AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON February 3, 2005.
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ADVAXIS, INC.
(NAME OF SMALL BUSINESS ISSUER IN OUR CHARTER)
COLORADO 2836 841521955
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
212 CARNEGIE CENTER
SUITE 206
PRINCETON, NJ 08540
(609) 497-7555
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL PLACE OF BUSINESS)
---------------------------
MR. TODD DERBIN, CHIEF EXECUTIVE OFFICER
212 CARNEGIE CENTER
SUITE 206
PRINCETON, NJ 08540
(609) 497-7555
(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 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: |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering: |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering: |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: |_|
i
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CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) UNIT (2) PRICE (2) REGISTRATION FEE
- --------------------------- --------------- --------- --------- ----------------
common stock par value $0.001 per share(3) 36,690,056 $1.00 $4,318.42 $4,318.42
common stock par value $0.001 per share(4) 19,630,588 $1.00 $2,310.52 $2,310.52
=======================================================================================================
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.
(1) In accordance with Rule 416(a), the Registrant is also registering
hereunder an indeterminate number of shares that may be issued and resold
to prevent dilution resulting from stock splits, stock dividends or
similar transactions as well as anti-dilution provisions applicable to
shares underlying the warrants.
(2) Estimated pursuant to Rule 457(c) of the Securities Act of 1933 solely for
the purpose of computing the amount of the registration fee.
(3) Represents shares of the Registrant's common stock being registered for
resale that have been issued to the selling stockholders named in the
prospectus or a prospectus supplement.
(4) Represents shares of the Registrant's common stock being registered for
resale that have been or may be acquired upon the exercise of warrants
issued to the selling stockholders named in the prospectus or a prospectus
supplement.
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The information in this prospectus is not complete and may be changed without
notice. The selling stockholders 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 February 3, 2005
PRELIMINARY PROSPECTUS
56,320,644 SHARES
ADVAXIS, INC.
This prospectus relates to the resale of up to 36,690,056 shares of common
stock and 19,630,588 shares of common stock underlying warrants of Advaxis, Inc.
by certain selling stockholders identified in this prospectus. All of the
shares, when sold will be sold by these selling stockholders. The selling
stockholders may sell their common stock from time to time at prevailing market
prices. We will not receive any proceeds from the sales by the Selling
Stockholders, but we will receive funds from the exercise of warrants held by
selling stockholders, if exercised and if payment is made by means other than
cashless exercise
We have applied for our common stock to be quoted on the Over The Counter
Bulletin Board, which is commonly referred to as the "OTC Bulletin Board"
maintained by various broker dealers. There is no "public market" for shares of
our common stock.
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 common
stock by the selling stockholders 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 stockholders 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 __________, 2005.
1
TABLE OF CONTENTS
ITEM DESCRIPTION PAGE NO.
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PROSPECTUS SUMMARY...........................................................3
THE OFFERING.................................................................7
RISK FACTORS.................................................................8
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...........................21
USE OF PROCEEDS.............................................................22
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS.....................22
DIVIDEND POLICY.............................................................22
DILUTION....................................................................22
CAPITALIZATION..............................................................23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATIONS...........................25
BUSINESS....................................................................32
MANAGEMENT..................................................................47
PRINCIPAL AND MANAGEMENT STOCKHOLDERS.......................................55
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS........................58
SELLING STOCKHOLDERS........................................................60
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY.................................72
SHARES OF THE COMPANY ELIGIBLE FOR FUTURE SALE..............................74
PLAN OF DISTRIBUTION........................................................76
LEGAL MATTERS...............................................................78
EXPERTS.....................................................................78
ADDITIONAL INFORMATION......................................................78
FINANCIAL STATEMENTS.......................................................F-1
INFORMATION NOT REQUIRED IN PROSPECTUS....................................II-1
INDEMNIFICATION OF DIRECTORS AND OFFICERS.................................II-1
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION...............................II-1
RECENT SALES OF UNREGISTERED SECURITIES...................................II-1
EXHIBITS..................................................................II-2
UNDERTAKINGS..............................................................II-5
2
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.
You should rely on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell
shares of our common stock and seeking offers to buy shares of our common stock
only in jurisdictions where offers and sales are pemitted. The information
contained in this prospectus is accurate only as of the date of the prospectus,
regardless of the time the prospectus is delivered or the common stock is sold.
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, or incorporated by reference into, 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, melanoma, 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
the first half of 2005*
Lovaxin B Breast cancer and melanoma Pre-clinical; Phase I
study anticipated to
commence in 2006
3
Lovaxin NY Ovarian, melanoma and lung cancer Pre-clinical; Phase I
study anticipated to
commence in 2006
Lovaxin W Wilms tumor and leukemia Pre-clinical; Phase I
study anticipated to
commence in 2006
Lovaxin T Cancer through control of telomerase Pre-clincial
Lovaxin H Prophylactic vaccine for HIV (AIDS) Pre-clincial
* Possible delays of up to three months based on availability of material
and toxicology studies.
See "Business - Research and Development Programs".
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:
o Initiate and complete Phase I clinical study of Lovaxin C;
o Continue the pre-clinical development of our products, as well as
continue research to expand our technology platform; and
o Initiate one or several strategic and development collaborations
with biotechnology and pharmaceutical companies.
HISTORY OF THE COMPANY
We were originally incorporated in the State of Colorado on June 5, 1987
under the name Great Expectations, Inc. We were administratively dissolved
January 1, 1997 and reinstated June 18, 1998 under the name Great Expectations
and Associates, Inc. In 1999, we became a reporting company under the Securities
Exchange of 1934 (the "Exchange Act'). Until November 2004, we were a shell
company without any business. On November 12, 2004, we acquired Advaxis, Inc., a
Delaware corporation ("Advaxis"), through a Share Exchange and Reorganization
Agreement, dated as of August 25, 2004 (the "Share Exchange"), by and among
Advaxis, the stockholders of Advaxis and us. As a result of such acquisition,
Advaxis become our wholly-owned subsidiary and our sole operating company. On
December 23, 2004, we amended and restated our articles of incorporation and
changed our name to Advaxis, Inc. Our principal executive offices are located at
212 Carnegie Center, Suite 206, Princeton, NJ 08540 and our telephone number is
(609) 844-7755.
---------------
RECENT DEVELOPMENT
In November 2004, we acquired 100% of the stock of Advaxis. Advaxis was
organized in 2002 to develop the Listeria System under patents licensed from
Penn which are described above under "General" and later in this prospectus
under "Business."
The acquisition of Advaxis was pursuant to the Share Exchange. In
connection with the Share Exchange (i) our existing stockholders entered into a
Surrender and Cancellation Agreement whereby such stockholders contributed to us
199 shares of every 200 shares of common stock beneficially owned by them so
that their ownership was reduced to 752,600 shares of common stock and (ii) we
issued to the existing stockholders of Advaxis and others 16,350,323 shares of
common stock, warrants to purchase 584,885 shares of common stock and options to
purchase 2,381,525 shares of common stock. Upon the closing of the Share
Exchange, the total number of shares of our common stock outstanding was
20,069,333 shares on a fully-diluted basis. The transaction is being accounted
for as a reverse acquisition, whereby Advaxis is the acquirer for accounting
purposes. Accordingly, the historical financial statements of Advaxis are our
financial statements for reporting purposes.
4
On November 12, 2004, we completed an initial closing of a private
placement offering the ("Private Placement"), whereby we sold an aggregate of
$2.925 million worth of units to accredited investors. Each unit was sold for
$25,000 (the "Unit Price") and consisted of (a) 87,108 shares of common stock
and (b) a warrant to purchase, at any time prior to the fifth anniversary
following the date of issuance of the warrant, to purchase 87,108 shares of
common stock included at a price equal to $0.40 per share of common stock (a
"Unit"). In consideration of the investment, we granted to each investor certain
registration rights and anti-dilution rights. Also, in November 2004, we
converted approximately $618,000 of aggregate principal promissory notes and
accrued interest outstanding into Units.
On December 8, 2004, we completed a second closing of the Private
Placement, whereby we sold an aggregate of $200,000 of Units to accredited
investors.
On January 4, 2005, we completed a third and final closing of the Private
Placement, whereby we sold an aggregate of $128,000 of Units to accredited
investors.
The aggregate sale of the Units was $3,253,000.
Pursuant to the terms of a investment banking agreement, dated March 19,
2004, by and between us and Sunrise Securities, Corp. (the "Placement Agent"),
we issued to the Placement Agent and its designees an aggregate of 2,283,445
shares of common stock and warrants to purchase up to an aggregate of 2,666,900
shares of common stock. The shares were issued as part consideration for the
services of the Placement Agent, as our placement agent in the Private
Placement. In addition, we paid the Placement Agent a total cash fee of $50,530.
On January 12, 2005, we completed a second private placement offering
whereby we sold an aggregate of $1,100,000 of units to a single investor. As
with the Private Placement, each unit issued and sold in this subsequent private
placement was sold at $25,000 per unit and is comprised of (i) 87,108 shares of
our common stock, and (ii) a five-year warrant to purchase 87,108 shares of our
common stock at an exercise price of $0.40 per share.
5
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
reverse acquistion, whereby Advaxis became the acquiror for accounting purposes.
Accordingly, the historical financial statements of Advaxis will be our
financial statements for reporting purposes.
The following condensed statement of operations data for the period from
March 1, 2002 (inception) to December 31, 2002, and the year ended December 31,
2003, and the selected balance sheet data at December 31, 2002 and 2003, 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
December 31, 2002 and 2003 and for period ended December 31, 2002 the year ended
December 31, and 2003 are included elsewhere herein. The unaudited selected
statement of operations data for the nine months ended September 30, 2003 and
2004, and the unaudited consolidated selected balance sheet data at September
30, 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.
PERIOD FROM
MARCH 1, 2002
(INCEPTION) TO YEAR ENDED NINE MONTHS ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, (unaudited)
------------ ------------ -----------
STATEMENT OF OPERATIONS DATA:
2002 2003 2003 2004
---- ---- ---- ----
Total operating expenses .............. $ 167,902 $ 897,076 $ 722,184 $ 697,012
Interest expense (income) ............. -- 17,190 7,539 46,048
Other income .......................... 966 4,521 505 57
Provision for income taxes ............ -- -- -- --
Net loss .............................. $(166,936) $(909,745) $(729,218) $(743,003)
LOSS PER SHARE INFORMATION:
Basic and diluted net loss per share . $ (0.01) $ (0.05) $ (0.04) $ (0.05)
========= ========= ========= =========
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
------------ ------------ -------------- -------------
(unaudited) (pro forma)
BALANCE SHEET DATA:
2002 2003 2004 2004
---- ---- ---- ----
Cash and cash equivalents ....... $ 204,382 $ 47,160 $ 48,045 $ 2,873,045
Intangible assets ............... -- $ 277,243 $ 386,743 $ 386,743
Total assets .................... $ 204,382 $ 324,403 $ 434,788 $3259,788
Total liabilities ............... $ 125,825 $ 1,131,138 $ 1,979,211 $ 1,979,211
Stockholders' equity (deficiency) 78,557 (806,735) (1,544,423) (1,280,788)
6
THE OFFERING
Common stock offered by selling stockholders...56,320,644(1)
Common stock outstanding.......................36,690,056 (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".....................None
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(1) Represents 36,690,056 shares of common stock that were issued to selling
stockholders and 19,630,588 shares of common stock underlying warrants
that were issued to selling stockholders.
(2) The number of shares of common stock outstanding as of January 31, 2005
listed above excludes
o 2,182,894 shares of common stock issuable upon exercise of options;
o 20,302,582 shares of common stock issuable upon exercise of warrants
with exercise prices ranging from $0.1952 to $0.40 per share;
o 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.
7
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.
We have sustained losses from operations in each fiscal year since our
inception and for the period ended September 30, 2004, and losses are expected
to continue, due to the substantial investment in research and development, for
the next several years. At September 30, 2004, we had an accumulated deficit of
$1,863,568 and a stockholders' deficiency of $1,544,423. We expect to spend
substantial additional sums on the continued research and development of
proprietary products and technologies with no certainty that losses will not
increase or that we will ever become profitable as a result of these
expenditures.
WE WILL REQUIRE SUBSTANTIAL ADDITIONAL FINANCING IN ORDER TO MEET OUR
BUSINESS OBJECTIVES.
Although we believe that the net proceeds received from the Private
Placement 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 issue equity or debt securities or enter into other financial
arrangements, including relationships with corporate and other partners, in
order to raise substantial additional capital during the five to ten year period
of product development and the United States Food and Drug Administration
("FDA") testing through Phase III testing. Depending upon market conditions, we
may not be successful in raising sufficient additional capital for our long-term
requirements. In such event, our business, prospects, financial condition and
results of operations could be materially adversely affected. 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 frequently
encountered by early stage companies, particularly in rapidly evolving markets
such as the vaccine and therapeutic biopharmaceutical industry. Such risks
include the following:
o competition from companies that have substantially greater assets
and financial resources than we have;
o need for acceptance of products;
o ability to anticipate and adapt to a competitive market and rapid
technological developments;
o amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and
infrastructure;
8
o 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
o dependence upon key personnel.
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 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".
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.
Pre-clinical tests include the evaluation of the product in the laboratory
and in animal studies to assess the potential safety and efficacy of the product
and its formulation. The results of the pre-clinical tests are submitted to the
FDA as part of an INDA to support the evaluation of the product in human
subjects or patients.
9
Clinical trials involve administration of the product to patients under
supervision of a qualified principal investigator. Such trials are typically
conducted in three sequential phases, although the phases may overlap. In Phase
I, the initial introduction of the drug into human subjects, the product is
tested for safety, dosage tolerance, absorption, metabolism, distribution and
excretion. Phase II involves studies in a limited patient population to: (1)
determine the biological or clinical activity of the product for specific,
targeted indications; (2) determine dosage tolerance and optimal dosage; and (3)
identify possible adverse effects and safety risks. If Phase II evaluations
indicate that a product is effective and has an acceptable benefit-to-risk
relationship, Phase III trials may be undertaken to further evaluate clinical
efficacy and to further test for safety within an expanded patient population.
Phase IV studies, or post-marketing studies, may also be required to provide
additional data on safety or efficacy.
The FDA reviews the results of the clinical trials and may order the
temporary or permanent discontinuation of clinical trials at any time if it
believes the product candidate exposes clinical subjects to an unacceptable
health risk. Investigational products used in clinical studies must be produced
in compliance with cGMP (current good manufacturing practices under U.S. 21 CFR
Part 211, as amended and supplemented from time to time and the foreign
equivalents).
On November 21, 1997, former President Clinton signed into law the Food
and Drug Administration Modernization Act. That act codified the FDA's policy of
granting "Fast Track" approval for cancer therapies and other therapies intended
to treat serious or life threatening diseases and that demonstrate the potential
to address unmet medical needs. The Fast Track program emphasizes close, early
communications between FDA and the sponsor to improve the efficiency of
preclinical and clinical development, and to reach agreement on the design of
the major clinical efficacy studies that will be needed to support approval.
Under the Fast Track program, a sponsor also has the option to submit and
receive review of parts of the NDA or BLA on a rolling schedule approved by FDA,
which expedites the review process.
The FDA's Guidelines for Industry Fast Track Development Programs require
that a clinical development program must continue to meet the criteria for Fast
Track designation for an application to be reviewed under the Fast Track
Program. Previously, the FDA approved cancer therapies primarily based on
patient survival rates or data on improved quality of life. While the FDA could
consider evidence of partial tumor shrinkage, which is often part of the data
relied on for approval, such information alone was usually insufficient to
warrant approval of a cancer therapy, except in limited situations. Under the
FDA's new policy, which became effective on February 19, 1998, Fast Track
designation ordinarily allows a product to be considered for accelerated
approval through the use of surrogate endpoints to demonstrate effectiveness. As
a result of these provisions, the FDA has broadened authority to consider
evidence of partial tumor shrinkage or other surrogate endpoints of clinical
benefit for approval. This new policy is intended to facilitate the study of
cancer therapies and shorten the total time for marketing approvals. Under
accelerated approval, the manufacturer must continue with the clinical testing
of the product after marketing approval to validate that the surrogate endpoint
did predict meaningful clinical benefit. To the extent applicable, we intend to
take advantage of the Fast Track programs to obtain accelarated 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 provisions of the Federal Food, Drug, and Cosmetic Act
provide incentives to drug and biologics manufacturers to develop and
manufacture drugs for the treatment of rare diseases, currently defined as
diseases that exist in fewer than 200,000 individuals in the U.S. or, for a
disease that affects more than 200,000 individuals in the U.S., where the
sponsor does not realistically anticipate that its product will become
profitable. Under these provisions, a manufacturer of a designated orphan
product can seek tax benefits, and the holder of the first FDA approval of a
designated orphan product will be granted a seven-year period of marketing
exclusivity for that product for the orphan indication. While the marketing
exclusivity of an orphan drug would prevent other sponsors from obtaining
approval of the same compound for the same indication, it would not prevent
other types of drugs from being approved for the same indication.
10
Sales outside the United States of products we develop will also be
subject to regulatory requirements governing human clinical trials and marketing
for drugs and biological products and devices. The requirements vary widely from
country to country, but typically the registration and approval process takes
several years and requires significant resources. In most cases, if the FDA has
not approved a product for sale in the United States the product may be exported
to any country if it complies with the laws of that country and has valid
marketing authorization by the appropriate authority (i) in Canada, Australia,
New Zealand, Japan, Israel, Switzerland or South Africa, or (ii) in the European
Union or a country in the European Economic Area if the drug is marketed in that
country or the drug is authorized for general marketing in the European Economic
Area. There are specific FDA regulations that govern this process.
Our ability to earn sufficient returns on our products may depend in part
on the extent to which government health administration authorities, private
health coverage insurers and other organizations will provide reimbursement for
the costs of such products and related treatments. Significant uncertainty
exists as to the reimbursement status of newly approved health care products,
and there can be no assurance that adequate third-party coverage will be
available.
WE CAN PROVIDE NO ASSURANCE THAT THE ADVAXIS PRODUCTS WILL OBTAIN
REGULATORY APPROVAL OR THAT THE RESULTS OF CLINICAL STUDIES WILL BE FAVORABLE.
The testing, marketing and manufacturing of any product will require the
approval of the FDA. We cannot predict with any certainty the amount of time
necessary to obtain such FDA approval and whether any such approval will
ultimately be granted. Preclinical and clinical trials may reveal that one or
more products is ineffective or unsafe, in which event further development of
such products could be seriously delayed or terminated. Moreover, obtaining
approval for certain products may require the testing on human subjects of
substances whose effects on humans are not fully understood or documented.
Delays in obtaining FDA or any other necessary regulatory approvals of any
proposed product and failure to receive such approvals would have an adverse
effect on the product's potential commercial success and on our business,
prospects, financial condition and results of operations. In addition, it is
possible that a product may be found to be ineffective or unsafe due to
conditions or facts which arise after development has been completed and
regulatory approvals have been obtained. In this event, we may be required to
withdraw such product from the market. To the extent that our success will
depend on any regulatory approvals from governmental authorities outside of the
United States which perform roles similar to that of the FDA, uncertainties
similar to those stated above will also exist. See "Business - Governmental
Regulation".
WE RELY UPON PATENTS TO PROTECT OUR TECHNOLOGY. WE MAY BE UNABLE TO
PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND WE MAY BE LIABLE FOR INFRINGING THE
INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Our ability to compete effectively will depend on our ability to maintain
the proprietary nature of our technologies, including the Listeria System, and
the proprietary technology of others with which we have entered into licensing
agreements. We have licensed eight patents and 12 patent applications from Penn.
Further, we rely on a combination of trade secrets and nondisclosure, and other
contractual agreements and technical measures to protect our rights in the
technology. We depend upon confidentiality agreements with our officers,
employees, consultants, and subcontractors to maintain the proprietary nature of
the technology. These measures may not afford us sufficient or complete
protection, and others may independently develop technology similar to ours,
otherwise avoid the confidentiality agreements, or produce patents that would
materially and adversely affect our business, prospects, financial condition,
and results of operations. We believe that our technology and the technology
licensed from Penn do not infringe; 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. 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. See
"Business--Patents and Licenses".
11
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 licences will be obtained on commercially reasonable terms. If we are
unable to maintain and/or obtain licenses, we may have to develop alternatives
to avoid infringing or the patents of others, potentially causing increased
costs and delays in product development and introduction or preclude the
development, manufacture, or sale of planned products. Some of our licenses
provide for limited periods of exclusivity that require minimum license fees and
payments and/or may be extended only with the consent of the licensor. We can
provide no assurance that we will be able to meet these minimum license fees in
the future or that these third parties will grant extensions on any or all such
licenses. This same restriction may be contained in licenses obtained in the
future. Additionally, we can provide no assurance that the patents underlying
any licenses will be valid and enforceable. Furthermore, we call to your
attention that in 2001 an issue arose regarding the inventorship of U.S. Patent
6,565,852 and U.S. Patent Application No. 09/537,642 of Penn. These patent
rights are included in the patent rights licensed by us from Penn. It is
contemplated by Glaxo, Smith, Klein, Inc. ("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".
12
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:
o decreased demand for our product candidates,
o injury to our reputation,
o withdrawal of clinical trial participants,
o costs of related litigation,
o substantial monetary awards to patients or other claimants,
o loss of revenues,
o the inability to commercialize product candidates, and
o 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 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.
13
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 one employee. 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. 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".
BECAUSE WE WILL NOT PAY CASH DIVIDENDS, INVESTORS MAY HAVE TO SELL SHARES
IN ORDER TO REALIZE THEIR INVESTMENT.
We have not paid any cash dividends on our common stock and we do not
intend to pay cash dividends in the foreseeable future. We intend to retain
future earnings, if any, for reinvestment in the development and expansion of
our business. Any credit agreements which we may enter into with institutional
lenders may restrict our ability to pay dividends. Whether we pay cash dividends
in the future will be at the discretion of our board of directors and will be
dependent upon our financial condition, results of operations, capital
requirements, and any other factors that the board of directors decides is
relevant. See "Dividend Policy" and "Description of Securities -- common stock."
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.
14
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.
We expect that our products under development and in clinical trials will
address major markets within the cancer sector. Our competition will be
determined in part by the potential indications for which drugs are developed
and ultimately approved by regulatory authorities. Additionally, the timing of
market introduction of some of our potential products or of competitors'
products may be an important competitive factor. Accordingly, the relative speed
with which we can develop products, complete pre-clinical testing, clinical
trials and approval processes and supply commercial quantities to market are
expected to be important competitive factors. We expect that competition among
products approved for sale will be based on various factors, including product
efficacy, safety, reliability, availability, price and patent position. See
"Business - Research and Development Programs" and "Business - Competition".
RISKS RELATED TO THE SECURITIES MARKETS AND INVESTMENTS IN OUR COMMON STOCK THE
PRICE OF OUR COMMON STOCK MAY BE VOLATILE.
