe that Dr. Paterson’s continuing research will serve as a source of
ongoing findings and data that both supports and strengthen the existing
patents. We expect her work to expand the claims of the patent portfolio
(potentially including adding claims for new tumor specific antigens, the
utilization of new vectors to deliver antigens, and applying the technology
to
new disease conditions) and create the infrastructure for the future filing
of
new patents.
Scientific
Advisory Board.
Dr.
Paterson is also the chairman of our Scientific Advisory Board and one of our
stockholders.
Dr.
David Filer
We
have
entered a consulting agreement with Dr. David Filer, a biotech consultant,
which
commenced on January 7, 2005 and has a six month term, which has been extended
on a month to month basis. Dr. Filer has agreed to provide us for
three
days per month during the term of the agreement assistance on its development
efforts, review our scientific, technical and business data and materials and
introduce us to industry analysts, institutional investors, collaborators and
strategic partners. In
consideration Dr. Filer receives $2,000 per month and, subject
to
the adoption of a new stock option plan by our stockholders,
will
receive 40,000 options to purchase shares of common stock, vesting monthly
over
12 months provided that the agreement is not terminated.
Freemind
Group LLC
(“Freemind”)
We
have
entered into an agreement, dated October 17, 2005, with Freemind
to
develop and manage our grant writing strategy and application program. Advaxis
is 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 and 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 our filing of a $4.196 million grant
application with NIH on December 1, 2005, covering the use of Lovaxin C for
cervical dysplasia.
UCLA
We
entered on March 17, 2004 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. In addition to an initial licensee fee of $2,000
Advaxis is to pay UCLA annual maintenance fees of $1,000 for use of the
Listeria. We may not sell products using the XFL7 strain Listeria other than
agreed upon products or sublicense the rights granted under the license
agreement without the prior written consent of UCLA.
Cobra
Biomanufacturing PLC
In
July
2003, we entered into an agreement with Cobra Biomanufacturing PLC for the
purpose of manufacturing our cervical cancer vaccine Lovaxin C. Cobra has
extensive experience in manufacturing gene therapy products for investigational
studies. Cobra is a full service manufacturing organization that manufactures
and supplies DNA-based therapeutics for the pharmaceutical and biotech industry.
These services include the GMP manufacturing of DNA, recombinant protein,
viruses, mammalian cell products and cell banking. Cobra’s manufacturing plan
for us calls for several manufacturing stages, including process development,
manufacturing of non-GMP material for toxicology studies and manufacturing
of
GMP material for the Phase I trial. The agreement is to extend for a period
beyond the delivery and completion of stability testing of the GMP material
for
the Phase I trial; the stability testing period is estimated to be more than
two
years. Cobra has agreed to convert $300,000 of its existing fees for
manufacturing into future royalties from the sales of Lovaxin C at the rate
of
1.5% of net sales, with payments not to exceed $1,950,000.
In
November 2005, in order to cover Lovaxin C on a long-term basis and to cover
other drug candidates which we are developing, we entered into a Strategic
Collaboration and Long-Term Vaccine Supply Agreement for Listeria Cancer
Vaccines, under which Cobra will manufacture experimental and commercial
supplies of our Listeria
cancer
vaccines, beginning with Lovaxin C, our therapeutic vaccine for the treatment
of
cervical and head and neck cancers that will be entering a phase I/II study
in
cervical cancer patients later this year. The new agreement leaves the existing
agreement in place with respect to the studies contemplated therein, and
supersedes a prior agreement and provides for mutual exclusivity, priority
of
supply, collaboration on regulatory issues, research and development of
manufacturing processes that have already resulted in new intellectual property
owned by Advaxis, and the long-term supply of live Listeria
based
vaccines on a discounted basis.
Pharm-Olam
International Ltd.
In
April
2005, we entered into a consulting agreement with POI, based on which POI is
to
execute and manage our Phase 1 clinical trial in Lovaxin C with POI to receive
in consideration therefor $430,000 (50% of which is contingent on the closing
by
us of a 5 million dollar equity financing) and reimbursement of certain expenses
of $181,060.
The
Investor Relations Group, Inc (“IRG”)
Pursuant
to an agreement with IRG providing for IRG to serve as an investor relations
and
public relations consultant on a month-to-month basis, SGI is paid $10,000
per
month over a period of 18 months commencing October 1, 2005, and is to receive
200,000 shares of common stock provided the agreement has not been terminated.
Patents
and Licenses
Dr.
Paterson and Penn have invested significant resources and time in developing
a
broad base of intellectual property around the cancer vaccine platform
technology as to which we have a 20-year exclusive worldwide license and a
right
to grant sublicenses pursuant to our license agreement. Penn currently has
eight
issued and 12 pending patents in the United States and other countries including
Japan, Canada, Israel, Australia, and the European Union, through the Patent
Cooperation Treaty (PCT) system pursuant to which we have an exclusive license
to exploit the patents. We believe that these patents will allow us to take
a
strong lead in the field of Listeria-based therapy.
The
Penn
patent portfolio is currently comprised of the following:
|
U.S.
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.” Filed November 8,
1994. 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.” Filed March 27, 2000. Expires May 20, 2020.
|
| |
|
| |
U.S.
Patent No. 6,099,848, issued August 8, 2000. Frankel et al., Patent
Application No. 08/972,902 “Immunogenic Compositions Comprising DAL/DAT
Double-Mutant, Auxotrophic, Attentuated Strains of Listeria and Their
Methods of Use.” Filed November 18, 1997. Expires November 18,
2017.
|
| |
|
| |
U.S.
Patent No. 6,504,020, issued January 7, 2003 of Divisional Application
No.
09/520,207 “Isolated Nucleic Acids Comprising Listeria DAL And DAT Genes”.
Filed March 7, 2000., Frankel et al. Expires March 7,
2020.
|
| |
|
| |
U.S.
Patent No. 6,635,749, issued October 21, 2003; Divisional U.S. Patent
Application No. 10/136,253 for “Isolated Nucleic Acids Comprising Listeria
DAL and DAT Genes.” Filed May 1, 2002, Frankel, et al. Filed May 1, 2022.
Expires November 18, 2017.
|
| |
|
| |
U.S.
Patent No. 5,830,702, issued November 3, 1998. Patent Application
No.
08/366,477, filed December 30, 1994 for “Live, Recombinant Listeria SSP
Vaccines and Productions of Cytotoxic T Cell Response” Portnoy, et al.
Filed December 30, 1997. Expires November 3, 2015.
|
| |
|
| |
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.
|
| |
|
|
U.
S. Patent Applications
|
| |
| |
U.S.
