|
OMB
APPROVAL
|
OMB
Number: 3235-0416
Expires:
January 31, 2007
Estimated
Average burden
Hours
per response……136
|
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
(Mark
One)
x
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
quarterly period ended July 31, 2006
o
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For
the
transition period from to ________________ to
Commission
file number
000
28489
Advaxis,
Inc.
(Exact
name of small business issuer as specified in its charter)
Delaware
|
841521955
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
The
Technology Center of New Jersey, 675 Route 1, Suite 119, North Brunswick, NJ
08902
(Address
of principal executive offices)
(732)
545-1590
(Issuer’s
telephone number)
Great
Expectations and Associates Inc.
(Former
name, former address and former fiscal year, if changed since last
report)
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes
x
No
o
State
the
number of shares outstanding of each of the issuer’s classes of common equity,
as of July 31, 2006:
39,150,100
shares outstanding of the Company’s Common Stock, par value $.001 per share
Transitional
Small Business Disclosure Format (Check one): Yes
o
No
x
Persons
who are to respond to the collection of information contained in this form
are
not required to respond unless the form displays a currently valid OMB control
number.
ADVAXIS,
INC.
(A
Development Stage Company)
July
31, 2006
INDEX
|
Page
No.
|
|
|
PART
I - FINANCIAL INFORMATION
|
|
|
|
Item
1. Condensed Financial Statements
|
|
|
|
Condensed
Balance Sheet at July 31, 2006 (unaudited)
|
3
|
|
|
Condensed
Statements of Operations for the three and nine-month periods ended
July
31, 2006 and 2005 and the period March 1, 2002 (inception) to July
31,
2006 (unaudited)
|
4
|
|
|
Condensed
Cash Flow Statements for the nine-month periods ended July 31, 2006
and
2005 and the period March 1, 2002 (inception) to July 31, 2006
(unaudited)
|
5
|
|
|
Notes
to Condensed Financial Statements
|
7
|
|
|
Item
2. Plan of Operations
|
12
|
|
|
Item
3. Controls and Procedures
|
14
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
Item
1. Legal Proceedings
|
15
|
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
15
|
|
|
Item
4. Submission of Matters to a Vote of Security Holders
|
15
|
|
|
Item
5. Other Information
|
15
|
|
|
Item
6. Exhibits and Reports on Form 8-K
|
16
|
|
|
SIGNATURES
|
17
|
|
|
CERTIFICATIONS
|
18
|
PART
I
Item
1. Financial Statements
ADVAXIS,
INC.
(A
Development Stage Company)
Condensed
Balance Sheet
|
|
July
31, 2006
|
|
|
|
(Unaudited)
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash
|
|
$
|
3,347,222
|
|
Prepaid
expenses
|
|
|
34,973
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
3,382,195
|
|
|
|
|
|
|
Property
and Equipment (net of accumulated depreciation of $20,037)
|
|
|
66,944
|
|
|
|
|
|
|
Intangible
Assets (net of accumulated amortization of $81,798)
|
|
|
908,323
|
|
|
|
|
|
|
Deferred
Financing Costs (net of accumulated amortization of
$39,019)
|
|
|
220,981
|
|
|
|
|
|
|
Other
Assets
|
|
|
19,216
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
4,597,659
|
|
|
|
|
|
|
LIABILITIES
& SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
800,541
|
|
|
|
|
|
|
Accrued
expenses
|
|
|
339,981
|
|
|
|
|
|
|
Notes
payable - current portion
|
|
|
60,568
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
1,201,090
|
|
|
|
|
|
|
Interest
payable
|
|
|
78,037
|
|
|
|
|
|
|
Notes
payable - net of current portion
|
|
|
443,000
|
|
|
|
|
|
|
Convertible
Secured Debentures
|
|
|
2,266,799
|
|
|
|
|
|
|
Embedded
Derivative Liability
|
|
|
562,716
|
|
|
|
|
|
|
Common
Stock Warrants Liability
|
|
|
266,370
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
4,818,012
|
|
|
|
|
|
|
Shareholders’
Equity:
|
|
|
|
|
Common
Stock - $0.001 par value; authorized 500,000,000 shares, issued
and
outstanding
39,150,100
|
|
|
39,150
|
|
Additional
Paid-In Capital
|
|
|
5,652,963
|
|
|
|
|
|
|
Deficit
accumulated during the development stage
|
|
|
(5,912,466
|
)
|
Total
Shareholders' Equity
|
|
|
(220,353
|
)
|
TOTAL
LIABILITIES & SHAREHOLDERS’ EQUITY
|
|
$
|
4,597,659
|
|
See
accompanying notes to condensed financial statements.
ADVAXIS,
INC.
(A
Development Stage Company)
Condensed
Statement of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Period
from
|
|
|
|
3
Months
|
|
3
Months
|
|
9
Months
|
|
9
Months
|
|
March
1, 2002
|
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
(Inception)
to
|
|
|
|
July
31,
|
|
July
31,
|
|
July
31,
|
|
July
31,
|
|
July
31,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
Revenue
|
|
$
|
-
|
|
$
|
440,851
|
|
$
|
397,312
|
|
$
|
440,851
|
|
$
|
1,070,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
& Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
262,257
|
|
|
401,278
|
|
|
1,098,190
|
|
|
965,783
|
|
|
2,942,074
|
|
General
& Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
426,497
|
|
|
444,628
|
|
|
1,444,068
|
|
|
847,605
|
|
|
3,710,800
|
|
Total
Operating expenses
|
|
|
688,754
|
|
|
845,906
|
|
|
2,542,258
|
|
|
1,813,388
|
|
|
6,652,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(688,754
|
)
|
|
(405,055
|
)
|
|
(2,144,946
|
)
|
|
(1,372,537
|
)
|
|
(5,582,288
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(151,100
|
)
|
|
(1,008
|
)
|
|
(265,109
|
)
|
|
(6,299
|
)
|
|
(293,837
|
)
|
Other
Income
|
|
|
27,928
|
|
|
17,459
|
|
|
63,290
|
|
|
31,371
|
|
|
108,813
|
|
Net
changes in fair value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
stock warrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
liability
and embedded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
derivative
liability
|
|
|
128,652
|
|
|
-
|
|
|
(101,271
|
)
|
|
-
|
|
|
(101,271
|
)
|
Net
loss
|
|
|
(683,274
|
)
|
|
(388,604
|
)
|
|
(2,448,036
|
)
|
|
(1,347,465
|
)
|
|
(5,868,583
|
)
|
Dividends
attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
preferred
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss applicable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
$
|
(683,274
|
)
|
$
|
(388,604
|
)
|
$
|
(2,448,036
|
)
|
$
|
(1,347,465
|
)
|
$
|
(5,912,467
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share, basic and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
|
|
$
|
(0.02
|
)
|
$
|
(0.01
|
)
|
$
|
(0.06
|
)
|
$
|
(0.04
|
)
|
$
|
(0.25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
diluted
|
|
|
38,880,998
|
|
|
37,319,731
|
|
|
38,294,316
|
|
|
35,180,722
|
|
|
24,008,053
|
|
See
accompanying notes to condensed financial statements.
ADVAXIS,
INC.