The trading price of our common stock may fluctuate substantially. The
price of the common stock that will prevail in the market after the sale of the
shares of common stock by the selling stockholders may be higher or lower than
the price you have paid, depending on many factors, some of which are beyond our
control and may not be related to our operating performance. These fluctuations
could cause you to lose part or all of your investment in our common stock.
Those factors that could cause fluctuations include, but are not limited to, the
following:
o price and volume fluctuations in the overall stock market from time
to time;
o fluctuations in stock market prices and trading volumes of similar
companies;
o actual or anticipated changes in our earnings or fluctuations in our
operating results or in the expectations of securities analysts;
o general economic conditions and trends;
o major catastrophic events;
o sales of large blocks of our stock;
o departures of key personnel;
o changes in the regulatory status of our product candidates,
including results of our clinical trials;
o events affecting Penn or any future collaborators;
o announcements of new products or technologies, commercial
relationships or other events by us or our competitors;
o regulatory developments in the United States and other countries;
15
o failure of our common stock to be listed quoted on the Nasdaq Small
Cap Market, American Stock Exchange, OTC Bulletin Board or other
national market system;
o changes in accounting principles; and
o 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
January 31, 2005, there were an aggregate of 59,374,162 shares of our common
stock issued and outstanding on a fully diluted basis.
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.
Currently, holders of 15,597,723 shares of our common stock are subject to
a standstill agreement. Pursuant to the standstill agreement, such holders agree
not to effect any sale, transfer or distribution of his, her or its equity
securities in us, or any securities convertible into or exchangeable or
exercisable for such securities, during the period from the November 12, 2004
until the earlier of (i) the date that this registration statement has been
filed with and declared effective by the Securities and Exchange Commission
("SEC") and (ii) the first year anniversary of the date hereof, unless (a) such
sale, transfer or distribution is approved in writing by a majority of the
investors in the Private Placement, and (b) the transferee of such sold,
transferred or distributed securities agrees in writing to be bound by the terms
of the standstill agreement to the same extent as if they had originally been a
party hereto.
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:
o with a price of less than $5.00 per share;
o that are not traded on a "recognized" national exchange;
o whose prices are not quoted on the NASDAQ automated quotation
system; or
o of issuers with net tangible assets less than $2,000,000 (if the
issuer has been in continuous operation for at least three years) or
$5,000,000 (if in continuous operation for less than three years),
or with average revenue of less than $6,000,000 for the last three
years.
Section 15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder
require broker-dealers dealing in penny stocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain a manually
signed and dated written receipt of the document before effecting any
transaction in a "penny stock" for the investor's account. We urge potential
investors to obtain and read this disclosure carefully before purchasing any
shares that are deemed to be "penny stock."
16
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:
o obtain from the investor information about his or her financial
situation, investment experience and investment objectives;
o 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;
o provide the investor with a written statement setting forth the
basis on which the broker-dealer made his or her determination; and
o receive a signed and dated copy of the statement from the investor,
confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives.
Compliance with these requirements may make it harder for investors in our
common stock to resell their shares to third parties. Accordingly, our common
stock should only be purchased by investors, who understand that such investment
is a long-term and illiquid investment, and are capable of and prepared to bear
the risk of holding the common stock for an indefinite period of time.
WE MAY INCUR INCREASED COSTS AS A RESULT OF RECENTLY ENACTED AND PROPOSED
CHANGES IN LAWS AND REGULATIONS RELATING TO CORPORATE GOVERNANCE MATTERS.
Recently enacted and proposed changes in the laws and regulations
affecting public companies, including the provisions of the Sarbanes-Oxley Act
of 2002 and rules adopted or proposed by the SEC and by the Nasdaq Stock Market,
will result in increased costs to us as we evaluate the implications of these
laws and regulations and respond to their requirements. These laws and
regulations could make it more difficult or more costly for us to obtain certain
types of insurance, including director and officer liability insurance, and we
may be forced to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar coverage. The impact of
these events could also make it more difficult for us to attract and retain
qualified persons to serve on our board of directors, our board committees or as
executive officers. We are presently evaluating and monitoring developments with
respect to these laws and regulations and cannot predict or estimate the amount
or timing of additional costs we may incur to respond to their requirements.
A LIMITED PUBLIC TRADING MARKET MAY CAUSE VOLATILITY IN THE PRICE OF OUR
COMMON STOCK.
We have applied to have our common stock quoted on the OTC Bulletin Board.
The quotation of our common stock on the OTC Bulleting Board does not assure
that a meaningful, consistent and liquid trading market currently exists, and in
recent years such market has experience extreme price and volume fluctuations
that have particularly affected the market prices of many smaller companies like
us. Our common stock is thus subject to this volatility. Sales of substantial
amounts of common stock, or the perception that such sales might occur, could
adversely affect prevailing market prices of our common stock.
THERE IS NO ASSURANCE OF AN ESTABLISHED PUBLIC TRADING MARKET.
A regular trading market for our common stock may not be established or
sustained in the future. The NASD has enacted recent changes that limit
quotation on the OTC Bulletin Board to securities of issuers that are current in
their reports filed with the SEC. The effect on the OTC Bulletin Board of these
rule changes and other proposed changes cannot be determined at this time. The
OTC Bulletin Board is an inter-dealer, Over-The-Counter market that provides
significantly less liquidity than the NASDAQ Stock Market. Quotes for stocks
included on the OTC Bulletin Board are not listed in the financial sections of
newspapers as are those for the NASDAQ Stock Market. Therefore, prices for
securities traded solely on the OTC Bulletin Board may be difficult to obtain
and holders of common stock may be unable to resell their securities at or near
their originial offering price or at any price. Market prices for our common
stock will be influenced by a number of factors, including:
17
o The issuance of new equity securities pursuant to a future offering;
o Changes in interest rates;
o Competitive developments, including announcements by competitors of
new products or services or significant contracts, acquisitions,
strategic partnerships, joint ventures or capital commitments;
o Variations in quarterly operating results
o Change in financial estimates by securities analysts;
o The depth and liquidity of the market for our common stock;
o Investor perceptions of our company and the technologies industires
generally; and
o 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.
OUR EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS CONTROL OUR
BUSINESS AND MAY MAKE DECISIONS THAT ARE NOT IN OUR BEST INTERESTS.
Our officers, directors and principal stockholders, and their affiliates,
in the aggregate, beneficially own approximately 63.79% of the outstanding
shares of our common stock on a fully diluted basis. As a result, such persons,
acting together, have the ability to substantially influence all maters
submitted to our stockholders for approval, including the election and removal
of directors and any merger, consolidation or sale of all or substantially all
of our assets, and to control our management and affairs. Accordingly, such
concentration of ownership may have the effect of delaying, deferring or
preventing a change in discouraging a potential acquirer from making a tender
offer or otherwise attempting to obtain control of our business, even if such a
transaction would be beneficial to other stockholders.
SALES OF ADDITIONAL EQUITY SECURITIES MAY ADVERSELY AFFECT THE MARKET
PRICE OF OUR COMMON STOCK AND YOUR RIGHTS IN US MAY BE REDUCED.
The Selling Stockholders 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 Stockholders 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.
Our stockholders may experience substantial dilution and a reduction in the
price that they are able to obtain upon sale of their shares. Also, any new
equity securities issued may have greater rights, preferences or privileges than
our existing common stock.
18
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
January 31, 2005, we had 36,690,056 shares of our common stock issued and
outstanding, excluding shares issuable upon exercise of our outstanding warrants
and options. As of January 31, 2005, we had outstanding 2,182,894 options to
purchase shares of our common stock at a weighted exercise price of $0.40 per
share and outstanding warrants to purchase 20,302,582 shares of our common
stock, with exercise prices ranging from $0.1952 to $0.40 per share. Pursuant to
our 2004 Stock Option Plan, 2,381,525 shares of common stock are reserved for
issuance under the plan. To the extent stock is issued or options and warrants
are exercised, holders of our common stock wll experience dilution. In addition,
in the event of any future financing of equity securities or securities
convertible into or exchangeable for, equity securities, 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 securites 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 cetain circumstans, 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 pursuat to Rule 144 or pursuant ot any
resale prospectus may have an adverse effect on the market price of our
securities.
Holders of 15,597,723 shares of our common stock are subject to a
standstill agreement. Pursuant to the standstill agreement, such holders agree
not to effect any sale, transfer or distribution of his, her or its equity
securities in us, or any securities convertible into or exchangeable or
exercisable for such securities, during the period from the November 12, 2004
until the earlier of (i) the date that this registration statement has been
filed with and declared effective by the SEC and (ii) the first year anniversary
of the date hereof, unless (a) such sale, transfer or distribution is approved
in writing by a majority of the investors in the Private Placement, and (b) the
transferee of such sold, transferred or distributed securities agrees in writing
to be bound by the terms of the standstill agreement to the same extent as if
they had originally been a party hereto.
An aggregate of 56,320,644 shares of common stock are being registered
with the SEC in the registration statement of which this prospectus forms a
part. 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.
WE ARE ABLE TO ISSUE SHARES OF PREFERRED STOCK WITH RIGHTS SUPERIOR TO
THOSE OF HOLDERS OF OUR COMMON STOCK. SUCH ISSUANCES CAN DILUTE THE TANGIBLE NET
BOOK VALUE OF SHARES OF OUR COMMON STOCK.
Our Articles of Incorporation provide for the authorization of 5,000,000
shares of "blank check" preferred stock. Pursuant to our Articles of
Incorporation, our Board of Directors is authorized to issue such "blank check"
preferred stock with rights that are superior to the rights of stockholders of
our common stock, at a purchase price then approved by our Board of Directors,
which purchase price may be substantially lower than the market price of shares
of our common stock, without stockholder approval.
19
WE HAVE NO INTENTION 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.
20
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:
o statements as to the anticipated timing of clinical studies and
other business developments;
o statements as to the development of new products;
o 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
o 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:
o Our limited operating history and ability to continue as a going
concern;
o Our ability to successfully develop and commercialize products based
on our therapies and the Listeria System;
o 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 aplications;
o 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;
o The degree and nature of our competition;
o Our ability to employ and retain qualified employees; and
21
o 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 additonal 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 to 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 proceeeds from the sale of the shares of common
stock by the selling stockholders, but we will receive funds from the exercise
of warrants held by selling stockholders, if exercised for cash.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Prior to January, 2005, there is no record of any quotes in the Pink
Sheets or OTC Bulletin Board and according to our records no public sales of our
securities have occurred.
At January 31, 2005, there were approximately 83 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 their 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 shares of common stock already outstanding and
held by selling stockholders under this prospectus. 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.
22
CAPITALIZATION
The following table sets forth as of December 31, 2004, our actual
capitalization. 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.
Actual
(Unaudited)
-----------
Long-term debt .......................................... $ 488,237
Stockholders' equity (deficit):
Common stock .......................................... 32,341
Additional paid in capital ............................ 3,942,670
Deferred compensation ................................. --
Retained earnings (deficit) ........................... (1,988,345)
Total stockholders equity (deficit) ..................... (1,988,345)
TOTAL CAPITALIZATION ........................... 2,476,582*
===========
* Not including short term payables.
23
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 reverse
acquistion whereby Advaxis became acquiror for accounting purposes. Accordingly,
the historical financial statements of Advaxis will be our financial statements
for reporting purposes.
The following condensed statement of operations data for the period from
March 1, 2002 (inception) to December 31, 2002, and the year ended December 31,
2003, and the selected balance sheet data at December 31, 2002 and 2003, 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
December 31, 2002 and 2003 and for periods ended December 31, 2002 and 2003 are
included elsewhere herein. The unaudited selected statement of operations data
for the nine months ended September 30, 2003 and 2004, and the unaudited
consolidated selected balance sheet data at September 30, 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.
PERIOD FROM
MARCH 1, 2002
(INCEPTION) TO YEAR ENDED NINE MONTHS ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, (unaudited)
------------ ------------ -----------
STATEMENT OF OPERATIONS DATA:
2002 2003 2003 2004
--------- --------- --------- ---------
Total operating expenses .............. $ 167,902 $ 897,076 $ 722,184 $ 697,012
Interest expense (income) ............. -- 17,190 7,539 46,048
Other income .......................... 966 4,521 505 57
Provision for income taxes ............ -- -- -- --
Net loss .............................. $(166,936) $(909,745) $(729,218) $(743,003)
LOSS PER SHARE INFORMATION:
Basic and diluted net loss per share . $ (0.01) $ (0.05) $ (0.04) $ (0.05)
========= ========= ========= =========
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
------------ ------------ -------------- -------------
(unaudited) (pro forma)
BALANCE SHEET DATA:
2002 2003 2004 2004
---- ---- ---- ----
Cash and cash equivalents ....... $ 204,382 $ 47,160 $ 48,045 $ 2,873,045
Intangible assets ............... -- $ 277,243 $ 386,743 $ 386,743
Total assets .................... $ 204,382 $ 324,403 $ 434,788 $ 3259,788
Total liabilities ............... $ 125,825 $ 1,131,138 $ 1,979,211 $ 1,979,211
Stockholders' equity (deficiency) 78,557 (806,735) (1,544,423) (1,280,788)
24
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 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 first quarter of 2005. 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 reverse-merger, where Advaxis was the
acquirer. As a result of the foregoing as well as the fact that the Share
Exchange is treated as a recapitalization of Advaxis rather than as a business
combination, the historical financial statements of Advaxis became our
historical financial statements after the Share Exchange.
On November 12, 2004, December 8, 2004 and January 4, 2005, we closed a
private offering of an aggregate of 11,334,495 shares of our common stock and
warrants to purchase an aggregate of 11,334,495 shares of our common stock
resulting in aggregate net proceeds of approximately $3,253,000. Such offering
was solely to "accredited investors", as defined in Rule 501(a) of Regulation D
under the Securities Act of 1933, through the Placement Agent. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Plan of Operations - Liquidity and Capital Resources".
25
On November 12, 2004 we converted $595,000 of aggregate principal
promissory notes plus accrued interest outstanding into an aggregate of
2,136,441 shares of our common stock and warrants to purchase 2,223,549 shares
of our common stock.
On January 12, 2005, we closed a private offering of 3,832,753 shares of
our common stock and warrants to purchase 3,832,753 shares of our common stock
resulting in aggregate net proceeds of approximately $1,100,000. Such offering
was to a single "accredited investor", as defined in Rule 501(a) of Regulation D
under the Securities Act of 1933. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations and Plan of Operations - Liquidity
and Capital Resources".
To date we have been in the development stage. During the year ended
December 31, 2003 and the nine months ended September 30, 2004, 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 and
$743,003, respectively. As of December 31, 2003 and September 30, 2004, we had a
working capital (deficit) of $997,184 and $(1,526,695), respectively and an
accumulated deficit of $1,076,861 and $1,863,568, respectively.
PLAN OF OPERATIONS
We intend to use the proceeds of the Private Placement closed on November
12, 2004, December 8, 2004 and January 4, 2005 and the proceeds of the offering
closed on January 12, 2005 to conduct a Phase I clinical trial in cervical
cancer using Lovaxin C, one of our lead product candidates in development using
our Listeria System. We intend to expand our research and development team and
further the development of the product candidates. We also intend to deploy a
portion of the funds in expanding our manufacturing capabilities and in
strategic activities. Our corporate staff will be responsible for the general
and administrative activities.
During the next 12 to 24 months, we anticipate that our strategic focus
will be to achieve several objectives. Our foremost objectives are as follows
and are further described under "Business - Strategy":
o Initiate and complete phase I clinical study of Lovaxin C;
o Continue pre-clinical development of our products;
o 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 year ending December 31, 2005. 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 and the nine months ended September 30, 2004 of $897,076 and $697,012,
respectively.
Research and Development. During the year ended December 31, 2003
and the nine months ended September 30, 2004, we recorded research and
development expenses of $491,508 and $228,880, respectively. Such expenses were
principally comprised of manufacturing scale up and process development, license
fees, sponsored research and consulting. We recognize research and development
expenses as incurred. During the year ending December 31, 2005 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.
26
General and Administrative Expenses. During the year ended December
31, 2003 and the nine months ended September 30, 2004, we recorded general and
administrative expenses of $405,568 and $468,132, respectively. General and
administrative costs primarily include the salaries for executive, finance,
facilities, insurances, accounting and legal assistance, as well as other
corporate and administrative functions that serve to support Advaxis' current
and our future operations and provide an infrastructure to support this
anticipated future growth. During the year ending December 31, 2005 and beyond,
we anticipate that our general and administrative costs will increase due to the
increased compliance requirements, including, without limitation, legal,
accounting, and insurance expenses, arising out of complying with periodic
reporting and other regulations applicable to public companies.
Interest Expense. During the year ended December 31, 2003 and the
nine months ended September 30, 2004, we recorded interest expense of $17,190
and $46,048, respectively. 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.
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
NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2003
Research and Development Expenses. Research and development expenses
decreased by $156,197, or 40.5%, from $385,077 for the nine months ended
September 30, 2003 to $228,880 for the nine months ended September 30, 2004.
This decrease was principally attributable to the following:
o a decrease in our related manufacturing expenses of 99.7% from
$219,907 to $583;
o a decrease in license fees of 96.4% from $56,082 to $2,000;
o an increase in outside research fees of 28.6% from $59,231 to
$76,150;
o an increase in consulting fees of 201.2% from $49,857 to $150,147;
and
o outside research fees increased by $16,919, or 28.6%, from $59,231
for the nine months ended September 30, 2003 to $76,150 for the nine
months ended September 30, 2004, as a result of sponsored research
conducted at Penn.
The following is a summary of the principal research and development
expenses for the nine months ending September 30, 2003 and 2004.
27
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
RESEARCH AND DEVELOPMENT 2004 2003 NET CHANGE %
EXPENSES CHANGE
--------- --------- --------- -----
Manufacturing $ 583 $ 219,907 $(219,324) (99.7)
License Fees $ 2,000 $ 56,082 $ (54,082) (96.4)
Outside Research Fees $ 76,150 $ 59,231 $ 16,919 28.6
Consulting Fees $ 150,147 $ 49,857 $ 100,290 201.2%
- --------------------------------------------------------------------------------
TOTAL $ 228,880 $ 385,077 $(156,197) (40.5)
- --------------------------------------------------------------------------------
General and Administrative Expenses. General and administrative expenses
increased by $131,025 or 38.9% from $337,107 for the nine months ended September
30, 2003 to $468,132 for the nine months ended September 30, 2004. This increase
is primarily attributable to the following:
o employee related expenses increased by $34,790, or 24.4%, from
$142,806 for the nine months ended September 30, 2003 to $177,596
for the nine months ended September 30, 2004;
o professional fees increased by $18,032, or 16.7%, from $107,546 for
the nine months ended September 30, 2003 to $125,578 for the nine
months ended September 30, 2004; and
o consulting expenses increased by $36,650, or 56.2%, from $65,182 for
the nine months ended September 30, 2003 to $101,832 for the nine
months ended September 30, 2004.
The following is a summary of the principal general and administrative
expenses for the nine months ending September 30, 2003 and 2004 and the nine
months ending September 30, 2003.
GENERAL AND NINE MONTHS ENDED
ADMINISTRATIVE EXPENSES SEPTEMBER 30,
-------------------
%
2004 2003 NET CHANGE CHANGE
-------- -------- -------- ------
Consulting $101,832 $ 65,182 $ 36,650 56.2%
Total Employee Costs $177,596 $142,806 $ 34,790 24.4%
Insurance $ 9,929 $ 1,902 $ 8,027 422.3%
Miscellaneous $ 1,983 $ 1,592 $ 391 24.6%
Total Professional Fees $125,578 $107,546 $ 18,032 16.8 %
Total Travel & Entertainment $ 14,191 $ 5,213 $ 8,978 172.2%
Other Expenses.
Other (expense) decreased by ($38,452), or 510.0%, from $7,539 for the
nine months ended September 30, 2003 to ($45,991) for the nine months ended
September 30, 2004. The decrease results primarily from an increase in interest
payable on certain notes.
28
The following chart shows the changes in Other Income (Expense):
NINE MONTHS ENDED
OTHER INCOME (EXPENSE) SEPTEMBER 30,
---------------------
2004 2003 NET CHANGE % CHANGE
-------- -------- -------- ------
Other Income $ 57 $ 505 $ (448) (88.71)%
Interest Expense $ 46,048 $ 7,539 $ 38,509 (510.80)%
No provision for income taxes was made for the nine months ended September
30, 2003 or 2004 due to significant tax losses during and prior to such periods.
YEAR ENDED DECEMBER 31, 2003 AND THE PERIOD FROM MARCH 1, 2002 (INCEPTION)
TO DECEMBER 31, 2002
Research and Development Expenses. Research and development expenses
increased by $440,609, or 865.6%, from $50,899 for the period from March 1, 2002
(inception) through December 31, 2002 to $491,508 for the year ended December
31, 2003. This increase was principally attributable to the increase in outside
research expenses increased by $33,838, or 53%, from $63,468 for the period from
March 1, 2002 (inception) through December 31, 2002 to $97,306 for the year
ended December 31, 2003 due to increased research fees due to Penn.
General and Administrative Expenses. General and administrative expenses
increased by $288,565 or 246.6% from $117,003 for the period from March 31, 2002
(inception) through December 31, 2002 to $405,568 for the year ended September
30, 2003. This increase is primarily attributable to the increase in
professional fees increased by $316,457, or 328.85%, from $96,231 for the period
from March 1, 2002 (inception) to December 31, 2002 to $412,688 for the year
ended December 31, 2003 due to increased consulting and legal requirements.
Interest Expenses. Interest expense increased by $17,190 or 100% from $0
for the period from March 31, 2002 (inception) through December 31, 2002 to
$17,190 for the year ended December 31, 2003. The increase results primarily
from the interest attributable to notes issued during such later period.
No provision for income taxes was made for the period from March 31, 2002
(inception) through December 31, 2002 or the year ended December 31, 2003 due to
significant tax losses incurred.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2003 and September 30, 2004, our cash was $47,160 and
$48,045, respectively, and our working capital (deficit) was $997,184 and
$1,526,665.
To date, our principal sources of liquidity has been cash provided by
private offerings of our securities. These offering have been structured so as
to be exempt from the prospectus delivery requirements under the Securities Act
of 1933. Our principal uses of cash have been research and development and
working capital. We anticipate these uses will continue to be our principal uses
of cash in the future.
Although we believe that the net proceeds to be received by us from our
private offerings and existing cash resources will be sufficient to finance our
currently planned operations for approximately the next 12 to 24 months, we do
not believe that these amounts will be sufficient to meet our longer-term cash
requirements or our cash requirements for the commercialization of any of our
existing or future product candidates. We will be required to issue equity or
debt securities or to enter into other financial arrangements, including
relationships with corporate and other partners, in order to raise additional
capital. Depending upon market conditions, we may not be successful in raising
sufficient additional capital for our long-term requirements. In such event, our
business, prospects, financial condition and results of operations could be
materially adversely affected.
29
The following factors, among others, could cause actual results to differ
from those indicated in the above forward-looking statements: increased length
and scope of our clinical trials, increased costs related to intellectual
property related expenses, increased cost of manufacturing and higher consulting
costs. These factors or additional risks and uncertainties not known to us or
that we currently deem immaterial may impair business operations and may cause
our actual results to differ materially from any forward-looking statement.
