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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-KSB

 

 

 

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 033-17264-NY

 

 

IMMUNOCELLULAR THERAPEUTICS, LTD.

(Name of small business issuer in its charter)

 

 

 

Delaware   93-1301885

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

21900 Burbank Boulevard

Woodland Hills, California

  91367
(Address of principal executive offices)   (Zip Code)

Issuer’s telephone number: (818) 992-2907

 

 

Securities registered under Section 12(b) of the Act: None.

Securities registered under Section 12(g) of the Act: None.

 

 

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.   ¨

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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes   ¨     No   x

Issuer’s revenues for its fiscal year ended December 31, 2007: $0

Aggregate market value of the common stock held by non-affiliates of the Issuer as of March 1, 2008 was approximately $6,997,811.

There were 12,582,493 shares of the Company’s common stock outstanding on March 1, 2008.

Transitional Small Business Disclosure Format:    Yes   ¨     No   x

 

 


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TABLE OF CONTENTS

 

  PART I   

ITEM 1.

  DESCRIPTION OF BUSINESS    1

ITEM 2.

  DESCRIPTION OF PROPERTY    26

ITEM 3.

  LEGAL PROCEEDINGS    27

ITEM 4.

  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS    27
  PART II   

ITEM 5.

  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS    27

ITEM 6.

  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION    28

ITEM 7.

  FINANCIAL STATEMENTS    31

ITEM 8.

  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE    31

ITEM 8A.

  CONTROLS AND PROCEDURES    31

ITEM 8B.

  OTHER INFORMATION    32
  PART III   

ITEM 9.

  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT    33

ITEM 10.

  EXECUTIVE COMPENSATION    37

ITEM 11.

  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS    44

ITEM 12.

  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS    47

ITEM 13.

  EXHIBITS    48

ITEM 14.

  PRINCIPAL ACCOUNTANT FEES AND SERVICES    51


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Introductory Comment

Throughout this Annual Report on Form 10-KSB, the terms “we,” “us,” “our,” “our company,” “Company” and “the Registrant” refer to ImmunoCellular Therapeutics, Ltd., a Delaware corporation formerly known as Optical Molecular Imaging, Inc. and Patco Industries, Ltd., and, unless the context indicates otherwise, also include our former subsidiary, Spectral Molecular Imaging, Inc., a Nevada corporation, which we sold in September 2006.

“SAFE HARBOR” STATEMENT

From time to time, we make oral and written statements that may constitute “forward-looking statements” (rather than historical facts) as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission, or SEC, in its rules, regulations and releases, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We desire to take advantage of the “safe harbor” provisions in the Private Securities Litigation Reform Act of 1995 for forward-looking statements made from time to time, including the forward-looking statements made in this Annual Report, as well as those made in our other filings with the SEC.

All statements in this Annual Report, including under the captions “Business,” “Risk Factors,” and “Management’s Discussion and Analysis or Plan of Operation,” other than statements of historical fact are forward-looking statements for purposes of these provisions, including statements of our current views with respect to our business strategy, business plan and research and development activities, our future financial results, and other future events. These statements include forward-looking statements both with respect to us, specifically, and the biotechnology industry, in general. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “could” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements.

All forward-looking statements involve inherent risks and uncertainties, and there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, those factors set forth in this Annual Report under the captions “Business,” “Risk Factors,” and “Management’s Discussion and Analysis or Plan of Operation,” all of which you should review carefully. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we anticipate. Please consider our forward-looking statements in light of those risks as you read this Annual Report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

PART I

 

ITEM 1. DESCRIPTION OF BUSINESS

Overview

ImmunoCellular Therapeutics, Ltd. is a development stage company that is seeking to develop and commercialize new therapeutics to fight cancer using the immune system. Our product candidate portfolio includes cellular immunotherapies targeting cancer antigens and cancer stem cell antigens, and

 

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monoclonal antibodies to diagnose and treat several different cancers. Our lead product candidate is a dendritic cell based vaccine in a Phase I clinical trial to treat glioblastoma multiforme, the most common brain tumors, that was initiated in May 2007. Through two important acquisitions in the last two years, we are building capabilities to develop new cancer immunotherapeutic products harnessing mechanisms of immune system surveillance in the human body.

In November 2006, we acquired an exclusive, worldwide license from Cedars-Sinai Medical Center (“Cedars-Sinai”) to certain technology for use as cellular-based therapies, including dendritic cell-based vaccines for neurological disorders that include brain tumors and neurodegenerative disorders and other cancers. This technology is covered by a number of pending U.S. and foreign patent applications.

In February 2008, we entered into an agreement with Molecular Discoveries LLC, a New York limited liability company (“Molecular Discoveries”), covering the Company’s acquisition of certain monoclonal antibody related technology owned by Molecular Discoveries and completed the acquisition of the technology on that date. The technology acquired under the Molecular Discoveries agreement and now owned by the Company consists of (i) a platform technology referred to by Molecular Discoveries as DIAAD for the potentially rapid discovery of targets (antigens) and monoclonal antibodies for diagnosis and treatment of diverse human diseases and (ii) certain monoclonal antibody candidates for the potential detection and treatment of multiple myeloma, small cell lung, pancreatic and ovarian cancers. The monoclonal antibodies are covered by issued patents and pending patent applications in the fields of multiple myeloma, small cell lung and ovarian cancers.

We contemplate commencing the initial phase of development of a diagnostic/prognostic product for small cell lung cancer and a therapeutic product for the treatment of small cell lung and pancreatic cancers, based upon the acquired proprietary monoclonal antibody candidates. The monoclonal antibody technology is at a pre-clinical stage of development and will require further development before an IND can potentially be filed for human testing of any of the acquired product candidates.

We do not currently anticipate that we will derive any revenues from either product sales or licensing during the foreseeable future. We do not have any bank credit lines and have financed all of our prior operations through the sale of securities. The estimated cost of completing the development of our current lead product candidate and of obtaining all required regulatory approvals to market that product candidate is substantially greater than the amount of funds we currently have available. We believe that our existing cash balances will be sufficient to fund completion of the current Phase I clinical trial of our dendritic cell based vaccine and to fund our currently planned level of operations through at least June 2009. We will seek to obtain additional funds through various financing sources, including possible sales of our securities, and in the longer term through strategic alliances with other pharmaceutical or biopharmaceutical companies, but there can be no assurance that we will be able to obtain any additional funding from any potential financing sources, or create any such alliances, or that the terms under which we would obtain any funding will be sufficient to fund our operations.

Company History

We filed our original Certificate of Incorporation with the Secretary of State of Delaware on March 20, 1987 under the name Redwing Capital Corp. On June 16, 1989, we changed our name to Patco Industries, Ltd. and conducted an unrelated business under that name until 1994. On January 30, 2006, we amended our Certificate of Incorporation to change our name to Optical Molecular Imaging, Inc. in connection with our merger on January 31, 2006 with Spectral Molecular Imaging, Inc. On November 2, 2006, we amended our Certificate of Incorporation to change our name to ImmunoCellular Therapeutics, Ltd. to reflect our disposition of our Spectral Molecular Imaging subsidiary and our acquisition of our cellular-based technology from Cedars-Sinai.

 

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Our principal executive offices are located at 21900 Burbank Boulevard, 3 rd Floor, Woodland Hills, California 91367, and our telephone number at that address is (818) 992-2907.

Technology and Proposed Products

Overview

The table below summarizes the status of our product candidates

 

Product candidate

  

Target Indication

  

Status

Cellular Immunotherapy:      
ICT-107 (cancer antigen vaccine)    Glioblastoma    Phase I ongoing
ICT-111 (cancer stem cell antigen vaccine)    Glioblastoma and other cancers    Pre-clinical
Monoclonal Antibodies:      
ICT-109 (Monoclonal Antibody)    Lung and pancreatic and colon cancer therapeutic    Pre-clinical
ICT-037 (Monoclonal Antibody)    colon, ovarian, multiple myeloma therapeutic and diagnostic    Pre-clinical
ICT-Diagnostic-SCLC    Diagnostic/Prognostic for small cell lung cancer    Pre-clinical

Cancer is caused by abnormal cells that grow in an uncontrolled manner. These cells proliferate and metastasize throughout the body causing tumors which can cause organ failure and death. The current treatments such as surgery, radiation and chemotherapy have limited therapeutic effects and significant undesirable side effects. Our approach is to harness the body’s immune system to provide therapeutics with the ability to fight cancer. There are two arms of the immune system that provide natural protection to the body: the cellular immune system (T-cell based) and the humoral immune system (B-cell based), which uses antibodies to fight foreign invaders. Our strategy is to utilize both of these mechanisms in our product development programs. We believe that the synergy between the two types of immunity can be powerful. Elicitation of a cellular immune response has the potential of long term protection against malignant diseases, while infusion of monoclonal antibodies (concentrated product of the humoral response) has the capacity to confer an immediate shield against the disease. The latter is especially important in cases where the patient’s immune system is compromised due to toxic treatment of the disease and cannot mount an adequate response to the active vaccine. In some situations a combination of a passive vaccine (monoclonal antibodies) aimed at halting the dissemination of cancer cells through the blood followed by an active vaccine when the patient recuperates may constitute an effective synergistic approach.

 

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Cellular ImmunoTherapy

One of our product strategies is the development of cell-based vaccine products that could bolster the body’s natural tendency through its immune system to defend it against malignant brain tumors. Dendritic cells (human derived cells responsible for antigen processing and presentation to the immune system) play a central role in the body’s immune response. They trigger the systems that help the body fight infection or foreign bodies, by initiating a T cell or T cell response to the infection or foreign body. The dendritic cells do this by recognizing, processing and presenting foreign antigens to the T cells, which then effectuate the immune response. The goal of a cell-based vaccine is to (1) make use of and enhance the dendritic cell’s ability to trigger the T cell response and (2) to stimulate the dendritic cell to focus the T cell response to specifically target the cancer cells for destruction.

Even though dendritic cells can be very potent, they are usually not present in sufficient numbers to permit an adequately potent immune response to fight cancer. What is more, dendritic cells often do not react aggressively to malignant tumors; they do not treat the tumor as a foreign body that needs to be destroyed or neutralized. Dendritic cells are powerful potentiators of acquired immunity through an effective presentation of the cancer antigens to T cells which subsequently mediate the killing of the cancer cells. Thus, dendritic cells are critical facilitators of T cell response. Dendritic cell therapy generally involves harvesting dendritic cells from a patient, then culturing and processing them in a laboratory to produce more numerous and effective dendritic cells. In the laboratory, the dendritic cells are cultured with specific antigens that are on tumor cells to enable the dendritic cells to recognize cancer cells as targets for attack. When the newly cultured dendritic cells are injected back into the patient, they seek out remaining tumor cells and signal the T cells to destroy them.

Antibody ImmunoTherapy

The second strategy for our product development is to harness the other arm of the immune system, which uses antibodies that can bind and neutralize any foreign antigen. These antibodies are produced by the B-lymphocytes (B-cells), and each antibody recognizes only one antigen. The antibodies we have acquired from Molecular Discoveries have been created to recognize certain antigens primarily expressed on the cancer cells and not expressed on the normal cells, such that binding to those antigens can lead to death of the tumor cells. We also have acquired an antibody development platform called DIAAD from our technology acquisition from Molecular Discoveries, which may enable us to discover and develop novel antigens and antibodies for cancer cells.

Lead Product Candidate: Cancer Vaccine For Glioblastoma Multiforme

The high rate of mortality of patients diagnosed with brain cancers and in particular with glioblastoma multiforme (the most lethal and devastating form) is driving the scientific community to discover and develop improved treatments that could increase the survival time and enhance the quality of life of patients. Of the approximately 19,000 cases of malignant brain and spinal cord tumors that are diagnosed each year in the United States, there currently is no satisfactory treatment, and the two-year survival rates are only in the range of 26%. Neither surgery, radiation nor anti-cancer drugs, the standard treatment modalities, have shown to date any prospect of meaningful extension of patients’ lives. We and others in the medical research community believe that immunotherapy has the potential, in the not too distant future, to be teamed with other treatment modalities to become an integral part of mainstream medical practice in the treatment of patients with brain tumors.

Dr. John Yu, our Chairman of the Board and Director of Surgical Neurooncology at the Maxine Dunitz Neurosurgical Institute at Cedars-Sinai, has previously completed two clinical trials at Cedars-Sinai prior to his association with our company using dendritic cells loaded with tumor lysates derived from the patient’s cancer to generate an immune response against intracranial tumors. The result of these early studies preliminarily demonstrated the safety of dendritic cell vaccination as well as biological

 

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efficacy in generating specific anti-tumor T cell responses. Based upon some additional pre-clinical research, Dr. Yu and his Cedars-Sinai team have developed what they believe could be a new, improved dendritic cell-based therapeutic vaccine that is our lead product candidate.

Current treatment of glioblastoma multiforme and other brain cancers involves a combination of surgery, radiation treatment, and chemotherapy. A significant issue with chemotherapy is that even as the chemicals become more powerful and more specifically targeted at a tumor’s DNA, the tumor’s cells may “outmaneuver” the chemotherapy by mutating or otherwise repulsing the attack. However, by combining chemotherapy with a cell-based immunotherapy treatment regimen, it appears that this could potentially enhance chemotherapy sensitivity and thereby improve patient treatment.

In a number of laboratory and clinical trials, dendritic cell immunotherapy has succeeded in eliciting a powerful immune response against brain tumor cells, but without achieving significant improvement in length of survival. Similarly, chemotherapy, even using agents specifically designed to attack the DNA of tumor cells and prevent their replication, becomes ineffective as the tumor cells develop drug resistance.

By combining chemotherapy and immunotherapy in a “two wave” approach, we believe that more promising results may be achievable. This would combine a first wave of a dendritic cell-based vaccine that is specifically formulated using highly immunogenic tumor antigens designed to destroy tumor cells and their ability to mutate, followed by a second wave of targeted chemotherapy targeted against the remaining cancer cells that have had their ability to mutate significantly impaired or destroyed by the vaccine.

Our lead product candidate is a new generation dendritic cell-based therapeutic vaccine that consists of a number of specific tumor antigens which, when loaded onto the dendritic cells, are expected to stimulate the body’s T cells to target only these specific proteins on the patient’s tumor cells. This product candidate is an intradermal dendritic cell-based therapeutic vaccine that we plan to use with chemotherapy concomitantly or subsequent to conventional therapy in patients with first diagnosed or recurrent glioblastoma.

We are testing this product in a Phase I clinical trial in patients with glioblastoma. This trial commenced in May 2007 at Cedars-Sinai. Nine patients have been enrolled and treated to date. The IND for this trial was originally submitted to the United States Food and Drug Administration (“FDA”) as a physician IND but has been transferred to us. The primary objective of this first in-human trial with our product candidate, which we anticipate will include a maximum of 30 patients, will be to evaluate safety, feasibility, dose limiting toxicity and an indication of an appropriate immune response. There have been no serious adverse effects noted to date from the vaccine. We are planning to evaluate immune responses to the vaccine on an on-going basis. Enrollment of patients in the trial has been slower than anticipated, and we now anticipate completing this trial by the first half of 2009.

Multi-drug resistance is a serious problem for patients associated with chemotherapy for cancers. Dr. Yu has included in our new vaccine formulation TRP2, a tumor associated protein. Dr. Yu characterized TRP2, which is expressed in glioblastoma cells, as a unique target molecule for tumor lysate vaccination that is a highly immunogenic tumor antigen and is also associated with chemotherapy resistance. He has previously demonstrated an important mechanism whereby targeting TRP2 with dendritic cells could make brain tumors more susceptible to chemotherapeutic agents. Dr. Yu further has demonstrated the important role of TRP2 in the important synergy between chemotherapy and immunotherapy.

We will be seeking in the future the assistance of outside expert providers to manufacture our biological product candidate in compliance with cGMP (the FDA’s regulations governing good manufacturing practices) so as to make available enough clinical grade material for the future clinical development of this product candidate. We also have retained an FDA regulatory affairs consultant to assist us in planning and coordinating our pre-clinical and clinical development activities.

 

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Immunotherapy Targeting Cancer Stem Cells for Brain and Other Cancers

Dr. Yu’s laboratory at Cedars-Sinai Medical Center was instrumental in identifying the cancer stem cells in glioblastoma. The characterization of cancer stem cells from glioblastoma has provided an opportunity to study the etiology of this dreaded disease and to be engaged in the development of product candidates that would be able to target the cancer stem cells which are believed to be responsible for the initiation and maintenance of glioblastoma. We have continued, initially in a preclinical setting, the preliminary important development work started by Dr. Yu for a vaccine that could kill glioblastoma cancer stem cells. We will seek, subject to successfully completing any necessary pre-clinical development work, to file an IND with the FDA for our stem cell cancer vaccine product candidate before the end of 2008.

Monoclonal Antibodies Targeting Cancer

We have acquired from Molecular Discoveries several MoAbs that react with small cell lung cancer (SCLC) cells, bind to the molecular structure and kill those cells in vitro. The survival rate is significantly higher when the disease is still localized, but only 16% of lung cancers are diagnosed at this early stage according to the American Cancer Society. Thus, the creation of new screening, monitoring and diagnostic tests for early detection and disease follow-up of SCLC may save many lives and prolong the survival of patients afflicted with this devastating disease.

We plan to conduct several studies at key academic institutions to further characterize the utility of these antibodies to screen patients with SCLC by testing serum and tissue samples. Such a diagnostic test can be used to screen patients who have the right epitopes on their cancer cells and are most likely to benefit from such a treatment.

SCLC is the most aggressive form of lung cancer tethered with cigarette smoking. SCLC cases are estimated to constitute about 13% of all lung cancer cases. In the United States, the American Cancer Society estimates 210,000 new lung cancer cases, as well as 161,000 deaths, are expected in 2008. Early diagnosis of SCLC is very difficult, and consequently, the vast majority of patients manifest an established cancer with metastasis at the time of diagnosis.

DIAAD utilizes immunological tolerization to accelerate the discovery of the molecular differences between diseased cells and their normal counterparts. The monoclonal antibodies (MoAbs) produced by DIAAD provide the basis for the discovery and development of our potential diagnostic and therapeutic products.

DIAAD enhances the antibody response of laboratory animals to disease-specific antigens. Antibodies are proteins produced by the body’s immune system that target and selectively bind antigens found on the surface of cancer cells or cells invaded by pathogens such as bacteria and viruses. There are billions of antibodies, each capable of recognizing and binding a different and specific antigen. Antibodies produced from a single B cell are termed “monoclonal” and represent one unique protein sequence with a unique specificity and affinity.

Conventional methods of monoclonal antibody discovery involve immunizing a laboratory animal with diseased cells. Since the majority of the antigens expressed by the diseased cells are also present on normal cells, the vast majority of the antibodies produced also bind to the normal cells. The discovery of antibodies that bind only to the diseased cell involves a lengthy screening process to remove antibodies reacting with normal tissues. Thus, the screen for such an antibody is often exhaustive and time consuming and entails testing thousands of antibodies for their ability to bind selectively to the diseased cell.