Patent Application No. 10/441,851, “Methods And Compositions For
Immunotherapy of Cancer,” Filed May 20, 2003, Paterson et
al.
|
| |
|
| |
U.S.
Patent Application No. 10/239,703 for “Compositions and Methods for
Enhancing Immunogenicity of Antigens.” Filed September 24, 2002, Paterson,
et al.
|
| |
|
| |
Patent
Application No. 09/537,642 for “Fusion of Non-Hemolytic, Truncated Form of
Listeriolysis o to Antigens to Enhance Immunogenicity.” Filed March 29,
2000. Paterson, et al.
|
| |
|
| |
U.S.
Patent Application No. 10/660,194, “Immunogenic Compositions Comprising
DAL/DAT Double Mutant, Auxotrophic Attenuated Strains Of Listeria
And
Their Methods Of Use,” Filed September 11, 2003, Frankel et
al.
|
|
International
Patents
|
| |
|
| |
Australian
Patent No. 730296, Patent Application No. 14108/99 for “Bacterial Vaccines
Comprising Auxotrophic, Attenuated Strains of Listeria Expressing
Heterologous Antigens.” Filed May 18, 2000. Frankel, et al. Expires
November 13, 2018.
|
| |
|
|
International
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. 2,309,790 for “Bacterial Vaccines Comprising
Auxotrophic, Attenuated Strains of Listeria Expressing Heterologous
Antigens.” Filed May 18, 2000, Frankel, 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. 95939926.2, for “Specific Immunotherapy of Cancer
Using a Live Recombinant Bacterial Vaccine Vector”. Filed November 3,
1995, 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. 515534/96, filed November 3, 1995 for “Specific
Immunotherapy of Cancer Using a Live Recombinant Bacterial Vaccine
Vector”, 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.
|
In
2001,
an issue arose regarding the inventorship of U.S. Patent 6,565,852 regarding
Specific Immunotherapy of Cancer Using a Live Recombinant Bacterial Vaccine
Vector and U.S. Patent Application No. 09/537,642 for Fusion of Non-Hemolytic,
Truncated Form of Listeriolysis o to Antigens to Enhance Immunogenicity. These
patent rights are included in the patent rights licensed by Advaxis from Penn.
It is contemplated by GlaxoSmithKline Biologicals PLC (“GSK”), Penn and us that
the issue will be resolved through: (1) a correction of inventorship to
add certain GSK inventors, (2) where necessary and appropriate, an assignment
of
GSK’s possible rights under these patent rights to Penn, and (3) a sublicense
from us to GSK of certain subject matter, which is not central to our business
plan. To date, this arrangement has not been finalized and we cannot assure
that
this issue will ultimately be resolved in the manner described above.
Pursuant
to our license with Penn, we have a four year option commencing June 17, 2005
to
license from Penn any new future invention conceived by either Dr. Yvonne
Paterson or by Dr. Fred Frankel in the vaccine area. We intend to expand our
intellectual property base by exercising this option and gaining access to
such
future inventions. Further, our consulting agreement with Dr. Paterson provides,
among other things, that, to the extent that Dr. Paterson’s consulting work
results in new inventions, such inventions will be assigned to Penn, and we
will
have access to those inventions under license agreements to be negotiated.
Our
approach to our intellectual property portfolio is to aggressively create
significant offensive and defensive patent protection for every product and
technology platform that we develop. We work closely with our patent counsel
to
maintain a coherent and aggressive strategic approach to building our patent
portfolio with an emphasis in the field of cancer vaccines.
We
have
become aware of a public company, Cerus Corporation, which has issued a press
release claiming to have a proprietary Listeria-based approach to a cancer
vaccine. We believe that through our exclusive license with Penn of U.S. Patent
Nos. 5,830,702, 6,051,237 and 6,565,852, we have the earliest known and dominant
patent position for the use of recombinant Listeria monocytogenes expressing
proteins or tumor antigens as a vaccine for the treatment of infectious diseases
and tumors. Based on searches of publicly available databases, we do not believe
that Cerus or The University of California Berkeley (which is where Cerus’
consulting scientist works) or any other third party owns any published Listeria
patents or has any issued patent claims that might materially negatively affect
our freedom to operate our business in the field of Listeria monocytogenes.
We
had
received written notice from the European Patent Office that Cerus has filed
an
opposition against European Patent Application Number 0790835 (EP 835 Patent)
which was granted by the European Patent Office and which is assigned to The
Trustees of the University of Pennsylvania and exclusively licensed to us.
We
are defending against Cerus’ allegations in the Opposition that the EP 835
Patent, which claims a vaccine for inducing a tumor specific antigen with a
recombinant live Listeria, is deficient because of (i) insufficient disclosure
in the specifications of the granted claims, (ii) the inclusion of additional
subject matter in the granted claims, and (iii) a lack of inventive steps of
the
granted claims of the EP 835 Patent. We believe that Cerus’ allegations in the
opposition have no basis and we
plan to
vigorously defend the claims.
The
opposition is in the early stages and, as yet, we are unable to evaluate the
merits, if any, to the opposition proceeding. If the European Patent Office
rules that the allegations are correct in whole or in part, and such ruling
is
upheld on appeal, our patent position in Europe may be eroded to the degree
that
the claims of the patent are narrowed or not allowed. The likely result of
this
decision will be increased competition for us in the European market for
recombinant live Listeria based vaccines. Regardless of the outcome of the
opposition proceeding, we believe that our freedom to operate in Europe, or
any
other territory, for its recombinant live Listeria based vaccine products will
not be diminished.
For
more
information about Cerus Corporation and its claims with respect to
listeria-based technology, you should visit their web site at www.cerus.com
or view
its publicly filed documents, www.sec.gov.
Trademarks
We
have
two trademark applications pending in the United States relating to the
trademark of “Advaxis” and ten trademark applications pending relating to the
trademark of “Lovaxin” in the United States and internationally. We work closely
with our trademark counsel to build a brandname for ourself and potential
products. Aventis, Inc. has filed trademark opposition proceedings in the United
States Patent and Trademark Office against our trademark applications Serial
Nos. 78/252527 and 78/252586 related to the trademark of “Advaxis”.
The opposition proceedings are in the early stages and it is impossible to
assess the merits at this point. As a result of the opposition we may lose
or may need to abandon the trademark “Advaxis”.
Governmental
Regulation
The
Drug Development Process
The
FDA
requires that pharmaceutical and certain other therapeutic products undergo
significant clinical experimentation and clinical testing prior to their
marketing or introduction to the general public. Clinical testing, known as
clinical
trials
or
clinical
studies,
is
either conducted internally by pharmaceutical or biotechnology companies or
is
conducted on behalf of these companies by contract research organizations.