Although we believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform them to
actual results or to make changes in our expectations.
We expect our future sources of liquidity to be primarily equity capital
raised from investors, as well as licensing fees and milestone payments in the
event we enter into licensing agreements with third parties, and research
collaboration fees in the event we enter into research collaborations with third
parties.
On November 12, 2004, we sold to accredited investors at an initial
closing of the Private Placement 117 Units at $25,000 per unit for an aggregate
purchase price of $2,925,000. Each Unit is comprised of (i) 87,108 shares of our
common stock and (ii) a five-year warrant to purchase 87,108 shares of our
common stock at an exercise price of $0.40 per share. At the initial closing,
the accredited investors received an aggregate of 10,191,638 shares of common
stock and warrants to purchase 10,191,638 shares of common stock. In addition,
on November 12, 2004, $595,000 aggregate principal amount of convertible
promissory notes of Advaxis, including accrued interest, were converted into
units on the same terms as those upon which the Units sold. The holders of these
notes received an aggregate of 2,136,441 shares of common stock and warrants to
purchase 2,136,441 shares of common stock upon conversion of these notes plus
accrued interest thereon.
On December 8, 2004, we sold to accredited investors at a second closing
of the Private Placement 8 units for an aggregate purchase price of $200,000. At
such closing, the accredited investors received an aggregate of 696,864 shares
of common stock and warrants to purchase 696,864 shares of Common Stock.
On January 4, 2005, we sold to accredited investors at a third closing of
the Private Placement 5.12 Units for an aggregate purchase price of $128,000. At
such closing, the accredited investors received an aggregate of 445,993 shares
of common stock and warrants to purchase 445,993 shares of Common Stock.
Pursuant to the terms of a investment banking agreement, dated March 19,
2004, by and between us and Sunrise Securities, Corp. ("Sunrise" or the
"Placement Agent"), we issued to the Placement Agent and its designees an
aggregate of 2,283,445 shares of common stock and warrants to purchase up to an
aggregate of 2,666,900 shares of common stock. The shares were issued as part
consideration for the services of Sunrise, as our placement agent in the Private
Placement. In addition, we paid Sunrise a total cash fee of $50,530.
On January 12, 2005, we sold to one accredited investor at a closing of a
subsequent private placement offering 44 units for an aggregate purchase price
of $1,100,000. As with the Private Placement, each Unit issued and sold in this
subsequent private placement was sold at $25,000 per unit and is comprised of
(i) 87,108 shares of our common stock, and (ii) a five-year warrant to purchase
87,108 shares of our common stock at an exercise price of $0.40 per share. At
such closing, the accredited investor received an aggregate of 3,832,752 shares
of common stock and warrants to purchase 3,832,752 shares of common stock.
30
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 over a four-year period as a royalty
after the first commercial sale of our products covered by the license. 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".
IMPACT OF INFLATION
We believe that our results of operations are not dependent upon moderate
changes in inflation rates.
31
BUSINESS
GENERAL
We are a biotechnology company utilizing multiple mechanisms of immunity
to develop what we hope to be more effective and safe cancer vaccines. We
believe that by using our licensed Listeria System to engineer a live attenuated
Listeria monocytogenes bacteria to secrete a protein sequence containing a
tumor-specific antigen, we will force the body's immune system to process and
recognize the antigen as if it were foreign, creating the immune response needed
to attack the cancer. The licensed Listeria System, developed at Penn over the
past 10 years, provides a substantial 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 first quarter of 2005. See "Business -
Research and Development Program".
STRATEGY
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:
Initiate and Complete Phase I Clinical Study of Lovaxin C. We have had
several meetings with the FDA and the Recombinant Advisory Committee of the
National Institutes of Health (the "NIH") and have designed a Phase I clinical
study, which is primarily a study of the safety of Lovaxin C. We plan to
commence this clinical study in the first quarter 2005 and complete this
clinical study by the first quarter of 2006. We anticipate that the study will
be conducted on 20 to 30 patients with advanced cervical cancer.
We have demonstrated that the therapeutic response works in concept. In
preparation for the commencement of our Phase I study of Lovaxin C, we have done
the following:
o optimized the Listeria strain to be used;
o identified and contracted with a manufacturing partner for material
manufactured in accordance with "good manufacturing practices" or
"GMP" as established by the FDA;
o identified a principal investigator for the trial;
o written a protocol; and
o 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.
32
At the conclusion of the Phase III studies, we intend to prepare and file
a BLA with the FDA. Prior to submission of the BLA, we intend to seek Fast Track
designation from the FDA, which shortens the internal FDA review process for the
BLA to six months. As we accrue clinical data demonstrating the safety, efficacy
and potency of the product in Phase I and II clinical studies we will also
explore other regulatory approval options with the FDA that could expedite the
licensure of the final vaccine.
Continue Pre-Clinical Development of Our Products, as well as Continued
Research to Expand Our Technology Platform. We intend to continue to devote a
substantial portion of our resources to the continued pre-clinical development
of our product candidates as well as the continued research to expand our
technology platform. Specifically, we intend to focus upon research relating to
combining our Listeria System with new and additional tumor antigens which, if
successful may lead to additional cancer vaccines and other therapeutic
products. These activities will require significant financial resources, as well
as areas of expertise beyond those readily available. In order to provide
additional resources and capital, we may enter into research, collaborative, or
commercial partnerships, joint ventures, or other arrangements with competitive
or complementary companies, including major international pharmaceutical
companies, or with universities, such as its relationship with Penn and UCLA.
See "Business - Partnerships and Agreements - Penn".
BACKGROUND
CANCER
Despite tremendous advances in science, cancer remains a major health
problem, and for many it continues to be the most feared of diseases. Although
age-adjusted mortality rates for all cancer fell during the 1990's, particularly
for the major cancer sites (lung, colorectal, breast, and prostate), mortality
rates are still increasing in certain sites such as liver and non-Hodgkin's
lymphoma. The American Cancer Society estimates that more than eight million
Americans were treated for cancer in 1999. According to the HCUP, in 2000,
treatment of the top five cancers resulted in $10.8 billion in hospital costs.
Cancer is the second largest cause of death in the United States, exceeded
only by heart disease. Approximately 1,268,000 new cases of cancer were expected
to be diagnosed in 2001, and 553,400 Americans were expected to die from the
disease. Since 1990, nearly 15 million new cases have been diagnosed. The NIH
estimates the overall cost for cancer in the year 2000 at $180.3 billion: $60
billion for direct medical costs, $15 billion for indirect morbidity costs (loss
of productivity due to illness) and, $105.2 billion for indirect mortality costs
(cost of lost productivity due to premature death). (Source: cancer facts &
figures 2001, American Cancer Society).
IMMUNE SYSTEM AND NORMAL ANTIGEN PROCESSING
Living creatures, including humans, are continually confronted with
potentially infectious agents. The immune system has developed multiple
mechanisms that allows the body to recognize these agents as foreign, and to
target a variety of immunological responses, including innate, antibody, and
cellular immunity, that mobilize the body's natural defenses against these
foreign agents that will eliminate them. In this regard, there are a host of
cells involved in the recognition of and response to antigens, substances,
typically proteins, that are recognized by the body's immune system and generate
an immune response. Antigens are frequently found on the outside of invading
cells like bacteria, but can also be found on the body's own cells when they are
either infected by a virus or transformed into a cancer cell.
33
The combination of the antibody (also called humoral) system and the cell
mediated system results in the immune response. Different disorders need a
different mix of responses to eliminate the problem, e.g., a streptococcal
infection is typically attacked primarily by the humoral system, and a cancer
cell is typically attacked by the cell mediated system.
The first step in recognizing a foreign antigen is antigen processing.
When cells involved in the recognition and response encounter an antigen that
they do not recognize, they ingest the antigen. The antigen is then cut into
small pieces and the pieces are combined with proteins called "MHCs" and pushed
out to the cell surface. On the cell surface, the antigen is then able to
interact with certain classes of cells created by the immune system that produce
the specialized cells needed to help in the production of antibodies and the
induction of cytotoxic lymphocytes, primarily with antibodies. This system is
called the exogenous pathway, since it is the prototypical response to an
exogenous antigen like a bacteria.
There exists another pathway, called the endogenous pathway. In this
system, when one of the body's cells begins to create unusual proteins, the
protein is processed and expelled to the surface cell and is the cytoplasm into
fragments. These are directed into the endoplasmic reticulum, where they bind
major Historocompatibility Complex proteins, and then traffic to the cell
surface. This signal then calls immune cells to come to the site of the
infection and kill the cell. The endogenous pathway is used by the body to
eliminate cells that are creating unusual proteins (e.g., cancer cells or cells
infected with a virus).
In clinical cancer, the body does not recognize the cancer cells as
foreign. Our technology forces the body to recognize tumor-associated or
tumor-specific antigens as foreign, thus creating the immune response needed to
attack the cancer. It does this by combining elements of the endogenous and
exogenous pathways utilizing a number of biologic characteristics of the
Listeria bacteria.
MECHANISM OF ACTION
Listeria is a bacteria well known to medical science because it can cause
an infection in humans. When Listeria enters the body, it is seen as foreign by
the antigen processing cells and ingested into cellular compartments called
lysosomes, whose destructive enzymes kill most of the bacteria. A certain
percentage of these bacteria, however, are able to break out of the lysosomes
and enter into the cytoplasm of the cell, where they are relatively safe from
the immune system. The bacteria multiply in the cell, and the Listeria is able
to force the cell to move the bacteria to its cell surface so it can push into
neighboring cells and spread. In this way, Listeria can cause various clinical
conditions, including sepsis, meningitis and placental infections in pregnant
women.
Listeria produces a substance known as listeriolysin ("LLO"), a protein
that cuts a hole in the membrane of the lysosome and allows the bacteria to
escape into the relatively safe cytoplasm. Once in the cytoplasm, however, LLO
is also capable of cutting a hole in the cell membrane. This would destroy the
cell, and spill the bacteria back out into the space between the cells, where it
would be exposed to more immune cell attacks and destruction. To prevent this,
LLO has a sequence of approximately 30 amino acids attached to it known as the
PEST1 sequence. This PEST sequence is used by normal cells to force the rapid
turnover of proteins that need only have a short life in the cytoplasm. Listeria
has evolved the ability to utilize this PEST sequence itself as a routing tag
that tells the cells to grab the LLO in the cytoplasm and pull it into the
endoplasmic reticulum, where it is processed just like a protein antigen in the
endogenous pathway. The benefit for the Listeria is that the LLO is neutralized
and the bacteria can continue to prosper inside the cell; the benefit provided
by our technology is that we now have a path into the antigen processing system
that causes an immune response of the tumor-specific antigen.
34
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 neck cancers Pre-clinincal; Phase I study
in cervical cancer anticipated
to commence in the first half
of 2005*
Lovaxin B Breast cancer and melanoma Pre-clinical; Phase I study
anticipated to commence in
2006
Lovaxin NY Ovarian melanoma and lung cancer Pre-clinical; Phase I study
anticipated to commence in
2006
Lovaxin W Wilms tumor and leukemia Pre-clinical; Phase I study
anticipated to commence in
2006
Lovaxin T Cancer through control of telomerase Pre-clinical
Lovaxin H Prophylactic vaccine for HIV (AIDS) Pre-clinical
* Possible delays of up to three months based on availability of materials
and toxins.
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, royalty payments based on net sales and
percentages of sublicense fees. Furthermore, upon the achievement of the first
sale of a product in certain fields, Penn shall be entitled to certain milestone
payments. 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.
35
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 new consulting agreement with Dr.
Paterson in January 2005 which expires on January 31, 2006 with automatic
renewals for up to six aditional preiods 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 additonal $3
million in equity capital, Dr. Paterson shall receive $5,000 per month;
provided, further, that upon the closing of an additonal $6 million in equity
capital, Dr. Paterson shall receive $7,000 per month; and provided, further,
that upon the closing of an additional of $9 million in equity capital, Dr.
Pateron shall receive $9,000 per month. In addition, subject to the adoption of
a new stock option plan by our stockholders, Dr. Paterson shall receive options
to purchase 400,000 shares of common stock at an exercise price of $0.28 per
share with 40,000 fully vested when granted and the remaining 360,000 options
vesting equally over 48 months; provided that Dr. Paterson remains a consultant
over the four year period.
Sponsored Research Agreement. We entered into a sponsored research
agreement which terminates on June 30, 2005 with Penn and Dr. Paterson and have
paid approximately $199,000 to sponsor her continued research in this area. We
believe that Dr. Paterson's continuing research will serve as a source of
ongoing findings and data that both supports and strengthen the existing
patents. Her work will expand the claims of the patent portfolio (potentially
including adding claims for new tumor specific antigens, the utilization of new
vectors to deliver antigens, and applying the technology to new disease
conditions) and create the infrastructure for the future filing of new patents.
Scientific Advisory Board. Dr. Paterson is also the chairman of our
Scientific Advisory Board and one of our stockholders.
DR. DAVID FILER
We have entered a consulting agreement with Dr. David Filer, a biotech
consultant. The Agreement commenced on January 7, 2005 and has a six month term,
which may be extended upon the agreement of both parties. Dr. Filer shall
provide to us for three days per month during the term of the agreement
assistance on its development efforts, reviewing our scientific technical and
business data and materials and introducing us to industry analysts,
institutional investors collaborators and strategic partners. In consideration
for provided the consulting services we will pay $2,000 per month in cash. In
addition, subject to the adoption of a new stock option plan by our
stockholders, Dr. Filer will receive 40,000 options to purchase shares of common
stock, vesting monthly over 12 months provided that the agreement is not
terminated.
36
ACCESSBIO, INC (JOY CAVAGNARO, PH.D.)
We entered into an agreement with Joy Cavagnaro, Ph.D., to advise us on an
on-going basis in the preparation of our science based regulatory strategy and
submissions with an emphasis on the design and safety of pre-clinical safety
evaluation programs to support initiation of clinical trials and integration of
pre-clinical and clinical research programs to support uninterrupted clinical
development, interpretation of FDA guidelines and development of global
registration strategies. A former expert toxicologist with the FDA, Dr.
Cavagnaro has a distinguished reputation within the industry and the agency.
Pursuant to the terms an agreement between Dr. Cavagnaro and us, in exchange for
its services, AccessBio is entitled to receive cash and accrued compensation
totalling $3,000 per month, as well as options to purchase our common stock. The
agreement was to terminate on September 15, 2004 but has been extended until
March 15, 2005.
DNA BRIDGES, INC. ("DNA")
We have entered into an agreement with DNA Bridges, Inc. to develop and
manage our grant writing strategy and application program. Advaxis will pay DNA
according to a fee structure based on achievement of milestones. In addition,
DNA has received 16,200 options to purchase shares of our common stock. Either
party may terminate this agreement upon 30 days' prior notice.
Eileen Gorman, Ph.D., a principal and owner of DNA, has extensive
experience in accessing public financing opportunites, the national SBIR and
related NIH/NCI programs with approximately 30 years of industry experience.
UCLA
We have entereed into a nonexclusive license and bailment agreement with
the Regents of the University of California ("UCLA") to commercially develop
products using the XFL7 strain of Listeria monoctyogenes in humans and animals.
The agreement is effective for a period of 15 years and renewable by mutual
consent of the parties. Advaxis is to pay UCLA an initial licensee fee and
annual maintainence fees for use of the Listeria. We may not sell products using
the Listeria other than agreed upon products or sublicense the rights granted
under the license agreement without the prior written consent of UCLA.
DAVID CARPI
We have entered into a consulting and placement agent agreement with David
Carpi, whereby Mr. Carpi will assist us in the prepartation and refinement of
our marketing summary and presentation materials and introduce us to
pharmaceutical and biotechnology companies which may be interested in strategic
partnerships. Mr. Carpi will receive compensation payable in cash and options
for our common stock upon completion of a transaction with a strategic partner
introduced by Mr. Carpi. The agreement was to terminate on December 31, 2004 but
the parties are in the process of renewing the agreement and intend to extend
the agreement until June 2005.
We have entered into a government funding fee agreement with Mr. Carpi,
whereby Mr. Carpi will assist us in obtaining government funding for clinicial
studies for certain of our products. Mr. Carpi will receive options for our
common stock if he is successful in obtaining government funding for us. The
agreement expires on April 5, 2005 and thereafter renews on a monthly basis
unless terminated in writing by either party.
37
COBRA BIO MANUFACTURING
In July 2003, we 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. The agreement is to expire upon the delivery of the GMP material for
the Phase I trial.
PHARM-OLAM INTERNATIONAL LTD.
In January 2005, we entered a consulting agreement with Pharm-Olam
International Ltd. ("POI"), a Texas limited partnership specializing in pre
clinical and toxicology programs. Pursuant to the agreement, POI shall execute
and manage our toxicology studies, with certain third parties. In consideration
for providing the consulting services, POI will receive $272,163.
LVEP MANAGEMENT, LLC
We entered into a consulting agreement with LVEP Management, LLC ("LVEP")
which is owned by Scott Flamm, one of our directors and a principal shareholder.
LVEP employs Mr. Flamm and Mr. Roni Appel, our Chief Financial Officer, director
and a principal shareholder. Pursuant to the consulting agreement, dated as of
January 19, 2005, LVEP is to provide various financial and strategic consulting
services to us. The initial term of the consulting agreement is until September
30, 2005 and thereafter the term of the consulting agreement shall be
automatically extended for six month periods unless we notify LVEP at least 60
days prior to the end of term of our intent not to extend. In consideration for
providing the consulting services, LVEP received an initial payment of $4,500
and shall receive $7,000 per month during the term of the consulting agreement
plus reimbursement of approved expenses in connection with providing the
consulting services. Additionally, LVEP shall receive, 3,500 restricted shares
of common stock per month.
STRATEGIC GROWTH INTERNATIONAL, INC.
We entered into an agreement with Strategic Growth International,
Inc.("SGI") whereby SGI will serve as an investor relations consultant. The term
of this agreement is for a period of 18 months commencing on the date of the
effectiveness of this registration statement. In consideration for performing
its services, SGI is to be paid $7,000 per month, provided, that upon the
effective date of this prospectus, SGI is to receive $8,000 per month and $7,000
of common stock with piggyback rights. In addition, SGI is to be issued a
warrant to purchase 240,000 shares of common stock, exercisable for 5 years,
with cashless exercise and piggyback rights. Furthermore, SGI is to be paid a
finder's fee for any financing by us, from an approved institution introduced to
us by SGI.
38
PATENTS AND LICENSES
Dr. Paterson and Penn have invested significant resources and time in
developing a broad base of intellectual property around the cancer vaccine
platform technology to which we have a 20-year exclusive worldwide license and a
right to grant sublicenses to pursuant to our license agreement with Penn. Penn
currently has eight issued and 12 pending patents in the United States and other
countries including Japan, Canada, Israel, Australia, and the European Union,
through the Patent Cooperation Treaty (PCT) system pursuant to which we have an
exclusive license to exploit the patents. We believe that these patents will
allow us to take a strong lead in the field of Listeria-based therapy.
The Penn patent portfolio is currently comprised of the following:
UNITED STATES
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."
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."
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.
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.
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.
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.
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. CIP of 09/537,642
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.
39
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.
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 and U.S. Patent Application No. 09/537,642. These patent rights are
included in the patent rights licensed by Advaxis from Penn. It is contemplated
by Glaxo, Smith, Klein, Inc. ("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.
40
Pursuant to our license with Penn, we have a three year option to license
from Penn any new future invention conceived by either Dr. Yvonne Paterson or by
Dr. Fred Frankel in the vaccine area. We intend to expand our intellectual
property base by exercising this option and gaining access to such future
inventions. Further, our consulting agreement with Dr. Paterson provides, among
other things, that, to the extent that Dr. Paterson's consulting work results in
new inventions, such inventions will be assigned to Penn, and we will have
access to those inventions under license agreements to be negotiated.
Our approach to the our intellectual property portfolio is to aggressively
create significant offensive and defensive patent protection for every product
and technology platform that we develop. We work closely with our patent counsel
to maintain a coherent and aggressive strategic approach to building our patent
portfolio with an emphasis in the field of cancer vaccines.
We have become aware of a public company, Cerus Corporation, which has
issued a press release claiming to have a proprietary Listeria-based approach to
a cancer vaccine. We believe that through our exclusive license with Penn of
U.S. Patent Nos. 5,830,702, 6,051,237 and 6,565,852, we have the earliest known
and dominant patent position for the use of recombinant Listeria monocytogenes
expressing proteins or tumor antigens as a vaccine for the treatment of
infectious diseases and tumors. Based on searches of publicly available
databases, we do not believe that Cerus or The University of California Berkeley
(which is where Cerus' consulting scientist works) or any other third party owns
any published Listeria patents or has any issued patent claims that might
materially negatively affect our freedom to operate our business in the field of
Listeria monocytogenes. For more information about Cerus Corporation and its
claims with respect to listeria-based technology, you should visit their web
site at www.cerus.com or to view its publicly filed documents, www.sec.gov.
TRADEMARKS
We have two trademark applications pending in the United States relating
to the trademark of "Advaxis" and ten trademark applications pending relating to
the trademark of "Lovaxin" in the United States and internationally. We work
closely with our trademark counsel to build a brandname for ourself and
potential products.
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:
o who must be recruited as qualified participants;
41
o how often to administer the drug;
o what tests to perform on the participants; and
o 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.
42
The drug approval process is time-consuming, involves substantial
expenditures of resources, and depends upon a number of factors, including the
severity of the illness in question, the availability of alternative treatments,
and the risks and benefits demonstrated in the clinical trials.
On November 21, 1997, former President Clinton signed into law the Food
and Drug Administration Modernization Act. That act codified the FDA's policy of
granting "Fast Track" approval for cancer therapies and other therapies intended
to treat serious or life threatening diseases and that demonstrate the potential
to address unmet medical needs. The Fast Track program emphasizes close, early
communications between FDA and the sponsor to improve the efficiency of
preclinical and clinical development, and to reach agreement on the design of
the major clinical efficacy studies that will be needed to support approval.
Under the Fast Track program, a sponsor also has the option to submit and
receive review of parts of the NDA or BLA on a rolling schedule approved by FDA,
which expedites the review process.
The FDA's Guidelines for Industry Fast Track Development Programs require
that a clinical development program must continue to meet the criteria for Fast
Track designation for an application to be reviewed under the Fast Track
Program. Previously, the FDA approved cancer therapies primarily based on
patient survival rates or data on improved quality of life. While the FDA could
consider evidence of partial tumor shrinkage, which is often part of the data
relied on for approval, such information alone was usually insufficient to
warrant approval of a cancer therapy, except in limited situations. Under the
FDA's new policy, which became effective on February 19, 1998, Fast Track
designation ordinarily allows a product to be considered for accelerated
approval through the use of surrogate endpoints to demonstrate effectiveness. As
a result of these provisions, the FDA has broadened authority to consider
evidence of partial tumor shrinkage or other surrogate endpoints of clinical
benefit for approval. This new policy is intended to facilitate the study of
cancer therapies and shorten the total time for marketing approvals. Under
accelerated approval, the manufacturer must continue with the clinical testing
of the product after marketing approval to validate that the surrogate endpoint
did predict meaningful clinical benefit. To the extent applicable we intend to
take advantage of the Fast Track programs to obtain accelarated 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.