 

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DIAAD focuses the immune response on the tumour antigens by first eliminating the immune response directed against antigens on the normal cells. This is done by a process immunologists call tolerization, which is followed by immunizing the tolerized animals with prostate cancer cells. This directs the immune response towards only those antigens that are present on the cancerous but not on the normal cells.

Cedars-Sinai License Agreement

In November 2006, we entered into a license agreement with Cedars-Sinai under which we acquired an exclusive, worldwide license to our technology for use as cellular therapies, including dendritic cell-based vaccines for neurological disorders that include brain tumors and neurodegenerative disorders and other cancers. This technology is covered by a number of pending U.S. and foreign patent applications, and the term of the license will be until the last to expire of any patents that are issued covering this technology.

As an upfront licensing fee, we issued Cedars-Sinai 694,000 shares of our common stock and paid Cedars-Sinai $62,000. Additional specified milestone payments will be required to be paid by us to Cedars-Sinai when we initiate patient enrollment in our first Phase III clinical trial and when we receive FDA marketing approval for our first product.

We have agreed to pay Cedars-Sinai specified percentages of all of our sublicensing income and of our gross revenues from sales of products based on the licensed technology, subject to a reduction if we must make any payments to any third party whose proprietary rights would be infringed by sale of the products. To maintain our rights to the licensed technology, we must meet certain development and funding milestones.

Molecular Discoveries Agreement

On February 14, 2008, we entered into an agreement with Molecular Discoveries covering our acquisition of certain monoclonal antibody related technology owned by Molecular Discoveries and completed the acquisition of the technology on that date. The Molecular Discoveries Agreement also was acknowledged and agreed to by Dr. Cohava Gelber, an inventor of the technology acquired by us under this agreement and an equity owner of Molecular Discoveries. We have retained Dr. Gelber as a consultant to assist us in developing the acquired technology.

The technology acquired under the Molecular Discoveries agreement and now owned by us consists of (i) a platform technology referred to by Molecular Discoveries as DIAAD for the potentially rapid discovery of monoclonal antibodies to detect and treat cancer and other chronic diseases and (ii) certain monoclonal antibody candidates for the potential detection and treatment of multiple myeloma, small cell lung, pancreatic and ovarian cancers. The monoclonal antibodies are covered by issued patents and pending patent applications in the fields of multiple myeloma, small cell lung and ovarian cancers.

The consideration that we paid for the acquired technology consists of (i) the issuance of 800,000 shares of our common stock to Molecular Discoveries and (ii) our reimbursement to Molecular Discoveries or its managing member of $250,000 of previously incurred patent expenses. We are required to register the shares that we have issued to Molecular Discoveries, who has agreed to not publicly resell more than 100,000 shares in any 90-day period. All of the shares issued to Molecular Discoveries have been placed in escrow to secure its obligations to us under the Molecular Discoveries agreement, with 400,000 shares subject to release in February 2009 and the remaining shares subject to release in February 2010.

We contemplate commencing the initial phase of development of a diagnostic/prognostic product for small cell lung cancer and a therapeutic product for the treatment of small cell lung and pancreatic

 

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cancers, based upon the acquired proprietary monoclonal antibody candidates. The monoclonal antibody technology is at a pre-clinical stage of development and will require further development before an IND can potentially be filed for human testing of any of the acquired product candidates.

Intellectual Property

We have acquired exclusive worldwide rights from Cedars-Sinai to the inventions described below. Our dendritic cell based vaccine and cancer stem cell vaccine product candidates are currently covered by patent applications that have been filed in the United States. Our current patent applications for our vaccine technology are as follows:

 

   

“Cancer Vaccine Including Dendritic Cells Loaded with Tumor-Associated Antigens.” A U.S. patent application has been filed relating to a vaccine including dendritic cells loaded with tumor-associated antigens.

 

   

“Cancer Vaccine Including Antigens Obtained From Cancer Stem Cells.” A U.S. patent application has been filed relating to a vaccine including dendritic cells loaded with antigens obtained from cancer stem cells.

 

   

“Use of COX-2 Inhibitors to Prevent T-Cell Anergy Induced by Dendritic Cell Therapy.” A U.S. patent application has been filed relating to the use of COX-2 inhibitors in combination with a therapeutic dendritic cell vaccine for treating cancer.

 

   

“Intratumoral Delivery of Dendritic Cells.” Patent rights based on an International PCT Patent Application are pending in Europe and South Korea for intellectual property on the treatment of a tumor by administering dendritic cells either directly into the tumor or into its surrounding tissue.

In addition, we have acquired exclusive worldwide ownership rights to four granted U.S. patents and 16 U. S. and foreign patent applications through our acquisition of the monoclonal antibody related technology from Molecular Discoveries. The issued patents relate to monoclonal antibodies targeting various cancers, including human myeloma, ovarian cancer and small cell lung cancer.

Employees

We have one full-time employee, our President and Chief Executive Officer. Our Chairman of the Board and Chief Financial Officer work part-time for us.

Competition

The pharmaceutical and biopharmaceutical industry is characterized by intense competition and rapid and significant technological changes and advancements. Many companies, research institutions and universities are doing research and development work in a number of areas similar to those that we focus on that could lead to the development of new products which could compete with and be superior to our product candidates.

Most of the companies with which we compete have substantially greater financial, technical, manufacturing, marketing, distribution and other resources than those of ours. A number of these companies may have or may develop technologies for developing products for treating various diseases that could prove to be superior to ours. We expect technological developments in the pharmaceutical and biopharmaceutical and related fields to occur at a rapid rate, and we believe competition will intensify as advances in these fields are made. Accordingly, we will be required to continue to devote substantial resources and efforts to research and development activities in order to potentially achieve and maintain a competitive position in this field. Products that we develop may become obsolete before we are able to

 

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market them or to recover all or any portion of our research and development expenses. We will be competing with respect to our products with companies that have significantly more experience in undertaking preclinical testing and human clinical trials with new or improved therapeutic products and obtaining regulatory approvals of such products. A number of these companies already market and may be in advanced phases of clinical testing of various drugs that may compete with our lead product candidate or any future product candidates. Our competitors may develop or commercialize products more rapidly than we do or with significant advantages over any products we develop. Our competitors may therefore be more successful in commercializing their products than we are, which could adversely affect our competitive position and business.

In addition to larger pharmaceutical or biopharmaceutical companies that may develop different competing technologies or technologies within the stem cell field, we will be competing with a number of smaller biotechnology companies that are focused on cellular therapy technologies, which may include among others Dendreon, Northwest Biotherapeutics, Antigenics, NeuralStem, Geron, NeuroNova, ReNeuron, Stemcells, Inc., Advanced Cell Technology and Osiris Therapeutics. We are aware that Dendreon and Northwest Biotherapeutics have conducted clinical trials with cancer vaccine product candidates utilizing dendritic cells (including a Northwest Biotherapeutics candidate for treating brain tumors that has been approved for marketing in Switzerland), and other companies may also be developing vaccines of this type.

A number of monoclonal antibody products currently are being marketed for the treatment of cancer, including Rituxan®, Herceptin®, Compath®, Avastin®, Erbitux®, Vectibix®, Zevatin®, and Bexxar®, and numerous other monoclonal antibody based products are under development for the treatment of cancer. In the monoclonal antibody space, we will be directly competing against a number of other well established pharmaceutical and biotech companies such as Genentech, Seattle Genetics, Immunomedica, Medarex, Immunogen and others. Several of these companies are also targeting lung, pancreatic and colon cancer.

Colleges, universities, governmental agencies and other public and private research organizations are becoming more active in seeking patent protection and licensing arrangements to collect royalties for use of technologies that they have developed, some of which may be directly competitive with our lead product candidate or any future product candidates. The governments of a number of foreign countries are aggressively investing in cellular therapy research and promoting such research by public and private institutions within those countries. These domestic and foreign institutions and governmental agencies, along with pharmaceutical and specialized biotechnology companies, can be expected to compete with us in recruiting qualified scientific personnel.

Our competitive position will be significantly impacted by the following factors, among others:

 

   

our ability to obtain FDA marketing approval for our product candidates on a timely basis

 

   

the level of acceptance of our products by physicians, compared to those of competing products or therapies

 

   

our ability to have our products manufactured on a commercial scale

 

   

the effectiveness of sales and marketing efforts on behalf of our products

 

   

our ability to meet demand for our products

 

   

our ability to secure insurance reimbursement for our products candidates

 

   

the price of our products relative to competing products or therapies

 

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our ability to recruit and retain appropriate management and scientific personnel

 

   

our ability to develop a commercial scale research and development, manufacturing and marketing infrastructure either on our own or with one or more future strategic partners.

Government Regulation

The United States and other developed countries extensively regulate the preclinical and clinical testing, manufacturing, labeling, storage, record-keeping, advertising, promotion, export, marketing and distribution of drugs and biologic products. The United States Food and Drug Administration, under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other federal statutes and regulations, regulates pharmaceutical and biologic products.

To obtain approval of our product candidates from the FDA, we must, among other requirements, submit data supporting safety and efficacy for the intended indication as well as detailed information on the manufacture and composition of the product candidate. In most cases, this will require extensive laboratory tests and preclinical and clinical trials. The collection of these data, as well as the preparation of applications for review by the FDA involve significant time and expense. The FDA also may require post-marketing testing to monitor the safety and efficacy of approved products or place conditions on any approvals that could restrict the therapeutic claims and commercial applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply with regulatory standards or if we encounter problems at any time following initial marketing of our products.

The first stage of the FDA approval process for a new biologic or drug involves completion of preclinical studies and the submission of the results of these studies to the FDA. This data, together with proposed clinical protocols, manufacturing information, analytical data and other information submitted to the FDA, in an investigational new drug application (“IND”), must become effective before human clinical trials may commence. Preclinical studies generally involve FDA regulated laboratory evaluation of product characteristics and animal studies to assess the efficacy and safety of the product candidate.

After the IND becomes effective, a company may commence human clinical trials. These are typically conducted in three sequential phases, but the phases may overlap. Phase I trials consist of testing of the product candidate in a small number of patients or healthy volunteers, primarily for safety at one or more doses. Phase I trials in cancer are often conducted with patients who are not healthy and who have end-stage or metastatic cancer. Phase II trials, in addition to safety, evaluate the efficacy of the product candidate in a patient population somewhat larger than Phase I trials. Phase III trials typically involve additional testing for safety and clinical efficacy in an expanded population at multiple test sites. A company must submit to the FDA a clinical protocol, accompanied by the approval of the Institutional Review Boards at the institutions participating in the trials, prior to commencement of each clinical trial.

To obtain FDA marketing authorization, a company must submit to the FDA the results of the preclinical and clinical testing, together with, among other things, detailed information on the manufacture and composition of the product candidate, in the form of a new drug application (“NDA”) or, in the case of a biologic, like dendritic cell-based vaccines for neurological disorders, a biologics license application (“BLA”).

The amount of time taken by the FDA for approval of an NDA or BLA will depend upon a number of factors, including whether the product candidate has received priority review, the quality of the submission and studies presented, the potential contribution that the compound will make in improving the treatment of the disease in question, and the workload at the FDA. The FDA has committed to reviewing standard BLAs in 10 months and priority BLAs in six months, but the actual time it takes to review any BLA that we may file could be substantially longer.

 

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The FDA may, during its review of an NDA or BLA, ask for additional test data that may require the conduct of additional clinical trials. If the FDA does ultimately approve the product candidate for marketing, it may require post-marketing testing to monitor the safety and effectiveness of the product. The FDA also may in some circumstances impose restrictions on the use of the product, which may be difficult and expensive to administer and may require prior approval of promotional materials.

The FDA may, in some cases, confer upon an investigational product the status of a fast track product. A fast track product is defined as a new drug or biologic intended for the treatment of a serious or life-threatening condition that demonstrates the potential to address unmet medical needs for this condition. The FDA can base approval of an NDA or BLA for a fast track product on an effect on a surrogate endpoint, or on another endpoint that is reasonably likely to predict clinical benefit. If a preliminary review of clinical data suggests that a fast track product may be effective, the FDA may initiate review of entire sections of a marketing application for a fast track product before the sponsor completes the application.

We will also be subject to a variety of regulations governing clinical trials and sales of our products outside the United States. Whether or not FDA approval has been obtained, approval of a product candidate by the comparable regulatory authorities of foreign countries and regions must be obtained prior to the commencement of marketing the product in those countries. The approval process varies from one regulatory authority to another and the time may be longer or shorter than that required for FDA approval. In the European Union, Canada and Australia, regulatory requirements and approval processes are similar, in principle, to those in the United States.

Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facilities are in compliance with the FDA’s cGMP, which are regulations that govern the manufacture, holding and distribution of a product. Manufacturers of biologics also must comply with the FDA’s general biological product standards. Following approval, the FDA periodically inspects drug and biologic manufacturing facilities to ensure continued compliance with the good manufacturing practices regulations. We must ensure that any third-party manufacturers continue to comply with those requirements. Failure to comply with these requirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing or recall or seizure of product. Adverse patient experiences with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes or market removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following approval.

The labeling, advertising, promotion, marketing and distribution of a drug or biologic product also must be in compliance with FDA and Federal Trade Commission, requirements, which include, among others, standards and regulations for off-label promotion, industry sponsored scientific and educational activities, promotional activities involving the internet, and direct-to-consumer advertising. We also will be subject to a variety of federal, state and local regulations relating to the use, handling, storage and disposal of hazardous materials, including chemicals and radioactive and biological materials. In addition, we will be subject to various laws and regulations governing laboratory practices and the experimental use of animals. In each of these areas, as above, the FDA has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of product approvals, seize or recall products, and deny or withdraw approvals.

We also will be subject to federal regulation by the Occupational Safety and Health Administration and the Environmental Protection Agency and to regulation under the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other federal and state regulatory statutes, and may in the future be subject to other federal, state or local regulations.

 

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GLOSSARY OF TERMS

 

Antibody:    any of a large body of proteins normally present in the body or produced in response to an antigen that it neutralizes, thus producing an immune response.
Antigen:    any substance that when introduced into the body can stimulate the production of antibodies and combine specifically with them.
Cellular differentiation:    the process by which a cell becomes specialized in order to perform a specific function.
Cytokine:    any of a class of immunoregulatory proteins (such as interleukin, tumor necrosis factor, and interferon) that are released by cells of the immune system and act as intercellular mediators in the generation of an immune response. Also called chemokine.
Dendritic cell:    a highly specialized white blood cell found in the skin, mucosa and lymphoid tissues that initiates a primary immune response by activating lymphocytes and secreting cytokines.
DNA:    a nucleic acid that carries the genetic information in the cell and is capable of self-replication and synthesis of RNA, which determines protein synthesis and the transmission of genetic information.
Immunogenic:    capable of inducing an immune response.
Lymphocyte:    any of various white blood cells, including B cells and T cells, that function in the body’s immune system by recognizing and deactivating antigens. B cells act by stimulating the production of antibodies. T cells contain receptors on their cell surfaces that are capable of recognizing and binding to specific antigens. Lymphocytes are found in the lymph nodes and spleen and circulate continuously in the blood and lymph.
Lysate:    the cellular debris and fluid produced by the disintegration of a cell resulting from the destruction of its membrane by a chemical substance, especially an antibody or enzyme.
Stem cell:    an unspecified cell that upon division replaces its own numbers and also gives rise to cells that differentiate further into one or more specialized cell type.
T cell:    any of several closely related lymphocytes, developed in the thymus, which circulate in the blood and lymph and orchestrate the immune system’s response to infected or malignant cells.

 

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RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before deciding to invest in or maintain your investment in our company. The risks described below are not intended to be an all-inclusive list of all of the potential risks relating to an investment in our securities. If any of the following or other risks actually occur, our business, financial condition or operating results and the trading price or value of our securities could be materially adversely affected.

Risks Related To Our Business

We are a development-stage company subject to all of the risks and uncertainties of a new business, including the risk that we may never market any products or generate revenues.

We are a recently formed development-stage company that has only recently commence any significant research and development activity. There is no assurance that we will be able to satisfactorily develop our dendritic cell-based cancer vaccine technology and to market our proposed product candidates or that our proposed product candidates will generate revenues or that any revenues generated will be sufficient for us to become profitable or thereafter maintain profitability. We have not generated any revenues to date, and we do not expect to generate any such revenues for a number of years.

Our lead product candidate for the treatment of glioblastoma multiforme is in an early stage of development, has been subjected to only very limited human testing and will require extensive testing and regulatory marketing approvals before commercialization. The enrollment of patients to date in our clinical trial of this product candidate has proceeded more slowly than anticipated and we may continue to enroll patients at a slower rate than we currently expect. Our dendritic cell-based vaccine technology and our recently acquired molecular antibody based technology currently are our primary platform technologies, and our commercial prospects will be heavily dependent on the outcome of the clinical trials for our lead vaccine product candidate and our ability to successfully develop and then clinically test one or more molecular antibody product candidates. We have only one full-time employee, our President and Chief Executive Officer, have limited resources and may not possess the ability to successfully overcome many of the risks and uncertainties frequently encountered by early stage companies involved in the new and rapidly evolving field of biotechnology in general and cancer immunotherapies and molecular antibodies in particular. You must consider that we may not be able to:

 

   

obtain additional financial resources necessary to develop, test, manufacture and market our lead vaccine product candidate, our molecular antibody product candidates or any future product candidates;

 

   

engage corporate partners to assist in developing, testing, manufacturing and marketing our lead vaccine product candidate, our molecular antibody product candidates or any future product candidates;

 

   

satisfy the requirements of acceptable pre-clinical and clinical trial protocols, including timely patient enrollment;

 

   

establish and demonstrate or satisfactorily complete the research to demonstrate at various stages the pre-clinical and clinical efficacy and safety of our lead vaccine product candidate, our molecular antibody product candidates or any future product candidates; and

 

   

market our lead vaccine product candidate, our molecular antibody product candidates or any future product candidates to achieve acceptance and use by the medical community and patients in general and produce revenues.

 

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We have a history of losses, expect future losses and cannot assure you that we will ever become or remain profitable.

We have not generated any revenues and have incurred operating losses since our inception and we expect to continue to incur operating losses for the foreseeable future. There is no assurance that we will be able to develop or market products in the future that will generate revenues or that any revenues generated will be sufficient for us to become profitable or thereafter maintain profitability. In the event that our operating losses are greater than anticipated or continue for longer than anticipated, we will need to raise significant additional capital sooner, or in greater amounts, than otherwise anticipated in order to be able to continue development of our present or future product candidates and maintain our operations.

We will need to obtain significant additional capital, which additional funding may dilute our existing stockholders.

We believe that our existing cash balances will be sufficient to complete the current Phase I clinical trial of our dendritic cell based vaccine and to fund our currently planned level of operations through at least June 2009. We will need significant funding to carry out all of our planned development work on our lead vaccine product candidate, our molecular antibody product candidates and future product candidates and to expand the scope of our operations (including seeking to employ additional support personnel on a full-time basis). If we are unable to obtain sufficient capital on a timely basis, the development of our current or any future product candidates could be delayed, and we could be forced to reduce the scope of our research and development projects or otherwise limit or terminate our operations altogether.