The
process of conducting clinical studies is highly regulated by the FDA, as well
as by other governmental and professional bodies. Below, we describe the
principal framework in which clinical studies are conducted, as well as describe
a number of the parties involved in these studies.
Protocols.
Before
commencing human clinical studies, the sponsor of a new drug must submit an
investigational new drug application, or IND, to the FDA. The application
contains what is known in the industry as a protocol.
A
protocol is the blueprint for each drug study. The protocol sets forth, among
other things, the following:
| · |
who
must be recruited as qualified
participants;
|
| · |
how
often to administer the drug;
|
| · |
what
tests to perform on the participants;
and
|
| · |
what
dosage of the drug to give to the
participants.
|
Institutional
Review Board.
An
institutional review board is an independent committee of professionals and
lay
persons which reviews clinical research studies involving human beings and
is
required to adhere to guidelines issued by the FDA. The institutional review
board does not report to the FDA, but its records are audited by the FDA. Its
members are not appointed by the FDA. All clinical studies must be approved
by
an institutional review board. The institutional review board’s role is to
protect the rights of the participants in the clinical studies. It approves
the
protocols to be used, the advertisements which the company or contract research
organization conducting the study proposes to use to recruit participants,
and
the form of consent which the participants will be required to sign prior to
their participation in the clinical studies.
Clinical
Trials.
Human
clinical studies or testing of a potential product are generally done in three
stages known as Phase I through Phase III testing. The names of the phases
are
derived from the regulations of the FDA. Generally, there are multiple studies
conducted in each phase.
Phase
I.
Phase I
studies involve testing a drug or product on a limited number of healthy
participants, typically 24 to 100 people at a time. Phase I studies determine
a
drug’s basic safety and how the drug is absorbed by, and eliminated from, the
body. This phase lasts an average of six months to a year.
Phase
II.
Phase
II trials involve testing up to 200 participants at a time who may suffer from
the targeted disease or condition. Phase II testing typically lasts an average
of one to two years. In Phase II, the drug is tested to determine its safety
and
effectiveness for treating a specific illness or condition. Phase II testing
also involves determining acceptable dosage levels of the drug. If Phase II
studies show that a new drug has an acceptable range of safety risks and
probable effectiveness, a company will continue to review the substance in
Phase
III studies.
Phase
III.
Phase
III studies involve testing large numbers of participants, typically several
hundred to several thousand persons. The purpose is to verify effectiveness
and
long-term safety on a large scale. These studies generally last two to three
years. Phase III studies are conducted at multiple locations or sites. Like
the
other phases, Phase III requires the site to keep detailed records of data
collected and procedures performed.
New
Drug Approval. The
results of the clinical trials are submitted to the FDA as part of a new drug
application (“NDA”). Following
the completion of Phase III studies, assuming the sponsor of a potential product
in the United States believes it has sufficient information to support the
safety and effectiveness of its product, it submits an NDA to the FDA requesting
that the product be approved for marketing. The application is a comprehensive,
multi-volume filing that includes the results of all clinical studies,
information about the drug’s composition, and the sponsor’s plans for producing,
packaging and labeling the product. The FDA’s review of an application can take
a few months to many years, with the average review lasting 18 months. Once
approved, drugs and other products may be marketed in the United States, subject
to any conditions imposed by the FDA.
Phase
IV.
The FDA
may require that the sponsor conduct additional clinical trials following new
drug approval. The purpose of these trials, known as Phase IV studies, is to
monitor long-term risks and benefits, study different dosage levels or evaluate
safety and effectiveness. In recent years, the FDA has increased its reliance
on
these trials. Phase IV studies usually involve thousands of participants. Phase
IV studies also may be initiated by the company sponsoring the new drug to
gain
broader market value for an approved drug. For example, large-scale trials
may
also be used to prove effectiveness and safety of new forms of drug delivery
for
approved drugs. Examples may be using an inhalation spray versus taking tablets
or a sustained-release form of medication versus capsules taken multiple times
per day.
The
drug
approval process is time-consuming, involves substantial expenditures of
resources, and depends upon a number of factors, including the severity of
the
illness in question, the availability of alternative treatments, and the risks
and benefits demonstrated in the clinical trials.
On
November 21, 1997, then President Clinton signed into law the Food and Drug
Administration Modernization Act. That act codified the FDA’s policy of granting
"Fast Track" approval for cancer therapies and other therapies intended to
treat
serious or life threatening diseases and that demonstrate the potential to
address unmet medical needs. The Fast Track program emphasizes close, early
communications between FDA and the sponsor to improve the efficiency of
preclinical and clinical development, and to reach agreement on the design
of
the major clinical efficacy studies that will be needed to support approval.
Under the Fast Track program, a sponsor also has the option to submit and
receive review of parts of the NDA or BLA on a rolling schedule approved by
FDA,
which expedites the review process.
The
FDA’s
Guidelines for Industry Fast Track Development Programs require that a clinical
development program must continue to meet the criteria for Fast Track
designation for an application to be reviewed under the Fast Track Program.
Previously, the FDA approved cancer therapies primarily based on patient
survival rates or data on improved quality of life. While the FDA could consider
evidence of partial tumor shrinkage, which is often part of the data relied
on
for approval, such information alone was usually insufficient to warrant
approval of a cancer therapy, except in limited situations. Under the FDA’s new
policy, which became effective on February 19, 1998, Fast Track designation
ordinarily allows a product to be considered for accelerated approval through
the use of surrogate endpoints to demonstrate effectiveness. As a result of
these provisions, the FDA has broadened authority to consider evidence of
partial tumor shrinkage or other surrogate endpoints of clinical benefit for
approval. This new policy is intended to facilitate the study of cancer
therapies and shorten the total time for marketing approvals. Under accelerated
approval, the manufacturer must continue with the clinical testing of the
product after marketing approval to validate that the surrogate endpoint did
predict meaningful clinical benefit. To the extent applicable we intend to
take
advantage of the Fast Track programs to obtain accelerated approval on our
future products; however, it is too early to tell what effect, if any, these
provisions may have on the approval of our product candidates.
The
Orphan Drug Act provides incentives to develop and market drugs (“Orphan Drugs”)
for rare disease conditions in the United States. A drug that receives Orphan
Drug designation and is the first product to receive FDA marketing approval
for
its product claim is entitled to a seven-year exclusive marketing period in
the
United States for that product claim. A drug which is considered by the FDA
to
be different than such FDA-approved Orphan Drug is not barred from sale in
the
United States during such exclusive marketing period even if it receives
approval for the same claim. We can provide no assurance that the Orphan Drug
Act’s provisions will be the same at the time of the approval, if any, of our
products.