43
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, Avi BioPharma,
Bachria, Biomira, Corixa, Dendreon, Epimmune, Genzyme Molecular Oncology,
Progenics Pharmaceuticals, Vical, CancerVax, Genitope and Xcyte, 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 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. 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.
44
Dr. Yvonne Paterson. For a description of our relationship with Dr.
Paterson, please see "Business - Partnerships and Agreements".
Carl June, M.D. Dr. June is currently Director of Translational Research
at the Abramson Cancer Center at Penn, and is an Investigator of the Abramson
Family Cancer Research Institute. He is a graduate of the Naval Academy in
Annapolis, and Baylor College of Medicine in Houston. He had graduate training
in immunology and malaria with Dr. Paul-Henri Lambert at the World Health
Organization, Geneva, Switzerland from 1978 to 1979, and post-doctoral training
in transplantation biology with Dr. E. Donnell Thomas at the Fred Hutchinson
Cancer Research Center in Seattle from 1983 to 1986. He is board certified in
Internal Medicine and Medical Oncology. Dr. June founded the Immune Cell Biology
Program and was head of the Department of Immunology at the Naval Medical
Research Institute from 1990 to 1995. Dr. June rose to Professor in the
Departments of Medicine and Cell and Molecular Biology at the Uniformed Services
University for the Health Sciences in Bethesda, Maryland before assuming his
current positions as of February 1, 1999. Dr. June maintains a research
laboratory that studies various mechanisms of lymphocyte activation that relate
to immune tolerance and adoptive immunotherapy.
Pramod Srivastava, Ph.D. Dr. Srivastava is Professor of Immunology at the
University of Connecticut School of Medicine, where he is also Director of the
Center for Immunotherapy of Cancer and Infectious Diseases. He holds the
Physicians Health Services Chair in Cancer Immunology at the University.
Professor Srivastava is the Scientific Founder of Antigenics, Inc. He serves on
the Scientific Advisory Council of the Cancer Research Institute, New York, and
was a member of the Experimental Immunology Study Section of the National
Institutes of Health of the U.S. Government (1994 to 1999). He serves presently
on the Board of Directors of two privately held companies: Ikonisys (New Haven,
Connecticut) and CambriaTech (Lugano, Switzerland). In 1997, he was inducted
into the Roll of Honor of the International Union Against Cancer and was listed
in Who's Who in Science and Engineering. He is among the 20 founding members of
the Academy of Cancer Immunology, New York. Dr. Srivastava obtained his
bachelor's degree in biology and chemistry and a master's degree in botany
(paleontology) from the University of Allahabad, India. He then studied yeast
genetics at Osaka University, Japan. He completed his Ph.D. in biochemistry at
the Center for Cellular and Molecular Biology, Hyderabad, India, where he began
his work on tumor immunity, including identification of the first proteins that
can mediate tumor rejection. He trained at Yale University and Sloan-Kettering
Institute for Cancer Research. Dr. Srivastava has held faculty positions at the
Mount Sinai School of Medicine and Fordham University in New York City.
Bennett Lorber, M.D. Dr. Lorver attended Swarthmore College where he
studied zoology and art history. He graduated from the University of
Pennsylvania School of Medicine and did his residency in internal medicine and
fellowship in infectious diseases at Temple University, following which he
joined the Temple faculty. At Temple he rose through the ranks to become
Professor of Medicine and, in 1988, was named the first recipient of the Thomas
Durant Chair in Medicine. He is also a Professor of Microbiology and Immunology
and serves as the Chief of the Section of Infectious Diseases. He is a Fellow of
the American College of Physicians, a Fellow of the Infectious Diseases Society
of America, and a Fellow of the College of Physicians of Philadelphia where he
serves as College Secretary and as a member of the Board of Trustees. Dr.
Lorber's major interest in infectious diseases is in human listeriosis, an area
in which he is regarded as an international authority. He has also been
interested in the impact of societal changes on infectious disease patterns as
well the relationship between infectious agents and chronic illness, and he has
authored papers exploring these associations. He has been repeatedly honored for
his teaching; among his honors are 10 golden apples, the Temple University Great
Teacher Award, the Clinical Practice Award from the Pennsylvania College of
Internal Medicine, and the Bristol Award from the Infectious Diseases Society of
America. On two occasions the graduating medical school class dedicated their
yearbook to Dr. Lorber. In 1996 he was the recipient of an honorary Doctor of
Science degree from Swarthmore College. Dr. Lorber is also a professional
painter and an accomplished guitarist.
45
EMPLOYEES
As of January 31, 2005, we have one employee, J. Todd Derbin who is full
time. Several other senior employees have been identified and are anticipated to
join Advaxis in the near future.
We anticipate increasing the number of employees in the research and
development department significantly during the next two years, as well as
increasing the number of employees in the general and administrative and
business development department.
FACILITIES
Our corporate offices are currently located at the corporate center at 212
Carnegie Center, Suite 206, Princeton, New Jersey 08540. We intend to enter into
a lease on or about April 1, 2005, which will continue on a monthly basis, at
the Princeton Corporate Plaza, a biotech industrial park, located at 7 Deer Park
Drive, Monmouth Junction, NJ 08852 which will include the research and
development offices and executive offices. We believe that our facility will be
sufficient for our purposes for the foreseeable future. Our monthly payment on
this facility will be approximately $2,500 per month. In the event that our
facility should, for any reason, become unavailable, we believe that alternative
facilities are available at competitive rates.
LITIGATION
We have not been a party to any material litigation or legal proceeding
relating to us or our technology. We are not aware of any 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.
46
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS, AND KEY EMPLOYEES
The following are our executive officers and directors and their
respective ages and positions as of January 1, 2005:
NAME AGE POSITION
J. Todd Derbin(3) 52 President, Chief Executive Officer, and Director
Dr. James Patton(1) 47 Chairman of the Board of Directors
Roni A. Appel(3) 38 Chief Financial Officer, Secretary and Director
Dr. Thomas McKearn(2) 55 Director
Dr. Steven Roth 62 Director
Scott Flamm(1) (2) 50 Director
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating and Corporate Governance Committee.
J. Todd Derbin. Mr. Derbin has served as our President, Chief Executive
Officer and a director since November 2004. Prior thereto he served as the
President, Chief Executive Officer and a director of Advaxis since November
2002. From 1996 until June, 2001, Mr. Derbin was the founder and Chairman of the
Board of Directors, President, and Chief Executive Officer of Micrus
Corporation, a market leader in the design and development of highly
differentiated and proprietary interventional neuroradiology devices and
delivery systems. From 1992 until 1996, he served as Director of Corporate
Business Development, Commercial Director - Cardiovascular and Director of
Strategic Planning, Mergers & Share Exchanges with Biocompatibles International,
plc, a UK biotechnology/biomedical Company. Prior to this, Mr. Derbin served as
Chief Executive Officer of Syncare Corporation, developers of synthetic wound
care products and drug delivery systems. His 20 year tenure in life sciences
includes senior management, strategic and operational positions with CollaTec,
Inc., a subsidiary of Marion Merrell Dow, and American Medical Products
Corporation's domestic and international divisions. He began his career at
Procter & Gamble and American Hospital Supply Corporation (Baxter) where he held
marketing positions. Mr. Derbin is an alumnus of Wilkes College and the Wharton
School of the University of Pennsylvania.
Dr. James Patton. Dr. Patton has served as Chairman of our Board and
Directors since November 2004. Prior thereto, Dr. Patton served as Chairman of
Advaxis' Board of Directors since February 2002 and as Advaxis' Chief Executive
Officer from February 2002 to November 2002. Additionally, since February 1999,
Dr. Patton has served as the President of Comprehensive Oncology Care, LLC,
which owns and operates a cancer treatment facility in Exton, Pennsylvania and
as Vice President of Millennium Oncology Management, Inc., which provides
technical services for oncology care to four sites. From February 1999 to
September 2003, Dr. Patton served as a consultant to LibertyView Equity Partners
SBIC, LP, a venture capital fund based in Jersey City, New Jersey
("LibertyView"). From July 2000 to December 2002, Dr. Patton served as a
director of Pinpoint Data Corp. From February 2000 to November 2000, Dr. Patton
served as a dirctor of Healthware Solutions. From June 2000 to June 2003, Dr.
Patton served as a director of LifeStar Response. He earned his B.S. from the
University of Michigan, his Medical Doctorate from Medical College of
Pennsylvania, and his M.B.A. from the University of Pennsylvania's Wharton
School. Dr. Patton was also a Robert Wood Johnson Foundation Clinical Scholar.
He has published papers regarding scientific research in human genetics,
diagnostic test performance and medical economic analysis.
47
Roni A. Appel. Mr. Appel has served as a member of our Board of Directors
and as our Secretary and Chief Financial Officer since November 2004. Prior
thereto he has served as Advaxis' Secretary and Chief Finanical Officer since it
was formed. Since January 1999, Mr. Appel has been a partner and managing
director in LV Equity Partners (fka LibertyView Equity Partners). From 1998
until 1999, he was a founder and the director of business development at
Americana Financial Services, Inc. From 1994 to 1998, he was an attorney and
completed his MBA at Columbia University.
Dr. Thomas McKearn. Dr. McKearn has served as a member of our Board of
Directors since November 2004. Prior thereto he served as an Advaxis director
since July 2002. He brings to Advaxis a 20 plus year experience in the
translation of biotechnology science into innovative products that address unmet
medical needs in oncology. First as one of the founders of Cytogen Corporation,
then as an Executive Director of Strategic Science and Medicine at Bristol-Myers
Squibb and now as the VP. Medical Affairs at GPC-Biotech, McKearn has always
worked at bringing the most innovative scientific findings into the clinic and
through the FDA regulatory process for the ultimate benefit of patients who need
better ways to cope with their afflictions. Prior to entering the then-nascent
biotechnology industry in 1981, McKearn did his medical, graduate and
post-graduate training at the University of Chicago and served on the faculty of
the Medical School at the University of Pennsylvania.
Dr. Steven Roth. Dr. Roth has served as a member of our Board of Directors
since November, 2004. Prior thereto he had served as an Advaxis director since
November 2002. He is a co-founder of Neose Technologies, a publicly traded
biotechnology Company, since 1990, and has served as its chief executive and
board chairman since 1994. Between 1980 and 1992 he was a professor of biology
at University of Pennsylvania and was appointed department chairman in 1982,
serving in that role until 1987. At the University of Pennsylvania, Dr. Roth
helped form its Plant Science Institute. Between 1992 and 1994 he was the chief
scientific officer and VP, R&D, of Neose Technologies. From 1970 through 1980,
Dr. Roth was assistant and associate professor of biology at The Johns Hopkins
University. His scholarly interests centered on the roles of complex
carbohydrates in embryonic morphogenesis and in malignancy, topics on which he
authored or co-authored nearly 100 articles and one book. He has received
several research awards and prizes, and is an inventor on 18 patents and six
patent applications. Dr. Roth received an A.B. degree from Johns Hopkins in
1964, a Ph.D. from Case Western Reserve University in 1968, and did postdoctoral
work in carbohydrate chemistry at Hopkins from 1968-1970. Currently, Dr. Roth is
a member of the board of directors of the Philadelphia Greenhouse Corporation, a
member of the board of overseers of the School of Arts and Sciences of the
University of Pennsylvania, a member of the board of visitors of the School of
Arts and Sciences of Case Western Reserve University, a member of the scientific
advisory boards of Quaker BioVentures and Birchmere Ventures, a member of the
editorial board of The Quarterly Review of Biology, a director of Neose
Technologies and a director of Chiral Quest.
Scott Flamm. Mr. Flamm has served as a member of our Board of Directors
since November, 2004. Mr. Flamm is one of Advaxis' founders and has served as an
Advaxis director since its inception. Since June 1998, Mr. Flamm has been the
president and general partner of LV Equity Partners (fka Liberty View Equity
Partners). Among his prior positions are Senior Managing Director of Trilon
Dominion Partners, a $100 million venture fund, and Executive Vice President of
Charterhouse Environment Capital Group, a subsidiary of the private equity
investment firm Charterhouse Group International. From 1988 until January 1993,
he was Executive Vice President, Chief Operating Officer and a Director of
Catalyst Energy, a $2 billion independent power producer. He received his
masters in public health from Yale University.
48
BOARD OF DIRECTORS AND OFFICERS
Messrs. McKearn and Roth have each received an option package of 82,763
options to purchase shares of our common stock.
Each director is elected for a period of one year at our annual meeting of
stockholders and serves until the next such meeting and until his or her
successor is duly elected and qualified. Officers are elected by, and serve at
the discretion of, our board of directors. Our directors do not presently
receive any compensation for their services as directors. The board of directors
may also appoint additional directors up to the maximum number permitted under
our by-laws. A director so chosen or appointed will hold office until the next
annual meeting of stockholders.
Each of our executive officers serves at the discretion of its board of
directors and holds office until his or her successor is elected or until his or
her earlier resignation or removal in accordance with our articles of
incorporation and by-laws.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 2003, our board of directors held four
meetings and took action by written consent on four occasions. During the year
ended December 31, 2004, our board of directors held three meetings and took
action by written consent on 7 occasions.
AUDIT COMMITTEE
Effective in November 2004, we established the audit committee of the
board of directors which consists of Messrs. Flamm and Patton.
The audit committee is responsible for the following:
o reviewing the results of the audit engagement with the independent
registered public accounting firm;
o identifying irregularities in the management of our business in
consultation with our independent accountants, and suggest an
appropriate course of action;
o reviewing the adequacy, scope, and results of the internal
accounting controls and procedures;
o 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;
o reviewing the auditors' fees; and
o 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 initially consists of Messrs. Flamm and McKearn. The
compensation committee determines the salaries and incentive compensation of our
officers and provides recommendations for the salaries and incentive
compensation of our other employees and consultants.
The compensation of our executive officers is determined by the
compensation committee of our board of directors, subject to applicable
employment agreements. Our compensation programs will enable us to attract,
motivate, reward and retain the management talent required to achieve corporate
objectives and thereby increase stockholder value. It is our policy to provide
incentives to our senior management to achieve both short-term and long-term
objectives and to reward exceptional performance and contributions to the
development of our business. To attain these objectives, our executive
compensation program includes a competitive base salary, cash incentive bonuses
and stock-based compensation.
49
Stock options have been granted to our senior executive officer by the
board of directors or the compensation committee under the 2004 Stock Option
Plan. We believe that stock options provide an incentive that focuses the
executive's attention on managing us from the perspective of an owner with an
equity stake in the business. Options are awarded with an exercise price equal
to the market value of common stock on the date of grant, have a maximum term of
ten years and generally become exercisable, in whole or in part, starting one
year from the date of grant. Among our executive officers, the number of shares
subject to options granted to each individual generally depends upon the level
of that officer's responsibility. The largest grants are awarded to the most
senior officers who, in our view, have the greatest potential impact on our
profitability and growth. Previous grants of stock options are reviewed but are
not considered the most important factor in determining the size of any
executive's stock option award in a particular year.
From time to time, the compensation committee may utilize the services of
independent consultants to perform analyses and to make recommendations to the
committee relative to executive compensation matters. No compensation consultant
has so far been retained.
RELATIONSHIP OF COMPENSATION TO PERFORMANCE AND COMPENSATION OF OUR EXECUTIVE
OFFICERS
The compensation committee will annually establish, subject to the
approval of the board of directors and any applicable employment agreements, the
salaries that will be paid to our executive officers during the coming year. In
setting salaries, the compensation committee takes into account several factors,
including competitive compensation data, the extent to which an individual may
participate in the stock plans maintained by us, and qualitative factors bearing
on an individual's experience, responsibilities, management and leadership
abilities and job performance.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Effective on November 2004, we established a nominating and corporate
governance committee of our board of directors which initially consists of
Messers. Derbin and Appel. The functions of the nominating and corporate
governance include the following:
o identifying and recommending to the board of directors individuals
qualified to serve as directors of the Company and on the committees
of the board;
o advising the board with respect to matters of board composition,
procedures and committees;
o developing and recommending to the board a set of corporate
governance principles applicable to us and overseeing corporate
governance matters generally; and
o overseeing the annual evaluation of the board and our management.
The nominating and corporate governance committee shall be governed by a
charter, which we intend to adopt.
CODE OF ETHICS
We have adopted a code of ethics that applies to our officers, employees
and directors, including our principal executive officers, principal financial
officers and principal accounting officers. The code of ethics sets forth
written standards that are designated to deter wrongdoing and to promote:
50
o Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
o 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;
o Compliance with applicable governmental laws, rules and regulations;
o The prompt internal reporting of violations of the code to an
appropriate person or persons identified in our code of ethics; and
o Accountability for adherence to our code of ethics.
A copy of our code of ethics has been filed with the SEC as an exhibit to our
Form 8K dated November 12, 2004.
COMPENSATION OF OFFICERS AND DIRECTORS
The aggregate compensation paid to our directors and executive officers,
including stock based compensation, for the year ended December 31, 2003 and
December 31, 2004 was approximately $183,692 and $238,795, respectively. This
amount includes $0 set aside or accrued to provide pension, severance,
retirement, or similar benefits or expenses, but does not include business
travel, relocation, professional and business association dues and expenses
reimbursed to office holders and other benefits commonly reimbursed or paid by
similarly situated companies. None of our directors has so far received any
compensation for his or her services as a director other than stock options and
reimbursement of expenses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no interlocking relationships between us and other entities
that might affect the determination of the compensation of its directors and
executive officers.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned during the years
ended December 31, 2003 and 2004 by our former and current chief executive
officer:
SUMMARY COMPENSATION TABLE FOR LAST FISCAL YEAR
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS
- --------------------------- ---- --------- -------- -------
.. Todd Derbin 2004 $ 168,270 $ 45,000 --
President, Chief Executive Officer, 2003 $ 150,000 $ 60,000 1,172,727
and Director
Dr. James Patton 2004 $ --* -- 29,583
Chairman of the Board of Directors 2003 $ --* -- 33,810
*Dr. Patton was paid consulting fees by Advaxis of $18,000 in 2003 and $15,750
in 2004.
51
OPTION GRANTS IN RECENT FISCAL YEARS
The following table sets forth each grant of stock options during the
years ended December 31, 2003 and 2004 to our current and former Chief Executive
Officer under a predecessor stock option plan. The assumed 5% and 10% rates of
stock price appreciation are provided in accordance with rules of the SEC and do
not represent our estimate or projection of our common stock price. Actual
gains, if any, on stock option exercises are dependent on the future performance
of our common stock, overall market conditions and the option holders' continued
employment through the vesting period. Unless the market price of our common
stock appreciates over the option term, no value will be realized from the
option grants made to these executive officers. The potential realizable values
shown in the table are calculated by assuming that the estimated fair market
value of our common stock on the date of grant increases by 5% and 10%,
respectively, during each year of the option term.
The outstanding stock options described above became options for our
common stock upon the Share Exchange.
-----------------------------------------------------
INDIVIDUAL GRANTS
-----------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM($)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------------
NAME YEAR GRANTED FISCAL YEAR) PRICE DATE 5% 10%
---- ---- ------- ------------ ----- ---- -- ---
J. Todd Derbin(1) 2004 -- -- -- -- -- --
President, Chief 2003 -- -- -- -- -- --
Executive Officer, and
Director
Dr. James Patton 2004 29,583 46.6% $ 0.35 11/1/2012 $ 2,190 $ 7,845
Chairman of the Board of 2003 33,810 53.3% $ 0.35 11/1/2012 $ 2,503 $ 8,966
Directors
- ----------
(1) The initial option grant was in the year 2002.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the options
exercised by Advaxis' current and former Chief Executive Officer in the years
ended December 31, 2003 and 2004 and the year-end number and value of
unexercised options with respect to each of these executive officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(2) AT FISCAL YEAR-END($)(3)
--------------------- ------------------------
SHARES
ACQUIRED VALUE
NAME YEAR ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---- ----------- ----------- ------------- ----------- -------------
J. Todd Derbin 2004 0 0 586,382 586,382 51,015 51,015
President, Chief 2003 0 0 293,191 879,575 0 0
Executive Officer,
and Director
Dr. James Patton 2004 0 0 29,583 0 0 0
Chairman of the 2003 0 0 33,810 0 0 0
Board of Directors
52
- ----------
(1) Based on the fair market value of our common stock on the date of
exercise, less the exercise price payable for such shares.
(2) Certain of the options are immediately exercisable for all the option
shares as of the date of grant but any shares purchased are subject to
repurchase by us at the original exercise price paid per share if the
optionee ceases service with us before vesting in such shares.
(3) Based on the fair market value of our common stock at fiscal year end of
$0.20 per share, determined by the board to be equal to our Private
Placement price per share less the exercise price payable for such shares.
2004 STOCK OPTION PLAN
In November 2004, our board of directors and stockholders adopted the 2004
Stock Option Plan ("Plan"). The Plan provides for the grant of options to
purchase up to 2,381,525 shares of our common stock to employees, officers,
directors and consultants. Options may be either "incentive stock options" or
non-qualified options under the Federal tax laws. Incentive stock options may be
granted only to our employees, while non-qualified options may be issued to
non-employee directors, consultants and others, as well as to our employees.
The Plan is administered by "disinterested members" of the board of
directors or the compensation committee, who determine, among other things, the
individuals who shall receive options, the time period during which the options
may be partially or fully exercised, the number of shares of common stock
issuable upon the exercise of each option and the option exercise price.
Subject to a number of exceptions, the exercise price per share of common
stock subject to an incentive option may not be less than the fair market value
per share of common stock on the date the option is granted. The per share
exercise price of the common stock subject to a non-qualified option may be
established by the board of directors, but shall not, however, be less than 85%
of the fair market value per share of common stock on the date the option is
granted. The aggregate fair market value of common stock for which any person
may be granted incentive stock options which first become exercisable in any
calendar year may not exceed $100,000 on the date of grant.
No stock option may be transferred by an optionee other than by will or
the laws of descent and distribution, and, during the lifetime of an optionee,
the option will be exercisable only by the optionee. In the event of termination
of employment or engagement other than by death or disability, the optionee will
have no more than three months after such termination during which the optionee
shall be entitled to exercise the option, unless otherwise determined by the
board of directors. Upon termination of employment or engagement of an optionee
by reason of death or permanent and total disability, the optionee's options
remain exercisable for one year to the extent the options were exercisable on
the date of such termination. No similar limitation applies to non-qualified
options.
We must grant options under the Plan within ten years from the effective
date of the Plan. The effective date of the Plan was November 12, 2004. Subject
to a number of exceptions, holders of incentive stock options granted under the
Plan cannot exercise these options more than ten years from the date of grant.