(A
Development Stage Company)
Condensed
Statement of Cash Flows
(Unaudited)
|
|
9
Months ended
July
31,
|
|
9
Months ended
July
31,
|
|
Period
from March 1
2002
(Inception) to July 31,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,448,036
|
)
|
$
|
(1,347,467
|
)
|
$
|
(5,868,582
|
)
|
Adjustments
to reconcile net loss
|
|
|
|
|
|
|
|
|
|
|
to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Non-cash
charges to consultants and employees for options and stock
|
|
|
326,108
|
|
|
42,527
|
|
|
582,102
|
|
Amortization
of deferred financing costs
|
|
|
39,019
|
|
|
-
|
|
|
39,019
|
|
Non-cash
interest expense
|
|
|
144,614
|
|
|
159,982
|
|
|
144,614
|
|
Accrued
interest on notes payable
|
|
|
81,028
|
|
|
11,299
|
|
|
93,336
|
|
Loss
on change in value of warrants and embedded derivative
|
|
|
101,271
|
|
|
|
|
|
101,271
|
|
Value
of penalty shares issued
|
|
|
|
|
|
117,498
|
|
|
117,498
|
|
Depreciation
expense
|
|
|
12,605
|
|
|
3,442
|
|
|
20,037
|
|
Amortization
expense of intangibles
|
|
|
32,311
|
|
|
24,248
|
|
|
84,969
|
|
Increase
in prepaid expenses
|
|
|
(34,973
|
)
|
|
|
|
|
(34,973
|
)
|
Increase
in other assets
|
|
|
(14,616
|
)
|
|
(4,600
|
)
|
|
(19,216
|
)
|
Increase
(decrease) in accounts payable
|
|
|
148,654
|
|
|
(200,145
|
)
|
|
1,115,747
|
|
Increase
in accrued expenses
|
|
|
339,981
|
|
|
-
|
|
|
339,981
|
|
Net
cash used in operating activities
|
|
|
(1,272,034
|
)
|
|
(1,193,216
|
)
|
|
(3,284,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Cash
paid on acquisition of Great Expectations
|
|
|
-
|
|
|
(44,940
|
)
|
|
(44,940
|
)
|
Purchase
of property and equipment
|
|
|
(6,404
|
)
|
|
(79,028
|
)
|
|
(86,981
|
)
|
Cost
of intangible assets
|
|
|
(189,546
|
)
|
|
(221,166
|
)
|
|
(906,211
|
)
|
Net
cash used in Investing Activities
|
|
|
(195,950
|
)
|
|
(345,134
|
)
|
|
(1,038,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from convertible secured debenture
|
|
|
3,000,000
|
|
|
-
|
|
|
3,000,000
|
|
Cash
paid for deferred financing costs
|
|
|
(260,000
|
)
|
|
-
|
|
|
(260,000
|
)
|
Proceeds
from notes payable
|
|
|
|
|
|
|
|
|
671,224
|
|
Net
proceeds of issuance of Preferred Stock
|
|
|
|
|
|
|
|
|
235,000
|
|
Net
proceeds of issuance of Common Stock
|
|
|
|
|
|
4,023,327
|
|
|
4,023,327
|
|
Net
cash provided by Financing Activities
|
|
|
2,740,000
|
|
|
4,023,327
|
|
|
7,669,551
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
1,272,016
|
|
|
2,484,977
|
|
|
3,347,222
|
|
Cash
at beginning of period
|
|
|
2,075,206
|
|
|
32,279
|
|
|
0.00
|
|
Cash
at end of period
|
|
$
|
3,347,222
|
|
$
|
2,517,256
|
|
$
|
3,347,222
|
|
See
accompanying notes to condensed financial statements.
Supplemental
Schedule of Noncash Investing and Financing Activities
|
|
9
Months
|
|
9
Months
|
|
Period
from
|
|
|
|
ended
|
|
ended
|
|
March
1, 2002
|
|
|
|
July
31,
|
|
July
31,
|
|
(Inception)
to
|
|
|
|
2006
|
|
2005
|
|
July
31, 2006
|
|
Common
Stock issued to Founders
|
|
|
|
|
|
|
|
$
|
40
|
|
Notes
payable and accrued interest
|
|
|
|
|
|
|
|
|
|
|
converted
to Preferred Stock
|
|
|
|
|
|
|
|
$
|
15,969
|
|
Stock
dividend on Preferred Stock
|
|
|
|
|
|
|
|
$
|
43,884
|
|
Notes
payable and accrued interest
|
|
|
|
|
|
|
|
|
|
|
converted
to Common Stock
|
|
$
|
150,000
|
|
$
|
613,158
|
|
$
|
763,158
|
|
Intangible
assets acquired with notes payable
|
|
|
|
|
|
|
|
$
|
360,000
|
|
Debt
discount in connection with recording the original value
of
|
|
|
|
|
|
|
|
|
|
|
the
embedded derivative liability
|
|
$
|
512,865
|
|
|
|
|
$
|
512,865
|
|
Allocation
of the original secured convertible debentures to
|
|
|
|
|
|
|
|
|
|
|
warrants
|
|
$
|
214,950
|
|
|
|
|
$
|
214,950
|
|
ADVAXIS,
INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
1.
Business description
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”).
The
accompanying unaudited interim consolidated financial statements include all
adjustments (consisting only of those of a normal recurring nature) necessary
for a fair statement of the results of the interim period. These interim
Financial Statements should be read in conjunction with the Company’s Financial
Statements and Notes for the year ended October 31, 2005 filed on form
10-KSB.
Since
inception through July 31, 2006, all of the Company’s revenue has been from
grants. For the three and nine-month periods ended July 31, 2006, all of the
revenue was received from three National Institute of Health (“NIH”)
grants.
2.
Stock-based Employee Compensation Expense
Effective
November 1, 2005, the Company adopted the fair value based method of accounting
for stock-based employee compensation under the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 123 (revised 2004),
Accounting
for Stock-Based Payment
(“SFAS
123(R)”) which requires the measurement and recognition of compensation expense
for all share-based payment awards made to employees and directors for employee
stock options based on estimated fair values. SFAS 123(R) supersedes the
Company’s previous accounting under the Accounting Principles Board Option No.
25, Accounting for Stock Issued to Employees” (“APB 25”) for periods beginning
in fiscal 2006. The adoption of SFAS 123R may materially impact our future
results of operations, although it will have no impact on our overall liquidity.
The
Company adopted SFAS 123(R) using the modified prospective transition method,
which requires the application of the accounting standard as of November 1,
2005, the first day of the Company’s fiscal year 2006. The Company’s Condensed
Financial Statements for the nine months ended July 31, 2006 reflect the impact
of SFAS 123(R). In accordance with the modified prospective transition method,
the Company’s Condensed Financial Statements for prior periods have not been
restated to reflect, and do not include the impact of SFAS 123(R). Stock-based
compensation expense for the three and nine months ended July 31, 2006 was
$12,656 and $46,766, respectively which consists of stock-based compensation
expense related to employee and director stock options. Stock-based compensation
expense was not reflected for the three months and nine months ended July 31,
2005 for employee stock based awards in which goods or services were the
consideration received for the equity instrument issued based on the fair value
of the equity instrument in accordance with the previous accounting standard.
The
Company began recognizing expense, in an amount equal to the fair value of
share-based payments (stock option awards) on their date of grant, over the
vesting period of the awards. Under the modified prospective method,
compensation expense for the Company is recognized for all share based
payments granted and vested on or after November 1, 2005 and all awards
granted to employees prior to November 1, 2005 that were unvested on that date
but vested in the period. Prior to the adoption of the fair value method, the
Company accounted for stock-based compensation to employees under the intrinsic
value method of accounting set forth in Accounting Principles Board Opinion
No. 25,
Accounting
for Stock Issued to Employees
,
and
related interpretations. Therefore, compensation expense related to employee
stock options was not reflected in operating expenses in any period prior to
the
first quarter of 2006 and prior period results have not been restated. In the
three months and nine months ended July 31, 2005, had the Company adopted the
fair value based method of accounting for stock-based employee compensation
under the provisions of SFAS No. 123, Stock Option Expense would have
totaled $52,701 and $136,702 respectively, and the effect on the Company’s net
income and net income per share would have been as follows:
|
|
Three
Months
Ended
July
31,
2005
|
|
Nine
Months
Ended
July
31,
2005
|
|
Net
loss, as reported
|
|
$
|
(388,604
|
)
|
$
|
(1,347,465
|
)
|
Add:
Stock based compensation expense included in recorded net
income
|
|
|
20,748
|
|
|
42,527
|
|
Deduct:
total stock-based employee compensation expense determined under
fair
|
|
|
|
|
|
|
|
value
based method for all awards
|
|
|
(52,701
|
)
|
|
(136,702
|
)
|
|
|
|
|
|
|
|
|
Net
loss, as reported
|
|
|
|
|
|
|
|
Pro
forma net loss
|
|
$
|
(420,557
|
)
|
$
|
(1,441,640
|
)
|
Net
loss per share amounts; basic and diluted:
|
|
|
|
|
|
|
|
As
reported
|
|
$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
Pro
forma
|
|
$
|
(0.01
|
)
|
$
|
(0.04
|
)
|
The
fair
value of each option granted from the Company’s stock option plans during the
three and nine months ended July 31, 2006 was estimated on the date of grant
using the Black-Scholes option-pricing model. Using this model, fair value
is
calculated based on assumptions with respect to (i) expected volatility of
the Company’s Common Stock price, (ii) the periods of time over which employees
and Board Directors are expected to hold their options prior to exercise
(expected lives), (iii) expected dividend yield on the Company’s Common
Stock, and (iv) risk-free interest rates, which are based on quoted U.S.