Other
Regulations
Various
Federal and state laws, regulations, and recommendations relating to safe
working conditions, laboratory practices, the experimental use of animals,
and
the purchase, storage, movements, import, export, use, and disposal of hazardous
or potentially hazardous substances, including radioactive compounds and
infectious disease agents, are used in connection with our research or
applicable to our activities. They include, among others, the United States
Atomic Energy Act, the Clean Air Act, the Clean Water Act, the Occupational
Safety and Health Act, the National Environmental Policy Act, the Toxic
Substances Control Act, and Resources Conservation and Recovery Act, national
restrictions on technology transfer, import, export, and customs regulations,
and other present and possible future local, state, or federal regulation.
The
extent of governmental regulation which might result from future legislation
or
administrative action cannot be accurately predicted.
Manufacturing
The
FDA
requires that any drug or formulation to be tested in humans be manufactured
in
accordance with its GMP regulations. This has been extended to include any
drug
which will be tested for safety in animals in support of human testing. The
GMPs
set certain minimum requirements for procedures, record-keeping, and the
physical characteristics of the laboratories used in the production of these
drugs.
We
have
entered into an agreement with Cobra Biomanufacturing PLC for the purpose of
manufacturing our vaccines. Cobra has extensive experience in manufacturing
gene
therapy products for investigational studies. Cobra is a full service
manufacturing organization that manufactures and supplies DNA-based therapeutics
for the pharmaceutical and biotech industry. These services include the GMP
manufacturing of DNA, recombinant protein, viruses, mammalian cells products
and
cell banking. Cobra’s manufacturing plan for us calls for several manufacturing
stages, including process development, manufacturing of non-GMP material for
toxicology studies and manufacturing of GMP material for the Phase I
trial.
Competition
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. As
a
result, our actual or proposed products could become obsolete before we recoup
any portion of our related research and development and commercialization
expenses. The biotechnology and biopharmaceutical industries are highly
competitive, and this competition comes from both from biotechnology firms
and
from major pharmaceutical and chemical companies, including Antigenics, Inc.,
Avi BioPharma, Inc., Bachria, Biomira, Inc., Corixa Corporation, Dendreon
Corporation, Epimmune, Inc., Genzyme Corp., Progenics Pharmaceuticals, Inc.,
Vical Incorporated, CancerVax Corporation, Genitope Corporation and Xcyte
Therapies, Inc., each of which is pursuing cancer vaccines. Many of these
companies have substantially greater financial, marketing, and human resources
than we do (including, in some cases, substantially greater experience in
clinical testing, manufacturing, and marketing of pharmaceutical products).
We
also experience competition in the development of our products from universities
and other research institutions and compete with others in acquiring technology
from such universities and institutions. In addition, certain of our products
may be subject to competition from products developed using other technologies,
some of which have completed numerous clinical trials.
We
expect
that our products under development and in clinical trials will address major
markets within the cancer sector. Our competition will be determined in part
by
the potential indications for which drugs are developed and ultimately approved
by regulatory authorities. Additionally, the timing of market introduction
of
some of our potential products or of competitors’ products may be an important
competitive factor. Accordingly, the relative speed with which we can develop
products, complete pre-clinical testing, clinical trials and approval processes
and supply commercial quantities to market are expected to be important
competitive factors. We expect that competition among products approved for
sale
will be based on various factors, including product efficacy, safety,
reliability, availability, price and patent position. See “Business - Research
and Development Programs” and “Business - Competition”.
Please
see “Description of Business - Patents and Licenses” for information as to Cerus
Corporation’s press release claiming to have a proprietary Listeria-based
approach to a cancer vaccine and its opposition to a patent as to which we
hold
an exclusive license. The opposition is in the early stages and, as yet, we
are
unable to evaluate the merits, if any, to the opposition proceeding. Regardless
of the outcome of the opposition proceeding, we believe that our freedom to
operate in Europe, or any other territory, for its recombinant live Listeria
based vaccine products will not be diminished.
For
more
information about Cerus Corporation and its claims with respect to
listeria-based technology, you should visit their web site at www.cerus.com
or to
view its publicly filed documents, www.sec.gov.
Scientific
Advisory Board
We
maintain a scientific advisory board consisting of internationally recognized
scientists who advise us on scientific and technical aspects of our business.
The scientific advisory board meets periodically to review specific projects
and
to assess the value of new technologies and developments to us. In addition,
individual members of the scientific advisory board meet with us periodically
to
provide advice in particular areas of expertise. The scientific advisory board
consists of the following members, information with respect to whom is set
forth
below: Yvonne Paterson, Ph.D.; Carl June, M.D.; Pramod Srivastava, Ph.D; and
Bennett Lorber, M.D.
Dr.
Yvonne Paterson.
For a
description of her background and our relationship with Dr. Paterson, please
see
“Business - Partnerships and Agreements”.
Carl
June, M.D. Dr.
June
is currently Director of Translational Research at the Abramson Cancer Center
at
Penn, and is an Investigator of the Abramson Family Cancer Research Institute.
He is a graduate of the Naval Academy in Annapolis, and Baylor College of
Medicine in Houston. He had graduate training in immunology and malaria with
Dr.
Paul-Henri Lambert at the World Health Organization, Geneva, Switzerland from
1978 to 1979, and post-doctoral training in transplantation biology with Dr.
E.
Donnell Thomas at the Fred Hutchinson Cancer Research Center in Seattle from
1983 to 1986. He is board certified in Internal Medicine and Medical Oncology.
Dr. June founded the Immune Cell Biology Program and was head of the Department
of Immunology at the Naval Medical Research Institute from 1990 to 1995. Dr.
June rose to Professor in the Departments of Medicine and Cell and Molecular
Biology at the Uniformed Services University for the Health Sciences in
Bethesda, Maryland before assuming his current positions as of February 1,
1999.
Dr. June maintains a research laboratory that studies various mechanisms of
lymphocyte activation that relate to immune tolerance and adoptive
immunotherapy.
Pramod
Srivastava, Ph.D.
Dr.