Options granted under the Plan generally provide for the payment of the exercise
price in cash and may provide for the payment of the exercise price by delivery
to us of shares of common stock already owned by the optionee having a fair
market value equal to the exercise price of the options being exercised, or by a
combination of these methods. Therefore, if it is provided in an optionee's
options, the optionee may be able to tender shares of common stock to purchase
additional shares of common stock and may theoretically exercise all of his
stock options with no additional investment other than the purchase of his
original shares.
53
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by us become available again for issuance under the Plan.
EMPLOYMENT AGREEMENTS
We have entered into an amended and restated employment agreement with J.
Todd Derbin, dated December 20, 2004 pursuant to which Mr. Derbin is employed as
our President and Chief Executive Officer. The effective date of the agreement
is January 1, 2005. The term of the agreement is for one year and will be
further renewed if mutually agreed to by Mr. Derbin and us. Mr. Derbin's annual
base salary shall be $200,000; provided that it shall be increased to $225,000
or $250,000 based upon certain milestones as set forth in the agreement. In
addition, Mr. Derbin shall be entitled to bonuses in the form of equity and/or
cash as set forth in the agreement and he shall be entitled to receive
non-qualified stock options to purchase our common stock, the amount of which
when added to his existing 1,172,767 options shall equal 5% of the our total
issued and outstanding common stock, as of March 31, 2005. One-half of the
options shall vest on the grant date and one-half of the options shall vest
monthly over four years at a rate of 1/48th per month. The grant of the options
is subject to us adopting a a new stock option plan, which is subject to
stockholder approval.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers and persons who own more than ten percent
of a registered class of our equity securities (collectively, "Reporting
Persons") to file with the SEC initial reports of ownership and reports of
changes in ownership of our common stock and our other equity securities.
Reporting Persons are required by SEC regulation to furnish us with copies of
all Section 16(a) forms that they file. To our knowledge, based solely on a
review of the copies of such reports furnished to us, we believe that during
calendar year ended December 31, 2004, all of the Reporting Persons complied
with all applicable filing requirements, except for (i) the former officers and
directors prior to November 12, 2004 who, to our knowledge, never filed Form 3s
with the SEC, (ii) Messers. Appel and Flamm who haven't filed Form 4s with the
SEC to reflect new option issuances, (iii) The Trustees of the University of
Pennsylvania who were late in filing their Form 3 with the SEC and (iv) Harvest
Advaxis LLC who has not filed a Form 3 with the SEC.
54
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth,
o each person who is known by us to be the owner of record or
beneficial owner of more than 5% of our outstanding common stock;
o each of our directors and each of our executive officers;
o all of our directors and executive officers as a group; and
o the number of shares of common stock beneficially owned by each such
person and such group and the percentage of the outstanding shares
owned by each such person and such group.
As used in the table below and elsewhere in this prospectus, the term
beneficial ownership with respect to a security consists of sole or shared
voting power, including the power to vote or direct the vote and/or sole or
shared investment power, including the power to dispose or direct the
disposition, with respect to the security through any contract, arrangement,
understanding, relationship, or otherwise, including a right to acquire such
power(s) during the next 60 days following the date of this prospectus. Except
as otherwise indicated, the stockholders listed in the table have sole voting
and investment powers with respect to the shares indicated.
Except as otherwise noted below, the address of each of the persons in the
table is 212 Carnegie Center, Suite 206, Princeton, New Jersey 08540.
NUMBER OF SHARES OF
REGISTRANT COMMON PERCENTAGE OF CLASS
NAME AND ADDRESS STOCK BENEFICIALLY BENEFICIALLY OWNED(1)
OWNED
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF COMMON PERCENTAGE OF CLASS BENEFICIALLY
STOCK BENEFICIALLY OWNED
OWNED
J. Todd Derbin(1)(2) 1,837,348 (3) 4.81%
Roni Appel(1)(2) 3,041,622 (4) 8.22%
Scott Flamm(1) 2,914,989 (5) 7.90%
Dr. Steve Roth(1) 82,763 (6) 0.02%
Dr. James Patton(1) 2,913,476 (7) 7.92%
Dr. Thomas McKearn(1) 306,601 (8) 0.08%
The Trustees of the University of Pennsylvania 6,339,282 17.2%
Center for Technology
Transfer, University of Pennsylvania
3160 Chestnut Street, Suite 200
Philadelphia, PA 19104-6283
55
Sunrise Equity Partners, LP 1,838,783 (9) 4.99%
641 Lexington Ave-25fl
New York, NY 10022
Level Counter, LLC 1,838,783 (10) 4.99%
c/o Sunrise Securities Corp.
641 Lexington Ave-25fl
New York, NY 10022
Marilyn Adler 1,838,783 (11) 4.99%
c/o Sunrise Securities Corp.
641 Lexington Ave-25fl
New York, NY 10022
Nathan Low 3,346,311 (12) 9.10%
c/o Sunrise Securities Corp.
641 Lexington Ave-25fl
New York, NY 10022
Amnon Mandelbaum 2,932,803 (13) 7.97%
c/o Sunrise Securities Corp.
641 Lexington Ave-25fl
New York, NY 10022
Emigrant Capital Corp. 1,838,783 (14) 4.99%
6 East 43 Street, 8th Fl.
New York, NY 10017
Harvest Advaxis LLC 3,832,753 (15) 10.4%
30052 Aventura, Suite C
Rancho Santa Margarita, CA 92688
All Directors and Officers as a Group (6 people) 11,096,799 28.95%
- ----------
* Based on 36,690,056 shares of common stock outstanding as of January
31, 2005.
(1) Director
(2) Officer
(3) Reflects 295,766 shares of common stock, 1,172,767 options to
purchase shares of common stock and 368,815 warrants to purchase
shares of common stock.
(4) Reflects 14,449 warrants to purchase shares of common stock and
2,522,166 shares of common stock owned by Mr. Appel but does not
reflect 58,580 warrants to purchase shares of common stock because
such warrants are not under the current circumstances, exercisable
within the next 60 days. Also reflects 355,528 shares of common
stock and 149,480 options and warrants to purchase shares of common
stock beneficially owned by Carmel Ventures, Inc. of which Mr. Appel
is a controlling person but does not reflect 355,528 warrants to
purchase shares of common stock owned by Carmel Ventures, Inc.
because such warrants are not under the current circumstances,
exercisable within the next 60 days.
(5) Reflects 125,772 shares of common stock and 122,751 options and
warrants to purchase shares of common stock owned by Mr. Flamm but
does not reflect 125,722 warrants to purchase shares of common stock
because such warrants are not under the current circumstances,
exercisable within the next 60 days. Also reflects 2,621,325 shares
of common stock and 45,141 warrants to purchase shares of common
stock beneficially owned by Flamm Family Partners LP of which Mr.
Flamm is a partner.
(6) Reflects options to purchase shares of common stock.
(7) Reflects 56,349 options to purchase shares of common stock, 36,551
warrants to purchase shares of common stock and 2,820,576 shares of
common stock but does not reflect 147,716 warrants to purchase
shares of common stock because such warrants are not under the
current circumstances, exercisable within the next 60 days.
(8) Reflects 195,586 options and warrants to purchase shares of common
stock and 111,015 shares of common stock.
(9) Reflects 1,742,160 shares of common stock held by Sunrise Equity
Partners, LP ("SEP") and warrants to purchase 96,623 shares of
common stock, but does not include warrants to purchase 1,645,537
shares of common stock issuable upon exercise of warrants held by
SEP because such warrants are not, under the current circumstances,
exercisable within the next 60 days. The General Partner of SEP is
Level Counter, LLC ("LC"), the managers of which are Nathan Low,
Marilyn Adler and Amnon Mandelbaum (the "Managers"). The 1,838,783
shares of common stock held by SEP also does not include: (1)
1,124,253 shares of common stock directly owned by Nathan Low or
warrants directly owned by Mr. Low to purchase up to 761,971 shares
of common stock (which warrants are not, under the circumstances,
exercisable within the next 60 days); (2) 1,094,020 shares of
directly owned by Amnon Mandelbaum or warrants directly owned by Mr.
Mandelbaum to purchase up to 672,539 shares of common stock (which
warrants are not, under the circumstances, exercisable within the
next 60 days), and (3) shares of common stock held by limited
partners of SEP or LC who may have a direct or indirect pecuniary
interest, but have no authority to vote or dispose of the shares of
common stock held by SEP.
56
(10) Reflects 1,742,160 shares of common stock held by SEP and warrants
to purchase 96,623 shares of common stock, but does not include
warrants to purchase 1,645,537 shares of common stock issuable upon
exercise of such warrants held by SEP because such warrants are not,
under the circumstances, exercisable within the next 60 days. LC is
the general partner of SEP and as such, is deemed to have beneficial
ownership of the securities held by SEP for purposes of calculating
percentage interest. However, LC disclaims beneficial interest in
such shares except to the extent of its pecuniary interest therein.
(11) Reflects 1,742,160 shares of common stock held by SEP and warrants
to purchase 96,623 shares of common stock, but does not include
warrants to purchase 1,645,537 shares of common stock issuable upon
exercise of such warrants held by SEP because such warrants are not,
under the circumstances, exercisable within the next 60 days. Ms.
Adler is a manager of LC, the general partner of SEP, and as such,
is deemed to have beneficial ownership of the securities held by SEP
for purposes of calculating percentage interest. However, Ms. Adler
disclaims beneficial interest in such shares except to the extent of
her pecuniary interest therein.
(12) Reflects 1,742,160 shares of common stock held by SEP and warrants
to purchase 96,623 shares of common stock, but does not include
warrants to purchase 1,645,537 shares of common stock issuable upon
exercise of such warrants held by SEP because such warrants are not,
under the circumstances, exercisable within the next 60 days. Mr.
Low is a manager of LC, the general partner of SEP, and as such, is
deemed to have beneficial ownership of the securities held by SEP
for purposes of calculating percentage interest. However, Mr. Low
disclaims beneficial interest in such shares except to the extent of
his pecuniary interest therein. Also reflects 1,124,253 shares of
common stock owned by Mr. Low but does not reflect warrants to
purchase 761,971 shares of common stock issuable upon exercise of
such warrants because such warrants are not, under the
circumstances, exercisable within the next 60 days. Also includes
383,275 shares of common stock held by Sunrise Securities Corp., a
corporation of which Mr. Low is sole stockholder and director, but
does not include warrants to purchase 348,432 shares of common stock
held by Sunrise Securities Corp. because such warrants are not,
under the circumstances, exercisable within the next 60 days. Mr.
Low's beneficial ownership does not include shares of common stock
held by Sunrise Foundation Trust, a charitable trust of which Mr.
Low is a trustee. Mr. Low disclaims beneficial ownership of such
shares of common stock held by Sunrise Foundation Trust.
(13) Reflects 1,742,160 shares of common stock held by SEP and warrants
to purchase 96,623 shares of common stock, but does not include
warrants to purchase 1,645,537 shares of common stock issuable upon
exercise of such warrants held by SEP because such warrants are not,
under the circumstances, exercisable within the next 60 days. Mr.
Mandelbaum is a manager of LC, the general partner of SEP, and as
such, is deemed to have beneficial ownership of the securities held
by SEP for purposes of calculating percentage interest. However, Mr.
Mandelbaum disclaims beneficial interest in such shares except to
the extent of his pecuniary interest therein. Also reflects
1,094,020 shares of common stock owned by Mr. Mandelbaum but does
not reflect warrants to purchase 672,539 shares of common stock
issuable upon exercise of such warrants because such warrants are
not, under the circumstances, exercisable within the next 60 days.
(14) Reflects 1,742,160 shares of common stock held by Emigrant Capital
Corp. ("Emigrant") and warrants to purchase 16,623 shares of common
stock, but does not include warrants to purchase 1,645,537 shares of
common stock issuable upon exercise of warrants held by Emigrant
because such warrants are not, under the current circumstances,
exercisable within the next 60 days.
(15) Reflects 3,832,753 shares of common stock but does not reflect
warrants to purchase 3,832,753 shares of common stock because such
warrants are not currently exercisable within the next 60 days.
57
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Our policy is to enter into transactions with related parties on terms
that, on the whole, are no more favorable, or no less favorable, than those
available from unaffiliated third parties. Based on our experience in the
business sectors in which we operate and the terms of our transactions with
unaffiliated third parties, we believe that all of the transactions described
below met this policy standard at the time they occurred.
CONSULTING AGREEMENT WITH CARMEL VENTURES, INC.
Carmel Ventures, Inc. ("Carmel") is owned by Roni Appel, our Chief
Financial Officer, director and a principal shareholder. Pursuant to a
consulting agreement, dated as of November 1, 2002, Carmel provided various
consulting services to us. Carmel has been paid consulting fees of $5,000 per
month since November 1, 2002 which fees have accrued but not been paid. As of
December 31, 2004, such accrued fees amounted to $130,000 of which 30,000 was
paid in cash. Carmel has assigned $35,000 of such fees to Mr. Scott Flamm, one
of our directors and principal shareholders. Carmel and Mr. Flamm have converted
the $65,000 and $35,000 respectively into shares of common stock and warrants.
In addition, we granted Carmel a bonus of $35,000 which was converted into Units
in the Private Placement and we granted Carmel options to purchase shares of our
common stock at the rate of 7,044 options per month since November 11, 2002. The
total number of options received by Carmel was 183,134. The exercise price of
these options is $0.35 per share. Carmel has assigned 91,567 of these options to
Mr. Flamm. The contract with Carmel was terminated as of December 31, 2004.
CONSULTING AGREEMENT WITH LVEP MANAGEMENT, LLC
LVEP is owned by Scott Flamm, one of our directors and a principal
shareholder. LVEP employs Mr. Flamm and Mr. Roni Appel, our Chief Financial
Officer, director and a principal shareholder. Pursuant to a consulting
agreement, dated as of January 19, 2005, LVEP is to provide various financial
and strategic consulting services to us. The initial term of the agreement is
until September 30, 2005 and thereafter the term of the agreement shall be
automatically extended for six month periods unless we notify LVEP at least 60
days prior to the end of term of our intent not to extend. In consideration for
providing the consulting services, LVEP received an initial payment of $4,500
and shall receive $7,000 per month during the term of the agreement plus
reimbursement of approved expenses in connection with providing the consulting
services. Additionally, LVEP shall receive 3,500 restricted shares of common
stock per month.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT WITH J. TODD DERBIN
J. Todd Derbin is of Chief Executive Officer and a director. On December
20, 2004, we entered into an amended and restated employment agreement with J.
Todd Derbin, pursuant to which Mr. Derbin is employed as our President and Chief
Executive Officer. The effective date of the employment agreement is January 1,
2005. The term of the employment agreement is for one year and will be further
renewed if mutually agreed to by Mr. Derbin and us. Mr. Derbin's annual base
salary shall be $200,000; provided that it shall be increased to $225,000 or
$250,000 based upon certain milestones as set forth in the employment agreement.
In addition, Mr. Derbin shall be entitled to bonuses in the form of equity
and/or cash as set forth in the employment agreement and he shall be entitled to
receive non-qualified stock options to purchase our common stock, the amount of
which when added to his existing 1,172,767 options shall equal 5% of the our
total issued and outstanding common stock, as of March 31, 2005. One-half of the
options shall vest on the grant date and one-half of the options shall vest
monthly over four years at a rate of 1/48th per month. The grant of the options
is subject to us adopting a a new stock option plan, which is subject to
stockholder approval.
58
SENTINEL CONSULTING, INC.
Sentinel Consulting Inc. is owned by Robert Harvey, an observer to our
Board and the manager of Harvest Advaxis LLC, one of our principal stockholders.
Sentinel provided financial consulting services to us. The term of the agreement
was for six months commencing as of September 5, 2004 with each party having the
right to terminate it after four months under the agreement. We have paid
Sentinel $33,000 for services performed and we have the obligation to issue to
them a warrant to purchase 191,638 shares of our common stock at an exercise
price of an $0.40 per share, plus 287,451 shares of our common stock, a retainer
of $5,000, a video preparation fee of $10,000 and expenses of $6,000 in
connection with the preparation of a scientific review.
59
SELLING STOCKHOLDERS
This prospectus relates to the resale from time to time of up to a total
of 56,320,114 shares of common stock by selling stockholders, comprising:
o 36,690,056 shares of our common stock that were issued to selling
stockholders pursuant to transactions exempt from registration under
the Securities Act of 1933; and
o 19,630,588 shares of common stock underlying warrants that were
issued to selling stockholders pursuant to transactions exempt from
registration under the Securities Act of 1933.
The following table set forth certain information regarding the beneficial
ownership of our common stock as to the selling stockholders and the shares
offered by them in this prospectus. Beneficial ownership is determined in
accordance with the rules of the SEC. In computing the number of shares
beneficially owned by a selling stockholders and the percentage of ownership of
that selling stockholder, shares of common stock underlying shares of
convertible preferred stock, options or warrants held by that selling
stockholder that are convertible or exercisable, as the case may be, within 60
days of January 31, 2005 are included. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
selling stockholder. Each selling stockholder's percentage of ownership in the
following table is based upon 36,690,056 shares of common stock outstanding as
of January 31, 2005.
Except as described below, none of the selling stockholders within the
past three years has had any material relationship with us or any of our
affiliates:
o J. Todd Derbin has served as our Chief Executive Officer and a
director since November 12, 2004;
o Roni Appel has served as our Chief Financial Officer and a director
since November 12, 2004; Carmel Ventures, Inc., of which Mr. Appel
is the principal stockholder has provided consulting services to us;
LVEP by which Mr. Appel is employed, is providing consulting
services to us;
o Scott Flamm has served as a director since November 12, 2004 and
LVEP of which Mr. Flamm is a principal stockholder and an employee
of, is providing consulting services to us;
o Thomas McKearn has served as a director since November 12, 2004;
o Dr. James Patton has served as a director since November 12, 2004
and has served as a consultant to us in the past;
o Dr. Yvonne Patton has served as a consultant;
o The Trustees of the University of Pennsylvania own the patents which
we have an exclusive license;
o Sunrise Securities Corp. acted as placement agent in the Private
Placement. Nathan Low, Amnon Mandelbaum, Marcia Kucher, Derek
Caldwell, Richard Stone and David Goodfriend are all affiliated with
Sunrise Securities Corp., the placement agent in the Private
Placement. Sunrise Equity Partners, LP and Sunrise Foundation Trust
are affiliates of Sunrise Securities Corp.; and
60
o Dr. David Filer is a consultant for us and provided consulting
services to the Sunrise Securities Corp.
The term "selling stockholders" also includes any transferees, pledges,
donees, or other successors in interest to the selling stockholders named in the
table below. To our knowledge, subject to applicable community property laws,
each person named in the table has sole voting and investment power with respect
to the shares of common stock set forth opposite such person's name.
The selling stockholders named below are selling the securities. The table
assumes that all of the securities will be sold in this offering. However, any
or all of the securities listed below may be retained by any of the selling
stockholders, and therefore, no accurate forecast can be made as to the number
of securities that will be held by the selling stockholders upon termination of
this offering. These selling stockholders acquired their shares by purchase
exempt from registration under section 4(2) of the Securities Act of 1933 or
Regulation D under the Securities Act of 1933. We believe that the selling
stockholders listed in the table have sole voting and investment powers with
respect to the securities indicated. We will not receive any proceeds from the
sale of the securities by the selling stockholders. No selling stockholders are
broker-dealers or affiliates of broker-dealers other than Sunrise Securities
Corp., David Goodfriend, Amnon Mandelbaum, Marcia Kucher, Derek Caldwell,
Richard Stone and Nathan Low.
TOTAL SHARES % BEFORE % AFTER RELATIONSHIP
NAME SHARES OWNED REGISTERED OFFERING OFFERING (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
Adele Pfenninger
12 Spring Brook Road
Annandale, NJ 08801 79,600(1) 70,790(1) 0.22% 0.02% --
AI International Corporate
Holdings, Ltd.
c/o FCIM Corp.
1 Rockefeller Plaza
Suite 1730
New York, NY 10020 174,216(2) 174,216(2) 0. 47% 0.0% --
Alan Gelband Company
Defined Contribution Pension Plan
and Trust
30 Lincoln Plaza
New York, NY 10023 348,432(3) 348,432(3) 0.95% 0.0% --
Alan Kestenbaum
18 Clover Drive
Great Neck, NY 11021 348,432(3) 348,432(3) 0.95% 0.0% --
Beretz Family Partners LP
48 South Drive
Great Neck, NY 11021 174,216(2) 174,216(2) 0.47% 0.0% --
Bridges & Pipes, LLC
830 Third Avenue
14th Floor
New York, NY 10022 1,393,728(4) 1,393,728(4) 3.73% 0.0% --
61
TOTAL SHARES % BEFORE % AFTER RELATIONSHIP
NAME SHARES OWNED REGISTERED OFFERING OFFERING (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce Fogel
218 Everglade Avenue
Palm Beach, FL 33480 348,432(3) 348,432(3) 0.95% 0.0% --
C. Leonard Gordon
551 Fifth Avenue
New York, NY 10176 174,216(2) 174,216(2) 0.47% 0.0% --
Carmel Ventures, Inc
22 Ruth Lane
Demarest, NJ 07627 860,537(5) 711,057(5)(a) 2.32% 0.41% 5(b)
Catherine Janus
4817 Creak Dr.
Western Spring, IL 60558 118,832(6) 105,767(6) 0.32% 0.04% --
Chaim Cymerman
c/o Tomer Cymerman
Paamoni 10, Apt. 19
Bavli, Tel Aviv
Israel 196,371(7) 174,593(7)(a) 0.53% 0.06% --
Charles Kwon
834 Monror Street
Evanston, Il 60202 491,233(8) 482,322(8)(a) 1.33% 0.02% --
Cranshire Capital, LP
666 Dundee Road
Sute 1901
Northbrook, IL 60602 1,045,296(9) 1,045,296(9) 2.81% 0.0% --
Crestwood Holdings, LLC
c/o Ran Nizan
109 Boulevard Drive
Danbury, CT 06810 360,253(10) 337,978(10)(a) 0.98% 0.06% --
David Stone
228 St. Charles Avenue
Suite 1024
New Orleans, LA 70130 348,432(3) 348,432(3) 0.95% 0.0% --
David Tendler
401 East 60th Street
New York, NY 10022 696,864(11) 696,864(11) 1.88% 0.0% --
62
TOTAL SHARES % BEFORE % AFTER RELATIONSHIP
NAME SHARES OWNED REGISTERED OFFERING OFFERING (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
Design Investments, LTD
9 Tanbark Circuit
Suite 1442
Werrington Downs
NSW 2747
Australia 696,864(11) 696,864(11) 1.88% 0.0% --
Emigrant Capital Corp.
6 East 43rd Street
8th Floor
New York, NY 10017 3,484,320(12) 3,484,320(12) 9.07% 0.0% --
Eugene Mancino
Blau Mancino
12 Roszel Road, Suite C-101
Princeton, NJ 08540 355,099(13) 212,544(13)(a) 0.96% 0.39% --
Fawdon Investments Ltd.