We have not identified the sources for the additional financing that we will require, and we do not have commitments from any third parties to provide this financing. Certain investors may be unwilling to invest in our securities since we are traded on the OTC Bulletin Board and not on a Nasdaq market, particularly if there is only limited trading in our common stock on the OTC Bulletin Board at the time we seek financing. The volume and frequency of such trading has been limited to date. There is no assurance that sufficient funding through a financing will be available to us at acceptable terms or at all. Any additional funding that we obtain in a financing is likely to reduce the percentage ownership of the company held by our existing securityholders. The amount of this dilution may be substantially increased if the trading price of our common stock has declined at the time of any financing from its current levels. We may seek SBIR or other government grants to conduct a portion of our planned research and development work in addition to certain equity financing. We have not yet submitted any requests for these grants, the competition for obtaining these grants is intense and there is no assurance that we will secure any grant funding on a timely basis or at all.

Our access to Dr. Yu’s research laboratory at Cedars-Sinai may be limited.

We are heavily dependent upon Dr. John Yu, both for past research and as we develop our lead vaccine product candidate or any future vaccine product candidates. His laboratory at Cedars-Sinai has been financed in part by Cedars-Sinai (which is the licensor of our cellular-based therapy technology) and the National Institutes of Health (“NIH”). Cedars-Sinai or the NIH or other governmental agencies could promulgate new rules and regulations that might interfere with our product development or ownership rights if we wish to access on a contractual basis Dr. Yu’s laboratory at Cedars-Sinai in connection with our research and development activities.

Our current product candidates and any future product candidates will be based on novel technologies and are inherently risky.

We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of the therapies creates significant challenges in regards to product

 

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development and optimization, manufacturing, government regulation, third party reimbursement and market acceptance. For example, the FDA has limited experience with dendritic cell-based therapeutics and has not yet approved any of these therapeutics for marketing, and the pathway to regulatory approval for our lead vaccine product candidate or any future vaccine product candidates may accordingly be more uncertain, complex and lengthy than the pathway for new conventional drugs. In addition, the manufacture of biological products, including dendritic cell-based vaccines, could be more complex and difficult, and therefore, these potential challenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.

We may elect to delay or discontinue preclinical studies or clinical trials based on unfavorable results. Any product candidate using a cellular therapeutic technology may fail to:

 

   

survive and persist in the desired location;

 

   

provide the intended therapeutic benefits;

 

   

properly integrate into existing tissue in the desired manner; or

 

   

achieve therapeutic benefits equal to or better than the standard of treatment at the time of testing.

In addition, our product candidates may cause undesirable side effects. Results of preclinical research with our lead or any future product candidates or clinical results with formulations used in earlier trials that are similar but not identical to our lead product candidate formulation may not be indicative of the results that will be obtained in later stages of preclinical or clinical research on our product candidates. If regulatory authorities do not approve our products or if we fail to maintain regulatory compliance, we would be unable to commercialize our products, and our business and results of operations would be harmed. Furthermore, because dendritic cells represent a new form of therapy, the marketplace may not accept any products we may develop. If we do succeed in developing products, we will face many potential obstacles, such as the need to obtain regulatory approvals and to develop or obtain manufacturing, marketing and distribution capabilities. In addition, we will face substantial additional risks, such as product liability claims.

Because of the early stage of development of our lead vaccine product candidate, we do not know if we will be able to generate data that will support the filing of a biologics license or new drug application for this product candidate or the FDA’s approval thereof. If we experience substantial delays, we may not have the financial resources to continue development of this product candidate or the development of any of our any future product candidates. Delays in clinical trials could reduce the commercial viability of our lead product candidate and any future product candidates.

We are required to pay substantial royalties under our license agreement with Cedars-Sinai, and we must meet certain milestones to maintain our license rights.

Under our license agreement with Cedars-Sinai for our cellular-based therapy technology, we will be required to pay substantial royalties to that institution based on our revenues from sales of our products utilizing this technology, and these royalty payments could adversely affect the overall profitability for us of any products that we may seek to commercialize. In order to maintain our license rights under the Cedars-Sinai license agreement, we will need to meet certain specified milestones, subject to certain cure provisions, in the development of our product candidate and in the raising of funding (including initiating a Phase II clinical trial of our lead vaccine product candidate by December 31, 2008). We do not anticipate initiating a Phase II trial of our lead vaccine product candidate by December 31, 2008, and if we are unable to timely cure this failure, we may lose our rights in the technology licensed from Cedars-Sinai unless that institution waives or modifies that milestone requirement. There also is no assurance that we will be successful in meeting other future milestones on a timely basis or at all.

 

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Before we can market our lead product candidate or any future product candidates, we must obtain governmental approval for each of these product candidates, the application and receipt of which is time-consuming, costly and uncertain.

Our current product candidates and any future product candidates that we will be developing will require approval of the U.S. Food and Drug Administration (“FDA”) before they can be marketed in the U.S. Although our focus at this time is primarily on the U.S. market, in the future similar approvals will need to be obtained from foreign regulatory agencies before we can market our current and proposed product candidates in other countries. The process for filing and obtaining FDA approval to market therapeutic products is both time-consuming and costly, with no certainty of a successful outcome. The historical failure rate for companies seeking to obtain FDA approval of therapeutic products is high and no dendritic cell-based cancer vaccine has to date been approved by the FDA. This process includes conducting extensive pre-clinical research and clinical testing, which may take longer and cost more than we initially anticipate due to numerous factors, including without limitation, difficulty in securing appropriate centers to conduct trials, difficulty in enrolling patients in conformity with required protocols in a timely manner, unexpected adverse reactions by patients in the trials to our proposed product candidates and changes in the FDA’s requirements for our testing during the course of that testing. The FDA may require pre-clinical work for our molecular antibody product candidates beyond what we currently plan to conduct, which could necessitate significant expenditures on our part that we have not budgeted and which could significantly delay the commencement of clinical trials for these product candidates. The formulation of our lead vaccine product candidate has not been previously tested in patients, and we may encounter unexpected and adverse immune responses or other side effects in the patients whom we test with this product candidate.

The time required to obtain FDA and other approvals is unpredictable but often can exceed five years following the commencement of clinical trials, depending upon the complexity of the product and other factors. Any analysis we perform of data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to a variety of reasons, including new government regulations from future legislation or administrative action, or from changes in FDA policy during the period of product development, clinical trials and FDA regulatory review.

Any delay or failure in our clinical trial program and in obtaining required approvals would have a material adverse effect on our ability to generate revenues from the particular product. Furthermore, any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product. These limitations may limit the size of the market for the product.

Our lead vaccine product candidate and any future product candidates may not be eligible for Orphan Drug status.

The United States and Europe may designate drugs for relatively small patient populations as orphan drugs. Orphan Drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process, but does make the product eligible for orphan drug exclusivity, reduced filing fees and specific tax credits. Generally, if a company receives the first marketing approval for a product with an Orphan Drug designation in the clinical indication for which it has such designation, the product is entitled to orphan drug exclusivity. Orphan drug exclusivity means that the FDA will not approve another application to market the same drug for the same indication, except in limited circumstances, for a period of seven years in the United States. This exclusivity, however, could block the approval of our proposed product candidates if a competitor obtains marketing approval before us. Although another investigational dendritic cell-based brain tumor vaccine being developed by another company has received orphan drug status, we may seek orphan drug status for our glioblastoma multiforme vaccine product candidate or any future product candidates if we believe they meet the eligibility criterion for this status. However, even if we obtain orphan drug exclusivity for any of our

 

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proposed product candidates, we may not be able to maintain it. For example, if a competitive product is shown to be clinically superior to our product, any orphan drug exclusivity we have will not block the approval of such competitive product.

Fast Track designation for development of our lead vaccine product candidate or any other potential product candidate may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidate will receive marketing approval.

If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA Fast Track designation for a particular indication. Marketing applications filed by sponsors of products in Fast Track development may qualify for priority review under the policies and procedures offered by the FDA, but the Fast Track designation does not assure any such qualification or ultimate marketing approval by the FDA. Receipt of Fast Track designation may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures. In addition, the FDA may withdraw any Fast Track designation at any time. We may seek Fast Track designation for our lead glioblastoma multiforme vaccine candidate or any other product candidates, but there is no assurance that the FDA will grant this status to any of our proposed product candidates.

Because our current product candidates represent and our other future potential product candidates will represent novel approaches to the treatment of disease, there are many uncertainties regarding the development, the market acceptance, third party reimbursement coverage and the commercial potential of our product candidates.

There is no assurance that the approaches offered by our current product candidates or any future product candidates will gain broad acceptance among doctors or patients or that governmental agencies or third party medical insurers will be willing to provide reimbursement coverage for proposed product candidates. Moreover, we do not have internal marketing data research resources and are not certain of and have not attempted to independently verify the potential size of the commercial markets for our current product candidates or any future product candidates. Since our current product candidates and any future product candidates will represent new approaches to treating various conditions, it may be difficult, in any event, to accurately estimate the potential revenues from these product candidates. We may spend large amounts of money trying to obtain approval for these product candidates, and never succeed in doing so. In addition, these product candidates may not demonstrate in large sets of patients the pharmacological properties ascribed to them in the laboratory studies or smaller groups of patients, and they may interact with human biological systems in unforeseen, ineffective or even harmful ways either before or after they are approved to be marketed. We do not yet have sufficient information to reliably estimate what it will cost to commercially manufacture our current product candidates or any future product candidates, and the actual cost to manufacture these products could materially and adversely affect the commercial viability of these products. As a result, we may never succeed in developing a marketable product. If we do not successfully develop and commercialize products based upon our approach, we will not become profitable, which would materially, adversely affect the value of our common stock.

Other factors that are presently unknown to us that we believe will materially affect market acceptance of our current product candidates or any future product candidates include:

 

   

the timing of our receipt of any marketing approvals, the terms of any approvals and the countries in which approvals are obtained;

 

   

the safety, efficacy and ease of administration;

 

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the availability of government and third-party payor reimbursement;

 

   

the pricing of our product candidates, particularly as compared to alternative treatments; and

 

   

the availability of alternative effective forms of treatments, at that time, for the diseases that the product candidates we are developing are intended to treat.

Adverse publicity regarding cellular therapies could impact our business.

Although we are not utilizing embryonic stem cells, adverse publicity due to the ethical and social controversies surrounding the use of such cells or any adverse reported side effects from any dendritic or other cell therapy clinical trials or to the failure of such trials to demonstrate that these therapies are efficacious could materially, adversely affect our ability to raise capital or recruit managerial or scientific personnel or obtain research grants.

As an early stage small company that will be competing against numerous large, established companies that have substantially greater financial, technical, manufacturing, marketing, distribution and other resources than us, we will be at a significant competitive disadvantage.

The pharmaceutical and biopharmaceutical industry is characterized by intense competition and rapid and significant technological changes and advancements. Many companies, research institutions and universities are doing research and development work in a number of areas similar to those that we focus on that could lead to the development of new products which could compete with and be superior to our product candidates.

Most of the companies with which we compete have substantially greater financial, technical, research, manufacturing, marketing, distribution and other resources than those of ours. A number of these companies may have or may develop technologies for developing products for treating various diseases, including brain cancers, that could prove to be superior to ours. We expect technological developments in the pharmaceutical and biopharmaceutical and related fields to occur at a rapid rate, and we believe competition will intensify as advances in these fields are made. Accordingly, we will be required to continue to devote substantial resources and efforts to research and development activities in order to potentially achieve and maintain a competitive position in this field. Products that we develop may become obsolete before we are able to market them or to recover all or any portion of our research and development expenses. We will be competing with respect to our products with companies that have significantly more experience and expertise in undertaking preclinical testing and human clinical trials with new or improved therapeutic products and obtaining regulatory approvals of such products. A number of these companies already market and may be in advanced phases of clinical testing of various drugs that will or may compete with our current product candidates or other future potential product candidates. Our competitors may develop or commercialize products more rapidly than we do or with significant advantages over any products we develop. Our competitors may therefore be more successful in commercializing their products than we are, which could adversely affect our competitive position and business.

In addition to larger pharmaceutical or biopharmaceutical companies that may develop different competing technologies or technologies within the cellular and stem cell field, we will be competing with a number of smaller biotechnology companies that are focused on cellular therapy technologies, which may include among others Dendreon, Northwest Biotherapeutics, Antigenics, NeuralStem, Geron, NeuroNova, ReNeuron, Stemcells, Inc., Advanced Cell Technology and Osiris Therapeutics. We are aware that Dendreon and Northwest Biotherapeutics have conducted clinical trials with cancer vaccine product candidates utilizing dendritic cells (including a Northwest Biotherapeutics candidate for treating brain tumors), and other existing and new companies that may enter the field, may also be developing vaccines of this type.

 

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A number of monoclonal antibody products currently are being marketed for the treatment of cancer, including Rituxan®, Herceptin®, Compath®, Avastin®, Erbitux®, Vectibix®, Zevatin®, and Bexxar®, and numerous other monoclonal antibody based products are under development for the treatment of cancer. Accordingly, our monoclonal antibody products, if marketed, can be expected to compete with our monoclonal antibody products (as well as other products for the treatment of cancer) that are well established and marketed by substantial organizations.

Colleges, universities, governmental agencies and other public and private research organizations are becoming more active in seeking patent protection and licensing arrangements to collect royalties for use of technologies that they have developed, some of which may be directly competitive with our lead product candidate or any future product candidates. The governments of a number of foreign countries are aggressively investing in cellular therapy research and promoting such research by public and private institutions within those countries. These domestic and foreign institutions and governmental agencies, along with pharmaceutical and specialized biotechnology companies, also can be expected to compete with us in recruiting qualified scientific personnel.

We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or any future product candidates, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.

We do not have the required financial and human resources to carry out on our own all the pre-clinical and clinical development for our lead product candidate or any future product candidates, and do not have the capability and resources to manufacture, market or sell our current product candidates or any future product candidates. Vaccines are often administered with one or more adjuvants, which if necessary we will have to procure from a third-party source. We will need to engage a firm with expertise in producing a humanized form of our molecular antibody product candidates. Our business model calls for the outsourcing of the clinical and other development and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentially improving our financial position. Accordingly, we will seek to enter, at the appropriate time, into agreements with other companies that can assist us and provide certain capabilities that we do not possess. We have not yet identified or entered into discussions with any company for any strategic alliances or other licensing or contract arrangements. Even if we do succeed in securing these alliances, we may not be able to maintain them if, for example, development results are disappointing or approval of a product is delayed or sales of an approved product are below expectations. Furthermore, any delay in entering into agreements could delay the development and commercialization of our products and reduce their competitiveness even if they reach the market. Any such delay related to our agreements could adversely affect our business.

If any party to which we have outsourced certain functions fails to perform its obligations under agreements with us, the development and commercialization of our lead product candidate and any future product candidates could be delayed or terminated.

To the extent that we rely on third party individuals or other companies to manage the day-to-day conduct of our clinical trials or to manufacture, sell or market our current product candidates or any future product candidates, we will be dependent on the timeliness and effectiveness of their efforts. If a clinical research management organization that we might utilize is unable to allocate sufficient qualified personnel to our studies or if the work performed by it does not fully satisfy the rigorous requirements of the FDA, we may encounter substantial delays and increased costs in completing our clinical trials. If a firm producing humanized forms of our molecular antibody product candidates or a manufacturer of the raw material or finished product for our clinical trials is unable to meet our time schedules or cost parameters, the timing of our clinical trials and development of our product candidates may be adversely affected. Any manufacturer that we select may encounter difficulties in scaling-up the manufacture of

 

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new products in commercial quantities, including problems involving product yields, product stability or shelf life, quality control, adequacy of control procedures and policies, compliance with FDA regulations and the need for further FDA approval of any new manufacturing processes and facilities. The manufacture of clinical supplies for studies and commercial quantities of our current product candidates and any future product candidates are likely to be inherently more difficult and costly than typical chemical pharmaceuticals. This could delay commercialization of any of our product candidates or reduce the profitability of these candidates for us. If any of these occur, the development and commercialization of our product candidates could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue such development and commercialization on our own.

If we or our manufacturers or service providers fail to comply with regulatory laws and regulations, we or they could be subject to enforcement actions, which could affect our ability to market and sell our lead product candidate and any future product candidates and may harm our reputation.

If we or our collaborators, manufacturers or service providers fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to enforcement actions, which could affect our ability to develop, market and sell our current product candidates or any future product candidates under development successfully and could harm our reputation and lead to reduced or non-acceptance of our proposed product candidates by the market. Even technical recommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make the manufacturing of a clinical product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. The very nature of the product may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longer commercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional Biosafety Committee; which may delay or make impossible clinical testing of a product candidate. The Data Safety Monitoring Committee established by us may stop a trial or deem a product candidate unsafe to continue testing. This may have significant negative repercussions on the value of the product candidate and may have negative repercussions on the company and on the shareholders.

Even if we obtain regulatory approvals, our products will be subject to ongoing regulatory review.

Following any initial regulatory approval of any products we may develop, we will also be subject to continuing regulatory review, including the review of adverse drug experiences and clinical results that are reported after our products are made commercially available. This would include results from any post-marketing tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities we use to make any of our products will also be subject to periodic review and inspection by the FDA. The discovery of any previously unknown problems with the product, manufacturer or facility may result in restrictions on the product or manufacturer or facility, including withdrawal of the product from the market. We do not have, and currently do not intend to develop, the ability to manufacture material for our clinical trials or on a commercial scale. Reliance on third-party manufacturers entails risks, including the continuation of a contractual or other relationship with the third party manufacturer, and reliance on the third-party manufacturer for regulatory compliance. Our product promotion and advertising also will be subject to regulatory requirements and continuing FDA review.

The potential ramifications are far-reaching if there are areas identified as out of compliance by regulatory agencies, including, but not limited to, significant financial penalties, manufacturing and clinical trial consent decrees, commercialization restrictions or other restrictions and litigation.

 

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Our patents may not protect the proprietorship of our products.

Our ability to compete successfully will depend significantly on our ability to defend patents that may have issued, obtain new patents, protect trade secrets and operate without infringing the proprietary rights of others or others infringing on our proprietary rights. Although Cedars-Sinai as our licensor has filed applications relative to our cancer vaccine technology, we are responsible going forward to prosecute these patent applications, we do not currently own or have licensed rights to any issued patents covering our cancer vaccine technology, and there is no guarantee that these patent applications will lead to issued patents.

Issuance of patents based upon the various patent applications licensed from Cedars-Sinai will depend upon the U.S. and foreign patent agencies being able to determine that the claims made in these applications were not already publicly known or were not obvious from prior published patents and literature, including the extensive previous vaccine work performed and published by Dr. John Yu and other researchers at Cedars-Sinai. One of the provisional applications in the licensed portfolio covered the use of a specific antigen, TRP-2, in vaccines. We have decided that in light of our present research interests and commercial strategies, as well as prior published literature, we will not pursue this application. Although TRP-2 is one of the antigens used in our lead vaccine product candidate, we have been seeking patent protection for this vaccine through our licensed multiple antigen patent application and not through the withdrawn TRP-2 patent application. The TRP-2 patent application did not cover in any material respect the technology incorporated in any other potential vaccine product candidate that we are currently contemplating for future development.