Srivastava is Professor of Immunology at the University of Connecticut School
of
Medicine, where he is also Director of the Center for Immunotherapy of Cancer
and Infectious Diseases. He holds the Physicians Health Services Chair in Cancer
Immunology at the University. Professor Srivastava is the
Scientific Founder of Antigenics, Inc. He serves on the Scientific Advisory
Council of the Cancer Research Institute, New York, and was a member of the
Experimental Immunology Study Section of the National Institutes of Health
of
the U.S. Government (1994 to 1999). He serves presently on the Board of
Directors of two privately held companies: Ikonisys (New Haven, Connecticut)
and
CambriaTech (Lugano, Switzerland). In 1997, he was inducted into the Roll of
Honor of the International Union Against Cancer and was listed in Who’s Who in
Science and Engineering. He is among the 20 founding members of the Academy
of
Cancer Immunology, New York. Dr. Srivastava obtained his bachelor’s degree in
biology and chemistry and a master’s degree in botany (paleontology) from the
University of Allahabad, India. He then studied yeast genetics at Osaka
University, Japan. He completed his Ph.D. in biochemistry at the Center for
Cellular and Molecular Biology, Hyderabad, India, where he began his work on
tumor immunity, including identification of the first proteins that can mediate
tumor rejection. He trained at Yale University and Sloan-Kettering Institute
for
Cancer Research. Dr. Srivastava has held faculty positions at the Mount Sinai
School of Medicine and Fordham University in New York City.
Bennett
Lorber, M.D. Dr.
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. Dr. Lorber is also a professional painter and an
accomplished guitarist.
David
B. Weiner, Ph.D. Dr.
David
Weiner received his B.S in Biology from the State University of New York and
performed undergraduate research in the Department of Microbiology, Chaired
by
Dr. Arnie Levine, at Stony Brook University. He completed his MS. and Ph.D.
in
Developmental Biology/Immunology from the Children’s Hospital Research
Foundation at the University of Cincinnati in 1986. He completed his Post
Doctoral Fellowship in the Department of Pathology at the University of
Pennsylvania in 1989, under the direction of Dr. Mark Greene. At that time
he
joined the Faculty at the Wistar Institute in Philadelphia. He was recruited
back to the University of Pennsylvania in 1994. He is currently an Associate
Professor with Tenure in the Department of Pathology, and he is the Associate
Chair of the Gene Therapy and Vaccines Graduate Program at the University of
Pennsylvania. Of relevance during his career he has worked extensively in the
areas of molecular immunology, the development of vaccines and vaccine
technology for infectious diseases and in the area of molecular oncology and
immune therapy. His laboratory is considered one of the founders of the field
of
DNA vaccines as his group not only was the first to report on the use of this
technology for vaccines against HIV, but was also the first group to advance
DNA
vaccine technology to clinical evaluation. In addition he has worked on the
identification of novel approaches to inhibit HIV infection by targeting the
accessory gene functions of the virus. Dr. Weiner has authored over 260 articles
in peer reviewed journals and is the author of more than 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 more than 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
February 20, 2006, we have four full-time employees, including Mr. Roni Appel
our Chief Executive Officer and Chief Financial Officer.
Facilities
Our
executive offices are currently located at the corporate center at 212 Carnegie
Center, Suite 206, Princeton, New Jersey 08540. We have entered into a
lease effective June 1, 2005, which will continue on a monthly basis at a rent
of approximately $2,500 per month, at the New Jersey Economic Development
Center, a biotech industrial park, located at 675 Route 1, Suite 117, North
Brunswick, NJ 08902 for research and development offices and executive offices.
We believe that our facility will be sufficient for our purposes for the
foreseeable future. In the event that our facility should, for any reason,
become unavailable, we believe that alternative facilities are available at
competitive rates.
Litigation
There
are
no material legal proceedings threatened against us. In the ordinary course
of
our business we may become subject to litigation regarding our products or
our
compliance with applicable laws, rules, and regulations.
Aventis,
Inc. has filed trademark opposition proceedings in the United States Patent
and
Trademark Office against our trademark applications Serial Nos. 78/252527
and 78/252586 related to the trademark of “Advaxis”. The opposition
proceedings are in the early stages and it is impossible to assess the merits
at
this point. As a result of the opposition we may lose or may need to
abandon the trademark “Advaxis”.
Please
see “Description of Business - Patents and Licenses” for claims of Cerus
Corporation with respect to one U.S. Patent held by Penn and licensed
exclusively to us and to a patent application filed with the European Patent
office for which we hold an exclusive license from Penn. We believe that Cerus’
allegations in opposition have no basis and we plan to vigorously defend the
claims.
The
opposition is in the early stages and, as yet, we are unable to evaluate the
merits, if any, to the opposition proceeding. Regardless of the outcome of
the
opposition proceeding, we believe that our freedom to operate in Europe, or
any
other territory, for its recombinant live Listeria based vaccine products will
not be diminished.
MANAGEMENT
|
Name
|
|
Age
|
|
Position
|
|
J.
Todd Derbin (1) (4)
|
|
53
|
|
Chairman
of the Board of Directors
|
|
Roni
A. Appel(1) (4)
|
|
39
|
|
President,
Chief Executive Officer, Chief Financial Officer, Secretary and
Director
|
|
Dr.
James Patton(2)
|
|
48
|
|
Director
|
|
Dr.
Thomas McKearn(3)
|
|
56
|
|
Director
|
|
Richard
Berman (1) (3)
|
|
63
|
|
Director
|
| (1) |
Member
of the Finance Committee
|
| (2) |
Member
of the Audit Committee.
|
| (3) |
Member
of the Compensation Committee.
|
| (4) |
Member
of the Nominating and Corporate Governance Committee.
|
J.
Todd Derbin.
Since
January 1, 2006 Mr. Derbin has served as Chairman
of the Board of Directors. Prior thereto,
he
served as the President, Chief Executive Officer and a director of Advaxis
since
November 2002. From 1996 until June, 2001, Mr. Derbin was the founder and
Chairman of the Board of Directors, President, and Chief Executive Officer
of
Micrus Corporation, a market leader in the design and development of highly
differentiated and proprietary interventional neuroradiology devices and
delivery systems. From 1992 until 1996, he served as Director of Corporate
Business Development, Commercial Director - Cardiovascular and Director of
Strategic Planning, Mergers & Share Exchanges with Biocompatibles
International, plc, a UK biotechnology/biomedical Company. Prior to 1992, Mr.
Derbin served as Chief Executive Officer of Syncare Corporation, developers
of
synthetic wound care products and drug delivery systems. His 20 year tenure
in
life sciences includes senior management, strategic and operational positions
with CollaTec, Inc., a subsidiary of Marion Merrell Dow, and American Medical
Products Corporation’s domestic and international divisions. He began his career
at Procter & Gamble and American Hospital Supply Corporation (Baxter) where
he held marketing positions. Mr. Derbin is an alumnus of Wilkes College and
the
Wharton School of the University of Pennsylvania.
Roni
A. Appel.
Mr.
Appel has served as our President and Chief Executive Officer since January
1,
2006 and as a member of our Board of Directors and as our Secretary and Chief
Financial Officer since November 2004. Since January 1999, Mr. Appel has been
a
partner and managing director in LV Equity Partners (fka LibertyView Equity
Partners). From 1998 until 1999, he was a founder and the director of business
development at Americana Financial Services, Inc. From 1994 to 1998. Mr. Appel,
an attorney, completed his MBA at Columbia University.