Treasury rates for securities with maturities approximating the options’
expected lives. Expected volatility for a development stage biotechnology
company is very difficult to estimate as such; management has based its estimate
in part on actual movements in the Company’s stock price (0.06% to 0.36%
volatility), and used the volatility of other companies in our industry and
market size for the periods. Various factors and events may have a significant
impact on the market price of our common stock as such factors out of management
control may lead to swings in the estimated volatility. Expected lives are
based using the simplified method for estimating the expected life. The expected
dividend yield is zero as the Company has never paid dividends and does not
currently anticipate paying any in the foreseeable future.
|
Quarter
Ended
|
|
July
31, 2006
|
|
July
31, 2005
|
Expected
volatility
|
50%
|
|
30%
|
Expected
Life
|
7.8
years
|
|
10
years
|
Dividend
yield
|
0
|
|
0
|
Risk-free
interest rate
|
5%
|
|
3%
|
Stock-based
compensation expense recognized during the period is based on the value of
the
portion of share-based payment awards that vested during the period. Stock-based
compensation expense for the three and nine months ended July 31, 2006 included
compensation expense for share-based payment awards granted prior to, but not
yet vested as of October 31, 2005 based on the grant date fair value
estimated in accordance with the pro forma provisions of SFAS 123 and
compensation expense for the share-based payment awards granted subsequent
to
October 31, 2005 based on the grant date fair value estimated in accordance
with
the provisions of SFAS 123(R). Compensation expense for all share-based payment
awards granted on or prior to October 31, 2005 will continue to be recognized
using SFAS 123 option approach while compensation expense for all share-based
payment awards granted subsequent to October 31, 2005 is recognized using SFAS
123 (R) single-option attribution method. As stock-based compensation expense
for the first nine months of 2006 is based on awards granted and vested, it
has
been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to
be
estimated at the time of grant and revised, if necessary, in subsequent periods
if actual forfeitures differ from those estimates. In the Company’s pro forma
information required under SFAS 123 for the periods prior to fiscal 2006, the
Company accounted for forfeitures as they occurred.
The
Company’s 2002 Stock Option Plan, which allowed for grants up to 8,000 shares of
the Company's common stock-was replaced by the Advaxis 2004 Option Plan (the
“2004 Plan”), which allows for grants up to 2,381,525 shares of the Company's
common stock. The board of directors and the Company’s shareholders approved and
adopted the 2005 Stock Option Plan (the “2005 Plan”), which allows for grants up
to an additional 5,600,000 shares of the Company's common stock. The 2004 Plan
and the 2005 Plan are administered and interpreted by the Company's board of
directors.
Both
the
2004 and 2005 Plans provide for the grant of options to purchase shares of
our
common stock to employees, officers, directors and consultants. These options
may be either “incentive stock options” or non-qualified options under the
Federal tax laws.
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.
Under
both Plans a stock option may not be transferred by an optionee (except when
agreed to by the board or the administrator of the 2005 Plan upon the death
or
disability of the employee) other than by will or the laws of descent and
distribution, and, during the lifetime of an optionee, the option will be
exercisable upon death or disability of the employee 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
to the extent then exercisable, unless otherwise determined by the board of
directors. If terminated 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.
Options
granted under the Plans must be made by November 11, 2014 under the 2004 Plan
and December 31, 2014 under the 2005 Plan. Under both Plans, the holders of
incentive stock options, subject to a number of exceptions, 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 or
by
delivery 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 permitted in an optionee’s
option, the optionee may 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 to the purchase of his original shares.
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.
A
summary
of the grants, cancellations and expirations (none were exercised) of the
Company’s outstanding options for the nine months ended July 31, 2006 is as
follows:
|
|
|
Shares
|
|
|
Weighted
Average Exercise Price
|
|
|
Remaining
Life
In Years
|
|
|
Aggregate
Intrinsic Value
|
Outstanding
as of October 31, 2005
|
|
|
4,842,539
|
|
$
|
0.27
|
|
|
|
|
|
|
Granted
|
|
|
1,933,179
|
|
$
|
0.23
|
|
|
|
|
|
|
Cancelled
or Expired
|
|
|
(116,641)
|
|
$
|
0.37
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Outstanding
as of July 31, 2006
|
|
|
6,659,077
|
|
$
|
0.25
|
|
|
7.8
|
|
$
|
-0-
|
Vested
& Exercisable at July 31, 2006
|
|
|
3,504,933
|
|
$
|
0.25
|
|
|
7.6
|
|
$
|
-0-
|
At
July
31, 2006, the weighted average price and weighted-average remaining contractual
life of outstanding options were $0.25 and 7.8 years,
respectively.
The
following table summarizes significant ranges of outstanding and exercisable
options as of July 31, 2006 (in thousands, except years and per-share amounts):
|
|
Options
Outstanding
|
|
Options
Exercisable
|
Range
of
Exercise
Prices
|
|
Number
Outstanding
|
|
Weighted-
Average
Remaining
Contractual
Life
(in Years)
|
|
Weighted-
Average
Exercise
Price
per
Share
|
|
Aggregate
Intrinsic
Value
|
|
Number
Exercisable
|
|
Weighted-
Average
Exercise
Price
per
Share
|
|
Aggregate
Intrinsic
Value
|
$0.19-0.21
|
|
2,608
|
|
6.7
|
|
$
|
0.20
|
|
$
|
0
|
|
1,825
|
|
$
|
0.20
|
|
$
|
0
|
0.24-0.26
|
|
760
|
|
9.7
|
|
|
0.26
|
|
|
0
|
|
25
|
|
|
0.26
|
|
|
0
|
0.28-0.29
|
|
2,970
|
|
8.5
|
|
|
0.29
|
|
|
0
|
|
1,333
|
|
|
0.29
|
|
|
0
|
0.35-0.43
|
|
322
|
|
6.6
|
|
|
0.37
|
|
|
0
|
|
322
|
|
|
0.37
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
6,659
|
|
7.8
|
|
$
|
0.25
|
|
$
|
0
|
|
3,505
|
|
$
|
0.25
|
|
$
|
0
|
The
aggregate intrinsic value in the preceding table represents the total pretax
intrinsic value, based on options with an exercise price less than the Company’s
closing stock price of $0.18 as of July 31, 2006, which would have been received
by the option holders had those option holders exercised their options as of
that date.
A
summary
of the status of the Company’s nonvested shares as of July 31, 2006, and changes
during the nine months ended July 31, 2006 are presented below:
|
|
Number
of
Shares
|
|
Weighted
Average Exercise Price at Grant Date
|
|
Weighted-Average
Remaining Contractural Term (in years)
|
|
Non-vested
shares at October 31, 2005
|
|
|
2,386,542
|
|
$
|
0.29
|
|
|
8.5
|
|
Options
granted
|
|
|
1,517,119
|
|
$
|
0.24
|
|
|
9.5
|
|
Options
vested
|
|
|
(749,517
|
)
|
$
|
0.28
|
|
|
8.8
|
|
Options
forfeited or expired
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
Non-vested
shares at July 31, 2006
|
|
|
3,154,144
|
|
$
|
0.26
|
|
|
9.1
|
|
As
of
July 31, 2006, there was approximately $384,000 of unrecognized compensation
cost related to non-vested stock option awards, which is expected to be
recognized over a remaining average vesting period of 3.0 years.
3.
Secured Convertible Debenture:
Pursuant
to a Securities Purchase Agreement dated February 2, 2006, we issued to Cornell
Capital Partners, LP (“Cornell”) $3,000,000 principal amount of the Company’s
Secured Convertible Debentures due February 1, 2009 (the “Debentures”) at face
amount, and five year Warrants to purchase 4,200,000 shares of Common Stock
at
the price of $0.287 per share and five year B Warrants to purchase 300,000
shares of Common Stock at a price of $0.3444 per share.
The
Debentures are convertible at a price equal to the lesser of (i) $0.287 per
share (“Fixed Conversion Price”), or (ii) 95% of the lowest volume weighted
average price of the Common Stock on the market on which the shares are listed
or traded during the 30 trading days immediately preceding the date of
conversion (“Market Conversion Price”). Interest is payable at maturity at the
rate of 6% per annum in cash or shares of Common Stock valued at the conversion
price then in effect.
Cornell
has agreed that (i) it will not convert the Debenture or exercise the Warrants
if the effect of such conversion or exercise would result in its and its
affiliates’ holdings of more than 4.9% of the outstanding shares of Common
Stock, (ii) neither it nor its affiliates will maintain a short position or
effect short sales of the Common Stock while the Debentures are outstanding,
and
(iii) no more than $300,000 principal amount of the Debenture may be converted
at the Market Conversion Price during a calendar month.