Even if we are able to obtain patent protection for our lead vaccine product candidate or any of our other current or future product candidates, there is no guarantee that the coverage of these patents or the existing patents we own covering our monoclonal antibody based technology, will be sufficiently broad to protect us from competitors or that we will be able to enforce our patents against potential infringement by third parties or protect us against our infringement of the proprietary rights of third parties. Patent litigation is expensive, and we may not be able to afford the costs. We may not become aware on a timely basis that products we are developing or marketing infringe the rights of others, nor may we be able to detect unauthorized use or take appropriate and timely steps to enforce our own intellectual property rights. Protecting our intellectual property rights may also consume significant management time and resources. Dr. John Yu, a co-inventor of our cellular-based therapy technology who serves as our Chairman of the Board, is employed by Cedars-Sinai, which may assert that future intellectual property generated by Dr. Yu belongs to that institution rather than to us, and we may be required to seek a license from Cedars-Sinai for any such rights. We acquired our monoclonal antibody related technology from Molecular Discoveries, but third parties who previously employed that company’s lead scientist could potentially assert ownership claims to the technology. We do not have any issued patents or patent applications covering DIAAD and may not be able to protect this technology through any trade secrets that we may hold or future patents, if any, that we may seek to obtain.

Nondisclosure agreements with employees and third parties may not adequately prevent disclosure of trade secrets and other proprietary information.

In order to protect our proprietary technology and processes, we will also rely in part on nondisclosure agreements with our employees, licensing partners, consultants, agents and other organizations to which we disclose our proprietary information. These agreements may not effectively prevent disclosure of confidential information, may be limited as to their term, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such party. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position. Since we will rely on trade secrets

 

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and nondisclosure agreements, in addition to patents, to protect some of our intellectual property, there is a risk that third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage. We may not be able to detect unauthorized use or take appropriate and timely steps to enforce our intellectual property rights.

The manufacture, use or sale of our current product candidates or any future product candidates may infringe on the patent rights of others, and we may be forced to litigate if an intellectual property dispute arises.

Should third parties patent specific cells, systems, receptors, molecular antibodies or other items that we are seeking to utilize in our development activities, we may be forced to license rights from these parties or abandon our development activities if we are unable to secure these rights on attractive terms or at all. In light of the large number of companies and institutions engaged in research and development in the cellular therapy and molecular antibody fields, we anticipate that many parties will be seeking patent rights for many cellular or molecular antibody based technologies and that licensing and cross licensing of these rights among various competitors may arise. It may be necessary for us to license certain rights from others for their technologies so that we can develop our current product candidates or any future product candidates, but we may not be able to do so on attractive terms or at all. Cedars-Sinai has previously granted another institution rights to the use of certain peptide materials that we may seek to incorporate into one or more of our cellular-based therapy product candidates. We may be required to obtain a license from that other institution if we wish to use these materials. If we are unable to obtain this license, we would be required to develop vaccine products without the potential enhanced benefits that could be provided by these materials.

If we infringe or are alleged to have infringed another party’s patent rights, we may be required to defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, do not successfully defend an infringement action or are unable to have infringed patents declared invalid, we may:

 

   

incur substantial monetary damages;

 

   

encounter significant delays in marketing our current product candidates or any future product candidates;

 

   

be unable to conduct or participate in the manufacture, use or sale of product candidates or methods of treatment requiring licenses;

 

   

lose patent protection for our inventions and products; or

 

   

find our patents are unenforceable, invalid, or have a reduced scope of protection.

Parties making such claims may be able to obtain injunctive relief that could effectively block our ability to further develop or commercialize our current product candidates or any future product candidates in the United States and abroad and could result in the award of substantial damages. Defense of any lawsuit or failure to obtain any such license could substantially harm to us. Litigation, regardless of outcome, could result in substantial cost to and a diversion of efforts by us.

We will be dependent on our key personnel, and the loss of one or more of our key personnel would materially and adversely affect our business and prospects.

Except for our President and Chief Executive Officer, we do not have any full-time management personnel. We are dependent on our officers and directors for their scientific or managerial skills,

 

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including Dr. John Yu, our Chairman of the Board, and Dr. Manish Singh, our President and Chief Executive Officer. However, these individuals (with the exception of Dr. Singh) are associated with us on a part-time basis only. We do not currently maintain key man life insurance on Drs. Yu and Singh, we do not have an employment contract with Dr. Yu and our employment contract with Dr. Singh expires in February 2009, and the loss of either of their services would materially, adversely affect our business.

We have recently obtained the full-time services of a President and Chief Executive Officer. As we retain additional full-time senior personnel, our overhead expenses for salaries and related items will increase substantially from current levels. Competition for such personnel is intense, and there is no assurance that we will be able to attract or retain qualified senior personnel and our failure to do so could have an adverse effect on our ability to implement our business plan.

The market success of our current product candidates and any future product candidates will be dependent in part upon third-party reimbursement policies that have not yet been established for our product candidates.

Our ability to successfully commercialize and penetrate the market for our current product candidate and any future product candidates is likely to depend significantly on the availability of reimbursement for our lead product candidate or any future product candidates from third-party payers, such as governmental agencies, private insurers and private health plans. Even if we are successful in bringing a proposed product candidate to the market, these product candidates may not be considered cost-effective, and the amount reimbursed for our products may be insufficient to allow us to sell any of our products on a competitive basis. We cannot predict whether levels of reimbursement for our product candidates, if any, will be high enough to allow the price of our product candidates to include a reasonable profit margin. Even with FDA approval, third-party payers may deny reimbursement if the payer determines that our particular product candidates are unnecessary, inappropriate or not cost effective. If patients are not entitled to receive reimbursements similar to reimbursements for competing products, which currently is reimbursable, they may be unwilling to use our product candidates since they will have to pay for the unreimbursed amounts. The reimbursement status of newly-approved health care products is highly uncertain. If levels of reimbursement are decreased in the future, the demand for our lead proposed product candidate and any future product candidates could diminish or our ability to sell our products on a profitable basis could be adversely affected.

We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. A number of legislative and regulatory proposals to change the healthcare system in the United States and other major healthcare markets have been proposed in recent years. These proposals have included prescription drug benefit legislation recently enacted in the United States and healthcare reform legislation recently enacted by certain states. Further federal and state legislative and regulatory developments are possible, and we expect ongoing initiatives in the United States to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipated revenues from any products that we may successfully develop.

We may be subject to product liability and other claims that could have a material negative effect on our operations and on our financial condition.

The development and sale of medical products in general, and vaccines in particular, expose us to the risk of significant damages from product liability and other claims. Product liability claims could delay or prevent completion of our clinical development programs. If we succeed in marketing our current lead products candidate or any future product candidates, such claims could result in an FDA investigation of the safety and effectiveness of our products or our marketing programs, and potentially a recall of our products or more serious enforcement action, or limitations on the indications for which they may be used, or suspension or withdrawal of approval. We plan to obtain and maintain product liability

 

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insurance for coverage of our clinical trial activities and have obtained this coverage for the current clinical trial of our glioblastoma multiforme vaccine. There is no assurance that we will be able to secure such insurance in the amounts we are seeking or at all for any of the future trials for our current product candidates or any future product candidates. We intend to obtain coverage for our products when they enter the marketplace (as well as requiring the manufacturers of our products to maintain insurance), but we do not know if insurance will be available to us at acceptable costs or at all. The costs for many forms of liability insurance have risen substantially in recent years and the costs for insuring a vaccine type product may be higher than other pharmaceutical products, and such costs may continue to increase in the future, which could materially impact our costs for clinical or product liability insurance. If the cost is too high, we will have to self-insure, and we may have inadequate financial resources to pay the costs of any claims. A successful claim in excess of our product liability coverage could have a material adverse effect on our business, financial condition and results of operations.

We may encounter delays and difficulties in the development of technologies or operations of any other businesses we may acquire.

We may, from time to time, acquire technologies or businesses that are complimentary to our existing technologies or operations or that we otherwise believe offer an attractive opportunity for us in the future. We may encounter various types of unanticipated difficulties in connection with developing these technologies or operating these businesses; the risk of these occurring potentially being greater if these technologies or businesses are not directly related to any existing technology of operations. Any such difficulties could have a material adverse effect on our financial performance and condition.

Risks Related to Our Securities

Our stock may be traded infrequently and in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.

The shares of our common stock may trade infrequently and in low volumes on the OTC Bulletin Board, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors, including the fact that we are a small early stage company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who can generate or influence sales volume, and that even if we came to the attention of such institutionally oriented persons, they tend to be risk-averse in this environment and would be reluctant to follow an early stage company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common shares will develop or be sustained. Due to these conditions, we can give you no assurance that you will be able to sell your shares at or near bid prices or at all if you need money or otherwise desire to liquidate your shares. As a result, investors could lose all or part of their investment.

You may have difficulty selling our shares because they are deemed “penny stocks.”

Since our common stock is not listed on the Nasdaq Stock Market, if the trading price of our common stock remains below $5.00 per share, trading in our common stock will be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a penny stock (generally, any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions). Such rules require the delivery, prior to

 

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any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally defined as an investor with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with a spouse). For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Such information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The additional burdens imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market liquidity of the common stock and the ability of holders of the common stock to sell their shares.

Our existing directors, executive officers and principal stockholders hold a substantial amount of our common stock and may be able to prevent other stockholders from influencing significant corporate decisions.

As of March 1, 2008, our directors and executive officers and their affiliates beneficially owned approximately 41.42% of our outstanding common stock. Dr. John Yu also currently is entitled to serve as a director and to designate two of our other directors. These stockholders, if they act together, and Dr. Yu, through his right to name three of our directors, may be able to direct the outcome of matters, including the election of our directors and other corporate actions such as:

 

   

our merger with or into another company;

 

   

a sale of substantially all of our assets; and

 

   

amendments to our certificate of incorporation.

The decisions of these stockholders may conflict with our interests or those of our other stockholders.

Potential conflicts of interest could arise for certain members of our management team in the performance of their services for us.

Dr. John Yu, our Chairman of the Board, and Dr. Keith Black, the Chairman of our Scientific Advisory Board, are full-time employees of Cedars-Sinai, which owns shares of our common stock and where we plan to conduct certain research and development work, including the current clinical trial of our glioblastoma multiforme vaccine. Potential conflicts of interest could arise as a result, including for Dr. Yu and Dr. Black in performing services for us and for Cedars-Sinai, in establishing the terms under which Cedars-Sinai performs work for us, and in Cedars-Sinai conducting the research. Dr. Yu and other scientists associated with Dr. Yu at Cedars-Sinai may perform research in the field of brain tumors that is sponsored by other third parties. We will not acquire any interest in the intellectual property generated by this research, including a clinical trial currently being conducted with a dendritic cell vaccine in combination with certain intracranial chemotherapy. These studies may compete for patients to be enrolled in clinical trials with our current or future clinical trials.

 

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Substantial sales of our common stock could cause our common stock price to fall.

Currently, approximately 11,782,493 shares of our currently outstanding common stock and another 14,934,919 shares of our common stock issuable upon exercise of warrants and options are eligible to be sold pursuant to Rule 144 or currently effective registration statements. The possibility that substantial amounts of our common stock may be sold in the public market may adversely affect prevailing market prices for our common stock and could impair our ability to raise capital through the sale of our equity securities.

Our securities are quoted on the OTC Bulletin Board, which may limit the liquidity and price of our securities more than if our securities were quoted or listed on the Nasdaq Stock Market or a national exchange.

Our securities are currently quoted on the OTC Bulletin Board, an NASD-sponsored and operated inter-dealer automated quotation system for equity securities not included in the Nasdaq Stock Market. Quotation of our securities on the OTC Bulletin Board may limit the liquidity and price of our securities more than if our securities were quoted or listed on The Nasdaq Stock Market or a national exchange. Some investors may perceive our securities to be less attractive because they are traded in the over-the-counter market. In addition, as an OTC Bulletin Board listed company, we do not attract the extensive analyst coverage that accompanies companies listed on Nasdaq or any other regional or national exchange. Further, institutional and other investors may have investment guidelines that restrict or prohibit investing in securities traded in the over-the-counter market. These factors may have an adverse impact on the trading and price of our securities.

The market price of our stock may be adversely affected by market volatility.

The market price of our common stock is likely to be volatile and could fluctuate widely in response to many factors, including:

 

   

announcements of the results of clinical trials by us or our competitors;

 

   

developments with respect to patents or proprietary rights;

 

   

announcements of technological innovations by us or our competitors;

 

   

announcements of new products or new contracts by us or our competitors;

 

   

actual or anticipated variations in our operating results due to the level of development expenses and other factors;

 

   

changes in financial estimates by securities analysts and whether our earnings meet or exceed such estimates;

 

   

conditions and trends in the pharmaceutical and other industries;

 

   

new accounting standards;

 

   

general economic, political and market conditions and other factors; and

 

   

the occurrence of any of the risks described in this report.

 

ITEM 2. DESCRIPTION OF PROPERTY

We currently maintain our corporate office in Woodland Hills, California under a one-year lease at a monthly rental rate of $1,507. We do not lease or own any other real property.

 

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ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

We may occasionally become subject to legal proceedings and claims that arise in the ordinary course of our business. It is impossible for us to predict with any certainty the outcome of any disputes that may arise, and we cannot predict whether any liability arising from claims and litigation will be material in relation to our consolidated financial position or results of operations.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our annual meeting of stockholders scheduled for November 5, 2007 was adjourned to and held on December 3, 2007. The following summarizes the proposals voted on at that meeting.

 

Proposal 1 -    The election of Jacqueline Brandwynne, Richard A. Cowell, Robert L. Martuza, M. D., Manfred Mosk, Ph.D. and John Yu, M.D. to serve as all of the members of the Board of Directors, with the following vote totals:
   5,670,224 votes were cast for the election of Ms. Brandwynne to the Corporation’s Board of Directors and 548,834 votes were withheld.
   5,670,224 votes were cast for the election of Mr. Cowell to the Corporation’s Board of Directors and 548,834 votes were withheld.
   6,057,224 votes were cast for the election of Dr. Martuza to the Corporation’s Board of Directors and 161,834 votes were withheld.
   5,670,224 votes were cast for the election of Dr. Mosk to the Corporation’s Board of Directors and 548,834 votes were withheld.
   5,670,224 votes were cast for the election of Dr. Yu to the Corporation’s Board of Directors and 548,834 votes were withheld.
Proposal 2 -    The ratification of the appointment of Stonefield Josephson, Inc. as the Corporation’s independent registered public accounting firm for the year ended December 31, 2007 was approved with 5,523,966 votes cast for, 1,000 votes cast against ratifying such appointment, and 694,092 votes abstained.

PART II

 

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been traded on the OTC Bulletin Board over-the-counter market since December 7, 2006, under the symbol “IMUC.” Our common stock had been listed since August 18, 2006 on the OTC Bulletin Board over-the-counter market under the symbol “OPMO,” and before that was listed in the over-the-counter market under the symbol “PCOI” and “PCOI.PK.”

There was little or no trading in our common stock prior to our merger with Spectral Molecular Imaging in January 2006, and there has only been very limited trading since then. The following price information reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions:

 

Quarter Ending

   High    Low

March 31, 2007

   2.91    0.85

June 30, 2007

   3.50    1.17

September 30, 2007

   1.39    0.83

December 31, 2007

   1.30    0.55

January 1, 2008 through March 1, 2008

   0.85    0.53

 

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Stockholders

As of March 1, 2008, there were approximately 200 holders of record of our common stock, not including any persons who hold their stock in “street name.”

Dividend Policy

We have not paid any dividends on our common stock to date and do not anticipate that we will be paying dividends in the foreseeable future. Any payment of cash dividends on our common stock in the future will be dependent upon the amount of funds legally available, our earnings, if any, our financial condition, our anticipated capital requirements and other factors that the Board of Directors may think are relevant. However, we currently intend for the foreseeable future to follow a policy of retaining all of our earnings, if any, to finance the development and expansion of our business and, therefore, do not expect to pay any dividends on our common stock in the foreseeable future.

 

ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

You should read the information in this Item 6 together with our consolidated financial statements and notes thereto that appear elsewhere in this Annual Report. This Annual Report contains forward-looking statements that involve risks, uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those presented under “Risk Factors “ included in Item 1 and elsewhere in this Annual Report.

Overview

On January 31, 2006, we completed a merger pursuant to which Spectral Molecular Imaging, Inc. became our wholly owned subsidiary. At the time of the merger, we had virtually no assets or liabilities, and we had not conducted any business operations for several years. In connection with the merger, we changed our name from Patco Industries, Ltd. to Optical Molecular Imaging, Inc. and replaced our officers and directors with those of Spectral Molecular Imaging. Although we acquired Spectral Molecular Imaging in the merger, for accounting purposes the merger was treated as a reverse merger since the stockholders of Spectral Molecular Imaging acquired a majority of our outstanding shares of common stock and the directors and executive officers of Spectral Molecular Imaging became our directors and executive officers. Accordingly, our financial statements contained in this Annual Report and the description of our results of operations and financial condition, reflect the operations of Spectral Molecular Imaging.

In May 2006, we decided to suspend our research and development activities on Spectral Molecular Imaging’s spectral imaging technology, and on September 11, 2006, we sold all of the outstanding capital stock of Spectral Molecular Imaging to Dr. Daniel Farkas, a co-founder of Spectral Molecular Imaging and inventor of its technology.

 

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In November 2006, we acquired an exclusive, worldwide license from Cedars-Sinai Medical Center for certain cellular-based therapy technology that we will be developing for the potential treatment of brain tumors and other forms of cancer and neurodegenerative disorders. We are currently funding a Phase I clinical trial of a vaccine product candidate for the treatment of glioblastoma multiforme based on this technology that we anticipate will be completed by the first half of 2009.

In February 2008, we acquired certain monoclonal antibody related technology owned by Molecular Discoveries LLC. This technology consists of (i) a platform technology referred to by Molecular Discoveries as DIAAD for the potentially rapid discovery of targets (antigens) and monoclonal antibodies for diagnosis and treatment of diverse human diseases and (ii) certain monoclonal antibody candidates for the potential detection and treatment of multiple myeloma, small cell lung, pancreatic and ovarian cancers.

Plan of Operation

We are a development stage company that is seeking to develop and commercialize new therapeutics to fight cancer using the immune system.

Since our company’s inception on February 25, 2004, we have been primarily engaged in the acquisition of certain intellectual property, together with the recent clinical testing activities for our lead vaccine product candidate, and have not generated any revenues. As a result, we have incurred operating losses and, as of December 31, 2007, we had an accumulated deficit of $9,025,211. We expect to incur significant research, development and administrative expenses before any of our products can be launched and revenues generated.

For additional information about our plan of business operation, see Item 1 of this Annual Report, entitled “Description of Business.”

Revenues

We had no revenues during the twelve months ended December 31, 2006 or during the twelve months ended December 31, 2007. We incurred a net loss of $5,152,713 for the twelve months ended December 31, 2006, and a net loss of $3,614,753 for the twelve months ended December 31, 2007. We do not expect to generate any operating revenues during 2008.