4 Ibn Shaprut Street
Jerusalem, Israel 92478 1,393,728(4) 1,393,728(4) 3.73% 0.0% --
Flamm Family Partners, LP.
c/o Scott Flamm
70 West Road
Short Hills, NJ 07078 2,666,466(14) 2,657,556(14)(a) 7.26% 0.02% (14)(b)
Fred Berdon Co, LP
717 Post Road
Suite 105
Sacrsdale, NY 10583 348,432(3) 348,432(3) 0.95% 0.0% --
Gina Ferarri
36 Stone Run Road
Bedmingter, NJ 07921 79,932(15) 71,022(15)(a) 0.22% 0.2% --
Hal H. Beretz
48 South Drive
Great Neck, NY 11021 522,648(16) 522,648(16) 1.41% 0.0% --
Howard Kaye Family Fund
2 Mohican Trail
Scarsdale, NY 10583 522,648(16) 522,648(16) 1.41% 0.0% --
IRA FBO / Walter S. Grossman
Pershing LLC Custodian
277 North Ave
Westport, CT 06880 696,864(11) 696,864(11) 1.88% 0.0% --
63
TOTAL SHARES % BEFORE % AFTER RELATIONSHIP
NAME SHARES OWNED REGISTERED OFFERING OFFERING (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
Itai Portnio
26 Yakinton St
Haifa, Isreal 34406 157,608(17) 14,186(17)(a) 0.43% 0.05% --
J. Todd Derbin
840 Pretty Brook Road
Princeton, NJ 08540 1,837,348(18) 591,532(18)(a) 4.81% 3.28% (18)(b)
James Patton
1937 Swedesford
Malvern, PA 19355 3,061,192(19) 2,968,291(19)(a) 8.29% 0.25% (19)(b)
James Paul
c/o Fulwider Patton
Howard Hughes Center
6060 Center Drive, 10th Floor
Los Angeles, CA 90045 39,215(20) 34,861(20)(a) 0.11% 0.01% --
Jonas Grossman
59 Huratio St
New York, NY 10014 80,640(21) 71,731(21)(a) 0.22% 0.02% --
Kerry Propper
59 Huratio St
New York, NY 10014 201,600(22) 179,326(22)(a) 0.55% 0.06% --
Lilian Flamm
c/o Scott Flamm
70 West Road
Short Hills, NJ 07078 197,328(23) 197,328(23) 0.54% 0.0% --
Marilyn Mendell
1203 River Road,
Apt. Penthouse 4
Edgewater, NJ 07020 284,500(24) 253,316(24)(a) 0.77% 0.08% --
Mary Ann Ryan Francis
1115 Beanaqt Ave
Seaside Park, NJ 08752 79,071(25) 70,360(25)(a) 0.22% 0.02% --
MEA Group, LLC
145 Talmadge Road
Edison, NJ 08817 348,432(3) 348,432(3) 0.95% 0.0% --
Mordechai Mashiach
8 Shlomzion Hamalka
Haifa, Isreal 34406 157,608(17) 140,186(17)(a) 0.43% 0.05% --
64
TOTAL SHARES % BEFORE % AFTER RELATIONSHIP
NAME SHARES OWNED REGISTERED OFFERING OFFERING (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
New Bank Ltd
Levinstein Tower #21st
23 Menahem Begin Road
Tel Aviv, Israel 1,393,728(4) 1,393,728(4) 3.73% 0.0% --
Open Ventures LLC
127 West Chestnut Hill Ave
Philadelphia, PA 19118 17,422 17,422 0.05% 0.0% --
Peggy Fern
1548 Herlong Court
Rock Hill, SC 29732 79,712(26) 70,081(26)(a) 0.22% 0.02% --
Penn Footware Retirement Trust
Line & Grove Streets
PO Box 87
Nanticoke, PA 18634 348,432(3) 348,432(3) 0.95% 0.0% --
Richard Yelovich
603 Milleson Lane
West Chester, PA 19380 151,289 151,289 0.41% 0.0% --
Roni Appel
22 Ruth Lane
Demarest, NJ 07627 2,595,193(27) 2,580,745(27)(a) 7.06% 0.04% (27)(b)
RP Capital, LLC
10900 Wilshire Blvd
Suite 500
Los Angeles, CA 90024 174,216(2) 174,216(2) 0.47% 0.0% --
Scott Flamm
c/o Scott Flamm
70 West Road
Short Hills, NJ 07078 374,296(28) 251,545(28)(a) 1.01% 0.33% (28)(b)
Shai Stern
43 Maple Aenue
Cedarhurst, NY 11516 174,216(2) 174,216(2) 0.47% 0.0% --
SRG Capital, LLC
120 Broadway
40th Floor
New York, NY 10271 696,864(11) 696,864(11) 1.88% 0.0% --
Sunrise Equity Partners, LP
641 Lexington Avenue
25th Floor
New York, NY 10022 3,484,320(12) 3,484,320(12) 9.07% 0.0% --
65
TOTAL SHARES % BEFORE % AFTER RELATIONSHIP
NAME SHARES OWNED REGISTERED OFFERING OFFERING (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas McKearn
6040 Lower Mountain Road
New Hope, PA 18938 374,876(29) 269,839(29)(a) 1.02% 0.29% (29)(b)
Titan Capital Management, LLC
(TCMP3 Partners)
7 Centure Drive
Suite 201
Parsippany, NJ 07054 696,864(11) 696,864(11) 1.88% 0.0% --
Tracy Yun
90 LaSalle St., Apt. #13G
New York, NY 10027 60,197 60,197 0.16% 0.0% --
Trinita, LLC
c/o Morten Kielland
22 Painters Lane
Chesterbrook, PA 19087 151,289 151,289 0.41% 0.0% --
The Trustees of the
University of Pennsylvania
Center for Technology Transfer
University of Pennsylvania
3160 Chestnut Street
Suite 200
Philadelphia, PA 19104-6283
Attn: Managing Director 6,339,282 6,339,282 17.28% 0.0% (41)
William Kahn
7903 Longmeadow Road
Baltimore, MD 21208 151,517 151,517 0.41% 0.0% --
Yair Talmor
517 Old Chappaqua Road
Briarcliff Manor, NY 10510 174,216(2) 174,216(2) 0.47% 0.0% --
Yoav Millet
950 Third Avenue
New York, NY 10022 174,216(2) 174,216(2) 0.47% 0.0% --
Yvonne Paterson
514 South 46 St
Philadelphia, PA 19143 873,412(30) 704,365 2.37% 0.46%
Amnon Mandelbaum
c/o Sunrise Equity Partners LP
641 Lexington Avenue
25th Floor
New York, NY 10022 1,766,559(31) 1,766,559(31) 4.73% 0.0% --
66
TOTAL SHARES % BEFORE % AFTER RELATIONSHIP
NAME SHARES OWNED REGISTERED OFFERING OFFERING (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
David Goodriend
c/o Sunrise Equity Partners LP
641 Lexington Avenue
25th Floor
New York, NY 10022 194,193(32) 194,193(32) 0.53% 0.0% --
David Filer
165 East 32 Street
New York, NY 10016 382,772(33) 382,772(33) 1.04% 0.0% (32)(a)
Marcia Kucher
c/o Sunrise Equity Partners LP
641 Lexington Avenue
25th Floor
New York, NY 10022 4,140(34) 4,140(34) 0.01% 0.0% --
Nathan Low
c/o Sunrise Equity Partners LP
641 Lexington Avenue
25th Floor
New York, NY 10022 1,886,224(35) 1,886,224(35) 5.04% 0.0% --
Derek Caldwell
c/o Sunrise Equity Partners LP
641 Lexington Avenue
25th Floor
New York, NY 10022 153,658(36) 153,658(36) 0.42% 0.0% --
Sunrise Securities Corp.
c/o Sunrise Equity Partners LP
641 Lexington Avenue
25th Floor
New York, NY 10022 731,707(37) 731,707(37) 1.98% 0.0% (37)(a)
Richard Stone
c/o Sunrise Equity Partners LP
641 Lexington Avenue
25th Floor
New York, NY 10022 307,317(38) 307,317(38) 0.83% 0.0% --
Sunrise Foundation Trust
c/o Sunrise Equity Partners LP
641 Lexington Avenue
25th Floor
New York, NY 10022 71,497 71,497 0.19% 0.0% --
67
TOTAL SHARES % BEFORE % AFTER RELATIONSHIP
NAME SHARES OWNED REGISTERED OFFERING OFFERING (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
Martin Trust Agreement
U/A/ DTD 11/05/01
Peter L. Martin TTE
3757 Wedbster St, Apt 203
San Francisco, CA 94123 348,432(3) 348,432(3) 0.95% 0.0% --
A. Heifetz Technologies Ltd
22 Kanfey Nesharim St
Jerusalem, Israel 95464 348,432(3) 348,432(3) 0.95% 0.0% --
Balestra Spectrum Partners, LLC
1185 Avenue of the Americas
32nd Floor
New York, NY 10036 1,045,296(9) 1,045,296(9) 2.81% 0.0% --
Reitler Brown Holdings, LLC
800 Third Avenue
21st Floor
New York, NY 10022 60,000(39) 60,000(39) 0.16% 0.0% (39)(a)
Harvest Advaxis LLC
30052 Aventura, Suite C
Rancho Santa Margarita,
CA 92688 7,665,506(40) 7,665,506(40) 18.92% 0.0% --
Miles Wynn
P.O. Box 440842
Aurora , CO 80044 696,700 696,700 1.90% 0.0% --
Teresa Waz
3679 S. Dawson St
Aurora, CO 80444 26,900 26,900 0.07% 0.0% --
Ormonde Frew
19996 E. Greenwood Drive Aurora
, CO 80013 12,000 12,000 0.03% 0.0% --
Ralph Grills
4042 S. Atchison Way
Aurora, CO 80014 12,000 12,000 0.03% 0.0% --
Daniel Unrein
281 S. Leyden St
Denver, CO 80220 2,500 2,500 0.01% 0.0% --
Frederick Malkhe
4105 E. Florida Ave
Suite 100
Denver, CO 80222 2,500 2,500 0.01% 0.0% --
68
- ----------
(1) Reflects 35,395 shares of common stock 44,205 warrants to purchase
shares of common stock.
(2) Reflects 87,108 shares of common stock and 87,108 warrants to purchase
shares of common stock.
(3) Reflects 174,216 shares of common stock and 174,216 warrants to purchase
shares of common stock.
(4) Reflects 696,864 shares of common stock and 696,864 warrants to purchase
shares of common stock.
(5) Reflects 355,528 shares of common stock, 413,441 warrants to purchase
shares of common stock and 91,567 options exercisable for shares of
common stock.
(5)(a) Reflects 355,528 shares of common stock and 355,528 warrants to purchase
shares of common stock
(5)(b) Carmel Ventures, Inc. has performed consulting services for us and is
owned by Roni Appel, our chief financial officer, director and principal
shareholder.
(6) Reflects 52,833 shares of common stock and 52.883 warrants to purchase
shares of common stock.
(7) Reflects 87,297 shares of common stock and 109,074 warrants to purchase
shares of common stock.
(7)(a) Reflects 87,297 shares of common stock and 87,297 warrants to purchase
shares of common stock. (8) Reflects 271,260 shares of common stock and
219,973 warrants to purchase shares of common stock.
(8)(a) Reflects 271,260 shares of common stock and 211,063 warrants to purchase
shares of common stock.
(9) Reflects 522,648 shares of common stock and 522,648 warrants to purchase
shares of common stock. (10) Reflects 244,933 shares of common stock and
115,320 warrants to purchase shares of common stock.
(10)(a) Reflects 266,933.shares of common stock and 93,046 warrants to purchase
shares of common stock.
(11) Reflects 348, 432 shares of common stock and 348,432 warrants to
purchase shares of common stock.
(12) Reflects 1,742,160 shares of common stock and 1,742,160 warrants to
purchase shares of common stock.
(13) Reflects 106,272 shares of common stock and 248,827 warrants to purchase
shares of common stock.
(13)(a) Reflects 106,272 shares of common stock and 106,272 warrants to purchase
shares of common stock.
(14) Reflects 2,585,094 shares of common stock and 45,141 warrants to
purchase shares of common stock.
(14)(a) Reflects 2,621,325 shares of common stock and 36,231 warrants to
purchase shares of common stock.
(14)(b) The general partner of Flamm Family Partners is Scott Flamm a director
and principal shareholder.
(15) Reflects 35,511 shares of common stock and 44,421 warrants to purchase
shares of common stock.
(15)(a) Reflects 35,511 shares of common stock and 35,511 warrants to purchase
shares of common stock.
(16) Reflects 261,324 shares of common stock and 261,324 warrants to purchase
shares of common stock.
(17) Reflects 70,093 shares of common stock and 87,515 warrants to purchase
shares of common stock.
(17)(a) Reflects 70,093 shares of common stock and 70,093 warrants to purchase
shares of common stock.
(18) Reflects 295,766 shares of common stock and 1,172,767 options to
purchase shares of common stock and 368,815 shares of common stock
issuable upon exercise of warrants.
(18)(a) Reflects 295,766 shares of common stock and 295,766 warrants to purchase
shares of common stock.
(18)(b) Mr. Derbin is one of our directors and the chief executive officer.
(19) Reflects 56,349 options to purchase shares of common stock, 36,551
warrants to purchase shares of common stock and 2,820,576 shares of
common stock but does not reflect 147,716 warrants to purchase shares of
common stock because such warrants are not currently exercisable within
the next 60 days.
(19)(a) Reflects 2,820,576 shares of common stock and 14,7716 warrants to
purchase shares of common stock.
(19)(b) Dr. Patton is one of our directors.
(20) Reflects 17,430 shares of common stock and 21,785 warrants to purchase
shares of common stock.
(20)(a) Reflects 17,430 shares of common stock and 17,430 warrants to purchase
shares of common stock.
(21) Reflects 35,865 shares of common stock and 44,775 warrants to purchase
shares of common stock.
(21)(a) Reflects 35,865 shares of common stock and 35,865 warrants to purchase
shares of common stock.
(22) Reflects 89,663 shares of common stock and 111,937 warrants to purchase
shares of common stock.
(22)(a) Reflects 89,663 shares of common stock and 89,663 warrants to purchase
shares of common stock.
(23) Reflects 98,664 shares of common stock and 98,664 warrants to purchase
shares of common stock.
(24) Reflects 126,658 shares of common stock and 157,842 warrants to purchase
shares of common stock.
(24)(a) Reflects 126,658 shares of common stock and 126,658 warrants to purchase
shares of common stock.
(25) Reflects 35,180 shares of common stock and 43,981 warrants to purchase
shares of common stock.
(25)(a) Reflects 35,180 shares of common stock and 35,180 warrants to purchase
shares of common stock.
(26) Reflects 35,401 shares of common stock and 44,311 warrants to purchase
shares of common stock.
(26)(a) Reflects 35,401 shares of common stock and 35,401 warrants to purchase
shares of common stock.
(27) Reflects 2,522,164 shares of common stock and 73,029 warrants to
purchase shares of common stock..
(27)(a) Reflects 2,522,164 shares of common stock and 58,580 warrants to
purchase shares of common stock
(27)(b) Mr. Appel is one of our directors and our chief financial officer and
owner of Carmel Ventures, Inc., one of our stockholders and is employed
by LVEP Management, LLC one of our consultants.
(28) Reflects 125,772 shares of common stock, 156,956 warrants to purchase
shares of common stock and 91,567 options.
69
(28)(a) Reflects 125,772 shares of common stock and 125,772 warrants to purchase
shares of common stock.
(28)(b) Mr. Flamm is one of our directors and also the general partner of Flamm
Family Partners, one of our stockholders and is the beneficial owner of
LVEP Management, LLC one of our consultants.
(29) Reflects 179,290 shares of common stock, 82,763 options and 112,823
warrants to purchase shares of common stock.
(29)(a) Reflects 179,290 shares of common stock and 90,549 warrants to purchase
shares of common stock.
(29)(b) Mr. McKearn is one of our directors.
(30) Refelcts 704,365 shares of common stock and 169,048 options to purchase
shares of common stock.
(31) Reflects 1,094,020 shares of common stock owned by Mr. Mandelbaum and
warrants to purchase 672,539 shares of common stock owned by Mr.
Mandelbaum
(32) Reflects 119,466 shares of common stock and 74,727 warrants to purchase
shares of common stock.
(33) Reflects 97,561 shares of common stock and 285,211 warrants to purchase
shares of common stock.
(34) Reflects 2,070 shares of common stock and 2,070 warrants to purchase
shares of common stock.
(35) Reflects 1,124,253 shares of common stock owned by Mr. Low and warrants
to purchase 761,971 shares of common stock owned by Mr. Low.
(36) Reflects 80,488 shares of common stock and 73,170 warrants to purchase
shares of common stock.
(37) Reflects 383,275 shares of common stock and 348,432 warrants to purchase
shares of common stock.
(37)(a) Our placement agent in connection with the Private Placement discussed
in this prospectus.
(38) Reflects 160,976 shares of common stock and 146,341 warrants to purchase
shares of common stock.
(39) Reflects 60,000 warrants to purchase shares of common stock.
(39)(a) Reitler Brown Holdings, LLC is an affiliate of our legal counsel in
connection with this prospectus.
(40) Reflects 3,832,753 shares of common stock and warrant to purchase
3,832,753 shares of common stock.
(41) We license our intellectual property from Penn through an exclusive
license.
BLUE SKY
Thirty-five states have what is commonly referred to as a "manual
exemption" for secondary trading of securities such as those to be resold by
selling stockholders under this registration statement. In these states, so long
as we obtain and maintain a listing in Standard and Poor's Corporate Manual,
secondary trading can occur without any filing, review or approval by state
regulatory authorities in these states. These states are: Alaska, Arizona,
Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Delaware,
Hawaii, Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan,
Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Texas, Utah,
Washington, West Virginia, and Wyoming. We cannot secure this listing, and thus
this qualification, until after this registration statement is declared
effective. Once we secure this listing, secondary trading can occur in these
states without further action.
We currently do not intend to and may not be able to qualify securities
for resale in other states which require shares to be qualified before they can
be resold by our stockholders; provided however that we intend to take
appropriate action to qualify securities for resale in the State of New York.
We are required to pay certain fees and expenses incurred by us incident
to the registration of the shares. We have agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act of 1933.
Because selling stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, they will be subject to the prospectus
delivery requirements of the Securities Act of 1933. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act of 1933 may be sold under Rule 144 rather than under this
prospectus. Each selling stockholder has advised us that they have not entered
into any agreements, understandings or arrangements with any underwriter or
broker-dealer regarding the sale of the resale shares. There is no underwriter
or coordinating broker acting in connection with the proposed sale of the resale
shares by the selling stockholders.
70
We agreed to keep this prospectus effective until the earlier of the date
which is three years after this registration has been declared effective by the
SEC, or such earlier date as of which all of the common stock registered for
resale hereunder has been sold. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act
of 1934, any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of the
distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of our common stock by the selling stockholder or any other
person. We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
71
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
At the date hereof we are authorized by our articles of incorporation to
issue an aggregate of 500,000,000 shares of common stock, par value $0.001 per
share and 5,000,000 shares of "blank check" preferred stock, par value $0.001
per share. 36,690,056 shares of common stock are outstanding and held of record
by 83 stockholders and no shares of convertible preferred stock will be
outstanding.
COMMON STOCK
Holders of common stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. There is no
cumulative voting for the election of directors. Subject to the prior rights of
any class or series of preferred stock which may from time to time be
outstanding, if any, holders of common stock are entitled to receive ratably,
dividends when, as, and if declared by our board of directors out of funds
legally available for that purpose and, upon our liquidation, dissolution, or
winding up, are entitled to share ratably in all assets remaining after payment
of liabilities and payment of accrued dividends and liquidation preferences on
the preferred stock, if any. Holders of common stock have no preemptive rights
and have no rights to convert their common stock into any other securities. The
outstanding common stock is validly authorized and issued, fully-paid and
nonassessable.
The shares of common stock offered in this prospectus have been fully paid
and not liable for further call or assessment. Holders of the common stock do
not have cumulative voting rights, which means that the holders of more than one
half of the outstanding shares of common stock, subject to the rights of the
holders of the preferred stock, if any, can elect all of our directors, if they
choose to do so. In this event, the holders of the remaining shares of common
stock would not be able to elect any directors. Except as otherwise required by
Colorado law, and subject to the rights of the holders of preferred stock, if
any, all stockholder action is taken by the vote of a majority of the
outstanding shares of common stock voting as a single class present at a meeting
of stockholders at which a quorum consisting of a majority of the outstanding
shares of common stock is present in person or proxy.
PREFERRED STOCK
We are authorized to issue up to 5,000,000 shares of "blank check"
preferred stock. Preferred stock may be issued in one or more series and having
the rights, privileges and limitations, including voting rights, conversion
privileges and redemption rights, as may, from time to time, be determined by
the board of directors. Preferred stock may be issued in the future in
connection with acquisitions, financings, or other matters as the board of
directors deems appropriate. In the event that any shares of preferred stock are
to be issued, a certificate of designation containing the rights, privileges and
limitations of such series of preferred stock shall be filed with the Secretary
of State of the State of Colorado. The effect of such preferred stock is that,
subject to Federal securities laws and Colorado law, the board of directors
alone, may be able to authorize the issuance of preferred stock which could have
the effect of delaying, deferring, or preventing a change in control of the
Company without further action by the stockholders, and may adversely affect the
voting and other rights of the holders of the common stock. The issuance of
preferred stock with voting and conversion rights may also adversely affect the
voting power of the holders of common stock, including the loss of voting
control to others.
STOCK SYMBOL; NO TRADING OF COMMON STOCK
Currently there is no market for our securities, however Vfinance
Investment has filed a form 15c2ll with NASD to become a market maker.
We have applied for trading on the OTC Bulletin Board. At this time there
is no symbol.
72
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Securities
Transfer Corporation, 2591 Dallas Parkway, Suite 102, Frisco, TX 75034.
DIRECTORS' LIMITATION OF LIABILITY
Our articles of incorporation and by-laws include provisions to (1)
indemnify the directors and officers to the fullest extent permitted by the
Colorado Revised Statutes, including circumstances under which indemnification
is otherwise discretionary and (2) eliminate the personal liability of directors
and officers for monetary damages resulting from breaches of their fiduciary
duty, except for liability for breaches of the duty of loyalty, acts, or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, violations under Section 7-108-704 of Colorado Law, or for any
transaction from which the director derived an improper personal benefit. We
believe that these provisions are necessary to attract and retain qualified
persons as directors and officers.
We will enter into an indemnification agreement with each of our directors
which provides that we will indemnify our directors and advance expenses to our
directors, to the extent permitted by the laws of the State of Colorado.
We have directors and officers liability insurance in an amount of $1
million.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons as
stated in the foregoing provisions or otherwise, we have been advised that, in
the opinion of the SEC, this indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
73
SHARES OF THE COMPANY ELIGIBLE FOR FUTURE SALE
Prior to the date of this prospectus, there has been a limited public
market for our common stock. Sales of substantial numbers of shares of our
common stock in the public market following this Offering, or the perception
that such sales may occur, could adversely affect prevailing market prices of
our shares.