The
Company may call the Debentures for redemption at the Redemption Price at any
time or from time to time but not more than $500,000 principal amount may be
called during any 30 consecutive day period. The Redemption Price will be 120%
of the principal redeemed plus accrued interest. The Company has also granted
the holder an 18-month right of first refusal assuming the Debentures are still
outstanding with respect to the Company’s issuance or sale of shares of capital
stock, options, warrants or other convertible securities. Pursuant to a
Registration Rights Agreement, the Company has registered at its expense under
the Securities Act of 1933, as amended (the “Act”) shares of Common Stock which
may be received upon conversion or exercise for reoffering by the holders of
the
Debentures and of the A Warrants and B Warrants.
The
Company has granted the holders a first security interest on its assets as
security for payment of the Company’s obligations.
The
Company has also agreed that as long as there is outstanding at least $500,000
principal amount of Debentures it would not, without the consent of the
Debenture holder, issue or sell any securities at a price or warrants, options
or convertible securities with an exercise or conversion price less than the
bid
price, as defined, immediately prior to the issuance; grant a further security
interest in its assets or file a registration statement on Form
S-8.
In
the
event of a Debenture default the Debenture shall, at the holder’s election,
become immediately due and payable in cash or, at the holder’s option, may be
converted into shares of Common Stock. Events of default include failure to
pay
principal when due or interest within five days following due date; failure
to
cure breaches or defaults of covenants, agreements or warrants within 10 days
following written notice of such breach or default; the entry into a change
of
control transaction meaning (A) the acquisition of effective control of more
than 50% of the outstanding voting securities by an individual or group (not
including the holder or its affiliates), or (B) the replacement of more than
one-half of the Directors not approved by a majority of the Company’s directors
as of February 2, 2006 or by directors appointed by such directors or (C) the
Company entering into an agreement to effect any of the foregoing; bankruptcy
or
insolvency acts; breach or default which results in acceleration of the maturity
of other debentures, mortgages or credit facilities, indebtedness or factor
agreements involving outstanding principal of at least $100,000; breach of
the
Registration Rights Agreement as to the maintaining effectiveness of the
registration statement which results in an inability to sell shares by holder
for a designated period; failure to maintain the eligibility of the Common
Stock
to trade on at least the Over-the-Counter Bulletin Board, and failure to make
delivery within five trading days of certificates for shares to be issued upon
conversion or the date the Company publicly announces its intention not to
comply with requests for conversion in accordance with the Debenture
terms.
The
Company paid Yorkville Advisor, LLC $240,000 as a structuring fee and due
diligence fees of $15,000 and $5,000, respectively. The amounts paid to
Yorkville Advisor, LLC was capitalized and charged to interest expense over
the
three-year term of the Debentures since Yorkville is related to the holders
of
the Debentures by virtue of common ownership. The amounts charged as interest
for the three month and nine month periods ended July 31, 2006 were $21,977
and
$39,019, respectively.
The
net
proceeds after deducting legal and accounting fees and other expenses, will
be
used for working capital including Phase I and initiation of Phase II testing
of
its Lovoxin C, its first Listeria cancer immunotherapy in cervical cancer
patients, and acceleration of pre-clinical testing for several pipeline vaccines
including Lovaxin B and Lovaxin S for breast and ovarian cancer,
respectively.
In
accounting for the Debentures and the warrants described above the Company
considered the guidance contained in EITF 00-19, "Accounting for Derivative
Financial Instruments Indexed To, and Potentially Settled In, a Company's Own
Common Stock," and SFAS 133 “Accounting for Derivative Instruments and Hedging
Activities.” In accordance with the guidance provided in EITF 00-19, the Company
determined that the conversion feature of the convertible debentures represents
an embedded derivative since the debenture is convertible into a variable number
of shares based upon the conversion formula and the conversion clause allowing
cash or shares of common stock in payment to the debenture holders. Accordingly,
the convertible debentures are not considered to be “conventional” convertible
debt under EITF 00-19 and thus the embedded conversion feature must be
bifurcated from the debt host and accounted for as a derivative
liability.
The
Company is required to measure the fair value of the warrants and the embedded
conversion feature to be calculated using the Black-Scholes valuation model
on
the date of each reporting period until the debt is extinguished. The Company
allocated from the proceeds of the sale of the Debentures the relative fair
values at the date of origination of the sale for the warrants, embedded
derivative and the debenture principal. The fair value of the warrants was
calculated by using the Black-Scholes valuation model with the following
assumptions: (i) 4,200,000 warrants at market price of common stock on the
date
of sale of $0.21 per share, and exercise price of $0.287 and (ii) 300,000
warrants at the market price of common stock of $0.21 per share, and exercise
price of $0.3444, both at risk-free interest rate of 4.5%, expected volatility
of 30% and expected life of five years. The fair value of the warrants of
$214,950 was recorded as a reduction to the Debenture liability and will be
amortized over the loan period and charged to interest expense. The portion
of
the fair value of the warrants charged to interest expense for the three and
nine months period ended July 31, 2006 was $17,912 and $35,825,
respectively.
The
fair
value of the embedded conversion feature at the date of origination allocated
to
the Debentures liability was based on the Black-Scholes valuation model with
the
following assumptions: (i) the conversion price equal to 95% of the lowest
volume weighted average price of the Common Stock on the market on which the
shares are listed or traded during the 30 trading days immediately preceding
the
date of conversion, or $0.2293 during the quarter ending April 30, 2006 (most
beneficial conversion rate), (ii) the conversion price of $0.287, (iii) the
risk
free interest rate of 4.5%, (iv) expected volatility of 30% and (v) expected
life of three years. The fair value of the embedded conversion feature of
$512,865 was recorded as a reduction to the Debenture liability and will be
amortized over the loan period and charged to interest expense. The portion
of
the fair value of the embedded conversion feature charged to interest expense
for the three and nine months period ended July 31, 2006 was, $40,408 and
$108,790, respectively.
Convertible
Secured Debenture due February 1, 2009: 6% per annum
|
|
$
|
3,000,000
|
|
Common
Stock Warrant liability
|
|
|
($214,950
|
)
|
Embedded
derivative liability
|
|
|
($512,865
|
)
|
Convertible
Debenture as the date of sale
|
|
$
|
2,272,185
|
|
Amortization
of discount on warrants & embedded feature as of July 31,
2006
|
|
$
|
144,614
|
|
Conversion
by Cornell Capital Partners LP
|
|
|
($150,000
|
)
|
Convertible
Secured Debenture Liability as of July 31, 2006
|
|
$
|
2,266,799
|
|
On
the
following dates Cornell Capital Partners LP converted the convertible notes
into
shares of the Company’s Common Stock as follows:
April
20,
2006 and May 9, 2006 - $50,000 into 212,947 shares on each date at an average
share price of $0.2348/share.
July
6,
2006 - $25,000 into 112,918 shares at an average share price of
$0.2214/share.
July
19,
2006 - $25,000 in to 139,198 shares at an average share price of
$0.1769/share.
The
Company is required to continue to measure the fair value of the warrants and
embedded conversion feature at each reporting date using the Black-Scholes
valuation model based on the current assumptions at that point in time. The
July
31, 2006 fair value calculation resulted in a value different than the April
30,
2006 reporting period as reported below. The decrease in the fair market value
of the warrants and embedded conversion feature from the April 30, 2006 period
resulted in a non-cash income reported on the other income line item in the
Statement of Operations along with a corresponding decrease in the respective
Warrant and Embedded Derivative Liability.
The
change in fair value of the warrants from April 30, 2006 was calculated using
the Black-Scholes valuation model as of the July 31, 2006 reporting date with
the following assumptions: (i) 4,200,000 warrants at market price of Common
Stock on the date of sale of $0.18 per share, exercise price of $0.287 and
(ii)
300,000 warrants at the market price of Common Stock of $0.18 per share,
exercise price of $0.3444. Both sets of options have a risk-free interest rate
of 4.89%, expected volatility of 50% and expected life of 4.50 years. This
change in the fair value resulted in a decrease of $88,680 from the $355,050
recorded on April 30, 2006, or a balance of $266,370, as of July 31, 2006.
This
decrease of the fair value of the warrants was recorded in the statement of
operations as other income with the offset reducing the Common Stock Warrants
Liability.