Expenses

General and administrative expenses for the twelve months ended December 31, 2006 and for the twelve months ended December 31, 2007 were $459,263 and $946,022, respectively. Research and development expenses for the twelve months ended December 31, 2006 and for the twelve months ended December 31, 2007 were $772,200 and $77,857, respectively. We had $4,797,645 of non-cash expense for the twelve months ended December 31, 2006, including $694,000 paid in stock for our license from Cedars-Sinai and $4,103,645 in stock-based compensation. We had $2,752,914 of non-cash expense for the twelve months ended December 31, 2007, including $1,296,714 in stock based compensation and $1,456,200 in change in fair value of warrant liability.

We expect our general and administrative expenses to increase significantly during 2008 as compared to 2007 as we expand the scope of our operations. We estimate that the cost of our research and development work will exceed $1,000,000 in 2008, and we may incur significant additional research and development expenses should we expand our research and development work on additional potential applications for our existing technologies or should we acquire additional technologies from one or more third parties.

 

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Loss

We incurred a net loss of $5,152,713 for the twelve months ended December 31, 2006, and a net loss of $3,614,753 for the twelve months ended December 31, 2007.

Liquidity and Capital Resources

As of December 31, 2007, we had working capital of $4,997,609, compared to working capital of $966,962 on December 31, 2006. In 2007, we raised net proceeds of approximately $4,892,486 through the sale of our securities in private placements.

The estimated cost of completing the development of our lead vaccine product candidate and of obtaining all required regulatory approvals to market that product candidate is substantially greater than the amount of funds we currently have available. We believe that our existing cash balances will be sufficient to complete our current Phase I clinical trial and to fund our currently planned level of operations through at least June 2009, although there is no assurance that such proceeds will be sufficient for this purpose.

We do not have any bank credit lines. We currently plan to attempt to obtain additional financing through the sale of additional equity, although we may also in the future seek to obtain funding through strategic alliances with larger pharmaceutical or biomedical companies. We have not yet identified, and cannot be sure that we will be able to obtain any additional funding from either of these sources, or that the terms under which we may be able to obtain such funding will be beneficial to us. If we are unsuccessful or only partly successful in our efforts to secure additional financing, we may find it necessary to suspend or terminate some or all of our product development and other activities.

As of December 31, 2007, we had no long-term debt obligations, no capital lease obligations, no material purchase obligations or other similar long-term liabilities. In addition, we have no financial guarantees, debt or lease agreements or other arrangements that could trigger a requirement for an early payment or that could change the value of our assets, and we do not engage in trading activities involving non-exchange traded contracts.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to impairment of long-lived assets, including finite lived intangible assets, accrued liabilities and certain expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Our significant accounting policies are summarized in Note 2 of our audited financial statements for the period from February 25, 2004 to December 31, 2007. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:

 

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Development Stage Enterprise

We are a development stage enterprise as defined by the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting by Development Stage Enterprises.” We are devoting substantially all of our present efforts to research and development. All losses accumulated since inception have been considered as part of our development stage activities.

Research and Development Costs

Although we believe that our research and development activities and underlying technologies have continuing value, the amount of future benefits to be derived from them is uncertain. Research and development costs are therefore expensed as incurred rather than capitalized. During 2007, 2006 and 2005, we recorded an expense of $77,857, $772,200 and $152,760, respectively, related to research and development activities.

Stock-Based Compensation

In December 2004, the FASB issued SFAS 123R, Share Based Payment: An Amendment of FASB Statements No. 123 and 95 (SFAS 123R). This statement requires that the cost resulting from all share-based payment transactions be recognized in our consolidated financial statements. In addition, in March 2005 the Securities and Exchange Commission (the “SEC”) released SEC Staff Accounting Bulletin No. 107, Share-Based Payment (SAB 107). SAB 107 provides the SEC staff’s position regarding the application of SFAS 123R and certain SEC rules and regulations, and also provides the SEC staff’s views regarding the valuation of share-based payment arrangements for public companies. Generally, the approach in SFAS 123R is similar to the approach described in SFAS 123. However, SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Pro forma disclosure of fair value recognition, as prescribed under SFAS 123, is no longer an alternative.

In the first quarter of 2006, we adopted the fair value recognition provisions of SFAS 123R utilizing the modified-prospective-transition method, as prescribed by SFAS 123R. Under this transition method, compensation cost recognized during the twelve months ended December 31, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with SFAS 123, and (b) compensation expense for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Under the modified-prospective-transition method, results for the prior periods have not been restated.

 

ITEM 7. FINANCIAL STATEMENTS

Our consolidated financial statements and notes thereto and the related report of Stonefield Josephson, Inc. are attached to this Annual Report beginning at page F-1 and are incorporated herein by reference.

 

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

 

ITEM 8A(T). CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file with the SEC under the Exchange Act is recorded,

 

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processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow for timely decisions regarding required disclosure. As required by SEC Rule 15d-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive and financial officers concluded that our disclosure controls and procedures are effective to ensure the information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is timely recorded, processed and reported within the time periods specified in the SEC’s rules and forms.

Management’s Report on Internal Control Over Financial Reporting

This report is provided by our management pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC rules promulgated thereunder. Management is responsible for establishing and maintaining adequate internal control over financial reporting and for assessing the effectiveness of internal control over financial reporting.

Our control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed our internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment of our internal control over financial reporting, management has concluded that, as of December 31, 2007, our internal control over financial reporting was effective.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 8B. OTHER INFORMATION

Dr. Manfred Mosk resigned as a member of our Board of Directors effective March 19, 2008.

 

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PART III

 

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Executive Officers and Directors

The following table sets forth the name, age and position held by each of our executive officers and directors. Directors are elected for a period of one year and thereafter serve until the next annual meeting at which their successors are duly elected by the stockholders.

 

Name

   Age    Position

John S. Yu, M.D. (1) (2)

   44    Chairman of the Board

Manish Singh, Ph.D. (2)

   39    President, Chief Executive Officer and Director

C. Kirk Peacock

   39    Treasurer and Chief Financial Officer

Jacqueline Brandwynne (2)

   70    Director

Richard A. Cowell (3)

   60    Director

Robert L. Martuza, M.D. (1)

   59    Director

 

(1)

Members of our Compensation Committee

(2)

Members of our Nominating and Corporate Governance Committee

(3)

Member of our Audit Committee

Business Experience and Directorships

The following describes the backgrounds of current executive officers and directors. Our Board of Directors has determined that all of our directors other than Dr. Singh are independent directors as defined in the Nasdaq rules governing members of boards of directors. Under his current right to designate two other members of our Board of Directors, Dr. Yu designated Dr. Robert Martuza in December 2006 and Jacqueline Brandwynne in January 2007 to serve as two of our directors. Dr. Manfred Mosk resigned from our Board of Directors effective March 19, 2008.

John S. Yu, M.D., Chairman of the Board

Dr. Yu served as our Chief Scientific Officer and as a director from November 2006 to January 2007, when he became our Chairman of the Board. He is a member of the full-time faculty in the Department of Neurosurgery at Cedars-Sinai Medical Center. An internationally renowned neurosurgeon, Dr. Yu’s clinical focus is on the treatment of malignant and benign brain and spinal tumors. He is also conducting extensive research in immune and gene therapy for brain tumors. He has also done extensive research in the use of neural stem cells as delivery vehicles for brain cancers and neurodegenerative diseases. He was inducted into Castle and Connelly’s America’s Top Doctors in 2005. Dr. Yu has published articles in a number of prestigious journals, including The Lancet, Cancer Research, Cancer Gene Therapy, Human Gene Therapy, Journal of Neuroimmunology, Journal of Neurological Science and Journal of Neurosurgery. Dr. Yu earned his bachelor’s degree in French literature and biological sciences from Stanford University and spent a year at the Sorbonne in Paris studying French literature. He also pursued a fellowship in immunology at the Institut Pasteur in Paris. He earned his medical degree from Harvard Medical School and master’s degree from the Harvard University’s Department of Genetics. He completed his neurosurgical residency at Massachusetts General Hospital in Boston. In addition, he was a Neuroscience Fellow at the National Institutes of Mental Health in the Neuroimmunology Unit at

 

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Massachusetts General Hospital from 1988 to 1989 and was a Culpepper Scholar at the Molecular Neurogenetics Unit at that hospital from 1993 to 1995. His other honors include the Preuss Award, Joint Section on Tumors, American Association of Neurological Surgeons and Congress of Neurologic Surgeons in 1995. He received the Academy Award from the American Academy of Neurological Surgery at its 1996 annual meeting. Other honors include the Young Investigator Award from the Congress of Neurological Surgeons in 2000, the National Brain Tumor Foundation Grant in 2001, and the Mahaley Clinical Research award from the American Association of Neurological Surgeons in 2005.

Manish Singh, Ph.D., President, Chief Executive Officer and Director

Dr. Singh has served as our President, Chief Executive Officer and as a director since February 2008. Dr. Singh served as a Director at California Technology Ventures, a venture capital firm from June 2003 to December 2007. He managed investments made by that venture capital firm in a number of medical device and biotechnology companies and served as a board director or board observer for several of the firm’s portfolio companies. Dr. Singh co-founded and served as acting Chief Executive Officer of Aliva Biopharmaceuticals, an early stage company focusing on DNA engineering to produce human monoclonal antibodies and humanized mice, from January 2006 to December 2007. From October 1995 to June 2002, he held various management and scientific positions with Odysseus Solutions, Cell Genesys, Chiron Corporation and Genetic Therapy, Inc. Dr. Singh has an MBA from UCLA, a Ph.D. in Chemical and Biochemical Engineering from the University of Maryland Baltimore County, an M.S. in Chemical Engineering from Worcester Polytechnic Institute and a B.S. in Chemical Engineering from the Indian Institute of Technology, Roorkee.

C. Kirk Peacock, Chief Financial Officer

Mr. Peacock has served as our Chief Financial Officer on a part-time basis since January 2006 and previously served in that capacity from May 2005 until September 2006 for our predecessor company on a part-time basis. He also served on a part-time basis as our interim President from November 2007 to February 2008. Mr. Peacock is a Certified Public Accountant and previously was Chief Financial Officer with CytRx Corporation, a ribonucleic acid interference and biopharmaceutical company focused on the development and commercialization of high-value human therapeutics from August 2003 through July 2004. Mr. Peacock has experience as Chief Financial Officer with several start-up companies, including DigitalMed, Inc., a venture-backed subsidiary of Tenet Healthcare, and Ants.Com, Inc., a venture-backed company of Bertelsmann Ventures. Mr. Peacock was also a manager with a large, international accounting firm for a number of years. Mr. Peacock serves as a director on the Board of Directors and a member of the Audit Committee of Laird Norton Company LLC. Mr. Peacock is a graduate of Claremont McKenna College.

Jacqueline Brandwynne, Director

Ms. Brandwynne has served as a director since January 2007. Since 1981, Ms. Brandwynne served as President and CEO of Brandwynne Corporation, which has co-founded and assisted in the development of several healthcare and biotech companies. Ms. Brandwynne is a business strategist with more than 25 years of experience working with companies such as American Cyanimid, Bristol Myers/Clairol, National Liberty Life, Seagram & Sons and Neutrogena. From 1974 to 1981 she was in charge of developing Citicorp’s global business strategy From 2000 to 2006, Ms. Brandwynne was a director of Microvision, Inc., a public company that develops sophisticated miniature displays. She has served in multiple advisory roles in several administrations, including as an Advisor to the Council of Economic Advisors, a member of the US Trade Representatives Services Policy Advisory Committee, a negotiator of the North American Trade Agreement, a participant in GATT negotiations and a member of The Committee on Critical Choices for America, and Chair of an Economic Summit at the White House. She currently serves on the boards of Pacific Union Bank, the Proteus Venture Biotech Fund and on several non-profit boards, including the Cedars-Sinai Health Systems Board of Governors and the California Institute of the Arts.

 

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Colonel Richard A. Cowell, USA, (Ret.), Director

Colonel Richard A. Cowell, USA, (Ret.) has served as a director since June 2007. Colonel Cowell is a Principal at Booz Allen Hamilton, Inc., where he is involved in advanced concepts, technology experimentation and integration, and establishing new business operations. Prior to joining Booz Allen Hamilton in March 1996, Colonel Cowell served in the United States Army for 25 years. Mr. Cowell serves as a director and Chair of the Audit Committee for Microvision, Inc. He holds a Top Secret security clearance with special accesses based on a special background investigation. Mr. Cowell holds a B.S. degree in accounting from Ohio State University.

Robert L. Martuza, M.D., Director

Dr. Martuza has served as a director since December 2006. He has been Chief of Neurosurgery Service at Massachusetts General Hospital and Higgins Professor of Neurosurgery at Harvard Medical School since 2000. Dr. Martuza has held appointments at Massachusetts General Hospital and Georgetown University Hospital since 1980 and academic appointments at Harvard Medical School and Georgetown University also since 1980. Dr. Martuza is presently Director of the Pappas Center for Neuro-Oncology at Massachusetts General Hospital and on the Board of Trustees for the Massachusetts General Physicians Organization, Inc. Dr. Martuza currently serves on the Managed Care Committee, Executive Committee on Research, and General Executive Committee at the Massachusetts General Hospital. In addition, he serves as a Director of the American Board of Neurological Surgery; serves on the Board of Scientific Counselors at the National Institute of Neurological Disorders and Stroke; and is coordinating reviewer and serves on the Program Committee for the American Society of Gene Therapy. Dr. Martuza is a recognized authority on neurosurgery, has published numerous articles and books in the field of neurology and has 11 patents issued or pending involving cell therapy. Dr. Martuza has received many grants for research with major research interests in central nervous system tumors, neurofibromatosis, cancer therapy with viral vectors and molecular neurosurgery. Dr. Martuza holds a B.A. degree from Bucknell University and a M. D. from Harvard Medical School. Dr. Martuza was a post-doctoral fellow at Massachusetts General Hospital.

Committees of the Board

Our Board of Directors has established an Audit Committee currently consisting of Richard Cowell, as Chairman, and sole member.

The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to:

 

   

the quality and integrity of our financial statements and reports;

 

   

the independent auditors’ qualifications and independence; and

 

   

the performance of our internal audit function and independent auditors.

The Audit Committee appoints the outside auditors, reviews with the outside auditors the plans and results of the audit engagement, approves permitted non-audit services provided by our independent auditors and reviews the independence of the auditors. Richard Cowell has been designated as an “audit committee financial expert” as defined under Item 407(d)(5) of Regulation S-B of the Exchange Act.

 

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Our Board of Directors has established a Compensation Committee currently consisting of Drs. John Yu and Robert Martuza. The Compensation Committee reviews, and makes recommendations to the full Board of Directors relating to, the compensation of our officers and directors, including our officers’ annual salaries and bonuses and the terms and conditions of option grants to our officers and directors under our stock incentive plan.

Our Board of Directors has established a Nominating and Corporate Governance Committee currently consisting of Jacqueline Brandwynne, as Chairwoman, and Drs. John Yu and Manish Singh. The Nominating and Corporate Governance Committee develops and recommends corporate governance guidelines to the Board, selects or recommends for selection nominees to serve on the Board, and oversees the evaluation of the Board and its committees.

Scientific Advisory Board

We have established a Scientific Advisory Board currently consisting of Dr. Keith Black, as Chairman, and Dr. Silvia Formenti to assist our management in the areas of expertise of the members of our Scientific Advisory Board. With Dr. Black, we are in the process of identifying and recruiting additional individuals to serve on this board .

Keith L. Black, M.D.

Dr. Black has served on our Scientific Advisory Board since January 2007. Dr. Black serves as Chairman of the Department of Neurosurgery and Director of the Maxine Dunitz Neurosurgical Institute at Cedars-Sinai Medical Center . An internationally renowned neurosurgeon and scientist, Dr. Black joined Cedars-Sinai Medical Center in July 1997 and was awarded the Ruth and Lawrence Harvey Chair in Neurosciences in November of that year. Prior to joining Cedars-Sinai, Dr. Black served on the University of California, Los Angeles (UCLA) faculty for 10 years where he was a Professor of Neurosurgery. In 1992 he was awarded the Ruth and Raymond Stotter Chair in the Department of Surgery and was Head of the UCLA Comprehensive Brain Tumor Program.

Dr. Black serves on the editorial boards of Neurological Research, Gene Therapy and Molecular Biology, Neurosurgery Quarterly and Frontiers In Bioscience . He was on the National Institutes of Health’s Board of Scientific Counselors for Neurological Disorders and Stroke and was appointed to the National Advisory Neurological Disorders and Stroke Council of the National Institutes of Health from 2000 to 2004. He was also selected as a committee member of the California Institute for Regenerative Medicine Independent Citizens Oversight Committee from 2004-2006.

Dr. Black pioneered research on designing ways to open the blood-brain barrier, enabling chemotherapeutic drugs to be delivered directly into the tumor for which he received the Jacob Javits award from the National Advisory Neurological Disorders and Stroke Council of the National Institutes of Health in June 2000. Other groundbreaking research done by Dr. Black focused on developing a vaccine to enhance the body’s immune response to brain tumors, use of gene arrays to develop molecular profiles of tumors, the use of optical technology for brain mapping, and the use of focused microwave energy to noninvasively destroy brain tumors.

Dr. Black has published extensively and has five patents issued or pending. Dr. Black was featured on the cover of Time magazine in the Fall 1997 special edition “Heroes of Medicine” and was profiled in 1996 on the PBS program, The New Explorers, in an episode called “Outsmarting the Brain.”

Silvia Chiara Formenti, M.D.

Dr. Formenti has served on our Scientific Advisory Board since June 2007. Dr. Formenti was appointed in 2000 as the first Sandra and Edward H. Meyer Chairman of the new Department of Radiation Oncology at New York University. Widely respected for her work in breast and cervical

 

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cancer, Dr. Formenti joined NYU from the University of Southern California, Keck School of Medicine in Los Angeles, where she was a tenured Associate Professor of both Radiation Oncology and Medicine. In addition to her role as Chairman of the NYU Department of Radiation Oncology, Dr. Formenti is currently the Associate Director for Clinical Research as well as the Leader of the Breast Cancer Research Program of the NYU Cancer Institute, where she oversees the clinical and research efforts of over 30 investigators.

A prolific researcher, Dr. Formenti is currently principal or co-principal investigator on five multi-year peer-reviewed grants. She has devoted her research career to the study of women’s malignancies, with a particular focus on underserved patients and Latina women. She has pioneered the use of concurrent chemo-radiation in the neo-adjuvant (before surgery) setting, an ideal setting to explore associations of pre-treatment tumor molecular markers with the extent of pathological response (response in the removed surgical specimen) after chemo-radiation. This research has been consistently funded by the NIH and ACS. The translational component of this research consists of several collaborations with basic scientists to identify in the laboratory which molecular tumor marker might determine response to a specific treatment. In addition, she is studying how chemo-radiation induced cell-death affects patient’s immunity.

Code of Ethics

Our Board of Directors has adopted a code of ethics covering all of our executive officers and key employees. A copy of our code of ethics will be furnished without charge to any person upon written request. Requests should be sent to: Secretary, ImmunoCellular Therapeutics, Ltd., 21900 Burbank Boulevard, Woodland Hills, California 91367.

