UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A No. 3
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of
The
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported) November 12, 2004
|
Advaxis,
Inc. |
|
(Exact
name of registrant as specified in its
charter) |
|
Colorado |
00028489 |
841521955 |
|
(State
or other jurisdiction |
(Commission |
(IRS
Employer |
|
of
incorporation) |
File
Number) |
Identification
No.) |
|
212
Carnegie Center, Ste 206, Princeton, NJ |
08540 |
|
(Address
of principal executive offices) |
(Zip
Code) |
Registrant’s
telephone number, including area code (609)
844-7755
|
(Former
name or former address, if changed since last
report.) |
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
This is
Amendment No. 32 to the Current Report on Form 8-K dated November 12, 2004 and
filed with the Securities and Exchange Commission on November 18, 2004 (the
“Original Filing”), for the purpose of amending and restating the financial
statements of Advaxis, Inc., a Delaware corporation (“Advaxis”) which were
initially filed in Amendment No. 1 to Current Report on Form 8-K dated November
12, 2004 and filed with the Securities and Exchange Commission on January 11,
2005 and then subsequently amended and restated and filed in Amendment No. 2 to
the Current Report on Form 8-K dated November 12, 2004 and filed with the
Securities and Exchange Commission on April 7, 2005.
Item
9.01 Financial Statements and Exhibits
A.
Financial Statements of Business Acquired
Advaxis,
Inc. Financial Statements for (i) the years ended December 31, 2003 and the
period from March 1, 2002 (inception) to December 31, 2002 with independent
auditors report (including Balance Sheet, Statement of Operations, Statement of
Shareholders’ Equity (Deficiency), Statement of Cash Flows, and Notes to
Financial Statements) and (ii) the nine-months ended September 30, 2004 and 2003
(unaudited) (including Balance Sheet, Statement of Operations, Statement of
Shareholders’ Equity (Deficiency), Statement of Cash Flows).
B.
Pro Forma Financial Information
None.
C.
Exhibits
|
Exhibit
99.1 |
Advaxis,
Inc. Financial Statements for (i) the year ended December 31, 2003 and the
period from March 1, 2002 (inception) to December 31, 2002 with
independent auditors report (including Balance Sheet, Statement of
Operations, Statement of Shareholders’ Equity (Deficiency), Statement of
Cash Flows, and Notes to Financial Statements) and (ii) the nine-months
ended September 30, 2004 and 2003 (unaudited) (including Balance Sheet,
Statement of Operations, Statement of Shareholders’ Equity (Deficiency),
Statement of Cash Flows). |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| ADVAXIS, INC. | ||
| |
|
|
| April 11, 2005 | By: | /s/ J. Todd Derbin |
|
Name: J. Todd Derbin | ||
| Title: President and Chief Executive Officer | ||
ADVAXIS,
INC.
(a
development stage company)
FINANCIAL
STATEMENTS
DECEMBER
31, 2003
ADVAXIS,
INC.
(a
development stage company)
CONTENTS
December
31, 2003
|
Report
of Independent Registered Public Accounting Firm |
1 |
|
Financial
Statements: |
|
|
Balance
Sheet |
2 |
|
Statement
of Operations |
3 |
|
Statement
of Shareholders' Equity (Deficiency) |
4 |
|
Statement
of Cash Flows |
5 |
|
Notes
to Financial Statements |
6 -
14 |
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.