Dr.
James Patton. Dr.
Patton served as Chairman of our Board of Directors from February 2002 until
December 31, 2005 and Chief Executive Officer from February 2002 to November
2002. Since February 1999, he has served as the President of Comprehensive
Oncology Care, LLC, which owns and operates a cancer treatment facility in
Exton, Pennsylvania and as Vice President of Millennium Oncology Management,
Inc., which provides technical services for oncology care to four sites. From
February 1999 to September 2003, Dr. Patton served as a consultant to
LibertyView Equity Partners SBIC, LP, a venture capital fund based in Jersey
City, New Jersey (“LibertyView”). Dr. Patton served as a director of Pinpoint
Data Corp from July 2000 to December 2002, as a director of Healthware Solutions
from February 2000 to November 2000 and as a director of LifeStar Response
from
June 2000 to June 2003. 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.
Dr.
Thomas McKearn. Dr.
McKearn has served as a member of our Board of Directors since November 2004.
Prior thereto he served
as
an Advaxis director since July 2002. He brings to Advaxis a 20 plus year
experience in the translation of biotechnology science into innovative products
that address unmet medical needs in oncology. First as one of the founders
of
Cytogen Corporation, then as an Executive Director of Strategic Science and
Medicine at Bristol-Myers Squibb and now as the VP. Medical Affairs at
GPC-Biotech, McKearn has always worked at bringing the most innovative
scientific findings into the clinic and through the FDA regulatory process
for
the ultimate benefit of patients who need better ways to cope with their
afflictions. Prior to entering the then-nascent biotechnology industry in 1981,
McKearn did his medical, graduate and post-graduate training at the University
of Chicago and served on the faculty of the Medical School at the University
of
Pennsylvania.
Richard
Berman . Mr.
Berman joined the Board on September 1, 2005. For the past five years, Mr.
Berman has been Chairman and CEO of Internet Commerce Corporation, an internet
supply chain company. He is also Chairman of a financial services company and
Candidate Resources, Inc., a company which delivers human resources services
over the web. He is a Director of seven public companies, Dyadic International,
Inc., International Microcomputer Software, Inc., Internet Commerce Corporation,
MediaBay, Inc., NexMed, Inc., GVI Security Solutions, Inc., and Financial
Services Co.; the latter as chairman. Previously, Mr. Berman worked at Goldman
Sachs; was Senior Vice President of Bankers Trust Company, where he started
the
M&A and Leverage Buyout Departments. He is a past Director of the Stern
School of Business of NYU where he earned a B.S. and an M.B.A. He also has
law
degrees from Boston College and The Hague Academy of International Law.
As
a
result of the death in January 2006 of Mr. Scott Flamm, a Director since
November 2004, a vacancy in the Board exists. The Board as of the date hereof
has not made a determination whether to reduce the Board to five Directors
or to
fill the vacancy.
Dr.
McKearn and Mr. Berman are independent directors as defined by the rules of
the
NASD, which define an independent director as a person other than an officer
or
employee of the company or its subsidiaries or any other individual having
a
relationship which, in the opinion of the company’s board of directors, would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director.
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. Subject to outstanding employment
agreements, our officers are elected by, and serve at the discretion of, our
Board of Directors. Our directors do not presently receive any compensation
for
their services as directors. The
Board
of Directors may also appoint additional directors up to the maximum number
permitted under our by-laws. A director so chosen or appointed will hold office
until the next annual meeting of stockholders.
Audit
Committee
Effective
in November 2004, we established an audit committee of the Board of Directors
which presently consists of Messrs. Berman and Patton.
The
audit
committee is responsible
for the following:
| · |
reviewing
the
results of the audit engagement with the independent registered public
accounting firm;
|
| · |
identifying
irregularities
in the management of our
business in consultation with our independent accountants, and 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
Effective
on November 2004, we established a compensation committee of the Board of
Directors which now consists of Messrs. Berman and McKearn. The compensation
committee determines the salaries and incentive compensation of our officers,
reviews on behalf of the Board proposed agreements with executive officers,
and
is to provide recommendations for the salaries and incentive compensation of
our
other employees and consultants.
The
compensation of our executive officers is to be determined by the compensation
committee of our Board of Directors, subject to applicable employment
agreements. We anticipate that our compensation programs will enable us to
attract, motivate, reward and retain the management talent required to achieve
corporate objectives and thereby increase stockholder value. It will be our
policy to provide incentives to our senior management to achieve both short-term
and long-term objectives and to reward exceptional performance and contributions
to the development of our business. To attain these objectives, our executive
compensation program includes a competitive base salary, cash incentive bonuses
and stock-based compensation.
Stock
options have been and will be granted to our senior executive officer and her
employees by the Board of Directors or the compensation committee under the
2004
Stock Option Plan. We believe that stock options provide an incentive that
focuses the optionee’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 will be
awarded to the most senior officers who, in our view, have the greatest
potential impact on our profitability and growth. Previous grants of stock
options are reviewed but are not considered the most important factor in
determining the size of any executive’s stock option award in a particular
year.
From
time
to time, the compensation committee may utilize the services of independent
consultants to perform analyses and to make recommendations to the committee
relative to executive compensation matters. No compensation consultant has
so
far been retained.
Relationship
of Compensation to Performance and Compensation of our executive
officers
The
compensation committee will annually establish, subject to the approval of
the
Board of Directors, the salaries that will be paid to our executive officers
during the coming year, subject to outstanding compensation agreements. In
setting salaries, the compensation committee takes into account several factors,
including competitive compensation data, the extent to which an individual
may
participate in the stock plans maintained by us, and qualitative factors bearing
on an individual’s experience, responsibilities, management and leadership
abilities and job performance.
Nominating
and Corporate Governance Committee
| · |
identifying
and recommending to the Board of Directors individuals qualified
to serve
as directors of the Company and on the committees of the board;
|
| · |
advising
the board with respect to matters of board composition, procedures
and
committees;
|
| · |
developing
and recommending to the board a set of corporate governance principles
applicable to us and overseeing corporate governance matters generally;
and
|
| · |
overseeing
the annual evaluation of the board and our management.
|
The
nominating and corporate governance committee will be governed by a charter,
which we intend to adopt.