Section 16(a) Beneficial Ownership Reporting Compliance

Because we have not registered our common stock under Section 12 of the Exchange Act, our directors and executive officers and owners of more than ten percent of our common stock are not required to file with the SEC reports under Section 16(a) of the Exchange Act regarding their ownership and changes in ownership of our common stock.

 

ITEM 10. EXECUTIVE COMPENSATION

Compensation of Executive Officers

The following table sets forth the compensation for services paid in all capacities for the two fiscal years ended December 31, 2007 to David Wohlberg, who served as our President and Chief Operating Officer until October 29, 2007, and to C. Kirk Peacock, who served as our Interim President from November 5, 2007 to February 18, 2008 and who has served as our Chief Financial Officer since May 16, 2005. Our company did not pay any compensation to any officer for services in 2004 or 2005, and we did not pay any other person compensation that exceeded $100,000 during the fiscal year ended December 31, 2007.

 

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Summary Compensation Table

 

Name and Principal Position

   Year    Salary
($)
    Bonus
($)
   Stock
Awards
($)
   Option
Awards
($) (5)
    Non-Equity
Incentive Plan
Compensation
($)
   Nonqualified
Deferred
Compensation
Earnings
($)
   All Other
Compensation
($)
   Total
($)
David Wohlberg    2007    $ 62,500 (1)   —      —        —       —      —      —      $ 62,500
President and Chief Operating Officer                         
   2006    $ 16,734 (2)   —      —      $ 118,400 (6 )   —      —      —      $ 135,134
C. Kirk Peacock    2007    $ 48,500 (3)           32,000 (7)            $ 80,500
Interim President and Chief Financial Officer                         
   2006    $ 15,734 (4)           48,000 (8)            $ 63,734

 

(1) Includes $2,500 per month for the period from January 1, 2007 through May 31, 2007 and $10,000 per month for the period June 1, 2007 through October 29, 2007 for services rendered to us as President and Chief Operating Officer.
(2) Includes $2,000 per month for the period from May 1, 2006 through November 16, 2006 and $2,500 per month for the period November 17, 2006 through December 31, 2006 for services rendered to us as President and Chief Operating Officer.
(3) Includes $2,500 per month for the period from January 1, 2007 through May 31, 2007, $4,000 per month from June 1 through October 29, 2007 and $8,000 per month from October 30, 2007 through December 31, 2007 for services as Treasurer and Chief Financial Officer from January 1, 2007 through November 4, 2007 and for services as Interim President and Chief Financial Officer from November 5, 2007 through December 31, 2007.
(4) Includes $2,000 per month for the period from May 16, 2006 through November 16, 2006 and $2,500 per month for the period November 17, 2006 through December 31, 2006 for services rendered to us as Treasurer and Chief Financial Officer.
(5) This column represents the dollar amount recognized for financial statement reporting purposes for the fair value of stock options granted to the named executive, in accordance with SFAS 123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the option grants, refer to Note 2 of our financial statements in this Annual Report. These amounts reflect our accounting expense for these awards, and do not correspond to the actual value that will be recognized by the named executive from these awards.
(6) Includes (i) a seven-year option to purchase 90,000 shares of our common stock granted October 30, 2006 at an exercise price of $1.00 per share, vesting upon grant, for services rendered as President and Chief Operating Officer from May 1, 2006 through October 29, 2006 and (ii) a seven-year option to purchase 95,000 shares of our common stock granted October 30, 2006, at an exercise price of $1.00 per share, vesting quarterly over a one-year period following the date of grant, for services rendered as President and Chief Operating Officer commencing October 30, 2006. Also includes a fully vested option to purchase 40,000 shares of our common stock granted on October 30, 2006 at an exercise price of $1.00 per share for prior service as a director of our predecessor company and our company through October 30, 2006.
(7) Includes a seven-year option to purchase 50,000 shares of our common stock granted October 30, 2007 at an exercise price of $1.30 per share, vesting monthly over a one-year period following the date of grant, for services rendered as Treasurer and Chief Financial Officer commencing October 30, 2007 and also as Interim President commencing November 5, 2007.
(8)

Includes (i) a seven-year option to purchase 25,000 shares of our common stock granted October 30, 2006 at an exercise price of $1.00 per share, vesting upon grant, for services rendered as Treasurer and Chief Financial

 

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Officer from May 16, 2006 through October 29, 2006 and (ii) a seven-year option to purchase 50,000 shares of our common stock granted October 30, 2006, at an exercise price of $1.00 per share, vesting quarterly over a one-year period following the date of grant, for services rendered as Treasurer and Chief Financial Officer commencing October 30, 2006.

Stock Option Grants

The following table sets forth information as of December 31, 2007 concerning unexercised options, unvested stock and equity incentive plan awards for the executive officers named in the Summary Compensation Table.

OUTSTANDING EQUITY AWARDS AT YEAR ENDED DECEMBER 31, 2007

 

     Option Awards    Stock Awards

Name

   Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
   Option
Exercise
Price
($)
   Option
Expiration
Date
   Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
   Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
   Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
   Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($)
David Wohlberg    150,479 (1)   —          $ 0.35    04-20-12            
   40,000 (2)   —            1.00    10-29-13            
   90,000 (2)   —            1.00    10-29-13            
   95,000 (3)   —            1.00    10-29-13            
C. Kirk Peacock    50,181 (4)   —            0.35    05-15-10            
   25,000 (2)   —            1.00    10-29-13            
   50,000 (3)   —            1.00    10-29-13            
   8,334 (5)   41,666 (5)        1.30    10-29-14            

 

(1) Vested 25% quarterly commencing on May 1, 2005.
(2) Vested upon grant, October 30, 2006.
(3) Vests 25% quarterly commencing on October 30, 2006.
(4) Vested monthly following grant commencing on May 16, 2005.
(5) Vests monthly following grant commencing on October 30, 2007.

Compensation of Directors

On November 5, 2007, the Board of Directors adopted a compensation program for the directors whereby each director will receive compensation in the form of cash and stock options for serving on the board as well as serving on board committees. The cash compensation consists of an annual retainer of $10,000 for serving as a director, a fee of $1,000 for each Board meeting attended, and a fee of $750 for each Board committee meeting attended. In addition, the Chairman of the Board will receive a $25,000 annual retainer, and the Chairperson of each of the Board committees will receive a $15,000 annual retainer. All fees are to be paid quarterly. Seven-year non-qualified stock options to purchase 25,000 shares of the Corporation’s common stock are to be granted annually on the date of the annual shareholders’ meeting to each director at an exercise price equal to the last reported trading price of the Corporation’s common stock on that day, with such option to vest quarterly over the one-year period following the date of grant.

 

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During the fiscal year ended December 31, 2007, we paid our directors cash compensation for serving on the Board of Directors and committees of the Board and granted each of our directors seven-year options to purchase 25,000 shares of our common stock. All of the foregoing options, granted to the directors in November 2007 have an exercise price of $1.30 per share. In November 2007, we also granted to each of two of our directors, Ms. Brandwynne and Dr. Mosk, a seven-year option to purchase 75,000 shares of our common stock at an exercise price of $1.30 per share for their identification, time consuming efforts and facilitation of the acquisition of the monoclonal antibody related technology from Molecular Discoveries, with such options to vest upon the closing of such acquisition.

The following table sets forth information concerning the compensation paid to each of our directors during 2007 for their services rendered as directors.

DIRECTOR COMPENSATION FOR FISCAL YEAR 2007

 

Name

   Fees
Earned
or Paid
in Cash
($)
   Stock
Awards
($)
   Option
Awards
($) (1)(2)
   Non-Equity
Incentive Plan
Compensation
($)
   Nonqualified
Deferred
Compensation
Earnings ($)
   All Other
Compensation
($)
   Total
($)

Jacqueline Brandwynne

   7,250       119,000             126,250

Richard A. Cowell

   8,000       63,500             71,500

Sanford J. Hillsberg

   3,500       20,500             24,000

Robert L. Martuza

   3,500    —      20,500    —      —      —      24,000

Manfred Mosk

   7,250    —      82,000    —      —      —      89,250

John Yu

   9,750    —      20,500    —      —      —      30,250

 

(1) This column represents the dollar amount recognized for financial statement reporting purposes with respect to the 2007 fiscal year for the fair value of stock options granted to the named director in fiscal year 2007, in accordance with SFAS 123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the 2007 grants, refer to Note 2 of our financial statements in this Annual Report. These amounts reflect our accounting expense for these awards, and do not correspond to the actual value that will be recognized from these awards by the named director.
(2) On November 5, 2007 we granted a seven-year non-qualified option to purchase 25,000 shares of the Company’s common stock at an exercise price of $1.30 per share to each of our directors, vesting quarterly over a one-year period, for their services as directors for the one-year period commencing November 5, 2007. Upon Mr. Hillsberg’s ceasing to serve as a director effective December 3, 2007 following his decision to not stand for re-election at the annual shareholders meeting, his 25,000 unvested shares were cancelled.

Upon Dr. Mosk ceasing to serve as a director effective March 19, 2008, his 18,750 unvested shares were cancelled.

Stock Incentive Plan

We have adopted an equity incentive plan, the 2006 Equity Incentive Plan, pursuant to which we are authorized to grant options, restricted stock and stock appreciation rights to purchase up to 2,250,000 shares of common stock to our employees, officers, directors, consultants and advisors. Awards under the plan may consist of stock options (both non- qualified options and options intended to qualify as “Incentive Stock Options” under Section 422 of the Internal Revenue Code of 1986, as amended), restricted stock awards and stock appreciation rights.

 

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The 2006 Equity Incentive Plan is administered by our Board of Directors or a committee appointed by the Board, which determines the persons to whom awards will be granted, the type of award to be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.

The 2006 Equity Incentive Plan provides that the exercise price of each incentive stock option may not be less than the fair market value of our common stock on the date of grant (or 110% of the fair market value in the case of a grantee holding more than 10% of our outstanding common stock). The exercise price of a non-qualified stock option shall be no less than the fair market value of the common stock on the date of grant. The maximum number of options that may be granted in any fiscal year to any participant is 600,000.

The plan also permits the grant of freestanding stock appreciation rights or in tandem with option awards. The grant price of a stock appreciation right shall be no less than the fair market value of a share on the date of grant of the stock appreciation right. No stock appreciation right shall be exercisable later than the tenth anniversary of its grant. Upon the exercise of a stock appreciation right, a participant shall be entitled to receive common stock at a fair market value equal to the benefit to be received by the exercise.

The plan also provides us with the ability to grant or sell shares of common stock that are subject to certain transferability, forfeiture, repurchase or other restrictions. The type of restriction, the number of shares of restricted stock granted and other such provisions shall be determined by our Board of Directors or its committee.

Unless otherwise determined by our Board of Directors or its committee, awards granted under the 2006 Equity Incentive Plan are not transferable other than by will or by the laws of descent and distribution.

The 2006 Equity Incentive Plan provides that, except as set forth in an individual award agreement, upon the occurrence of a corporate transaction: (1) our Board of Directors or its committee shall notify each participant at least thirty (30) days prior to the consummation of the corporate transaction or as soon as may be practicable and (2) all options and stock appreciation rights shall terminate and all restricted stock shall be forfeited immediately prior to the consummation of such corporate transaction unless the committee determines otherwise in its sole discretion. A “corporate transaction” means (i) a liquidation or dissolution of the company; (ii) a merger or consolidation of the company with or into another corporation or entity (other than a merger with a wholly-owned subsidiary); (iii) a sale of all or substantially all of the assets of the company; or (iv) a purchase or other acquisition of more than 50% of the outstanding stock of the company by one person or by more than one person acting in concert.

Our Board of Directors may alter, amend or terminate the plan in any respect at any time, but no alteration, amendment or termination will adversely affect in any material way any award previously granted under the plan, without the written consent of the participant holding such award.

During the fourth quarter of 2007, under the 2006 Equity Incentive Plan, we granted options for 350,000 shares at an exercise price of $1.30. As of December 31, 2007, there were outstanding options under our 2006 Equity Incentive Plan to purchase approximately 1,161,660 shares of our common stock at a weighted- average exercise price of approximately $0.98 per share.

In November 2007, we granted an option to purchase 25,000 shares of common stock to each of the directors for their service as a director for the one-year period commencing November 3, 2007. Each of the options granted to the directors has a term of seven years, has an exercise price of $1.30 per share and may be exercised within their term during the period the grantee provides services to us and for 24

 

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months after the grantee ceases providing services for any reason other than termination by us for cause. Upon Mr. Hillsberg’s ceasing to serve as a director effective December 3, 2007 following his decision to not stand for re-election at the annual shareholders meeting, his 25,000 unvested option shares were cancelled.

In November 2007, we granted a seven-year non-qualified option to purchase 75,000 shares of common stock each to Ms. Brandwynne and Dr. Mosk for their facilitation of the acquisition of our monoclonal antibody related technology from Molecular Discoveries, with such options to vest upon the final closing of such acquisition. The options have an exercise price of $1.30 per share and may be exercised within their term during the period that the grantee provides services to us and for 24 months after the grantee ceases providing services for any reason other than termination by us for cause.

In November 2007, we granted a seven-year non-qualified option to purchase 50,000 shares of common stock at an exercise price of $1.30 per share to C. Kirk Peacock in accordance with his employment contract, with one-twelfth of the shares vesting each month for the year following the date of grant. This option may be exercised within its term during the period the grantee provides services to the Company and for 24 months after the grantee ceases providing services for any reason other than termination by the Company for cause.

In February 2008, we granted a five-year non-qualified option to purchase 75,000 shares of our common stock at an exercise price of $0.53 per share to Dr. Cohava Gelber pursuant to a consulting agreement with Dr. Gelber, with such option to vest 5,000 shares per month for ten months following the date of grant and the remaining shares to vest upon completion of milestones contained in the consulting agreement. Also, in February 2008 a seven-year non-qualified option to purchase 600,000 shares of our common stock at an exercise price of $1.00 per share was granted to Dr. Manish Singh upon his employment as our President and Chief Executive Officer, with vesting subject to shareholder approval of additional authorized shares under the 2006 Equity Incentive Plan.

Employment Agreements

On November 17, 2006, Dr. Yu and the Company entered into a definitive Agreement, dated as of November 17, 2006, and a related Securities Purchase Agreement, dated as of November 17, 2006, Non-qualified Stock Option Agreement, dated as of November 17, 2006 and Registration Rights Agreement, dated as of November 17, 2006. Under the Agreement, Dr. Yu agreed to serve as our Chief Scientific Officer for an initial one-year term on a part-time basis and will not receive any compensation for these services except the grant of the stock option described below. Under the terms of the Agreement and the Non-Qualified Stock Option Agreement, the Company granted Dr. Yu (i) an option to purchase 150,000 shares of its common stock in consideration for his relinquishment of his royalty interest in the cellular-based therapy technology and (ii) an option to purchase 5,783,424 shares of its common stock in consideration of his agreeing to serve as its Chief Scientific Officer for a one-year term. Both options have an exercise price of $1.00 per share, a term of ten years and were fully vested upon grant.

For so long as Dr. Yu owns Company shares or fully vested immediately exercisable options to purchase Company shares totaling at least 2,000,000 shares, the Company has agreed to use commercially reasonable efforts to enable Dr. Yu to continue to serve on its Board of Directors. For so long as Dr. Yu owns Company shares or fully vested immediately exercisable options to purchase Company shares totaling at least 4,000,000 shares or at least 5,000,000 shares, the Company has agreed to use commercially reasonable efforts to enable Dr. Yu and either one or two, respectively, of his designees to serve on its Board of Directors.

Effective as of November 5, 2007, the Company entered into a new agreement with C. Kirk Peacock under which Mr. Peacock agreed to serve as Interim President and to continue to serve as Chief Financial Officer for a one-year term, subject to earlier termination by the Company or Mr. Peacock on

 

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30 days notice. Mr. Peacock will provide his services to the Company on a part-time basis. Under the agreement with Mr. Peacock, he will receive a salary of $8,000 per month and was granted an option with a seven-year term to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.30 per share, vesting monthly for the year following the date of grant. Such option may be exercised within its term during the period Mr. Peacock provides services to the Company and for 24 months after the grantee ceases providing services for any reason other than termination by the Company for cause.

Effective as of February 18, 2008, the Company entered into an employment agreement with Dr. Manish Singh under which Dr. Singh will serve on a full-time basis as the Company’s President and Chief Executive Officer for a one-year term commencing February 18, 2008. Under the agreement, Dr. Singh will receive an annual salary of $200,000, a $100,000 bonus if the Company generates aggregate net financing proceeds of at least $5,000,000 during the term of the agreement and an additional bonus of $100,000 if the Company generates aggregate net financing proceeds of at least $10,000,000 during the term of the agreement. Pursuant to the agreement, the Company granted to Dr. Singh a seven-year non-qualified stock option to purchase 600,000 shares of the Company’s common stock at an exercise price of $1.00 per share, vesting monthly for the year following the date of grant. This option is subject to cancellation in the event of, and may not be exercised unless and until, the Company’s shareholders approve an increase in the authorized number of shares covered by the 2006 Equity Incentive Plan. Such option may be exercised within its term during the period Dr. Singh provides services to the Company and for 24 months after the grantee ceases providing services for any reason other than termination by the Company for cause. The Company is required under the Employment Agreement to use its commercially reasonable efforts to have Dr. Singh serve as a member of the Company’s Board of Directors during the term of the Employment Agreement.

In the event that the Company terminates the Employment Agreement without cause or does not extend the Employment Agreement upon its expiration for an additional one-year term or Dr. Singh terminates the Employment Agreement due to (i) his principal place of work for the Company being relocated by more than 50 miles, (ii) a material change in his duties, (iii) a failure by the Company to pay him any of his contractual compensation, (iv) a constructive termination of Dr. Singh or unlawful harassment or retaliation against him or (v) a failure by the Company to obtain approval of the increase in the number of authorized shares covered by 2006 Equity Incentive Plan described above and the cancellation of Dr. Singh’s option by the Company, then the Company upon such termination will be required to make a lump sum payment to Dr. Singh equal to six months of his base annual salary and 50% of the shares covered by his option that have not yet vested will immediately become vested.

Indemnification of Directors and Officers

Our Amended and Restated Certificate of Incorporation provides that, to the full extent permitted by the Delaware General Corporation Law, no director will be personally liable to us or our stockholders for or with respect to any acts or omissions in the performance of his or her duties as a director.

Our Amended and Restated Certificate of Incorporation also provides that each person who is or was or had agreed to become a director or officer, and each such person who is or was serving or who had agreed to serve at our request as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other entity, will be indemnified by us to the full extent permitted by the Delaware General Corporation Law and will be entitled to advancement of expenses in connection therewith. Our Bylaws have similar indemnification provisions.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding beneficial ownership of our common stock as of March 1, 2008 (a) by each person known by us to own beneficially 5% or more of any class of our common stock, (b) by each of our executive officers named in the Summary Compensation Table and our directors and (c) by all executive officers and directors of this company as a group. As of March 1, 2008 there were 12,582,493 shares of our common stock issued and outstanding. Unless otherwise noted, we believe that all persons named in the table have sole voting and investment power with respect to all the shares beneficially owned by them.