The
change in fair value of the embedded derivative feature calculated using the
Black Scholes valuation model as of July 31, 2006 was recorded in the Embedded
Derivative Liability. On July 31, 2006 the fair value of this feature was based
on the following assumptions: (i) conversion price equal to 95% of the lowest
volume weighted average price of the Common Stock on the market on which the
shares are listed or traded during the 30 trading days immediately preceding
the
date of conversion, or $0.1651, on July 31, 2006, (ii) the market price, (iii)
the risk free interest rate of 4.91%, (iv) expected volatility of 50% and (v)
expected life of 2.5 years. The fair value of the embedded conversion feature
was $562,716 as of July 31, 2006, or a decrease of $39,972 from $602,688
recorded on April 30, 2006. This decrease of the fair value of the feature
was
charged to the statement of operations as other income and the offset reduced
the Embedded Derivative Liability.
Upon
full
payment of the Debentures (through repayment or conversion to equity) the fair
value of the warrants on that date will be reclassified to equity.
Item
2. Plan of Operations
The
Company has included in this Quarterly Report certain “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995 concerning the Company’s business, operations and financial condition.
“Forward-looking statements” consist of all non-historical information, and the
analysis of historical information, including the references in this Quarterly
Report to future revenue growth, collaborative agreements, future expense
growth, future credit exposure, earnings before interest, taxes, depreciation
and amortization, future profitability, anticipated cash resources, anticipated
capital expenditures, capital requirements, and the Company’s plans for future
periods. In addition, the words “could”, “expects”, “anticipates”, “objective”,
“plan”, “may affect”, “may depend”, “believes”, “estimates”, “projects” and
similar words and phrases are also intended to identify such forward-looking
statements.
Actual
results could differ materially from those projected in the Company’s
forward-looking statements due to numerous known and unknown risks and
uncertainties, including, among other things, unanticipated technological
difficulties, the length and scope of our clinical trials, costs related to
intellectual property related expense, cost of manufacturing and higher
consulting costs, product demand, changes in domestic and foreign economic,
market and regulatory conditions, the inherent uncertainty of financial
estimates and projections, the uncertainties involved in certain legal
proceedings, instabilities arising from terrorist actions and responses thereto,
and other considerations described as “Risk Factors” in other filings by the
Company with the SEC. Such factors may also cause substantial volatility in
the
market price of the Company’s Common Stock. All such forward-looking statements
are current only as of the date on which such statements were made. The Company
does not undertake any obligation to publicly update any forward-looking
statement to reflect events or circumstances after the date on which any such
statement is made or to reflect the occurrence of unanticipated
events.
Plan
of Operations
We
were
originally incorporated in the state of Colorado on June 5, 1987 under the
name
Great Expectations, Inc. We were administratively dissolved 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 without any business
until November 12, 2004 when we acquired Advaxis through the issuance of
15,597,723 shares of our Common Stock (the “Share Exchange”), as a result of
which Advaxis become our wholly-owned subsidiary and our sole operating company.
For financial reporting purposes, we have treated the Share Exchange as a
recapitalization, 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 on November 12, 2004 became our historical financial
statements after the Share Exchange. On June 6, 2006 our shareholders approved
the reincorporation of the Company from the state of Colorado to the state
of
Delaware by merging the Company into its wholly-owned subsidiary.
We
are a
biotechnology company which utilizes 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.
We
have
no customers. We are in the development stage and have focused our initial
development efforts on six lead compounds. In February 2006 we received
governmental approvals in Mexico, Israel and Serbia to commence in those
countries a Phase I clinical study of Lovaxin C, a vaccine with a potential
for
treatment of cervical and neck cancer.
Our
revenues are primarily grants received from the NIH. For the three months ended
July 31, 2006 there were no revenues. Revenues reported in the same period
last
year were $440,851. For the nine months ended July 31, 2006 the revenue was
$397,312 or a decrease of $43,539, or 9.9% compared to the same period last
year.
Research
and development (R&D) expenses for the three months ended July 31, 2006 were
$262,257, a decrease of $139,021, or 34.6% from those of the same period of
the
prior year. This decrease was primarily related to the outside costs involved
in
working on grants and a toxicology study that took place in the prior period
and
didn’t recur in the current period. These decreases in cost were partially
offset by additional research cost due to additional key research personnel
and
clinical study costs. For the nine months ended July 31, 2006 R&D expenses
were $1,098,190, an increase of $132,407, or 13.7%, over those for the same
prior year period. The increase in R&D expenses was primarily due to the
cost associated with the employment of key research personnel in 2006 and
clinical study costs partially offset by costs involved in working on grants
and
a toxicology study that took place in the comparable prior year
period.
We
anticipate a continued increase in R&D expenses as a result of expanded
development and commercialization efforts related to toxicology studies,
clinical trials, and product development, and expenses to be incurred in the
development of strategic and other relationships required ultimately for the
licensing, manufacture and distribution of our product candidates.
General
and Administrative (G&A) expenses for the three months ended July 31, 2006
were $426,497, a decrease of $18,131, or 4.1%, from G&A the same period in
the prior year. This decrease was primarily related to the lower offering costs
involved in fund raising in the prior period, partially offset by higher
consulting fees in the 2006 period. For the nine months ended July 31, 2006
G&A expenses were $1,444,068 an increase of $596,463, or 70.4%, over G&A
for the same prior year period. The increase in G&A expenses was primarily
due to the higher legal and consulting fees involved in raising funds than
those
incurred in the same period of the prior year.
Other
Income/(Expense) for the three months ended July 31, 2006 were $5,480, a
decrease in income of $10,971, or 66.7%, from that for the same period of the
prior year. While the interest income for the three months ended July 31, 2006
increased by $10,469, an increase in non-cash interest expenses of ($150,092)
was more than offset by $128,652 of non-cash income resulting from the recording
of the change in fair values. Both interest expense and change in fair values
were primarily related to the accounting for our secured convertible debenture
issued in February and March 2006. The interest expenses were comprised of
interest accrued on the debenture ($43,763), amortization of deferred financing
costs ($21,977), amortization of the initial values of the initial warrant
($17,913) and embedded derivative ($66,051) and the recording of interest
payable on the long term notes ($1,008) and other ($388). We did not incur
the
expense related to the debenture in prior year period. Changes in fair value
are
a non-cash record of the changes in fair value from the April 30, 2006 reporting
period
Other
Income/(Expense) for the nine months ended July 31, 2006 was $(303,090), an
increase in expense of ($328,161) from that for the same period of the prior
year. While by way of comparison for the two nine month periods ended July
31,
2006 and 2005, respectively interest income increased by $31,919, non-cash
interest expense increased by ($258,810), and the non-cash expense recorded
for
the change in fair value of the warrants and embedded conversion feature
increased by ($101,271). Both interest expense and changes in fair value
primarily related to the accounting for our secured convertible debenture issued
in February and March 2006. The interest expenses were comprised of interest
accrued on the debenture ($78,037), amortization of deferred financing costs
($39,019), amortization of our initial valuation of the initial warrant
($35,825) and embedded derivative ($108,790) interest payable on the long term
notes ($1,984) and other ($1,454). We did not incur the expense related to
the
debenture in prior year period. Changes in Fair Value are a non-cash record
of
the changes in fair value from the original valuation dates and as of record
period July 31, 2006 of the warrant and the embedded derivative
liabilities.
On
July
31, 2006, our cash balance was $3,347,222, and our working capital was
$2,181,105 primarily as a result of net proceeds of approximately $2,760,000
from the sale to an investor of our 6% Secured Convertible Debentures in the
principal amount of $3,000,000 in February and March 2006.
We
intend
to use our available cash and resources during the 12 months ending July 31,
2007 to conduct Phase I clinical trials in cervical cancer using Lovaxin C,
one
of our lead product candidates in development using our Listeria System, expand
our research and development team, to further develop Lovaxin B (our Listeria
vaccine directed toward treatment of breast cancer), and Lovaxin P (our Listeria
vaccine directed toward treatment of prostate cancer) as well as several
additional Listeria based vaccines for the treatment of cancer, and to expand
our manufacturing capabilities and strategic activities.
Off-balanceSheet
Arrangements.
We
are
party to a license agreement, dated June 17, 2002, as amended, with The Trustees
of the University of Pennsylvania, pursuant to which we agreed to pay, an
aggregate of $482,000 in licensing fees in three annual installments on December
15, 2005, 2006 and 2007, respectively or upon achieving certain financing
milestones. In addition, commencing with the first commercial sale of our
products covered by the license product Advaxis is to pay a royalty of $525,000
over a four-year period and annual license maintenance fees ranging from $25,000
to $125,000 per year. We do not expect that the first commercial sale will
occur
prior to 2011.
Item
3. Controls and Procedures.
As
of the
end of the period covered by this report, based on an evaluation of the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e)
under the Securities Exchange Act of 1934), the President, Chief Executive
Officer and the Vice President of Finance, Principal Financial Officer of the
Company has concluded that the Company’s disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company
in
its Exchange Act reports is recorded, processed, summarized and reported within
the applicable time periods specified by the rules and forms of the Securities
and Exchange Commission.