Code
of Ethics
We
have
adopted a code of ethics that applies to our officers, employees and directors,
including our principal executive officers, principal financial officers and
principal accounting officers. The code of ethics sets forth written standards
that are designated to deter wrongdoing and to promote:
| · |
Honest
and ethical conduct, including the ethical handling of actual or
apparent
conflicts of interest between personal and professional
relationships;
|
| · |
Full,
fair, accurate, timely and understandable disclosure in reports and
documents that a we file with, or submit to, the SEC and in other
public
communications made by us;
|
| · |
Compliance
with applicable governmental laws, rules and
regulations;
|
| · |
The
prompt internal reporting of violations of the code to an appropriate
person or persons identified in our code of ethics;
and
|
| · |
Accountability
for adherence to our code of ethics.
|
A
copy of
our code of ethics has been filed with the SEC as an exhibit to our Form 8-K,
dated November 12, 2004.
Officers
Vafa
Shahabit, Ph.D.
Dr.
Shahabit, effective March 1, 2005, has been Head of Director of Science. Her
duties involve managing research and development projects specified by the
Company.
Dr.
John Rothman, Ph.D.
Dr.
Rothman has been engaged as Vice President of Clinical Development effective
March 7, 2005.
Mr.
Fredrick D. Cobb.
Mr.
Cobb joined us on February 20, 2006 as Vice President - Finance.
Mr.
Appel’s compensation as our Chief Executive Officer, President, Chief Financial
Officer and Secretary is paid by LVEP Management, LLC (“LVEP”) pursuant to a
consulting agreement with us. LVEP is controlled by the estate of Scott Flamm,
a
former director and a principal shareholder. LVEP employs Mr. Appel, a director
and a principal shareholder of the Company and had employed Mr. Flamm. Pursuant
to the consulting agreement, dated as of January 19, 2005, and amended on April
15, 2005, and further amended on October 31, 2005, LVEP is to provide various
financial and strategic consulting services to us including the executive
services of Mr. Appel.
Under
the
October 31, 2005 amendment the initial term of the consulting agreement was
extended until December 31, 2007 and thereafter the term of the agreement is
automatically extended for one year periods unless we notify LVEP at least
60
days prior to the end of term of our intent not to extend. In addition, the
Consulting Agreement may be terminated by us for any reason upon 60 days prior
notice or by Consultant upon 45 days prior notice. Upon such notice all
compensation and bonuses payable under the Consulting Agreement shall continue
until the later to occur of the end of the term or twelve (12) months from
such
termination. In consideration for providing the consulting services, under
the
consulting agreement as amended, LVEP receives compensation of $250,000 per
year
payable at the rate of $20,833.33 per month for the term of the agreement plus
reimbursement of approved expenses in connection with providing the consulting
services. LVEP has paid and intends to continue to pay all such compensation
to
Mr. Appel. The consultant received a bonus payment at the end of 2005 of
$70,000.
In
subsequent years the bonus is to equal 40% of the base consulting compensation.
At the election of the Company or of LVEP up to 100% of the bonus may be paid
in
our common stock. Additionally, LVEP is to receive additional options to
purchase shares of our common stock which along with the options held by LVEP
(including the existing 3%) would amount to 5% of the outstanding shares and
options of the Company as of December 31, 2005. The incremental options are
to
vest monthly over four years commencing in April, 2005. LVEP has assigned such
options to Mr. Appel.
The
aggregate
compensation paid to our directors and executive officers, including stock
based
compensation, for
the
year ended December 31, 2003, the ten months ended October 31, 2004
and
the
twelve months ended October 31, 2005 was approximately $183,692, $212,004 and
$366,255, respectively, including the payment made by LVEP to Mr. Appel. No
amount was set aside or accrued to provide pension, severance, retirement,
or
similar benefits or expenses. However, business travel, relocation, professional
and business association dues and expenses were reimbursed to office holders
and
other benefits commonly reimbursed or paid by similarly situated companies.
None
of our directors has so far received any compensation for his or her services
as
a director other than stock options and reimbursement of expenses, except for
Mr. Berman who receives $2,000 per month in cash or in stock.
| |
|
|
Annual
Compensation
|
|
Long
Term
Compensation
Awards
|
|
Name
And Principal Position
|
|
Year
|
Salary
|
Bonus
|
Other*
|
|
Securities
Underlying
Options
|
|
J.
Todd Derbin
President,
Chief Executive Officer,
and
Director
|
|
2005
2004(1)
2003
|
$225,000
$125,000
$150,000
|
$45,000
$60,000(4)
|
|
|
684,473
(6)
—
1,172,727
(6)
|
|
Dr.
James Patton
Chairman
of the Board of Directors
|
|
2005
2004(1)
2003
|
—
$15,000(2)
$15,750(2)
|
—
—
—
|
|
|
28,175
33,810
|
|
Roni
Appel
Secretary,
Chief Financial Officer,
and
Director
|
|
2005
2004(1)
2003
|
$139,250
(5)
$50,000(3)
$60,000(3)
|
$35,000
|
|
|
1,114,344
(5)
35,218
42,262
|
|
Dr.
Vafa Shahabit (7)
Head
Director of Science
|
|
2005
|
$83,333
(7)
|
|
|
|
150,000
|
|
Dr.
John Rothman
Vice
President - Clinical Development (8)
|
|
2005
|
$141,667
(8)
|
|
|
|
360,000
|
| |
|
*
None of the officers listed received perquisites from us which exceeded
more
than $20,000 in
the aggregate for
the period for the individual.
|
|
(1)
Information for 2004 reflects the ten month period ended October
31,
2004.
(2)
Dr. Patton was paid $18,000 in 2003 and $15,750 in 2004 for services
as a
consultant under a consulting agreement which was terminated on November
2004.
(3)
Represents consulting fees of $60,000 in 2003 and fees of $50,000
in the
10 months ended October 31, 2004 paid to Carmel Ventures, Inc., of
which
he is a principal stockholder. He assigned $35,000 of such fees to
Mr.
Scott Flamm.
(4)
Mr. Derbin’s stock option award was based in his employment contract. His
2003 bonus of $60,000 was paid in 2004 by the issuance of 307,377
shares
of common stock of the Company on the basis of a price of $0.1952
per
share and
was two-third’s of the maximum amount of $90,000 he could have been
awarded. The basis for this bonus was the successful conclusion of
several
matters of great importance to the Company including:
- extending
the patent portfolio and moving it to the care of competent patent
counsel;
- creating
grant opportunities for the Company;
- scaling
up manufacturing; and
- creating
certain collaboration opportunities.
In
determining Mr. Debin’s bonus, the Board acted in part on a discretionary
basis.
(5)
Mr. Appel’s compensation in year 2005 was paid through our consulting
agreement with LVEP Management, LLC. See “Compensation of Directors and
Officers”.