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
1185
Avenue of the Americas Suite 500 New York, NY
10036-2602
TEL 212
372 1800 FAX 212 372 1801 www.ggkllp.com
NEXIA
INTERNATIONAL IS A WORLDWIDE NETWORK OF INDEPENDENT ACCOUNTING AND CONSULTING
FIRMS
1
|
ADVAXIS,
INC. |
|||||||||||||
|
(a
development stage company) |
|||||||||||||
|
BALANCE
SHEET
|
|||||||||||||
|
December
31, |
September
30, |
|||||||||
|
2002 |
2003 |
2004 |
||||||||
|
(unaudited) |
||||||||||
| ASSETS | ||||||||||
|
Current
Asset - cash |
$ |
204,382 |
$ |
47,160 |
$ |
48,045 |
||||
|
Intangible
Assets |
277,243
|
386,743
|
||||||||
|
Total
Assets |
$ |
204,382 |
$ |
324,403 |
$ |
434,788 |
||||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY (DEFICIENCY) |
|||||||||||||
|
Current
Liabilities: |
||||||||||
|
Accounts
payable |
$ |
85,825 |
$ |
1,018,936 |
$ |
966,720 |
||||
|
Notes
payable, current portion |
25,408
|
607,990
|
||||||||
|
Total
current liabilities |
85,825
|
1,044,344
|
1,574,710
|
|||||||
|
Notes
Payable, net of current portion |
40,000
|
86,794
|
404,501
|
|||||||
|
Total
liabilities |
125,825
|
1,131,138
|
1,979,211
|
|||||||
|
Commitments
and Contingencies |
||||||||||
|
Shareholders'
Equity (Deficiency): |
||||||||||
|
Convertible
Preferred Stock - $0.001 par value; authorized 50,000 shares; Designated
as Series A Preferred Stock - 6,000 shares, issued and outstanding
4,288.96, 3,650.45, and 3,418.18 shares at September 30, 2004, December
31, 2003 and 2002, respectively |
$ | 235,000 | $ | 250,969 | $ | 294,853 | ||||
|
Common
stock - $0.01 par value; authorized 100,000 |
||||||||||
|
shares,
issued and outstanding 40,000 shares |
40 |
40 |
40 |
|||||||
|
Additional
paid-in capital |
10,453 |
18,937 |
24,252 |
|||||||
|
Deficit
accumulated during the development stage |
(166,936 |
) |
(1,076,681 |
) |
(1,863,568 |
) | ||||
|
Shareholders'
equity (deficiency) |
78,557
|
(806,735 |
) |
(1,544,423 |
) | |||||
|
Total
Liabilities and Shareholders' Equity (Deficiency) |
$ |
204,382 |
$ |
324,403 |
$ |
434,788 |
The accompanying notes and the report of independent registered
public
accounting firm should be read in conjunction with the financial statements
accounting firm should be read in conjunction with the financial statements
2
|
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) |
(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 | $ |
(4.17 |
) |
$ |
(22.74 |
) |
$ |
(26.92 |
) |
$ |
(18.23 |
) |
$ |
(19.67 |
) |
$ |
(46.59 |
) | |
| Weighted-average number of shares |
40,000 |
40,000 |
40,000 |
40,000 |
40,000 |
40,000 |
|||||||||||||
The accompanying notes and the report of independent registered public
accounting firm should be read in conjunction with the financial statements
3
|
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 |
|
|
|
|
|
Deficit
Accumulated |
|
|
| ||||||||||
|
|
Number
of |
|
|
|
Number of |
|
|
|
Additional |
|
During
the |
|
Shareholders' |
| |||||||
|
|
Shares |
|
|
|
Shares |
|
|
|
Paid-in |
|
Development |
|
Equity |
| |||||||
|
|
|
Outstanding |
|
Amount |
|
Outstanding |
|
Amount |
|
Capital |
|
Stage |
|
(Deficiency) |
||||||||
|
Preferred
stock issued |
3,418.18
|
$ |
235,000 |
$ |
235,000 |
|||||||||||||||||
|
Common
stock issued |
40,000
|
$ |
40 |
$ |
(40 |
) |
||||||||||||||||
| Options granted to consultants and | ||||||||||||||||||||||
|
professionals |
10,493
|
10,493
|
||||||||||||||||||||
|
Net
loss |
$ |
(166,936 |
) |
(166,936 |
) | |||||||||||||||||
|
Balance
at December 31, 2002 |
3,418.18 |
235,000 |
40,000 |
40 |
10,453 |
(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 |
) | ||||||||||||||||||
|
Balance
at December 31, 2003 |
3,650.45 |
250,969 |
40,000 |
40 |
18,937 |
(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 |
) | ||||||||||||||||||
|
Balance
at September 30, 2004 |
4,200.76 |
$ |
294,853 |
40,000 |
$ |
40 |
$ |
24,252 |
$ |
(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
accounting firm should be read in conjunction with the financial statements
4
|
ADVAXIS,
INC. | |||||||||||||||||||||||
|
(a
development stage company) | |||||||||||||||||||||||
|
STATEMENT
OF CASH FLOWS
| |||||||||||||||||||||||
|
|
|
Period from March 1, 2002 (inception) to December 31, 2002 |
|
Year ended December 31, 2003 |
|
Period from March 1, 2002 (inception) to December 31, 2003 |
|
Nine-month period ended September 30, 2003 |
|
Nine-month period ended September 30, 2004 |
|
Period from March 1, 2002 (inception) to September 30, 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
preferred stock |
$ |
15,969 |
$ |
15,969 |
$ |
15,969 |
$ |
15,969 |
|||||||||||
|
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
accounting firm should be read in conjunction with the financial statements
5
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)
(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 BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
Advaxis,
Inc. (the "Company") was incorporated in 2002 and is a biotechnology
company researching and developing new cancer-fighting
techniques.
The
Company is in the development stage and its operations are subject to all
of the risks inherent in an emerging business enterprise. The 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.