There
were no significant changes in the Company’s internal controls or in any other
factors that could significantly affect those controls subsequent to the date
of
the most recent evaluation of the Company’s internal controls by the Company,
including any corrective actions with regard to any significant deficiencies
or
material weaknesses.
Part
II - OTHER INFORMATION
Item
1. Legal Proceedings
Sanofi
Aventis filed trademark opposition proceedings in the United States Patent
and
Trademark Office against our trademark applications Serial Nos. 78/252527
and 78/252586 related to the trademark of “Advaxis”. In response to the
opposition we agreed in August 28, 2006 to withdraw our mark,
“Advaxis”.
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.
There are no material legal proceedings threatened against us except as
follows:
We
had
received written notice from the European Patent Office that Cerus Corporation
(Cerus) has filed an Opposition against European Patent Application Number
0790835 (EP 835 Patent) which was granted by the European Patent Office and
which is assigned to The Trustees of the University of Pennsylvania and
exclusively licensed to us. We are defending against Cerus’ allegations in the
Opposition that the EP 835 Patent, which claims a vaccine for inducing a tumor
specific antigen with recombinant live Listeria, is deficient because of (i)
insufficient disclosure in the specifications of the granted claims, (ii) the
inclusion of additional subject matter in the granted claims, and (iii) a lack
of inventive steps of the granted claims of the EP 835 Patent. We plan to
vigorously defend the claims and responded to their claims on February 20,
2006.
The
Opposition is in the early stages and, as yet, we are unable to
evaluate the merits, if any, of the Opposition. If the European Patent
Office rules that the allegations are correct in whole or in part, and such
ruling is upheld on appeal, our patent position in Europe may be eroded to
the
degree that the claims of the patent are narrowed or not allowed. The likely
result of this decision will be increased competition for us in the European
market for recombinant live Listeria based vaccines. Regardless of the outcome
of the Opposition proceeding, we believe that our freedom to operate for our
recombinant live Listeria based vaccine products will not be
diminished.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
During
the nine months ended July 31, 2006, we issued 177,422 shares of Common Stock
to
our employees as bonuses, 52,000 shares of Common Stock to a director as fees
and 556,241 shares of Common Stock to consultants and service providers in
payment for their services. The recipients agreed that no transfer of the shares
may be effected unless the shares registered under the Securities Act of 1933,
as amended or exempt from registration.
In
February and March 2006, we sold for $3,000,000 to Cornell Capital Partners
LP
(“Cornell”) our Secured Convertible Debenture due February 1, 2009 in the
principal amount of $3,000,000 and five year warrants to purchase: 4,200,000
shares of Common Stock at a price of $0.287 per share and 300,000 shares of
Common Stock at a price of $0.3444 per share. The net proceeds of $2,760,000
after deducting commission, diligence and structure fees are being used for
working capital and research and development. See Item 2. “Plan of
Operations”
The
above
sales were exempt from registration under the Act by virtue of the provisions
of
4(2) thereof.
Pursuant
to our agreement with Cornell, we have registered under the Act for reoffering
shares which are acquired upon conversion of the Debentures and shares which
are
acquired upon exercise of the Warrants. The Debentures are convertible at a
price equal to the lesser of (i) $0.287 per share, or (ii) 95% of the lowest
volume weighted average price of the Common Stock on the market on which the
shares are listed or traded during the 30 trading days immediately preceding
the
date of conversion. Interest is payable at maturity at the rate of 6% per annum
in cash or shares of Common Stock valued at the conversion price then in effect.
As of July 31, 2006 Cornell Capital Partners LP converted $150,000 into 678,010
shares of common stock.
Item
4.
Submission
of Matters to a Vote of Security
Holders
At
our
Annual Meeting of Stockholders held on June 6, 2006, stockholders took the
following actions:
|
|
Votes
For
|
|
Votes
Against
|
|
Election
of Directors:
|
|
|
|
|
|
|
|
J.
Todd Derbin
|
|
|
28,450,225
|
|
|
233,990
|
|
Roni
Appel
|
|
|
28,629,515
|
|
|
54,700
|
|
James
Patton
|
|
|
28,629,515
|
|
|
54,700
|
|
Thomas
McKearn
|
|
|
28,629,515
|
|
|
54,700
|
|
Martin
Wade
|
|
|
28,629,515
|
|
|
54,700
|
|
Richard
Berman
|
|
|
28,629,515
|
|
|
54,700
|
|
|
|
Votes
For
|
|
Votes
Against
|
|
Abstentions
|
|
Broker
Non-votes
|
|
|
|
|
|
|
|
|
|
|
|
Approved
and adopted the 2005 Stock Option Plan
|
|
|
18,543,773
|
|
|
66,200
|
|
|
6,374,683
|
|
|
|
|
Approved
the reincorporation of the Company from the state of Colorado to
the state
of Delaware
|
|
|
24,966,456
|
|
|
6,200
|
|
|
7,000
|
|
|
|
|
Ratified
the appointment by the Board of Directors of Goldstein Golub Kessler
LLP
as auditor of the Company’s financial statements for the year ending
October 31, 2006
|
|
|
22,320,326
|
|
|
1,200
|
|
|
6,362,688
|
|
|
|
|
Item
5. Other Information
.
The
merger (reincorporation) with the Parent Company was effective June 23,
2006.
Item
6. Exhibits and Reports on Form 8-K
|
10.1
|
Advaxis,
Inc. 2005 Stock Option Plan (previously filed as ANNEX A to the Company’s
Definitive Proxy Statement filed with the Commission on May 15, 2006
and
hereby incorporated by reference).
|
|
10.2
|
Agreement
and Plan of Merger of Advaxis, Inc., a Colorado corporation, and
Advaxis,
Inc., a Delaware corporation (previously filed as ANNEX B to the
Company’s
Definitive Proxy Statement filed with the Commission on May 15, 2006
and
hereby incorporated by reference).
|
|
10.3
|
Amended
and Restated Certificate of Incorporation of Advaxis, Inc. (previously
filed as ANNEX C to the Company’s Definitive Proxy Statement filed with
the Commission on May 15, 2006 and hereby incorporated by
reference).
|
|
10.4
|
Advaxis,
Inc. Amended By-Laws (filed herewith)
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.2
|
Certification
of Principal Financial Officer pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
|
No
Reports in Form 8-K were filed since April 30, 2006.
SIGNATURES
In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
|
|
|
|
Advaxis,
Inc.
Registrant
|
|
|
|
Date: September
13, 2006
|
By:
|
/s/ Roni
Appel
|
|
Roni
Appel
|
|
President,
Chief Executive Officer
|
|
|
|
|
By:
|
/s/ Fred
Cobb
|
|
Fred
Cobb
|
|
Vice
President Finance, Principal Financial Officer
|
|
|
ADVAXIS,
INC.
Effective
as of March 29, 2006
ARTICLE
I
MEETINGS
OF STOCKHOLDERS
Section
1
.
Place
of Meetings
.
Meetings of the stockholders for the election of directors or for any other
purpose shall be held at such time and place, either within or without the
State
of Delaware as shall be designated from time to time by the Board of Directors
or the President and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section
2
.
Annual
Meetings
.
The
Annual Meeting of Stockholders shall be held on such date and at such time
as
shall be designated from time to time by the Board of Directors and stated
in
the notice of the meeting, at which meeting the stockholders shall elect by
a
plurality vote a Board of Directors, and transact such other business as may
properly be brought before the meeting. Written notice of the Annual Meeting
of
Stockholders stating the place, date and hour of the meeting shall be given
to
each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting.
Section
3
.
Special
Meetings
.
Unless
otherwise prescribed by law or by the Certificate of Incorporation, Special
Meetings of Stockholders, for any purpose or purposes, may be called at any
time
by the Board of Directors. Written notice of a Special Meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section
4
.
Quorum
.
Except
as otherwise provided by law or by the Certificate of Incorporation, the holders
of one-third of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
at
all meetings of the stockholders for the transaction of business. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person
or
represented by proxy, shall have power to adjourn the meeting from time to
time,
without notice other than announcement at the meeting, until a quorum shall
be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for
more
than thirty days, or if after the adjournment a new record date is fixed for
the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting.
Section
5
.
Voting
.