(6)
Pursuant to an employment agreement, only 928,441 of the options
granted n
2003 had vested, and only 427,796 of the options granted in 2005
had
vested on termination of the agreement on December 31, 2005. The
balance
of the options were surrendered to us.
(7)
Dr. Shahabit entered our employ on March 1, 2005.
(8)
Dr. Rotham entered our employ on March 7,
2005.
|
The
following
table sets forth each
grant of stock options during the year ended
December 31, 2003,
the
10 month period ended October 31, 2004 and the year ended October 31, 2005
to
our
current and former Chief Executive Officer and other officer under a predecessor
stock option plan. Actual gains, if any, on stock option exercises are dependent
on the future performance
of our
common stock,
which
will be affected in part by 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. They do not represent our estimate or projection
of our
common stock price
The
outstanding stock options described above became options for our common stock
upon the Share Exchange.
|
|
|
|
|
Individual
Grants
|
|
|
|
Name
|
|
Year
|
|
Number
Of
Securities
Underlying
Options
Granted
|
|
Percent
Of
Total
Options
Granted
To
Employees
In
Fiscal
Year)
|
|
Exercise
Price
|
|
Expiration
Date
|
|
Potential
Realizable
Value
At
Assumed
Annual
Rates of
Stock
Price Appreciation
For
Option Term($)
|
| |
|
|
|
|
|
|
|
|
|
|
|
5%
|
|
10%
|
|
J.
Todd Derbin(1)
|
|
2005
|
|
|
427,796
|
|
13%
|
|
$
|
0.29
|
|
12/15/2014
|
|
$
|
49,772.07
|
|
$
|
139,489.90
|
|
President,
Chief Executive Officer,
|
|
2004
|
|
|
928,441
|
|
39%
|
|
|
0.195
|
|
11/1/2012
|
|
$
|
193,436.35
|
|
$
|
388,149.99
|
|
|
|
2003
|
|
|
—
|
|
0%
|
|
|
0
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Dr.
James Patton
|
|
2005
|
|
|
5,635
|
|
0.17%
|
|
$
|
0.35
|
|
11/1/2012
|
|
$
|
300.60
|
|
$
|
1,482.38
|
|
Chairman
of the Board
|
|
2004
|
|
|
28,175
|
|
1.18%
|
|
$
|
0.35
|
|
11/1/2012
|
|
$
|
1,503.00
|
|
$
|
7,411.90
|
|
of
Directors
|
|
2003
|
|
|
33,810
|
|
0.00%
|
|
$
|
0.35
|
|
11/1/2012
|
|
$
|
1,803.61
|
|
$
|
8,894.27
|
|
Roni
Appel
|
|
2005
|
|
|
1,114,344
|
(2)
|
34%
|
|
$
|
0.29
|
|
3/31/2015
|
|
$
|
129,648.73
|
|
$
|
363,350.14
|
|
Secretary,
Chief Financial Officer,
|
|
2004
|
|
|
35,218
|
|
1%
|
|
$
|
0.35
|
|
11/1/2012
|
|
$
|
1,878.72
|
|
$
|
9,264.67
|
|
|
|
2003
|
|
|
42,262
|
|
0%
|
|
$
|
0.35
|
|
11/1/2012
|
|
$
|
2,254.48
|
|
$
|
11,117.71
|
|
Dr.
John Rothman
|
|
2005
|
|
|
360,000
|
|
11%
|
|
$
|
0.29
|
|
3/1/2015
|
|
$
|
41,884.32
|
|
$
|
117,383.90
|
| (1) |
Under
our 2005 Stock Option Plan and subject to approval of the Plan by
stockholders, Mr. Derbin was granted 684,473 options of which 256,677
options were surrendered pursuant to a termination of his employment
agreement. Under our 2004 Stock Option Plan (which replaced the 2003
plan), Mr. Derbin had been granted 1,172,767 options of which 244,326
options were surrendered pursuant to a termination of his employment
agreement.
|
| (2) |
Reflects
the grant to Mr. Appel equal to 3% of our outstanding shares made
in April
2005 but does not reflect a subsequent grant in 2006 of options to
increase the number of options to 5% of our outstanding shares and
options.
|
| |
|
|
|
|
|
Number
Of Securities
Underlying
Unexercised Options
|
|
Value
Of Unexercised
In-The-Money
Options
|
| |
|
|
|
|
|
At
Fiscal Year-End(1)
|
|
At
Fiscal Year-End($)(2)
|
| |
|
|
|
Shares
Acquired
|
|
|
|
|
|
|
|
|
| Name |
|
Year
|
|
On
Exercise
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
|
J.
Todd Derbin
|
|
2005
|
|
|
0
|
|
|
1,273,135
|
|
|
584,106
|
|
$
|
47,033
|
|
$
|
17,469
|
|
President,
Chief Executive Officer,
|
|
2004
|
|
|
0
|
|
|
586,382
|
|
|
586,382
|
|
$
|
53,947
|
|
$
|
51,015
|
|
and
Director
|
|
2003
|
|
|
0
|
|
|
293,191
|
|
|
879,575
|
|
$
|
26,974
|
|
$
|
80,921
|
|
Dr.
James Patton
|
|
2005
|
|
|
0
|
|
|
73,253
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Chairman
of the Board
|
|
2004
|
|
|
0
|
|
|
29,583
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
of
Directors
|
|
2003
|
|
|
0
|
|
|
33,810
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Roni
Appel
|
|
2005
|
|
|
0
|
|
|
254,075
|
|
|
951,835
|
|
$
|
—
|
|
$
|
—
|
|
Secretary,
Chief Financial Officer,
|
|
2004
|
|
|
0
|
|
|
91,567
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
and
Director
|
|
2003
|
|
|
0
|
|
|
49,305
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
(1) |
Certain
of the options are immediately exercisable for all the option shares
as of
the date of grant but any shares purchased are subject to repurchase
by us
at the original exercise price
paid per share if
the optionee ceases service with us before vesting in such shares.
|
|
|
(2) |
The
price at the end of fiscal year 2005 is based on a price per share
of
$0.25, the highest-bid price on October 31, 2005 quoted on the
OTCBB. The
price for previous years is based on the
fair
market value
of
our
common stock at
fiscal year end of $0.195
per share prior to November 11, 2004, and $0.287 per share post
- November
11, 2004, determined by the Board to be equal to our November 2004
Private
Placement price per share less
the exercise price of the warrants payable for such shares.
|
2004
Stock Option Plan
2005
Stock Option Plan
In
June
2005, our Board of Directors adopted the 2005 Stock Option Plan (“2005 Plan”).
The 2005 Plan needs to be approved and adopted by our shareholders at our next
shareholder meeting or as provided in our bylaws.
The
2005
Plan provides for the grant of options