Assuming no exercise of options outstanding, or up 671,994 warrants to
purchase shares of our common stock, and assuming exercise of 19,630,588
warrants to purchase shares of our common stock, there are 56,320,644 shares of
our common stock issued and outstanding as of the date of this prospectus. These
shares of common stock will be deemed to be "restricted securities" under Rule
144. Restricted securities may only be sold in the public market pursuant to an
effective registration statement under the Act or pursuant to an exemption from
registration under Rule 144, Rule 701 or Rule 904 under the Act. These rules are
summarized below.
ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN THE PUBLIC MARKET
As of the date of this prospectus no shares may be eligible for resale,
46,586,560 shares of common stock may become eligible for resale under Rule 144
on November 12, 2005, 1,671,080 shares of common stock may be eligible for
resale under Rule 144 on December 8, 2005, 1,069,491 shares of common stock may
be eligible for resale under Rule 144 on January 4, 2006 and 7,665,606 shares of
common stock may be eligible for resale under Rule 144 on January 12, 2006, in
each case subject to volume, manner of sale and other limitations under Rule
144.
RULE 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of common stock for at least one year is entitled to
sell within any three-month period a number of shares that does not exceed the
greater of:
o 1.0% of the number of shares of common stock outstanding, which is
approximately 366,900 shares of common stock; or
o the average weekly trading volume of the shares of common stock
during the four calendar weeks preceding the filing of a notice on
Form 144 in connection with the sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. In addition, under Rule 144(k) as currently in effect, a person:
o who is not considered to have been one of our affiliates at any time
during the 90 days preceding a sale; and
o who has beneficially owned the shares proposed to be sold for at
least two years, including the holding period of any prior owner
other than an affiliate, is entitled to sell his shares without
complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
RULE 701
In general, under Rule 701, any of our employees, directors, officers,
consultants, or advisors (other than affiliates) who purchased shares of common
stock from us under a compensatory stock option plan or other written agreement
before the closing of the Share Exchange is entitled to resell these shares.
These shares can be resold 90 days after the effective date of the Share
Exchange in reliance on Rule 144, without having to comply with restrictions,
including the holding period, contained in Rule 144. However, the 2004 Plan has
a lock-up provision and shares issued under it are not eligible for resale at
this time. Pursuant to such lock-up provision any common stock or other equity
securities issued or issuable upon exercise of an option may not be sold,
transferred or disposed of until the earlier of (i) the date that this
registration statement has been filed with and declared effective by the SEC,
and (ii) November 12, 2005, unless (a) such sale, transfer or distribution is
approved in writing by a majority of the investors in the Private Placement, and
(b) the transferee of such sold, transferred or distributed securities agrees in
writing to be bound by the terms of such lock-up provision to the same extent as
if they had originally been a party hereto.
74
The Securities and Exchange Commission has indicated that Rule 701 will
apply to typical share options granted by an issuer before it becomes subject to
the reporting requirements of the Securities Exchange Act of 1934, along with
the shares acquired upon exercise of these options, including exercises after
the date of this prospectus. Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this prospectus, may be sold:
o by persons other than affiliates subject only to the manner of sale
provisions of Rule 144; and
o by affiliates under Rule 144 without compliance with its one year
minimum holding period requirement.
OPTIONS
We intend to file one or more registration statements on Form S-8 under
the Act to register 2,381,525 shares of common stock reserved for issuance under
our stock option plans. The registration statement on Form S-8 will become
effective automatically upon filing. As of the date of this prospectus, options
to purchase 2,182,894 shares of common stock were issued and outstanding, of
which options to purchase approximately 1,400,988 shares of common stock had
vested and had not been exercised. Shares of common stock issued upon exercise
of a share option and registered under the Form S-8 registration statement will,
subject to vesting provisions and Rule 144 volume limitations applicable to our
affiliates and the lock-up provision described above, be available for sale in
the open market immediately.
LOCK UP OF CERTAIN SHARES
We have secured the agreement of all persons who received their shares of
common stock by reason of securities ownership in Advaxis prior to the Share
Exchange to not sell, transfer, pledge or otherwise dispose of such shares
during the period from November 12, 2004 until the earlier of (i) the date that
this registration statement has been filed with and declared effective by the
SEC, and (ii) the first year anniversary of the date hereof, unless (a) such
sale, transfer or distribution is approved in writing by a majority of the
investors in the Private Placement, and (b) the transferee of such sold,
transferred or distributed securities agrees in writing to be bound by the terms
of the standstill agreement to the same extent as if they had originally been a
party hereto.
75
PLAN OF DISTRIBUTION
The selling stockholders, and any of their pledgees, asignees and
successors-in-interest, may from time to time, sell any or all of their shares
of our common stock on any stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits Investors;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales (other than short sales established prior to the
effectiveness of the Registration Statement to which this Prospectus
is a part)
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
Broker-dealers engaged by selling stockholders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each selling stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.
The selling stockholders may from time to time pledge or grant a security
interest in some or all of the registrable securities owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell shares of common Stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus.
Upon us being notified in writing by a selling stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
common stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act of 1933, disclosing (i) the name of each such selling stockholder
and of the participating broker-dealer(s), (ii) the number of shares involved,
(iii) the price at which such the shares of common stock were sold, (iv) the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the transaction. In addition,
upon us being notified in writing by a selling stockholder that a donee or
pledge intends to sell more than 500 shares of common stock, a supplement to
this prospectus will be filed if then required in accordance with applicable
securities law.
76
The selling stockholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933. Each selling
stockholder has represented and warranted to us that it does not have any
agreement or understanding, directly or indirectly, with any person to
distribute the common stock.
We are required to pay all fees and expenses incident to the registration
of the shares. We have agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act of 1933.
77
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by Frascona, Joiner, Goodman and Greenstein, PC.
EXPERTS
The financial statements appearing in this prospectus and registration
statement have been audited by Goldstein Golub Kessler LLP, independent
accountants; to the extent and for the periods indicated in their report
appearing elsewhere herein, and are included in reliance upon such report and
upon the authority of such firms as experts in accounting and auditing.
ADDITIONAL INFORMATION
We filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933 for the shares of common stock in this offering. This
prospectus does not contain all of the information in the registration statement
and the exhibits and schedule that were filed with the registration statement.
For further information with respect to us and our common stock, we refer you to
the registration statement and the exhibits that were filed with the
registration statement. Statements contained in this prospectus about the
contents or any contract or any other document that is filed as an exhibit to
the registration statement are not necessarily complete, and we refer you to the
full text of the contract or other document filed as an exhibit to the
registration statement. A copy of the registration statement and the exhibits
and schedules that were filed with the registration statement may be inspected
without charge at the Public Reference Room maintained by the SEC at 450 Fifth
Street, N.W., Washington, DC 20549, and copies of all or any part of the
registration statement may be obtained from the SEC upon payment of the
prescribed fee. Information regarding the operation of the Public Reference Room
may be obtained by calling the SEC at 800-SEC-0330. The SEC maintains a web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
site is www.sec.gov.
We are subject to the information and periodic reporting requirements of
the Securities Exchange Act of 1934, and in accordance with the Securities
Exchange Act of 1934, we file annual, quarterly and special reports, and other
information with the SEC. These periodic reports, and other information are
available for inspection and copying at the regional offices, public reference
facilities and website of the SEC referred to above.
78
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2
FINANCIAL STATEMENTS:
Balance Sheet F-3
Statement of Operations F-4
Statement of Shareholders' Equity (Deficiency) F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7 - F-18
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Advaxis, Inc.
We have audited the accompanying balance sheets of Advaxis, Inc. (a development
stage company) as of December 31, 2002 and 2003, and the related statements of
operations, shareholders' equity (deficiency), and cash flows for the period
March 1, 2002 (inception) to December 31, 2002, the year ended December 31,
2003, and the period March 1, 2002 (inception) to December 31, 2003. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advaxis, Inc. as of December
31, 2002 and 2003, and the results of its operations and its cash flows for the
period March 1, 2002 (inception) to December 31, 2002, the year ended December
31, 2003, and the period March 1, 2002 (inception) to December 31, 2003 in
conformity with United States generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses from operations, has a
working capital deficiency and has a shareholders' deficiency that raise
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to these matters is also described in Note 1. These financial
statements do not include any adjustments that may result from the outcome of
this uncertainty.
/s/ GOLDSTEIN GOLUB KESSLER LLP
New York, New York
April 22, 2004, except for Note 5, Note 8, and the last paragraph of Note 4, as
to which the date is December 20, 2004
F-2
ADVAXIS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, SEPTEMBER 30,
2002 2003 2004 2004
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited) (pro forma)
ASSETS
Current Asset - cash $ 204,382 $ 47,160 $ 48,045 $ 2,873,045
Intangible Assets 277,243 386,743 386,743
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 204,382 $ 324,403 $ 434,788 $ 3,259,788
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable $ 85,825 $ 1,018,936 $ 966,720 $ 966,720
Notes payable, current portion 25,408 607,990 607,990
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 85,825 1,044,344 1,574,710 1,574,710
Notes Payable, net of current portion 40,000 86,794 404,501 404,501
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 125,825 1,131,138 1,979,211 1,979,211
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Shareholders' Equity (Deficiency):
Common stock - $0.001 par value; authorized 500,000,000
shares, issued and outstanding 17,102,923 shares 17,103 17,103 17,103 3,149
Additional paid-in capital 228,390 252,843 302,042 3,140,996
Deficit accumulated during the development stage (166,936) (1,076,681) (1,863,568) (1,863,568)
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY (DEFICIENCY) 78,557 (806,735) (1,544,423) 1,280,577
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) $ 204,382 $ 324,403 $ 434,788 $ 3,259,788
====================================================================================================================================
The accompanying notes and the report of independent registered public
accounting firm should be read in conjunction with the financial statements.
F-3
ADVAXIS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
PERIOD FROM PERIOD FROM PERIOD FROM
MARCH 1, MARCH 1, MARCH 1,
2002 2002 NINE-MONTH NINE-MONTH 2002
(INCEPTION) TO YEAR ENDED (INCEPTION) TO PERIOD ENDED PERIOD ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2002 2003 2003 2003 2004 2004
(unaudited)
-------------------------------------------------------------------------------------------
Research and development expenses $ 50,899 $ 491,508 $ 542,407 $ 385,077 $ 228,880 $ 771,287
General and administrative expenses 117,003 405,568 522,571 337,107 468,132 990,703
Interest expense 17,190 17,190 7,539 46,048 63,238
Other income 966 4,521 5,487 505 57 5,544
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss (166,936) (909,745) (1,076,681) (729,218) (743,003) (1,819,684)
Dividends attributed to preferred stock 43,884 43,884
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss applicable to common stock $ (166,936) $ (909,745) $ (1,076,681) $ (729,218) $ (786,887) $ (1,863,568)
====================================================================================================================================
Basic and diluted net loss per share $ (0.01) $ (0.05) $ (0.06) $ (0.04) $ (0.05) $ (0.11)
====================================================================================================================================
Weighted-average number of shares 17,102,923 17,102,923 17,102,923 17,102,923 17,102,923 17,102,923
====================================================================================================================================
The accompanying notes and the report of independent registered public
accounting firm should be read in conjunction with the financial statements.
F-4
ADVAXIS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)
PERIOD FROM MARCH 1, 2002 (INCEPTION) TO SEPTEMBER 30, 2004
PREFERRED STOCK COMMON STOCK
NUMBER OF NUMBER OF DEFICIT ACCUMULATED SHAREHOLDERS'
SHARES SHARES ADDITIONAL DURING THE DEVELOPMENT EQUITY
OUTSTANDING AMOUNT OUTSTANDING AMOUNT PAID-IN CAPIT STAGE (DEFICIENCY)
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred stock issued 3,418.18 $ 235,000
Common stock issued 40,000 $ 40 $ (40)
Options granted to 10,493 10,493
consultants and
professionals
Net loss $ (166,936) (166,936)
Retroactive restatement to (3,418.18) (235,000) 17,062,923 17,063 217,937
reflect recapitalization
on November 12, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
2002 0 0 17,102,923 17,103 228,390 (166,936) 78,557
Note payable converted
into preferred stock 232.27 15,969 15,969
Options granted to
consultants and
professionals 8,484 8,484
Net loss (909,745) (909,745)
Retroactive restatement to
reflect recapitalization
on November 12, 2004 (232.27) (15,969) 15,969
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
2003 0 0 17,102,923 17,103 252,843 (1,076,681) (806,735)
(Unaudited):
Stock dividend on
preferred stock 638.31 43,884 (43,884)
Options granted to
consultants and
professionals 5,315 5,315
Net loss (743,003) (743,003)
Retroactive restatement to
reflect recapitalization
on November 12, 2004 (638.31) (43,884) 43,884
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30,
2004 $ 0 $ 0 17,102,923 $ 17,103 $ 302,042 $(1,863,568) $(1,544,423)
====================================================================================================================================
The accompanying notes and the report of independent registered public
accounting firm should be read in conjunction with the financial statements.
F-5
ADVAXIS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM PERIOD FROM NINE-MONTH NINE-MONTH PERIOD FROM
MARCH 1, 2002 MARCH 1, 2002 PERIOD PERIOD MARCH 1, 2002
(INCEPTION) TO YEAR ENDED (INCEPTION) TO ENDED ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,SEPTEMBER 30,SEPTEMBER 30,
2002 2003 2003 2003 2004 2004
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (166,936) $ (909,745) $(1,076,681) $ (729,218) $ (743,003) $(1,819,684)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Value assigned to options given as payment to
consultants and professionals 10,493 8,484 18,977 8,450 5,315 24,292
Amortization expense 14,970 14,970
Accrued interest on notes payable 3,171 3,171 2,378 27,800 30,971
Increase (decrease) in accounts payable 85,825 933,111 1,018,936 746,205 (52,216) 966,720
- ------------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (70,618) 35,021 (35,597) 27,815 (747,134) (782,731)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows used in investing activity - cost of
intangible assets (277,243) (277,243) (248,516) (124,470) (401,713)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from notes payable 40,000 85,000 125,000 25,969 872,489 997,489
Net proceeds on issuance of preferred stock 235,000 235,000 235,000
- ------------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 275,000 85,000 360,000 25,969 872,489 1,232,489
Net increase (decrease) in cash 204,382 (157,222) 47,160 (194,732) 885 48,045
Cash at beginning of period 204,382 204,382 47,160
- ------------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 204,382 $ 47,160 $ 47,160 $ 9,650 $ 48,045 $ 48,045
====================================================================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES:
Common stock issued to founders $ 40 $ 40 $ 40
====================================================================================================================================
Notes payable and accrued interest converted to $ 15,969 $ 15,969 $ 15,969 $ 15,969
preferred stock
====================================================================================================================================
Stock dividend on preferred stock $ 43,884 $ 43,884
====================================================================================================================================
The accompanying notes and the report of independent registered public
accounting firm should be read in conjunction with the financial statements.
F-6
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
1. PRINCIPAL Advaxis, Inc. (the "Company") was incorporated in 2002
BUSINESS and is a biotechnology company researching and
ACTIVITY AND SUMMARY developing new cancer-fighting techniques.
OF SIGNIFICANT
ACCOUNTING POLICIES:
The Company is in the development stage and its
operations are subject to all of the risks inherent in
an emerging business enterprise. The accompanying
financial statements have been prepared assuming the
Company will continue as a going concern. As shown in
the financial statements, the Company has incurred
losses from operations, and has a working capital
deficit of $971,776 and $1,526,665, and a shareholders'
deficiency of $806,735 and $1,544,423 at December 31,
2003 and September 30, 2004, respectively. Management
intends to raise additional funds through equity and to
develop technologies that will generate revenue that
will allow the Company to continue as a going concern.
These financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits.
Intangible assets, which consist primarily of legal
costs in obtaining trademarks and patents, are being
amortized on a straight-line basis over 15 and 17 years,
respectively.
The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be
recoverable. An asset is considered to be impaired when
the sum of the undiscounted future net cash flows
expected to result from the use of the asset and its
eventual disposition exceeds its carrying amount. The
amount of impairment loss, if any, is measured as the
difference between the net book value of the asset and
its estimated fair value.
BASIC LOSS PER SHARE IS COMPUTED BY DIVIDING NET LOSS BY
THE WEIGHTED-AVERAGE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING DURING THE PERIODS. DILUTED EARNINGS PER
SHARE GIVES EFFECT TO DILUTIVE OPTIONS, WARRANTS AND
OTHER POTENTIAL COMMON STOCK OUTSTANDING DURING THE
PERIOD. POTENTIAL COMMON STOCK HAS NOT BEEN INCLUDED IN
THE COMPUTATION OF DILUTED LOSS PER SHARE, AS THE EFFECT
WOULD BE ANTIDILUTIVE.
Deferred income taxes are provided for the differences
between the bases of assets and liabilities for
financial reporting and income tax purposes. A valuation
allowance is established when necessary to reduce
deferred tax assets to the amount expected to be
realized.
The preparation of financial statements in conformity
with accounting principles generally
F-7
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
accepted in the United States of America requires the
use of estimates by management. Actual results could
differ from these estimates.
The estimated fair value of the notes payable
approximates the carrying amount based on the rates
available to the Company for similar debt.
Accounts payable consists entirely of trade accounts
payable.
Research and development costs are charged to expense as
incurred.
Management does not believe that any recently issued,
but not yet effective, accounting standards if currently
adopted would have a material effect on the accompanying
financial statements.
The Company has elected to apply APB Opinion No. 25 and
related interpretations in accounting for its stock
options granted to employees and has adopted the
disclosure-only provisions of SFAS No. 123. Had the
Company elected to recognize compensation cost based on
the fair value of the options granted at the grant date
as prescribed by SFAS No. 123, the Company's net loss
would have been as follows:
Period from
March 1, 2002
(date of Year
inception) to ended period ended Nine-month
December 31, December 31, September 30,
------------------------------------------------------------------------------------------
2002 2003 2003 2004
Net loss, as reported $(166,936) $(909,745) $(729,218) $(743,003)
Deduct stock options
compensation expense
determined under fair-value-
based method (8,566) (32,923) (4,280) (61,983)
------------------------------------------------------------------------------------------
Adjusted net loss $(175,502) $(942,668) $(733,498) $(804,986)
==========================================================================================
Basic and diluted loss per
share, as reported $ (.01)$ (.05) $ (0.04) $ (0.05)
==========================================================================================
Basic and diluted loss per
share, pro forma $ (.01)$ (.05) $ (0.04) $ (0.05)
==========================================================================================
F-8
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
The Company accounts for nonemployee stock-based awards
in which goods or services are the consideration
received for the equity instruments issued based on the
fair value of the equity instruments in accordance with
the guidance provided in the consensus opinion of the
Emerging Issues Task Force ("EITF") Issue 96-18,
Accounting for Equity Instruments that Are Issued to
Other than Employees for Acquiring, or in Conjunction
With Selling Goods or Services.
THE ACCOMPANYING UNAUDITED INTERIM FINANCIAL STATEMENTS
HAVE BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES FOR INTERIM FINANCIAL INFORMATION
AND THE REQUIREMENTS OF ITEM 310(B) OF REGULATION S-B.
ACCORDINGLY, CERTAIN INFORMATION AND FOOTNOTE
DISCLOSURES NORMALLY INCLUDED IN FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES HAVE BEEN CONDENSED OR OMITTED
PURSUANT TO THE RULES AND REGULATIONS OF THE SECURITIES
AND EXCHANGE COMMISSION. THE RESULTS OF OPERATIONS FOR
THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2004 ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS OF OPERATIONS
EXPECTED FOR THE YEAR ENDED DECEMBER 31, 2004.
In the opinion of management, the accompanying unaudited
interim financial statements for the nine-month periods
ended September 30, 2004 and 2003 include all
adjustments (consisting only of those of a normal
recurring nature) necessary for a fair statement of the
results of the interim period.
2. INTANGIBLE Intangible assets consist of the following:
ASSETS
December 31, 2003
------------------------------------------------------------------------------------------
Trademarks $ 8,243
Patents 269,000
------------------------------------------------------------------------------------------
$277,243
==========================================================================================
Estimated amortization expense is as follows:
Year ending December 31,
2004 $18,483
2005 18,483
2006 18,483
2007 18,483
2008 18,483
F-9
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
During the nine-month period ended September 30, 2004,
the Company acquired $124,470 of new patents.
Amortization expense during the period amounted to
$14,970.
Notes payable consist of the following:
December 31, 2003 2002
----------------------------------------------------------------------------------------
Note payable with interest at 6% per annum, due on
December 31, 2005. The amount is mandatorily
convertible at the time of the closing of the
Company's contemplated $2,000,000 equity financing
into the same class of shares issued at the equity
financing at a conversion price per share
equivalent to the price per share in the equity
financing. Upon closing of an equity financing
which is less than $2,000,000, the holder has the
right to convert, at the holder's option, into the
same class of shares issued at the equity financing
at a conversion price per share equivalent to the
price per share in the equity financing. $ 10,060
Note payable with interest at 8% per annum, due on
November 10, 2008. 10,112
Note payable with interest at 8% per annum, due on
December 17, 2008. 40,122
Note payable with interest at 6% per annum, due on
December 31, 2004. The amount is mandatorily
convertible at the time of the closing of the
Company's contemplated $2,000,000 equity financing
into the same class of shares issued at the equity
financing at a conversion price per share
equivalent to the price per share in the equity
financing. Upon closing of an equity financing
which is less than $2,000,000, the holder has the
right to convert, at the holder's option, into the
same class of shares issued at the equity financing
at a conversion price per share equivalent to the
price per share in the equity financing. 25,408
(continued)
F-10
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
December 31, 2003 2002
------------------------------------------------------------------------------------------
Note payable with interest at 6% per annum, due on
June 30, 2005. The amount is convertible at the
holder's option into Series A convertible preferred
stock at a price per share of $68.75. $ 26,500 $25,000
Note payable with interest at 6% per annum, due and
payable on June 30, 2005. The amount is
convertible at the holder's option into Series A
convertible preferred stock at a price per share of
$68.75. The full amount of this note plus accrued
interest of $969 was converted into 232.27
shares of Series A preferred stock on September 22,
2003. 15,000
------------------------------------------------------------------------------------------
112,202 40,000
Less current portion 25,408
------------------------------------------------------------------------------------------
$ 86,794 $40,000
==========================================================================================
Aggregate maturities of notes payable at December
31, 2003 are as follows:
Year ending December 31,
2004 $ 25,408
2005 36,560
2006
2007
2008 50,234
------------------------------------------------------------------------------------------
$112,202
==========================================================================================
During the nine-month period ended September 30,
2004, the Company entered into various convertible
loan agreements amounting to $872,489, which
accrue interest at 8% per annum and expire at
various dates through 2008. A portion of these
loans was converted into common stock at the time
of the Company's recapitalization (see Note 8).
F-11
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
4. STOCK OPTION The Company has adopted the Advaxis, Inc. 2002 Stock
Option Plan (the "Plan"), which allows for grants up to
8,000 shares of the Company's common stock. The Plan
shall be administered and interpreted by the Company's
board of directors.