Unless
otherwise required by law, the Certificate of Incorporation or these By-Laws,
any question brought before any meeting of stockholders shall be decided by
the
vote of the holders of a majority of the stock represented and entitled to
vote
thereat. Each stockholder represented at a meeting of stockholders shall be
entitled to cast one vote for each share of the capital stock entitled to vote
thereat held by such stockholder. Such votes may be cast in person or by proxy
but no proxy shall be voted on or after three years from its date, unless such
proxy provides for a longer period. The Board of Directors, in its discretion,
or the officer of the Corporation presiding at a meeting of stockholders, in
his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section
6
.
Consent
of Stockholders in Lieu of Meeting
.
Unless
otherwise provided in the Certificate of Incorporation, any action required
or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without
a
vote, in a consent in writing, setting forth the action so taken, signed by
the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of
the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
In the event that the action which is consented to is such as would have
required the filing of a certificate under the General Corporation Law, if
such
action had been voted on by stockholders at a meeting thereof, the certificate
filed shall state, in lieu of any statement concerning any vote of stockholders,
that written consent and written notice has been given as provided in this
Section 6.
Section
7
.
List
of Stockholders Entitled to Vote
.
The
officer of the Corporation who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to
the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section
8
.
Stock
Ledger
.
The
stock ledger of the Corporation shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by Section
7 of this Article I or the books of the Corporation, or to vote in person or
by
proxy at any meeting of stockholders.
ARTICLE
II
DIRECTORS
Section
1
.
Number,
Election, Resignation and Removal of Directors
.
The
Board of Directors shall consist of not less than one nor more than nine
members, the exact number of which shall be fixed from time to time by the
Board
of Directors. Except as provided in Section 2 of this Article, directors shall
be elected by a plurality of the votes cast at Annual Meetings of Stockholders,
and each director so elected shall hold office until the next Annual Meeting
and
until his successor is duly elected and qualified, or until his earlier
resignation or removal. Any director may resign at any time upon notice to
the
Corporation. Any director may be removed at any time for cause or without cause
by the vote of the holders of a majority of the common stock then entitled
to
vote at an election of directors. Any director may be removed at any time for
cause by the vote of a majority of the Board of Directors. The vacancy on the
Board of Directors caused by any such removal may be filled by the stockholders
at such meeting or as provided in Section 2 of this Article II.
Section
2
.
Vacancies
.
Vacancies, and newly created directorships resulting from any increase in the
authorized number of directors, may be filled by vote of a majority of the
directors then in office (even if such remaining directors constitute less
than
a quorum) or of the sole remaining director, and the directors so chosen shall
hold office until the next annual election and until their successors are duly
elected and qualified, or until their earlier resignation or
removal.
Section
3
.
Duties
and Powers
.
The
business of the Corporation shall be managed by or under the direction of the
Board of Directors which may exercise all such powers of the Corporation and
do
all such lawful acts and things as are not by statute or by the Certificate
of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
Section
4
.
Meetings
.
The
Board of Directors of the Corporation may hold meetings, both regular and
special, either within or without the State of Delaware. Regular meetings of
the
Board of Directors may be held without notice at such time and at such place
as
may from time to time be determined by the Board of Directors. Special meetings
of the Board of Directors may be called by the President or any of the
directors. Notice thereof stating the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called shall be given to each
director either by mail not less than forty-eight (48) hours before the date
of
the meeting, by telephone on twenty-four (24) hours’ notice, or on such shorter
notice as the person or persons calling such meeting may deem necessary or
appropriate in the circumstances.
Section
5
.
Quorum
.
Except
as may be otherwise specifically provided by law, the Certificate of
Incorporation or these By-Laws, at all meetings of the Board of Directors,
one-third of the entire Board of Directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present
at
any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time
to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section
6
.
Actions
of Board
.
Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if all
the
members of the Board of Directors or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes
of
proceedings of the Board of Directors or committee.
Section
7
.
Meeting
by Means of Conference Telephone
.
Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
Section
8
.
Committees
.
The
Board of Directors may, by resolution passed by a majority of the entire Board
of Directors, designate one or more committees, each committee to consist of
one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who
may
replace any absent or disqualified member at any meeting of any such committee.
In the absence or disqualification of a member of a committee, and in the
absence of a designation by the Board of Directors of an alternate member to
replace the absent or disqualified member, the member or members thereof present
at any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent allowed by law and provided in the
resolutions establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation
to
be fixed to all papers which require it. Each committee shall keep regular
minutes and report to the Board of Directors when required.
ARTICLE
III
OFFICERS
Section
1
.
General
.
The
officers of the Corporation shall be chosen by the Board of Directors and shall
be a President, Treasurer and a Secretary. The Board of Directors, in its
discretion, may also choose a Chief Executive Officer, Chief Financial Officer,
Chief Operations Officer and one or more Vice Presidents, Assistant Secretaries,
Assistant Treasurers and other officers. Any number of offices may be held
by
the same person, unless otherwise prohibited by law, the Certificate of
Incorporation or these By-Laws. The officers of the Corporation need not be
stockholders of the Corporation nor need such officers be directors of the
Corporation.
Section
2
.
Election
.
The
Board of Directors at its first meeting held after each Annual Meeting of
Stockholders shall elect the officers of the Corporation who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as
shall be determined from time to time by the Board of Directors; and all
officers of the Corporation shall hold office until their successors are chosen
and qualified, or until their earlier resignation or removal. Any officer
elected by the Board of Directors may be removed with or without cause, at
any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed
by
the Board of Directors.
Section
3
.
Voting
Securities Owned by the Corporation
.
Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed
in
the name of and on behalf of the Corporation by any officer of the Corporation
and any such officer may, in the name of and on behalf of the Corporation,
take
all such action as any such officer may deem advisable to vote in person or
by
proxy at any meeting of security holders of any corporation in which the
Corporation may own securities and at any such meeting shall possess and may
exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
Section
4
.
President
.
The
President shall, subject to the control of the Board of Directors, have general
supervision of the business of the Corporation and shall see that all orders
and
resolutions of the Board of Directors are carried into effect. The President
shall have the power and authority to execute all bonds, mortgages, contracts
and other instruments of the Corporation requiring a seal, under the seal of
the
Corporation, except where required or permitted by law to be otherwise signed
and executed without seal and except in such cases in which the other officers
of the Corporation may sign and execute documents when so authorized by these
By-Laws, the Board of Directors or the President. The President shall preside
at
all meetings of the stockholders and the Board of Directors. The President
shall
also perform such other duties and may exercise such other powers as from time
to time may be assigned to him by these By-Laws or by the Board of
Directors.
Section
5
.
Secretary
.
The
Secretary shall attend all meetings of the Board of Directors and all meetings
of stockholders and record all the proceedings thereat in a book or books to
be
kept for that purpose; the Secretary shall also perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed
by
the Board of Directors or the President, under whose supervision he shall be.
If
the Secretary shall be unable or shall refuse to cause to be given notice of
all
meetings of the stockholders and special meetings of the Board of Directors,
then either the Board of Directors or the President may choose another officer
to cause such notice to be given. The Secretary shall have custody of the seal
of the Corporation and the Secretary shall have authority to affix the same
to
any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary. The Secretary shall have the power and authority
to
execute all bonds, mortgages, contracts and other instruments of the Corporation
requiring a seal, under the seal of the Corporation, except where required
or
permitted by law to be otherwise signed and executed without seal. The Board
of
Directors may give general authority to any other officer to affix the seal
of
the Corporation and to attest the affixing by his signature. The Secretary
shall
see that all books, reports, statements, certificates and other documents and
records required by law to be kept or filed are properly kept or filed, as
the
case may be.
Section
6
.
Other
Officers
.
Such
other officers as the Board of Directors may choose shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors. The Board of Directors may delegate to any other officer of the
Corporation the power to choose such other officers and to prescribe their
respective duties and powers.
ARTICLE
IV
STOCK
Section
1
.
Form
of Certificates
.
Every
holder of stock in the Corporation shall be entitled to have a certificate
signed, in the name of the Corporation (i) by the President and (ii) by the
Secretary or the Treasurer of the Corporation, certifying the number of shares
owned by him in the Corporation.
Section
2
.
Signatures
.
Where a
certificate is countersigned by (i) a transfer agent other than the Corporation
or its employee, or (ii) a registrar other than the Corporation or its employee,
any other signature on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent
or
registrar at the date of issue.
Section
3
.
Lost
Certificates
.
The
Board of Directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in
its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as the Board of Directors
shall require and/or to give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or
destroyed.
Section
4
.
Transfers
.
