March
30,
2007
United
States
Securities
and Exchange Commission
Attn:
Mr.
Jim B. Rosenberg, Senior Assistant Chief Accountant
100
F
Street N.E.
Washington,
DC 20549
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Re:
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Advaxis,
Inc.
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Form
10-K for Fiscal Year Ended October 31, 2006
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Filed
on February 13, 2007
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File
No. 000-28489
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Dear
Mr.
Rosenberg:
Per
your
request the Company’s responses to the comments in your letter dated February
23, 2007 concerning Advaxis, Inc. Form 10-K for fiscal year ended October 31,
2006 are as follows:
Accounting
Policies:
| 1. |
“Clarify
for us as proposed disclosure if you capitalize all costs related
to
acquiring patents or only those costs where a patent is obtained.
If you
capitalize all costs, indicate how you account for capitalized costs
when
the patent is not granted. Tell us if you have written off any costs
related to patents not obtained in the years presented or if any
costs
capitalized at October 31, 2006 relate to patents that were not obtained.
If patents pending are material, disclose those amounts separately
from
patents held. Disclose the nature of the licenses capitalized and
explain
why it is appropriate to capitalize the costs rather than expense
them as
research and development as
incurred.”
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Response:
Advaxis,
Inc. (the “Company”) has historically capitalized the costs for patent
expenditures (for patents granted and pending) and all License cost under the
license agreement (Agreement) with the University of Pennsylvania (Penn). The
Company writes-off any capitalized cost related to patent or patent applications
that are abandoned or do not support subsequent patent filings. The Company
has
not abandoned any of its patents and patent applications that would materially
affected the future value of its patents.
In
terms
of breaking down the assets between patents issued and pending, the Company
was
not able to provide that breakdown given that all historical and current patent
cost information was recorded by the law firms and Penn as a docket and that
a
docket includes both issued and pending patents as well as patent application’s
in process. It believes a reasonable estimate of the patent pending assets
can
be determined based on the age of the docket and number of patents pending
versus issued within a docket therefore the total value of all patents pending
is $555,000 out of $976,000 gross intangible assets.
In
the
patent asset category the Company recorded $490,893 as capitalized patent
expenditures. This asset is amortized over 20 years based on the life of
the
agreement. All of the historical and current costs are summarized by docket
number and not by patent or patent application. A docket refers to a subject
on
which a patent application or applications are filed. A docket number can
contain several applications, usually related. Sometimes related applications
are assigned to more than one docket number-if, for example, the inventor
lists
are not identical. Thus a summary by patent number is not available. However,
if
a docket is abandoned or a portion of a docket is abandoned a reasonable
estimate can be made to value the impairment and to write down the
asset.
In
the
License category the Company recorded $485,123 as an asset with Penn amounting
to $482,000 and the University of California amounting to $3,123. The License
and Patent assets are amortized over 20 years based on the life of the
agreement. This license agreement supports the Company’s efforts to
commercialize the entire Listeria System for cancer vaccines and that is why
it
is capitalized.
The
determination to capitalize our patents and licenses and why they should
be
capitalized, is based on management’s assessment of the ultimate recoverability
of the amounts paid and the potential for alternative future uses. All
capitalized license costs and patent costs represent the value assigned to
the
20-year exclusive worldwide license with Penn. Advaxis, Inc. is a Biotech
company engaged in the attempt to commercialize a safe and effective cancer
vaccine (s) that utilizes multiple mechanisms of immunity. The Company uses
a
Listeria System licensed from Penn to secrete a protein sequence containing
a
tumor-specific antigen. Using the Listeria System the Company believes it
can
force the body’s immune system to attack the cancer. Thus the Company believes
the Listeria System to be a broadly enabling platform technology that can
be
applied to many types of cancer. The patents form a web of support, each
contributing to add value. The Company is in a phase I clinical study and
as it
gains new information, the asset portfolio will be further analyzed for any
impairment.
Exhibit
A. hereto contains our draft of the disclosure language under footnote # 1
Critical Accounting Policies and the footnote # 3. Intangible Assets: for
inclusion in all future filings.
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2.
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“Form
SB-2 File No. 333-122504 filed in 2005 states that trademarks are
being
amortized over 15 years and patents are being amortized over 17 years.
Please justify to us the change in life to 20
years.”
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Response:
The
information on the SB-2 filed in 2005 referred to above was misstated and
corrected and amended on March 9, 2006. All subsequent filings have reflected
the proper amortization period of 20 years.
Exhibit
31.1
Certification
- Pursuant to Section 301 of the Sarbanes Oxley Act of
2002
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3.