Stock option activity during the periods indicated is as
follows:
Weighted-
average
Options Exercise
Granted Price
------------------------------------------------------------------------------------------
Granted from the period March 1, 2002 (inception)
to December 31, 2002 4,522 $73.63
Outstanding at December 31, 2002 4,522 73.63
Granted 1,286 97.47
------------------------------------------------------------------------------------------
Outstanding at December 31, 2003 5,808 $78.91
==========================================================================================
Vested and exercisable at December 31, 2003 2,835 $89.55
==========================================================================================
At December 31, 2003, the weighted exercise prices
and weighted-average remaining contractual life of
outstanding options were $78.91 and 8.87 years,
respectively.
The fair value of each option is estimated on the
date of grant using the Black-Scholes
option-pricing model with the following
assumptions used for grants in 2003 and 2002:
dividend yield of 0%; average risk-free interest
rates of 6%; volatility of 0%; and an expected
life of 10 years in each year.
Also under the Plan, the Company has granted 3,430
options to purchase the Company's common stock
that are being accounted for under variable plan
accounting because these options have an exercise
price that is subject to a one-time price
adjustment following the next round of equity
financing. Accordingly, each period, increases in
the stock price of the Company will result in a
charge to operations for the increase in the
Company's stock price multiplied by the number of
these options still outstanding. However, there
has been no fluctuation in the Company's stock
price from inception to December 31, 2003 and, as
such, no charge has been taken on the accompanying
statement of operations.
F-12
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
On November 12, 2004, in connection with the
recapitalization (see Note 8), the above options were
canceled, and employees and consultants were granted
options of Great Expectations. The pro forma disclosures
in Note 1 are presented for the options outstanding
prior to the recapitalization.
5. SHAREHOLDERS' Prior to the recapitalization (see Note 8), the Company
EQUITY: had convertible preferred stock with $.001 par value and
50,000 shares authorized. 6,000 of those shares were
designated as Series A and 3,418.18, 3,650.45, and
3.640.45 were issued and outstanding at December 31,
2002, December 31, 2003 and September 30, 2004,
respectively. The Company also had 100,000 shares
authorized of $.001 par value common stock with 40,000
shares issued and outstanding at December 31, 2002 and
2003, and at September 30, 2004.
The preferred stock and common stock amounts were
retroactively restated to reflect the effects of the
recapitalization on November 12, 2004 (see Note 8).
6. COMMITMENTS AND Pursuant to multiple consulting agreements and a
CONTINGENCIES: licensing agreement, the Company is contingently liable
for the following:
The Company is obligated to pay $35,500 to two
consultants upon receiving financing of $1,000,000 or
greater.
The Company is obligated to pay $20,000 to two
consultants upon receiving financing of $500,000 or
greater and an additional $20,000 upon receiving
financing of $2,000,000 or greater.
The Company is obligated to pay $91,000 to two
consultants upon receiving financing of $4,000,000 or
greater.
Under a licensing agreement, the Company has agreed to
pay $525,000 over a four-year period as a royalty after
the first commercial sale of a product under the
license. The Company is also obligated to pay annual
license maintenance fees ranging from $25,000 to
$125,000 per year after the first commercial sale of a
product under the license. The Company is also obligated
to pay up to $660,000 to the licensor upon receiving
financing. The amount due is contingent upon the size of
the financing.
As of December 31, 2003, the Company has an employment
agreement with a key executive through December 31,
2004. The agreement shall be automatically renewed for
one-year periods unless the Company or the key executive
gives the other party written consent of its intent not
to renew at least 30 days prior to the end of the term
of the contract. The agreement provides for an annual
base salary of $150,000, which will be adjusted to
$225,000 to $250,000 per annum once the Company closes
on its next round of equity financing.
F-13
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
The Company is also obligated under two employment
agreements to pay approximately $220,000 per annum to
two employees upon the closing of the next round of
equity financing.
F-14
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
7. Income Taxes: The Company has a net operating loss carryforward of
approximately $1,800,000 available to offset taxable
income through 2023.
The tax effects of loss carryforwards give rise to a
deferred tax asset and a related valuation allowance as
follows:
Net operating losses $ 720,000
Less valuation allowance (720,000)
--------------------------------------------------------
Deferred tax asset $ - 0 -
========================================================
The difference between income taxes computed at
the statutory federal rate of 34% and the provision for
income taxes relates to the following:
Period from
March 1, 2002 Nine-month
(inception) to Year ended period ended
December 31, December 31, September 30,
2002 2003 2004 2003
---------------------------------------------------------------------------------------------
(unaudited)
Provision at federal statutory rate 34% 34% 34% 34%
Valuation allowance (34) (34) (34) (34)
---------------------------------------------------------------------------------------------
-0-% -0-% -0-% -0-%
=============================================================================================
8. SUBSEQUENT On November 12, 2004, Great Expectations and Associates,
EVENTS: Inc. ("Great Expectations") acquired the Company through
a share exchange and reorganization (the
"Recapitalization"), pursuant to which the Company
became a wholly owned subsidiary of Great Expectations.
Great Expectations acquired (i) all of the issued and
outstanding shares of common stock of the Company and
the Series A preferred stock of the Company in exchange
for an aggregate of 15,597,723 shares of authorized, but
theretofore unissued, shares of common stock, no par
value, of Great Expectations; (ii) all of the issued and
outstanding warrants to purchase the Company's common
stock, in exchange for warrants to purchase 584,885
shares of Great Expectations; and (iii) all of the
issued and outstanding options to purchase the Company's
common stock in exchange for an aggregate of 2,381,525
options to purchase common stock of Great Expectations,
constituting approximately 96% of the common stock of
Great Expectations prior to the issuance of shares of
common stock of Great Expectations in the private
placement described below. Prior to the closing of the
Recapitalization, Great Expectations performed a
200-for-1 reverse stock split, thus reducing the issued
and outstanding shares of common stock of Great
Expectations from 150,520,000 shares to 752,600 shares.
Additionally, 752,600 shares of common stock of Great
Expectations were issued to the financial advisor in
connection with the Recapitalization. Pursuant to the
Recapitalization, there are 17,102,923 common shares
outstanding in Great Expectations.
F-15
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
As a result of the transaction, the former shareholders
of Advaxis are the controlling shareholders of the
Company. Additionally, prior to the transaction, Great
Expectations had no substantial assets. Accordingly, the
transaction is treated as a reverse acquisition of a
public shell, and the transaction has been accounted for
as a recapitalization of Advaxis, rather than a business
combination. The historical financial statements of
Advaxis are now the historical financial statements of
the Company. Historical shareholders' equity
(deficiency) of Advaxis has been restated to reflect the
recapitalization, and include the shares received in the
transaction.
Pro forma information has not been presented since the
transaction is not a business combination.
Subsequent to September 30, 2004, Great Expectations
sold to accredited investors at an initial closing of a
private placement offering 117 units at $25,000 per unit
for an aggregate purchase price of $2,925,000. Great
Expectations issued to the Placement Agent and/or its
designees an aggregate of 2,057,160 shares of common
stock and warrants to acquire up to an aggregate of
2,038,328 shares of common stock. Each unit is comprised
of (i) 87,108 shares of common stock, no par value, of
Great Expectations ("Common Stock") and (ii) a five-year
warrant (each a "Warrant" and collectively the
"Warrants) to purchase 87,108 shares of 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 the Company
("Advaxis Notes") including accrued interest, were
converted into units on the same terms as the Units
sold. The holders of the Advaxis 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 the Advaxis Notes plus accrued
interest thereon. As of September 30, 2004, such
convertible notes, including accrued interest, amounted
to $580,190. The Company is continuing to market the
units and presently intends to market up to a maximum
aggregate of $7,000,000 of said units but, may yet, in
its sole discretion, increase the offering to a maximum
aggregate of $10,000,000. Pursuant to the
Recapitalization and the first closing of the private
placement, there are 31,488,160 common shares
outstanding in Great Expectations.
F-16
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
The accompanying pro forma balance sheet reflects the
private placement as if it had occurred on September 30,
2004.
Pursuant to the Recapitalization and the first closing
of the private placement, there are 2,381,525 options to
purchase the Company's common stock outstanding. These
options have a 10-year life and vest ratably over a
four-year period. A summary of the options outstanding
are as follows:
Options Exercise Price
--------------------------------------------------------
1,966,939 $0.1952
14,087 $0.2839
35,639 $0.2870
227,509 $0.3549
137,351 $0.4259
--------------------------------------------------------
2,381,525
========================================================
Pursuant to the Recapitalization and the first closing
of the private placement, there are 14,951,292 warrants
to purchase the Company's common stock outstanding. A
summary of the warrants outstanding are as follows:
Amount Exercise Price Expiration
--------------------------------------------------------
2,543,553 $0.20 2009
35,218 $0.28 2011
142,555 $0.29 2007
2,038,328 $0.29 2009
10,191,638 $0.40 2009
--------------------------------------------------------
14,951,292
========================================================
F-17
ADVAXIS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
- --------------------------------------------------------------------------------
(information related to the nine-month periods ended September 30, 2004 and 2003
is unaudited)
- --------------------------------------------------------------------------------
On December 20, 2004, the Company entered into an
Amended and Restated Employment Agreement with J. Todd
Derbin, its current chief executive officer and
president ("Employment Agreement"). Pursuant to the
terms of the Employment Agreement, Mr. Derbin shall
serve as the Company's chief executive officer and
president for a period of one year commencing on January
1, 2005. The Employment Agreement may be extended, in
writing, by the Company and Mr. Derbin. Mr. Derbin's
salary shall be $200,000, provided that it shall be
increased to $225,000 or $250,000 based upon certain
milestones of the Company as set forth in the Employment
Agreement. In addition, Mr. Derbin shall be entitled to
bonuses in the form of equity and/or cash as set forth
in the Employment Agreement and he shall be entitled to
receive non-qualified stock options to purchase common
stock of the Company (the "Options"), the amount of
which when added to his existing 1,172,767 options shall
equal 5% of the total issued and outstanding common
stock of the Company, as of March 31, 2005. One-half of
the Options shall vest on the grant date and one-half of
the Options shall vest monthly over four years at a rate
of 1/48th per month. The grant of the Options is subject
to the Company adopting a 2005 Stock Option Plan, which
is subject to stockholder approval.
F-18
56,320,114 Shares
ADVAXIS, INC.
Common Stock
------------------
PROSPECTUS
____________, 2005
------------------
Until [__________], 2005, all dealers that buy, sell, or trade the common stock,
may be required to deliver a prospectus, regardless of whether they are
participating in this offering. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our articles of incorporation and by-laws include provisions to (1)
indemnify the directors and officers to the fullest extent permitted by the
Colorado Revised Statutes, including circumstances under which indemnification
is otherwise discretionary and (2) eliminate the personal liability of directors
and officers for monetary damages resulting from breaches of their fiduciary
duty, except for liability for breaches of the duty of loyalty, acts, or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, violations under Section 7-108-704 of Colorado Law, or for any
transaction from which the director derived an improper personal benefit. We
believe that these provisions are necessary to attract and retain qualified
persons as directors and officers.
We will enter into an indemnification agreement with each of our directors
which provides that we will indemnify our directors and advance expenses to our
directors, to the extent permitted by the laws of the State of Colorado.
We have directors and officers liability insurance in an amount not less
than $1 million.
Insofar as indemnification for liability arising under the Act may be
permitted to our directors, officers and controlling persons as stated in the
foregoing provisions or otherwise, we have been advised that, in the opinion of
the SEC, this indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, if any, payable by the Registrant
relating to the sale of common stock being registered. All amounts are estimates
except the SEC registration fee.
SEC registration fee.......................................... $6,628.94*
Printing and engraving expenses............................... $10,000*
Legal fees and expenses....................................... $25,000*
Accounting fees and expenses.................................. $5,000*
Transfer agent and registrar's fees and expenses.............. $10,000*
Miscellaneous expense......................................... $3,371.06*
Total........................................ ........$60,000*
- ----------
* Estimates only.
RECENT SALES OF UNREGISTERED SECURITIES
During the last three years, we have issued unregistered securities to the
persons, as described below. None of these transactions involved any
underwriters, underwriting discounts or commissions, except as specified below,
or any public offering, and we believe that each transaction was exempt from the
registration requirements of the Securities Act of 1933 by virtue of Section
4(2) thereof and/or Regulation D promulgated thereunder. All recipients had
adequate access, though their relationships with us, to information about us.
II-1
We issued on November 12, 2004 pursuant to the Share Exchange, 16,350,323
shares of our common stock, 2,381,525 options to purchase shares of common stock
and 584,885 warrants to purchase shares of common stock.
We issued on November 12 ,2004 pursuant to the conversion of $595,000
principal amount of outstanding promissory notes, 2,136,441 shares of our common
stock and warrants to purchase 2,136,441 shares of our common stock.
On November 12, 2004 in connection with the first closing of the Private
Placement we issued 12,248,798 shares of our common stock and 12,229,966
warrants to purchase shares of our common stock.
On November 12, 2004 we issued a warrant to purchase 60,000 shares of
common stock to RB Holdings, LLC, an affilate of Reitler Brown & Rosenblatt LLC
in connection with legal services rendered.
On December 8, 2004, in connection with the second closing of the Private
Placement we issued 834,843 shares of our common stock and 836,237 warrants to
purchase shares of our common stock.
On January 4, 2005, in connection with the third and final closing of the
Private Placement we issued 534,299 shares of our common stock and 535,192
warrants to purchase shares of our common stock.
On January 12, 2005, in connection with the closing of a second private
placement offering, we issued 3,832,752 shares of our common stock and 3,832,752
warrants to purchase shares of our common stock.
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
Exhibi t3.1 Amended and Restated Articles of Incorporation.
Incorporated by reference to Exhibit 3.1 to Report on Form 8K
filed with the SEC on December 27, 2004.
Exhibit 3.2 Amended and Restated Bylaws. Incorporated by reference to
Exhibit 3.1 to Report on Form 8K filed with the SEC on
December 27, 2004.
Exhibit 4.1 Form of Warrant issued to purchasers. Incorporated by
reference to Exhibit 4.1 to Report on Form 8K filed with the
SEC on November 18, 2004.
Exhibit 4.2 Form of Warrant issued to Placement Agent. Incorporated by
reference to Exhibit 4.2 to Report on Form 8K filed with the
SEC on November 18, 2004.
Exhibit 5.1 Opinion of Frascona, Joiner, Goodman and Greenstein, PC
II-2
Exhibit 10.1 Share and Exchange Agreement, dated as of August 25,
2004, by and among the Company, Advaxis and the shareholders
of Advaxis. Incorporated by reference to Exhibit 10.1 to
Report on Form 8K filed with the SEC on November 18, 2004.
Exhibit 10.2 Form of Securities Purchase Agreement, by and among the
Company and the purchasers listed as signatories thereto.
Incorporated by reference to Exhibit 10.2 to Report on Form 8K
filed with the SEC on November 18, 2004.
Exhibit 10.3 Form of Registration Rights Agreement, by and among the
Company and the persons listed as signatories thereto.
Incorporated by reference to Exhibit 10.3 to Report on Form 8K
filed with the SEC on November 18, 2004.
Exhibit 10.4 Form of Standstill Agreement, by and among the Company
and persons listed on Schedule 1 attached thereto.
Incorporated by reference to Exhibit 10.4 to Report on Form 8K
filed with the SEC on November 18, 2004.
Exhibit 10.5 Amended and Restated Employment Agreement, dated December
20, 2004, by and between the Company and J.Todd Derbin.
Incorporated by reference to Exhibit 10.1 to Report on Form 8K
filed with the SEC on December 23, 2004.
Exhibit 10.6 2004 Stock Option Plan of the Company. Incorporated by
reference to Exhibit 10.1 to Report on Form 8K filed with the
SEC on December 27, 2004.
Exhibit 10.7 License Agreement, dated as of June 17, 2002, by and
between Advaxis and The Trustees of the University of
Pennsylvania.*
Exhibit 10.8 Non-Exclusive License and Bailment, dated as of March 17,
2004, betweeen The Regents of the University of California and
Advaxis, Inc.*
Exhibit 10.9 Consultancy Agreement, dated as of January 19, 2005, by
and between LVEP Management, Inc. and the Company.*
Exhibit 10.10 Government Funding Agreement, dated as of April 5, 2004,
by and between David Carpi and Advaxis, Inc.*
Exhibit 10.11 Amended and Restated Consulting and Placement Agreement,
dated as of May 28, 2003, by and between David Carpi and
Advaxis, Inc., as amended*
Exhibit 10.12 Consultancy Agreement, dated as of January 22, 2005, by
and between Dr. Yvonne Paterson and Advaxis, Inc.*
Exhibit 10.13 Consultancy Agreement, dated as of March 15, 2003, by
and between Dr. Joy A. Cavagnaro and Advaxis, Inc.*
II-3
Exhibit 10.14 Grant Writing Agreement, dated June 19, 2003, by and
between DNA Bridges, Inc. and Adavaxis, Inc.*
Exhibit 10.15 Consulting Agreement, dated as of July 2, 2004, by and
between Sentinel Consulting Corporation and Advaxis, Inc.*
Exhibit 10.16 Agreement, dated July 7, 2003, by and between Cobra
Biomanufacturing PLC and Advaxis, Inc.*
Exhibit 10.17 Securities Purchase Agreement, dated as of January 12,
2005, by and between the Company and Harvest Advaxis LLC.
Incorporated by reference to Exhibit 10.1 to Report on Form 8K
filed with the SEC on January 18, 2005.
Exhibit 10.18 Registration Rights Agreement, dated as of January 12,
2005, by and between the Company and Harvest Advaxis LLC.
Incorporated by reference to Exhibit 10.2 to Report on Form 8K
filed with the SEC on January 18, 2005.
Exhibit 10.19 Letter Agreement, dated as of January 12, 2005 by and
between the Company and Robert T. Harvey. Incorporated by
reference to Exhibit 10.3 to Report on Form 8K filed with the
SEC on January 18, 2005.
Exhibit 10.20 Consultantcy Agreement, dated as of January 15, 2005, by
and between Dr. David Filer and the Company.*
Exhibit 10.21 Consultancy Agreement, dated as of January 15, 2005, by
and between Pharm-Olam International Ltd. and the Company.*
Exhibit 10.22 Agreement, dated February 1, 2004, by and between
Strategic Growth International Inc. and the Company.
Exhibit 14.1 Code of Ethics. Incorporated by reference to Exhibit 14.1
to Report on Form 8K filed with the SEC on November 18, 2004.
Exhibit 21.1 Advaxis, Inc., a Delaware corporation
Exhibit 23.1 Consent of Goldstein Golub Kessler LLP
Exhibit 23.2 Consent of Frascona, Joiner, Goodman and Greenstein, PC
(included in Exhibit 5.1 above)
Exhibit 24.1 Power of Attorney (Included on the signature page)
- ----------
* To be filed by amendment.
II-4
UNDERTAKINGS
The undersigned small business issuer hereby undertakes to:
(1) For determining any liability under the Securities Act of 1933, treat
the information omitted from this form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b) (1), or (4) or
497(h) under the Securities Act of 1933 as part of this registration statement
as of the time the SEC declared it effective. (2) For determining any liability
under the Securities Act of 1933, treat each post-effective amendment that
contains a form of prospectus as a new registration statement for the securities
offered in this registration statement, and that offering of the securities at
that time as the initial BONA FIDE offering of those securities.
The undersigned small business issuer hereby undertakes with respect to
the securities being offered and sold in this offering: (1) To file, during any
period in which it offers or sells securities, a post-effective amendment to
this Registration Statement to:
(a) Include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(b) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(c) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act of 1933, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification by the undersigned small business issuer for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the small business issuer
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Princeton, Mercer County, State of
New Jersey, on the 2nd day of February, 2005.
ADVAXIS, INC.
By: /s/ J. Todd Derbin
-------------------------------------
J. Todd Derbin,
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person who signature appears
below constitutes and appoints J. Todd Derbin as his true and lawful
attorneys-in-fact and agents, with full power of substitution for him in any and
all capacities, to sign (1) any and all amendments (including post-effective
amendments) to this Registration Statement and (2) any registration statement or
post-effective amendment thereto to be filed with the Securities and Exchange
Commission pursuant to Rule 462(b) under the Securities Act of 1933, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said,
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ J. Todd Derbin
- -------------------- Chief Executive Officer and Director February 2, 2005
J. Todd Derbin (Principal Executive Officer
/s/ Roni Appel
- -------------------- Chief Financial Officer and Director
Roni Appel (Principal Financial and Accounting Officer) February 2, 2005
/s/ Scott Flamm
- --------------------
Scott Flamm Director February 2, 2005
/s/ Thomas McKearn
- --------------------
Thomas McKearn Director February 2, 2005
/s/ James Patton
- --------------------
James Patton Director February 2, 2005
/s/ Steven Roth
- --------------------
Steven Roth Director February 2, 2005
Exhibit 5.1
February 3, 2005
Advaxis, Inc.
212 Carnegie Center
Suite 206
Princeton, NJ 08540
Re: Registration Statement on Form SB-2
Gentlemen:
We have acted as special counsel to Advaxis, Inc. a Colorado
corporation (the "Company") with respect to Colorado law in connection with the
above Registration Statement on Form SB-2 of the Company, as amended
("Registration Statement") relating to shares of its Common Stock (the
"Shares"), namely: (i) outstanding shares of Common Stock held by certain
stockholders of the Company, and (ii) shares of Common Stock to be offered upon
exercise of certain outstanding Warrants.
We have reviewed a copy of the Company's Amended and Restated
Articles of Incorporation on file with the Colorado Secretary of State, as well
as copies of its By-laws, as amended, the Warrants, the minutes of the relevant
corporate proceedings and such other documents as we deemed pertinent to this
opinion.
We have assumed the accuracy of the information set forth in the
Registration Statement without an independent investigation.
Based on the foregoing, it is our opinion that the Shares when
offered by means of the prospectus which is part of the Registration Statement
will be legally issued, fully paid and nonassessable.
We are furnishing this opinion solely to you. It may not be relied
upon by any other person, or for any other purpose, or used, circulated, quoted
or otherwise referred to for any other purpose.
We hereby consent to the reference to our firm under the caption
"Legal Matter" in the prospectus and the filing of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
/s/ Frascona, Joiner, Goodman & Greenstein, P.C.
Frascona, Joiner, Goodman & Greenstein, P.C.
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GOLDSTEIN GOLUB KESSLER LLP
Certified Public Accountants and Consultants
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NEXIA
INTERNATIONAL
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Advaxis, Inc.
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form SB-2 of our report dated April 22, 2004 (except
for certain matters as to which the date is December 20, 2004) on the financial
statements of Advaxis, Inc. as of December 31, 2003 and 2002 which appear in
such Prospectus. We also consent to the reference to our Firm under the captions
"Experts" and "Summary Financial Data of Advaxis" in such Prospectus.
/s/ GOLDSTEIN GOLUB KESSLER LLP
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
January 28, 2005
1185 Avenue of the Americas Suite 500 New York, NY 10036-2602
TEL 212 372 1800 FAX 212 372 1801 www.ggkllp.cpm
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