Stock
of the Corporation shall be transferable in the manner prescribed by law and
in
these By-Laws. Transfers of stock shall be made on the books of the Corporation
only by the person named in the certificate or by his attorney lawfully
constituted in writing and upon the surrender of the certificate therefor,
which
shall be canceled before a new certificate shall be issued.
Section
5
.
Record
Date
.
In
order that the Corporation may determine the stockholders entitled to notice
of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to express consent to corporate action in writing without a meeting,
or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall be before
the date of such meeting; in the case of consent to corporate action in writing
without a meeting, the record date must not be more than ten days after the
date
upon which the resolution fixing the record date is adopted by the Board of
Directors. A determination of stockholders of record entitled to notice of
or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided
,
however
,
that
the Board of Directors may fix a new record date for the adjourned
meeting.
Section
6
.
Beneficial
Owners
.
The
Corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends, and to
vote
as such owner, and to hold liable for calls and assessments a person registered
on its books as the owner of shares, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
ARTICLE
V
NOTICES
Section
1
.
Notices
.
Whenever written notice is required by law, the Certificate of Incorporation
or
these By-Laws, to be given to any director, member of a committee or
stockholder, such notice may be given by mail, addressed to such director,
member of a committee or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given five days after the same shall be deposited in the United
States mail. Written notice may also be given personally or by email, facsimile,
telex or cable.
Section
2
.
Waivers
of Notice
.
Whenever any notice is required by law, the Certificate of Incorporation or
these By-Laws, to be given to any director, member of a committee or
stockholder, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE
VI
GENERAL
PROVISIONS
Section
1
.
Dividends
.
Dividends upon the capital stock of the Corporation, subject to the provisions
of the Certificate of Incorporation, if any, may be declared by the Board of
Directors at any regular or special meeting, and may be paid in cash, in
property, or in shares of the capital stock. Before payment of any dividend,
there may be set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board of Directors from time to time, in
its
absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining
any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section
2
.
Disbursements
.
All
checks or demands for money and notes of the Corporation shall be signed by
such
officer or officers or such other person or persons as the Board of Directors
may from time to time designate.
Section
3
.
Fiscal
Year
.
The
fiscal year of the Corporation shall be fixed by the resolution of the Board
of
Directors.
Section
4
.
Corporate
Seal
.
The
corporate seal shall have inscribed thereon the name of the Corporation, the
year of its organization and the words “Corporate Seal, Delaware.” The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE
VII
INDEMNIFICATION
Section
1
.
Power
to Indemnify in Actions, Suits or Proceedings other Than Those by or in the
Right of the Corporation
.
Subject
to Section 3 of this Article VII, the Corporation shall indemnify any officer
or
director of the Corporation who was or is a party or is threatened to be made
a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or
was a
director, officer, employee or agent of the Corporation, or is or was serving
at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, limited liability company, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of
nolo
contendere
or its
equivalent, shall not, of itself, create a presumption that the person did
not
act in good faith and in a manner which he reasonably believed to be in or
not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, have reasonable cause to believe that his conduct
was unlawful.
Section
2
.
Power
to Indemnify in Actions, Suits or Proceedings by or in the Right of the
Corporation
.
Subject
to Section 3 of this Article VII, the Corporation shall indemnify any officer
or
director of the Corporation who was or is a party or is threatened to be made
a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact
that
he is or was a director, officer, employee or agent of the Corporation, or
is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys’ fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in
good faith and in a manner he reasonably believed to be in or not opposed to
the
best interests of the Corporation; except that no indemnification shall be
made
in respect of any claim, issue or matters as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent
that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section
3
.
Authorization
of Indemnification
.
Any
indemnification under this Article VII (unless ordered by a court) shall be
made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper
in
the circumstances because he has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article VII, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who were
not
parties to such action, suit or proceeding even though less than a quorum,
or
(ii) if there are no such directors, or, if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders.
To
the extent, however, that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue
or
matter therein, he shall be indemnified against expenses (including attorneys’
fees) actually and reasonably incurred by him in connection therewith, without
the necessity of authorization in the specific case.
Section
4
.
Good
Faith Defined
.
For
purposes of any determination under Section 3 of this Article VII, a person
shall be deemed to have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
or,
with respect to any criminal action or proceeding, to have had no reasonable
cause to believe his conduct was unlawful, if his action is based on the records
or books of account of the Corporation or another enterprise, or on information
supplied to him by the officers of the Corporation or another enterprise in
the
course of their duties, or on the advice of legal counsel for the Corporation
or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in
this
Section 4 shall mean any other corporation or any partnership, limited liability
company, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 4 shall
not
be deemed to be exclusive or to limit in any way the circumstances in which
a
person may be deemed to have met the applicable standard of conduct set forth
in
Section 1 or 2 of this Article VII, as the case may be.
Section
5
.
Indemnification
by a Court
.
Notwithstanding any contrary determination in the specific case under Section
3
of this Article VII, and notwithstanding the absence of any determination
thereunder, any officer or director may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Sections 1 and 2 of this Article VII. The basis
of
such indemnification by a court shall be a determination by such court that
indemnification of the officer or director is proper in the circumstances
because he has met the applicable standards of conduct set forth in Sections
1
or 2 of this Article VII, as the case may be. Neither a contrary determination
in the specific case under Section 3 of this Article VII nor the absence of
any
determination thereunder shall be a defense to such application or create a
presumption that the officer or director seeking indemnification has not met
any
applicable standard of conduct. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the Corporation promptly upon
the
filing of such application. If successful, in whole or in part, the officer
or
director seeking indemnification shall also be entitled to be paid the expense
of prosecuting such application.
Section
6
.
Expenses
Payable in Advance
.
Expenses incurred in defending or investigating a threatened or pending action,
suit or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by
or on behalf of such officer or director to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article VII.
Section
7
.
Nonexclusivity
of Indemnification and Advancement of Expenses
.
The
indemnification and advancement of expenses provided by or granted pursuant
to
this Article VII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any bylaw, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as
to
action in another capacity while holding such office, it being the policy of
the
Corporation that indemnification of the persons specified in Sections 1 and
2 of
this Article VII shall be made to the fullest extent permitted by law. The
provisions of this Article VII shall not be deemed to preclude the
indemnification of any person who is not specified in Section 1 or 2 of this
Article VII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware,
or
otherwise.
Section
8
.
Insurance
.
The
Corporation may purchase and maintain insurance on behalf of any person who
is
or was a director, officer, employee or agent of the Corporation, or is or
was
serving at the request of the Corporation as a director, officer, employee
or
agent of another corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of
his status as such, whether or not the Corporation would have the power or
the
obligation to indemnify him against such liability under the provisions of
this
Article VII.
Section
9
.
Certain
Definitions
.
For
purposes of this Article VII, references to "the Corporation" shall include,
in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to
indemnify its officers or directors, so that any such person who is or was
a
director, officer, employee or agent of such constituent corporation, or is
or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise, shall stand in the same position under the provisions of this
Article VII with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence
had
continued. For purposes of this Article VII, references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the Corporation" shall include
any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee
or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VII.
Section
10
.
Survival
of Indemnification and Advancement of Expenses
.
The
indemnification and advancement of expenses provided by, or granted pursuant
to,
this Article VII shall, unless otherwise provided when authorized or ratified,
or by contract, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section
11
.
Limitation
of Indemnification
.
Notwithstanding anything contained in this Article VII to the contrary, except
for proceedings to enforce rights to indemnification (which shall be governed
by
Section 5 of this Article VII), the Corporation shall not be obligated to
indemnify any officer or director in connection with a proceeding (or part
thereof) initiated by such person unless such proceeding (or part thereof)
was
authorized or consented to by the Board of Directors of the
Corporation.
Section
12.
Repeal
or Amendment
.
Any
repeal or amendment of the indemnification provisions contained herein will
not
adversely affect any right or protection in respect of any act or omission
occurring prior to the time of such repeal or modification.
ARTICLE
VIII
AMENDMENTS
Section
1
.
These
By-Laws may be altered, amended or repealed, in whole or in part, or new by-laws
may be adopted by the stockholders or by the Board of Directors;
provided
,
however
,
that
notice of such alteration, amendment, repeal or adoption of new by-laws be
contained in the notice of such meeting of stockholders or Board of Directors,
as the case may be. All such amendments must be approved be either of the
holders of a majority of the outstanding capital stock entitled to vote thereon
or by a majority of the entire Board of Directors then in office.
Section
2
.
Entire
Board of Directors
.
As used
in this Article VIII and in these By-Laws generally, the term “entire Board of
Directors” means the total number of directors which the Corporation would have
if there were no vacancies.
[END
OF
DOCUMENT]