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“Please
amend your filing and revise this Exhibit and Exhibit 31.2 so that
their
language is exactly the same as the language required by Item 601(b)(31)
of Regulation S-B.”
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Response:
Per
your
request, on March 6, 2007, we amended the filings related to the Exhibit 31.1
and 31.2.
The
Company acknowledges the following:
| · |
The
Company is responsible for the adequacy and accuracy of the disclosure
in
the filings;
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| · |
Staff
comments or changes to disclosure in response to staff comments do
not
foreclose the Commission from taking any action with respect to the
filing; and
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| · |
The
Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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If
you
have any questions, please contact me.
Sincerely,
/s/
Fred
Cobb
Fred
Cobb
Vice
President Finance, Principal Financial Officer
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c:
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Ibolya
Ignat, Staff Accountant
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Lisa
Vanjoske, Assistant Chief Accountant
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Exhibit
A.
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CRITICAL
ACCOUNTING POLICIES:
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Intangible
assets consist primarily of the Penn license agreement costs ($485,123), as
well
as legal and filing costs associated with obtaining trademarks ($74,948) and
patents ($490,893). Capitalized license and patent costs represent the value
assigned to the Company’s 20-year exclusive worldwide license with the Penn. The
value of the license and patents are based on management’s assessment regarding
the ultimate recoverability of the amounts paid and the potential for
alternative future uses. This license includes the exclusive right to exploit
11
issued and 15 pending patents as well as the option to license new inventions
developed in Dr. Paterson’s laboratory. Management exercised its rights under
the Penn Agreement to gain the exclusive rights of up to eighteen additional
inventions and intends to fund research at Dr. Paterson’s laboratory to exploit
the findings of future inventions. As of October 31, 2006, capitalized costs
associated with patents filed and granted approximately $421,000 and the costs
associated with patents pending or in the application process are $555,000.
The
expirations of existing patents range from 2014 to 2020. Capitalized costs
associated with patent applications that are abandoned (none of a material
nature as of October 31, 2006) are charged to expense when the determination
is
made not to pursue the application or it has no future value. There have been
no
patent applications abandoned and charged to expense in the current or prior
years that were material in value. Amortization expense for Trademarks, licensed
technology and capitalized patent cost is included in general and administrative
cost and are amortized over 20 years.
The
Company reviews long-lived assets for impairment whenever events or changes
in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An asset is considered to be impaired when the sum of the
undiscounted future net cash flows expected to result from the use of the asset
and its eventual disposition exceeds its carrying amount. The amount of
impairment loss, if any, is measured as the difference between the net book
value of the asset and its estimated fair value.
3.
INTANGIBLE ASSETS:
Intangible
assets consist of trademarks, patents,
and
licenses that are amortized on a straight-line basis over their remaining useful
lives, which are estimated to be twenty years.
Capitalized license and patent costs represent the value assigned to the
Company’s 20 year exclusive worldwide license with the University of
Pennsylvania, based on management’s assessment regarding the ultimate
recoverability of the amounts paid and the potential for alternative future
uses. This license includes the exclusive right to exploit 11 issued and 15
pending patents as well as the option to license new inventions developed in
Dr.
Paterson’s laboratory. Management exercised its rights under the Penn Agreement
to gain the exclusive rights of up to eighteen additional inventions and intends
to fund research at Dr. Paterson’s laboratory to exploit the findings of future
inventions. As of October 31, 2006, capitalized costs associated with patents
filed and granted approximately $421,000 and the costs associated with patents
pending or in the application process are $555,000. The expirations of existing
patents range from 2014 to 2020. Capitalized costs associated with patent
applications that are abandoned (none of a material nature as of October 31,
2006) are charged to expense when the determination is made not to pursue the
application or it has no future value. There have been no patent applications
abandoned and charged to expense in the current or prior years that were
material in value. Amortization expense for Trademarks, licensed technology
and
capitalized patent cost is included in general and administrative cost and
are
amortized over 20 years.
Intangible
assets consist of the following at October 31, 2006:
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Trademarks
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$
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74,948
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Patents
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490,893
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License
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485,123
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Less:
Accumulated Amortization
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(94,555
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)
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$
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956,409
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As
of
October 31, 2006, the estimated annual amortization expense for patents,
licenses and trademarks for each of the succeeding five years total $262,740
as
follows:
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Year
ending October 31,
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2007
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$
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52,548
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2008
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52,548
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2009
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52,548
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2010
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52,548
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2011
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52,548
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Amortization
expense of intangibles amounted to $45,068 and $33,669 for the years ended
October 31, 2006 and 2005, respectively.