 

Name and Address of Beneficial Owner (1)

   Shares
Beneficially
Owned (2)
   Percentage
of Class
John S. Yu, M.D.    5,939,674 (3)    32.07%

Sanford J. Hillsberg

1801 Century Park East, Suite 1600

Los Angeles, California 90067

   1,539,350 (4)    12.14%
Manfred Mosk, Ph.D.    1,464,100 (5)    11.43%

Keith Black, M.D.

8631 West Third Street, Suite 800E

Los Angeles, CA 90048

   1,451,111 (6)    10.38%

RAB Special Situations (Master) Fund Limited

C/O RAB Capital Plc

1 Adam Street

London WC2N 6LE United Kingdom

   1,245,667 (7)    9.9%

Cedars-Sinai Medical Center

Davis 4021

8700 Beverly Blvd.

Los Angeles, CA 90048

   694,000    5.52%
C. Kirk Peacock    150,183 (3)    1.18%
Dr. Manish Singh    0 (8)    *

David Wohlberg

1801 Century Park East, Suite 1600

Los Angeles, California 90067

   462,879 (9)    3.57%
Jacqueline Brandwynne    271,250 (10)    2.13%
Robert L. Martuza, M.D.    56,250 (3)    *
Richard A. Cowell    43,750 (3)    *
All executive officers and directors as a group (7 persons) (11)    7,925,207    41.42%

 

* Less than 1%.

 

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(1)

Unless otherwise indicated, the address of each of the persons shown is c/o ImmunoCellular Therapeutics, Ltd., 21900 Burbank Boulevard, 3 rd Floor, Woodland Hills, California 91367.

(2) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants and convertible securities currently exercisable or convertible, or exercisable or convertible within 60 days, are deemed outstanding, including for purposes of computing the percentage ownership of the person holding such option, warrant or convertible security, but not for purposes of computing the percentage of any other holder.
(3) All of the shares shown are subject to options.
(4) Represents 1,439,350 shares of our common stock and 100,000 shares of our common stock issuable upon the exercise of options and warrants. Excludes 266,593 shares owned beneficially by TroyGould PC, of which Mr. Hillsberg is a member.
(5) Includes 1,103,979 shares of common stock and 81,250 shares of our common stock issuable upon exercise of options owned of record by Dr. Mosk, and 128,871 shares of common stock and 150,000 shares of our common stock issuable upon the exercise of options owned of record by Technomedics Management & Systems, Inc., of which Dr. Mosk is the controlling stockholder.
(6) Includes 51,111 shares owned of record and 1,400,000 shares of our common stock issuable upon exercise of options.
(7) Includes 1,000,000 shares of our common stock owned of record and 245,667 shares of our common stock issuable upon exercise of warrants. RAB holds warrants to exercise up to 1,666,668 shares, but the exercise of these warrants is limited by their terms so that RAB’s beneficial ownership shall not exceed at any time 9.9% of the common shares outstanding.
(8) Dr. Singh was granted 600,000 shares of our common stock issuable upon exercise of options on February 18, 2008, but such options will not vest until shareholders approve an increase in the 2006 Equity Incentive Plan authorized shares.
(9) Includes 87,400 shares owned of record and 375,479 shares of our common stock issuable upon exercise of options. Mr. Wohlberg ceased serving as our President and Chief Operating Officer effective October 30, 2007.
(10) Includes 140,000 shares owned of record and 131,250 shares of our common stock issuable upon exercise of options.
(11) Includes Dr. Manfred Mosk who resigned as a director on March 19, 2008.

Equity Compensation Plan Information

The following table summarizes, as of December 31, 2007, (1) the number of shares of our common stock that are issuable upon the exercise of outstanding options, warrants and other rights, (2) the weighted-average exercise price of such options, warrants and rights, and (3) the number of securities remaining available for future issuance under our equity compensation plans.

 

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Plan Category

   Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights*
    Weighted-average
exercise price of
outstanding options,
warrants and rights
   Number of
securities remaining
available for future
issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
     (a)     (b)    (c)
Equity compensation plans approved by stockholders (1)    7,095,084 *   $ 0.99    328,278
        —  
Equity compensation plans not approved by stockholders    2,254,312 *   $ 1.21    —  
                 

Total

   9,349,396     $ 1.05    328,278

 

* Does not include warrants attached to units that were sold to investors in private placements.

Our stockholders approved our 2006 Equity Incentive Plan. The only awards that are outstanding under that plan as of March 1, 2008 are options to acquire 1,836,660 shares of our common stock. In January 2008 the Board increased the authorized number of shares of the Company’s Common Stock available to be issued under the Company’s 2006 Equity Incentive Plan from 1,500,000 shares to 2,250,000 shares, with such increase to be subject to approval by the Company’s shareholders.

In May 2007, we granted to third parties, in consideration for services rendered in connection with introducing the Company to investors, warrants to purchase a total of 169,500 shares of the Company’s common stock at an exercise price of $2.50 per share. The warrants are fully vested and exercisable over a term of two years.

In April 2007, we granted to third parties in consideration for services rendered in connection with introducing the Company to investors and to RAB, warrants to purchase a total of 138,812 shares of the Company’s common stock at an exercise price of $2.50 per share. The warrants are fully vested and exercisable over a term of two years.

In February 2007, the Company agreed that for services rendered in connection with introducing the Company to RAB, the Company will issue to that third party a warrant to purchase 96,000 shares of the Company’s common stock at an exercise price of $2.50 per share. The warrant is fully vested and exercisable over a term of two years. The Company also agreed to pay a further finder’s fee to the third party in cash equal to 8% of any further amounts invested by RAB in the Company’s securities during the 18-month period commencing February 16, 2007 and to issue to the third party a warrant to purchase a number of shares of the Company’s common stock equal to 12% of the securities purchased by RAB during that period.

In January 2007, we granted to Dr. Keith L. Black a fully-vested, ten-year option to purchase 1,500,000 shares of our common stock at an exercise price of $1.10 per share in consideration for his agreeing to serve as the Chairman of our Scientific Advisory Board.

In November 2006, we granted to Dr. John Yu (i) an option to purchase 150,000 shares of our common stock in consideration for his relinquishment of his royalty interest in the cellular-based therapy technology that we licensed and (ii) an option to purchase 5,783,424 shares of our common stock in consideration of his agreeing to serve as our Chief Scientific Officer for a one-year term. Both options have an exercise price of $1.00 per share, a term of ten years and were fully vested upon grant. In November 2006, our stockholders approved these option grants to Dr. Yu.

 

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In November 2006, we granted to Technomedics Management & Systems, Inc. an option to purchase 300,000 shares of our common stock for a term of seven years at an exercise price of $1.00 per share in consideration for Dr. Mosk agreeing to serve as our Non-Executive Chairman of the Board on a part-time basis for one year. Upon grant, 150,000 shares of the option vested, with the balance of the shares to vest in four equal quarterly installments following the date of grant. Dr. Mosk voluntarily resigned as our Non-Executive Chairman of the Board in January 2007 but remains a director. The balance of Technomedics’ 150,000 unvested option shares were cancelled as a result of Dr. Mosk’s voluntary resignation.

In March 2005, SMI issued warrants to purchase 300,000 shares of its common stock to two individuals for services rendered in introducing investors to make investments in a private placement of SMI’s securities. We assumed those warrants in the merger with SMI without the approval of our stockholders, which was not required under applicable law. The warrants are exercisable at a purchase price of $0.15 per share, vest over a period of two years and expire on January 29, 2009.

 

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions Between Us and Our Affiliates

Dr. Manfred Mosk is a greater than 10% beneficial owner of our common stock. In July 2006, we entered into an agreement with Technomedics, of which Dr. Mosk is the controlling shareholder, pursuant to which that company was retained as our consultant in connection with identifying and assisting us to complete our acquisition of the cellular-based therapy technology license from Cedars-Sinai. We agreed to pay Technomedics a total of $80,000 in four equal monthly installments for these services subsequent to the completion of the transaction, and $20,000 of this fee was paid in 2006. At the time we retained Technomedics and the services were performed, Dr. Mosk was not an officer or director of our company. In November 2006, we entered into an agreement with Technomedics pursuant to which Dr. Mosk agreed to serve as our Non-Executive Chairman of the Board on a part-time basis for a one-year term. Under this agreement, we granted Technomedics options with a seven-year term to purchase a total of 300,000 shares of our common stock at an exercise price of $1.00 per share, with the option fully vested upon grant as to 150,000 shares and the option for the balance of the shares to vest in four equal quarterly installments following the date of grant. Dr. Mosk voluntarily resigned as Non-Executive Chairman of the Board in January 2007 but remains a director. The balance of Technomedics’ 150,000 unvested shares from the November 2006 option grant were cancelled as a result of Dr. Mosk’s voluntary resignation. Dr. Mosk did not receive an option to purchase 50,000 shares that was granted to our other directors.

Independent Directors

Information regarding our independent directors is set forth above in Item 9 under the captions “Business Experience and Directorships” and “Committees of the Board”.

 

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ITEM 13. EXHIBITS

 

Exhibit

Number

 

Description

2.1

  Agreement and Plan of Reorganization dated as of May 5, 2005 among the Registrant, Patco Industries Subsidiary, Inc., William C. Patridge, and Spectral Molecular Imaging, Inc., as amended on June 30, 2005, September 26, 2005 and January 20, 2006. (1)

2.2

  Agreement, dated as of September 11, 2006, by and between Optical Molecular Imaging, Inc. and Daniel L. Farkas. (2)

3.1

  Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (3)

3.2

  Certificate of Amendment to Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (3)

3.3

  Amended and Restated Bylaws of ImmunoCellular Therapeutics, Ltd. (4)

3.4

  Certificate of Amendment to Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (9)

4.1

  Form of Common Stock Certificate (6)

4.2

  Form of Subscription Agreement containing registration rights issued by Spectral Molecular Imaging, Inc. in January 2006 and assumed by ImmunoCellular Therapeutics, Ltd. (4)

4.3

  Form of Warrant issued in January 2006 to purchase shares of the common stock of Spectral Molecular Imaging, Inc. and assumed by ImmunoCellular Therapeutics, Ltd. (4)

4.4

  Subscription Agreement dated February 16, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (8)

4.5

  Letter Agreement dated February 16, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited (8)

4.6

  Subscription Agreement dated April 19, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (8)

4.7

  Warrant dated February 16, 2007 issued by ImmunoCellular Therapeutics, Ltd. to Credit Suisse Client Nominees (UK) Limited, as nominee for RAB Special Situations (Master) Fund Limited, for the purchase of 800,000 shares of the common stock of ImmunoCellular Therapeutics, Ltd. (8)

4.8

  Warrant dated February 16, 2007 issued by ImmunoCellular Therapeutics, Ltd. to Credit Suisse Client Nominees (UK) Limited, as nominee for RAB Special Situations (Master) Fund Limited, for the purchase of 533,334 shares of the common stock of ImmunoCellular Therapeutics, Ltd. (8)

4.9

  Warrant dated April 19, 2007 issued by ImmunoCellular Therapeutics, Ltd. to Credit Suisse Client Nominees (UK) Limited, as nominee for RAB Special Situations (Master) Fund Limited, for the purchase of 200,000 shares of the common stock of ImmunoCellular Therapeutics, Ltd. (8)

4.10

  Warrant dated April 19, 2007 issued by ImmunoCellular Therapeutics, Ltd. to Credit Suisse Client Nominees (UK) Limited, as nominee for RAB Special Situations (Master) Fund Limited, for the purchase of 133,334 shares of the common stock of ImmunoCellular Therapeutics, Ltd. (8)

 

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4.11

  Form of Subscription Agreement containing registration rights between the participants in the April/May 2007 private placement and the Registrant. (10)

4.12

  Form of Warrant issued to participants in the April/May 2007 private placement to purchase shares of common stock of the Registrant. (10)

4.13

  Form of Non-Qualified Stock Option Agreement for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (13)

4.14

  Form of Incentive Stock Option Agreement for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (13)

10.1

  Exclusive License Agreement, dated as of November 17, 2006, by and between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd.† (5)

10.2

  Agreement, dated as of November 17, 2006, by and between Dr. John Yu and ImmunoCellular Therapeutics, Ltd.* (5)

10.3

  Stock Purchase Agreement, dated as of November 17, 2006, by and between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (5)

10.4

  Registration Rights Agreement, dated as of November 17, 2006, by and between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (5)

10.5

  Securities Purchase Agreement, dated as of November 17, 2006, by and between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. (5)

10.6

  Nonqualified Stock Option Agreement, dated as of November 17, 2006, by and between Dr. John Yu and ImmunoCellular Therapeutics, Ltd.* (5)

10.7

  Registration Rights Agreement, dated as of November 17, 2006, by and between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. (5)

10.8

  2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (4)

10.9

  Amendment No. 1 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (11)

10.10

  Amendment No. 2 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. **

10.11

  Agreement, dated July 7, 2006, by and between Technomedics Management & Systems, Inc. and ImmunoCellular Therapeutics, Ltd. (7)

10.12

  Agreement, dated November 17, 2006, by and between Technomedics Management & Systems, Inc. and ImmunoCellular Therapeutics, Ltd.* (6)

10.13

  Agreement, dated April 22, 2005, by and between David Wohlberg and ImmunoCellular Therapeutics, Ltd.* (4)

10.14

  Agreement, dated October 30, 2006, by and between David Wohlberg and ImmunoCellular Therapeutics, Ltd.* (7)

10.15

  Agreement, dated May 16, 2005, by and between Kirk Peacock and ImmunoCellular Therapeutics, Ltd.* (4)

10.16

  Agreement, dated October 30, 2006, by and between Kirk Peacock and ImmunoCellular Therapeutics, Ltd.* (7)

10.17

  Agreement, dated June 28, 2007, by and between David Wohlberg and ImmunoCellular Therapeutics, Ltd. (10)

10.18

  Agreement, dated November 5, 2007, by and between Kirk Peacock and ICT.* (12)

 

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10.19

  Memorandum of Agreement, dated November 21, 2007, by and between Molecular Discoveries LLC and ImmunoCellular Therapeutics, Ltd. **

10.20

  Agreement, dated February 14, 2008, by and between Molecular Discoveries, LLC and ImmunoCellular Therapeutics, Ltd. **

10.21

  Agreement, dated February 14, 2008, by and between Dr. Cohava Gelber and ImmunoCellular Therapeutics, Ltd.* **

10.22

  Agreement, dated February 18, 2008, by and between Dr. Manish Singh and ICT.* **

10.23

  Amendment No. 3 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. **

23.1

  Consent of Stonefield Josephson, Inc. **

31.1

  Certification of the Registrant’s Principal Executive Officer under Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

31.2

  Certification of the Registrant’s Principal Financial Officer under Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

32.1

  Certification of the Registrant’s Principal Executive Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2

  Certification of the Registrant’s Principal Financial Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

 

Certain portions of the exhibit have been omitted based upon a request for confidential treatment filed by the Registrant with the Securities and Exchange Commission. The omitted portions of the exhibit have been separately filed by the Registrant with the Securities and Exchange Commission.
* Indicates a management contract or compensatory plan or arrangement.
** Filed with this Annual Report on Form 10-KSB.
(1) Previously filed by us on January 26, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(2) Previously filed by us on September 15, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(3) Previously filed by us on November 3, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(4) Previously filed by us on February 6, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(5) Previously filed by us on November 22, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(6) Previously filed by us on February 12, 2007 as an exhibit to our Registration Statement on Form SB-2 and incorporated herein by reference.
(7) Previously filed by us on April 2, 2007 as an exhibit to our Form 10-KSB dated December 31, 2006.
(8) Previously filed by us on May 1, 2007 as an exhibit to our Registration Statement on Form SB-2 and incorporated herein by reference.
(9) Previously filed by us on May 9, 2007 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(10) Previously filed by us on July 12, 2007 as an exhibit to our Registration Statement on Form SB-2 and incorporated herein by reference

 

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(11) Previously filed by us on September 14, 2007 as an exhibit to our Registration Statement on Form SB-2/A and incorporated herein by reference.
(12) Previously filed by us on November 6, 2007 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(13) Previously filed by us on November 9, 2007 as an exhibit to our Registration Statement on Form S-8 and incorporated herein by reference.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Audit Committee has appointed Stonefield Josephson, Inc. as our independent registered public accounting firm for the fiscal year ending December 31, 2007. The following table shows the fees that were paid or accrued by us (including by SMI) for audit and other services provided by Stonefield Josephson, Inc. for the 2006 and 2007 fiscal years.

 

     2006    2007

Audit Fees (1)

   $ 58,483    $ 56,020

Audit-Related Fees (2)

     —      $ 34,581

Tax Fees (3)

     —      $ 2,776

All Other Fees

     —        —  
             

Total

   $ 58,483    $ 93,377
             

 

(1) Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review of our financial statements included in our Form 10-QSB quarterly reports and services that are normally provided in connection with statutory or regulatory filings for the 2006 and 2007 fiscal years.
(2) Audit-related fees represent fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and not reported above under “Audit Fees.”
(3) Tax fees represent fees for professional services related to tax compliance, tax advice and tax planning.

All audit related services, tax services and other services rendered by Stonefield Josephson, Inc. were pre-approved by our Board of Directors or Audit Committee. The Audit Committee has adopted a pre-approval policy that provides for the pre-approval of all services performed for us by Stonefield Josephson, Inc. The policy authorizes the Audit Committee to delegate to one or more of its members pre-approval authority with respect to permitted services. Pursuant to this policy, the Board delegated such authority to the Chairman of the Audit Committee. All pre-approval decisions must be reported to the Audit Committee at its next meeting. The Audit Committee has concluded that the provision of the non-audit services listed above is compatible with maintaining the independence of Stonefield Josephson, Inc.

 

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

IMMUNOCELLULAR THERAPEUTICS, LTD
By:  

/s/ Manish Singh

Manish Singh, Ph.D.

President and Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

 

Signature

 

Title

 

Date

/s/ Manish Singh

Manish Singh, Ph.D.

  President, Chief Executive Officer and Director (Principal Executive Officer)  

March 25, 2008

 

/s/ C. Kirk Peacock

  Treasurer & Chief Financial Officer   March 25, 2008
C. Kirk Peacock   (Principal Financial and Accounting Officer)  

/s/ Jacqueline Brandwynne

  Director   March 25, 2008
Jacqueline Brandwynne    

/s/ Richard A. Cowell

  Director   March 25, 2008
Richard A. Cowell    

/s/ Robert L. Martuza

  Director   March 25, 2008
Robert L. Martuza, M.D.    

/s/ John Yu

  Director   March 25, 2008
John Yu, M.D.    

 

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Table of Contents

ImmunoCellular Therapeutics, Ltd.

(a Development Stage Company)

Index to Financial Statements

 

     Page

Financial Statements:

  

ImmunoCellular Therapeutics, Ltd. for the Year Ended December 31, 2007

  

Report of Independent Registered Public Accounting Firm

   F-2

Balance Sheets

   F-3

Statements of Operations

   F-4

Statements of Shareholders Equity (Deficit)

   F-5

Statements of Cash Flows

   F-6

Notes to Financial Statements

   F-7

 

F-1


Table of Contents

Report of Independent Registered Public Accounting Firm

Board of Directors

ImmunoCellular Therapeutics, Ltd.