In accordance with Securities and Exchange Commission (SEC)
Staff Accounting Bulletin (SAB) No. 104, revenue from license fees and
grants is recognized when the following criteria are met; persuasive
evidence of an arrangement exists, services have been rendered, the
contract price is fixed or determinable, and collectibility is reasonably
assured. In licensing arrangements, delivery does not occur for
revenue recognition purposes until the license term begins.
Nonrefundable upfront fees received in exchange for products delivered or
services performed that do not represent the culmination of a separate
earnings process will be deferred and recognized over the term of the
agreement.
For revenue contracts that contain multiple elements, the
Company will determine whether the contract includes multiple units of
accounting in accordance with EITF No. 00-21, Revenue Arrangements
with Multiple Deliverables. Under that guidance, revenue
arrangements with multiple deliverables are divided into separate units of
accounting if the delivered item has value to the customer on a standalone
basis and there is objective and reliable evidence of the fair value of
the undelivered item.
The
Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits.
Intangible
assets, which consist primarily of legal costs in obtaining trademarks and
patents, are being amortized on a straight-line basis over 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 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. |
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)
(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 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 inception) to |
Year
ended |
Nine-month
period ended |
|||||||||||
|
December
31, |
December
31, |
September
30, |
|||||||||||
|
2002 |
2003 |
2003 |
2004 |
||||||||||
|
Net
loss, as reported |
$ |
(166,936 |
) |
$ |
(909,745 |
) |
$ |
(729,218 |
) |
$ |
(743,00 |
) | |
|
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 |
$ |
(4.17 |
) |
$ |
(22.74 |
) |
$ |
(18.23 |
) |
$ |
(19.67 |
) | |
|
Basic
and diluted loss per |
|||||||||||||
|
share,
pro forma |
$ |
(4.39 |
) |
$ |
(23.57 |
) |
$ |
(18.34 |
) |
$ |
(20.12 |
) | |
|
|
|
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.
|
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)
|
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 ASSETS: | Intangible assets consist of the following: |
|
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 |
|
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. | ||
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)
| 3. | NOTES PAYABLE: | 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)
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)
|
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). |
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)
(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 OPTIONS: | The Company has adopted the Advaxis, Inc. 2002 Stock Option Plan (the "Plan"), which allows for grants up to 8,000 shares of the Company's common stock. 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. | ||
|
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.
The cancellation and replacement had no accounting
consequence since the aggregate intrinsic value of the options immediately
after the cancellation and replacement was not greater than the aggregate
intrinsic value immediately before the cancellation and replacement, and
the ratio of the exercise price per share to the fair value per share was
not reduced. Additionally, the original options were not modified to
accelerate vesting or extend the life of the new
options. |
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)
(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)
| 5. | SHAREHOLDERS’ EQUITY: |
Prior
to the recapitalization (see Note 8), the Company had convertible
preferred stock with $.001 par value and 50,000 shares authorized. 6,000
of those shares were designated as Series A and 3,418.18, 3,650.45, and
3.640.45 were issued and outstanding at December 31, 2002, December 31,
2003 and 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 CONTINGENCIES: |
Pursuant
to multiple consulting agreements and a 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. | ||
|
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. |
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)
(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
(inception) to |
Year
ended |
Nine-month 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 EVENTS: |
On November 12, 2004, Great Expectations and Associates,
Inc. ("Great Expectations") acquired the Company through a share exchange
and reorganization (the "Recapitalization"), pursuant to which the Company
became a wholly owned subsidiary of Great Expectations. Great Expectations
acquired (i) all of the issued and outstanding shares of common stock of
the Company and the Series A preferred stock of the Company in exchange
for an aggregate of 15,597,723 shares of authorized, but theretofore
unissued, shares of common stock, no par value, of Great Expectations;
(ii) all of the issued and outstanding warrants to purchase the Company's
common stock, in exchange for warrants to purchase 584,885 shares of Great
Expectations; and (iii) all of the issued and outstanding options to
purchase the Company's common stock in exchange for an aggregate of
2,381,525 options to purchase common stock of Great Expectations,
constituting approximately 96% of the common stock of Great Expectations
prior to the issuance of shares of common stock of Great Expectations in
the private placement described below. Prior to the closing of the
Recapitalization, Great Expectations performed a 200-for-1 reverse stock
split, thus reducing the issued and outstanding shares of common stock of
Great Expectations from 150,520,000 shares to 752,600 shares.
Additionally, 752,600 shares of common stock of Great Expectations were
issued to the financial advisor in connection with the Recapitalization.
Pursuant to the Recapitalization, there are 17,102,923 common shares
outstanding in Great Expectations. |
|
As
a result of the transaction, the former shareholders of Advaxis are the
controlling shareholders of the Company. Additionally, prior to the
transaction, Great Expectations had no substantial assets. Accordingly,
the transaction is treated as a recapitalization of a public shell, 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. | ||
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)
|
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 |
|||||||
|
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. |
|
14 |