Woodland Hills, California

We have audited the accompanying balance sheets of ImmunoCellular Therapeutics, Ltd. (a development stage company) as of December 31, 2007 and 2006 and the related statements of operations, shareholders’ equity (deficit) and cash flows for the years ended December 31, 2007, 2006 and 2005 and for the period from inception of operations (February 25, 2004) to December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ImmunoCellular Therapeutics, Ltd. as of December 31, 2007 and 2006 and the results of its operations and its cash flows for the years ended December 31, 2007, 2006 and 2005 and for the period from inception of operations (February 25, 2004) to December 31, 2007 in conformity with U.S. generally accepted accounting principles.

 

/s/ Stonefield Josephson, Inc.
Los Angeles, California
March 21, 2008

 

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Table of Contents

ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Balance Sheets

 

     December 31,
2006
    December 31,
2007
 

Assets

    

Current assets:

    

Cash

   $ 82,567     $ 14,044  

Cash equivalents

     977,774       5,026,780  

Other assets

     9,399       29,540  
                

Total current assets

     1,069,740       5,070,364  

Other assets

     100       100  
                

Total assets

   $ 1,069,840     $ 5,070,464  
                

Liability and Shareholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 75,200     $ 30,196  

Accrued liabilities

     27,578       42,559  
                

Total current liabilities

     102,778       72,755  
                

Warrant derivatives

     777,400       —    
                

Commitments and contingencies

     —         —    
                

Shareholders’ equity:

    

Common stock, $0.0001 par value; 74,000,000 shares authorized; 8,199,779 shares and 11,782,493 shares issued and outstanding as of December 31, 2006 and 2007

     8,200       11,782  

Preferred stock, $0.0001 par value, 1,000,000 shares authorized; 0 shares outstanding as of December 31, 2006 and 2007

     —         —    

Additional paid in capital

     5,591,920       14,011,138  

Deficit accumulated during the development stage

     (5,410,458 )     (9,025,211 )
                

Total shareholders’ equity

     189,662       4,997,709  
                

Total liabilities and shareholders’ equity

   $ 1,069,840     $ 5,070,464  
                

The accompanying notes are an integral part of these financial statements.

 

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Table of Contents

ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Statements of Operations

 

     For the Year
Ended
December 31,
2005
    For the Year
Ended
December 31,
2006
    For the Year
Ended
December 31,
2007
    February 25,
2004
(Inception) to
December 31,
2007
 

Revenues

   $ —       $ —       $ —       $ —    

Expenses:

        

Research and development

     152,760       772,200       77,857       1,008,339  

Merger costs

     39,118       34,859       —         73,977  

Stock-based compensation for general and administrative services

     —         4,103,645       1,296,714       5,400,359  

General and administrative

     54,126       459,263       946,022       1,465,630  
                                

Total expenses

     246,004       5,369,967       2,320,593       7,948,305  
                                

Loss before other income and income taxes

     (246,004 )     (5,369,967 )     (2,320,593 )     (7,948,305 )

Other income:

        

Interest income

     —         30,054       162,040       192,094  

Change in fair value of warrant liability

     —         187,200       (1,456,200 )     (1,269,000 )
                                
     —         217,254       (1,294,160 )     (1,076,906 )

Loss before income taxes

     (246,004 )     (5,152,713 )     (3,614,753 )     (9,025,211 )

Income taxes

     —         —         —         —    
                                

Net loss

   $ (246,004 )   $ (5,152,713 )   $ (3,614,753 )   $ (9,025,211 )
                                

Weighted average number of shares:

        

Basic and diluted

     6,867,620       8,733,072       10,853,406       8,293,546  
                                

Earnings (loss) per share:

        

Basic and diluted

   $ (0.04 )   $ (0.59 )   $ (0.33 )   $ (1.09 )
                                

The accompanying notes are an integral part of these financial statements.

 

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ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Statements of Shareholders’ Equity (Deficit)

 

     Common Stock    

Additional

Paid – In

    Deficit
Accumulated
During the
Development
       
     Shares     Amount     Capital     Stage     Total  

Initial capitalization at $0.00002 per share

   6,256,500     $ 97     $ —       $ —       $ 97  

Common stock issued for cash during 2004 at $0.00078 per share

   193,500       150       —         —         150  

Net loss

   —         —         —         (11,741 )     (11,741 )
                                      

Balance at December 31, 2004

   6,450,000       247       —         (11,741 )     (11,494 )

Common stock issued for cash during 2005 at $0.19 per share

   387,000       6,590       68,410       —         75,000  

Common stock issued for cash during 2005 at $0.32 per share

   154,800       155       49,845       —         50,000  

Common stock issued for research and development during 2005 at $0.99 per share

   154,800       155       152,605       —         152,760  

Net loss

   —         —         —         (246,004 )     (246,004 )
                                      

Balance at December 31, 2005

   7,146,600       7,147       270,860       (257,745 )     20,262  

Common stock issued for general and administrative services during 2006 at $0.50 per share

   73,093       73       36,473       —         36,546  

Common stock issued for cash during 2006 in private placements at $1.00 per share, net of redemptions

   1,510,000       1,510       547,890       —         549,400  

Common stock issued for research and development during 2006 at $1.00 per share

   694,000       694       693,306       —         694,000  

Shares issued in connection with reverse merger

   825,124       825       (825 )     —         —    

Shares cancelled in connection with the sale of OMI

   (2,059,100 )     (2,059 )     (62,941 )     —         (65,000 )

Exercise of stock options

   10,062       10       3,512       —         3,522  

Stock-based compensation (options)

   —         —         4,103,645       —         4,103,645  

Net loss

   —         —         —         (5,152,713 )     (5,152,713 )
                                      

Balance at December 31, 2006

   8,199,779       8,200       5,591,920       (5,410,458 )     189,662  

Common stock issued for cash during 2007 in private placements at $1.50 per share

   3,531,603       3,531       4,888,955       —         4,892,486  

Cashless exercise of stock options

   51,111       51       (51 )     —         —    

Reclassification of warrant derivative liability

   —         —         2,233,600       —         2,233,600  

Stock-based compensation (options)

   —         —         1,296,714       —         1,296,714  

Net loss

   —         —         —         (3,614,753 )     (3,614,753 )
                                      

Balance at December 31, 2007

   11,782,493     $ 11,782     $ 14,011,138     $ (9,025,211 )   $ 4,997,709  
                                      

The accompanying notes are an integral part of these financial statements.

 

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ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Statements of Cash Flows

 

     For the Year
Ended
December 31,
2005
    For the Year
Ended
December 31,
2006
    For the Year
Ended
December 31,
2007
    February 25,
2004
(Inception) to
December 31,
2007
 

Cash flows from operating activities:

        

Net loss

   $ (246,004 )   $ (5,152,713 )   $ (3,614,753 )   $ (9,025,211 )

Adjustments to reconcile net loss to net cash used in operating activities:

        

Depreciation and amortization

     —         —         —         —    

Change in fair value of warrant liability

     —         (187,200 )     1,456,200       1,269,000  

Stock based compensation

     —         4,103,645       1,296,714       5,400,359  

Common stock issued for services

     —         36,546       —         36,546  

Common stock issued for research and development

     152,760       694,000       —         846,760  

Changes in assets and liabilities:

        

Other assets

     (3,700 )     (5,799 )     (20,141 )     (29,640 )

Accounts payable

     15,142       60,058       (45,004 )     30,196  

Accrued liabilities

     27,093       (11,256 )     14,981       42,559  
                                

Net cash used in operating activities:

     (54,709 )     (462,719 )     (912,003 )     (1,429,431 )
                                

Cash flows from investing activities:

        

Purchase of property and equipment

     (40,000 )     —         —         (40,000 )

Cash paid for sale of OMI

     —         (25,000 )     —         (25,000 )
                                
     (40,000 )     (25,000 )     —         (65,000 )
                                

Cash flows from financing activities:

        

Advances from shareholders

     (101 )     —         —         —    

Exercise of stock options

     —         3,522       —         3,522  

Proceeds from issuance of common stock under private placement

     —         1,514,000       4,892,486       6,406,486  

Proceeds from issuance of common stock

     125,247       —         —         125,247  
                                

Net cash provided by financing activities

     125,146       1,517,522       4,892,486       6,535,255  
                                

Increase in cash and cash equivalents

     30,437       1,029,803       3,980,483       5,040,824  

Cash and cash equivalents at beginning of period

     101       30,538       1,060,341       —    
                                

Cash and cash equivalents at end of period

   $ 30,538     $ 1,060,341     $ 5,040,824     $ 5,040,824  
                                

Supplemental cash flows disclosures:

        

Interest expense paid

   $ —       $ —       $ —       $ —    
                                

Income taxes paid

   $ —       $ —       $ —       $ —    
                                

The accompanying notes are an integral part of these financial statements.

 

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Table of Contents

ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Notes to Financial Statements

For the Period From February 25, 2004 (Date of Inception) to December 31, 2007

1. Nature of Organization and Development Stage Operations

In January 2006, Spectral Molecular Imaging, Inc., a Nevada corporation (“SMI”) that was incorporated and commenced operations on February 25, 2004, merged with Patco Industries, Ltd., which had no operations, assets or liabilities at the time of the merger. For accounting purposes, the financial statements of Patco Industries, Ltd. (now known as ImmunoCellular Therapeutics, Ltd.) reflect the operations of SMI (the “Company”).

In May 2006, the Company decided to suspend its research and development activities on its spectral imaging technology, and on September 11, 2006, the Company sold all of the outstanding capital stock of SMI to Dr. Daniel Farkas, a co-founder of SMI and inventor of this technology. In November 2006, the Company acquired from Cedars-Sinai Medical Center (“Cedars-Sinai”) an exclusive, worldwide license for a cancer vaccine therapy technology that the Company is now developing.

The Company entered into an Agreement, dated as of February 14, 2008, with Molecular Discoveries LLC, covering the Company’s acquisition of certain monoclonal antibody related technology owned by Molecular Discoveries LLC and completed the acquisition of the technology on that date (Note 8).

Reorganization

On January 31, 2006, the Company completed a merger under an Agreement and Plan of Reorganization (the “Agreement”) dated as of May 5, 2005 with Patco Industries, Ltd., a Delaware corporation (“Patco”), pursuant to which Patco agreed to acquire the Company as a wholly-owned subsidiary. The acquisition was accomplished through the merger (the “Merger”) of a newly formed subsidiary of Patco with and into the Company, with the Company as the surviving corporation and with Patco issuing shares of Patco common stock to the stockholders of the Company. Pursuant to the Agreement, Patco effected a reverse stock split of approximately .00434 for one of the outstanding shares of Patco common stock so that Patco had approximately 825,000 shares of Patco common stock issued and outstanding immediately prior to the Merger.

Each share of the Company’s common stock issued and outstanding immediately prior to the Merger was converted into one share of Patco common stock and each outstanding option or warrant to purchase the Company’s common stock, whether or not then exercisable, was converted into an option or warrant to purchase one share of Patco common stock at a price equal to the exercise price in effect immediately prior to the Merger.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents – The Company considers all highly liquid debt instruments with an original maturity of 90 days or less to be cash equivalents. The Company had $5,026,780 and $977,774 of cash equivalents, consisting of certificates of deposit with an original maturity of 90 days or less, at December 31, 2007 and 2006, respectively.

 

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Property and Equipment – Property and equipment are stated at cost and depreciated using the straight-line methods based on the estimated useful lives (generally three to five years) of the related assets. Management continuously monitors and evaluates the realizability of recorded long-lived assets to determine whether their carrying values have been impaired. The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the nondiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. Any impairment loss is measured by comparing the fair value of the asset to its carrying amount.

Research and Development Costs – Research and development expenses consist of costs incurred for direct research and are expensed as incurred.

Stock Based Compensation – In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS 123R, Share Based Payment: An Amendment of FASB Statements No. 123 and 95 (SFAS 123R). This statement requires that the cost resulting for all share-based payment transactions be recognized in the Company’s consolidated financial statements. In addition, in March 2005 the SEC released SEC Staff Accounting Bulletin No. 107, Share-Based Payment (SAB 107). SAB 107 provides the SEC’s staff’s position regarding the application of SFAS 123R and certain SEC rules and regulations, and also provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. Generally, the approach in SFAS 123R is similar to the approach described in SFAS 123. However, SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Pro forma disclosure of fair value recognition, as prescribed under SFAS 123, is no longer an alternative.

In the first quarter of 2006, the Company adopted the fair value recognition provisions of SFAS 123R utilizing the modified-prospective-transition method, as prescribed by SFAS 123R. Under this transition method, compensation cost recognized during the year ended December 31, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with SFAS 123, and (b) compensation expense for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Under the modified-prospective-transition method, results for the prior periods have not been restated.

The following table illustrates the pro forma effect on net loss if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation:

 

     Year Ended
December 31,
2005
    February 25,
2004
(Inception) to
December 31,
2005
 

Net loss as reported

   $ (246,004 )   $ (257,745 )

Deduct: Total employee stock-based compensation expense determined under the fair value method

     (23,405 )     (23,405 )
                

Pro forma net loss

   $ (269,409 )   $ (281,150 )
                

Fair value was estimated at the date of grant using the Black-Scholes pricing model, with the following weighted average assumptions:

 

     Year Ended
December 31,
2005
    Year Ended
December 31,
2006
    Year Ended
December 31,
2007
 

Risk-free interest rate

   3.625 %   3.65 %   4.56 %

Expected dividend yield

   None     None     None  

Expected life

   3.0 years     3.0 years     3.0 years  

Expected volatility

   100.0 %   100.0 %   100.0 %

 

F-8


Table of Contents

The weighted-average grant-date fair value of options granted during the years 2005, 2006, and 2007 was $0.34, $0.64, and $0.73, respectively.

The risk-free interest rate used in the Black-Scholes valuation method is based on the implied yield currently available in U.S. Treasury securities at maturity with an equivalent term. We have not declared or paid any dividends and do not currently expect to do so in the future. The expected term of options represents the period that our stock-based awards are expected to be outstanding and was determined based on projected holding periods for the remaining unexercised shares. Consideration was given to the contractual terms of our stock-based awards, vesting schedules and expectations of future employee behavior. Expected volatility is based on market prices of traded options for comparable entities within our industry.

The Company’s stock price volatility and option lives involve management’s best estimates, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option.

When options are exercised, our policy is to issue previously unissued shares of common stock to satisfy share option exercises. As of December 31, 2007, we had 62.2 million shares of unissued shares of common stock.

No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets.

Income Taxes – The Company accounts for federal and state income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. Under the liability method specified by SFAS No. 109, a deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities, as measured by the enacted tax rates. The Company’s provision for income taxes represents the amount of taxes currently payable, if any, plus the change in the amount of net deferred tax assets or liabilities. A valuation allowance is provided against net deferred tax assets if recoverability is uncertain on a more likely than not basis. In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 on January 1, 2007. The adoption of FIN 48 did not have a material impact on the Company’s financial position or results of operations. Upon adoption of FIN 48 and as of December 31, 2007, the Company had no unrecognized tax benefits recorded.

The Company recognizes interest and penalties for uncertain tax positions in income tax expense. Upon adoption and as of December 31, 2007, the Company had no interest and penalty accrual or expense.

 

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Table of Contents

Fair Value of Financial Instruments – The carrying amounts reported in the balance sheets for cash and accounts payable approximate their fair values.

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions about the future outcome of current transactions which may affect the reporting and disclosure of these transactions. Accordingly, actual results could differ from those estimates used in the preparation of these financial statements.

Basic and Diluted Loss per Common Share – Basic and diluted loss per common share are computed based on the weighted average number of common shares outstanding. Common share equivalents (which consist of options and warrants) are excluded from the computation of diluted loss per share since the effect would be antidilutive. Common share equivalents which could potentially dilute basic earnings per share in the future, and which were excluded from the computation of diluted loss per share, totaled 328,887 shares, 8,624,084 shares and 15,057,667 shares at December 31, 2005, December 31, 2006 and December 31, 2007, respectively.

Recently Issued Accounting Standards In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements , or SFAS 157, which provides guidance on how to measure assets and liabilities that use fair value. This statement clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 will apply whenever another generally accepted accounting principle requires, or permits, assets or liabilities to be measured at fair value but does not expand the use of fair value to any new circumstances. This statement will also require additional disclosures in both annual and quarterly reports. SFAS 157 is effective for fiscal years beginning after November 2007, and will be adopted by us beginning January 1, 2008. We are currently evaluating the potential impact this statement may have on our financial statements, but do not believe the impact of adoption will be material.

In February 2007, the FASB issued Statement 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of SFAS 115 (“Statement 159”), which permits but does not require the Company to measure financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the potential impact this statement may have on our financial statements.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations (“Statement 141(R)”), a replacement of FASB Statement No. 141. Statement 141(R) is effective for fiscal years beginning on or after December 15, 2008 and applies to all business combinations. Statement 141(R) provides that, upon initially obtaining control, an acquirer shall recognize 100% of the fair values of acquired assets, including goodwill, and assumed liabilities, with only limited exceptions, even if the acquirer has not acquired 100% of its target. As a consequence, the current step acquisition model will be eliminated. Additionally, Statement 141(R) changes current practice, in part, as follows: (1) contingent consideration arrangements will be fair valued at the acquisition date and included on that basis in the purchase price consideration; (2) transaction costs will be expensed as incurred, rather than capitalized as part of the purchase price; (3) pre-acquisition contingencies, such as legal issues, will generally have to be accounted for in purchase accounting at fair value; and (4) in order to accrue for a restructuring plan in purchase accounting, the requirements in FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities , would have to be met at the acquisition date. While there is no expected impact to our consolidated financial statements on the accounting for acquisitions completed prior to December 31, 2008, the adoption of Statement 141(R) on January 1, 2009 could materially change the accounting for business combinations consummated subsequent to that date.

 

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Reclassifications – Certain prior year items have been reclassified to conform to current year presentation.

3. Property and Equipment

As of December 31, 2006 and 2007, no equipment had been placed into service. On September 11, 2006, the Company sold all of the outstanding capital stock of SMI, which owned all of the research equipment that had been previously acquired by SMI for $40,000 from a third party. Depreciation expense was zero for the period from February 25, 2004 (date of inception) to December 31, 2006.

4. Related-Party Transactions

Cedars-Sinai Medical Center License Agreement

In November 2006, the Company entered into a license agreement with Cedars-Sinai Medical Center (“Cedars-Sinai”) under which the Company acquired an exclusive, worldwide license to its technology for use as cellular therapies, including dendritic cell-based vaccines for neurological disorders that include brain tumors and neurodegenerative disorders and other cancers. This technology is covered by a number of pending U.S. and foreign patent applications, and the term of the license will be until the last to expire of any patents that are issued covering this technology.

As an upfront licensing fee, the Company issued Cedars-Sinai 694,000 shares of its common stock and paid Cedars-Sinai $62,000. Additional specified milestone payments will be required to be paid to Cedars-Sinai when the Company initiates patient enrollment in its first Phase III clinical trial and when it receives FDA marketing approval for its first product.

The Company has agreed to pay Cedars-Sinai specified percentages of all of its sublicensing income and gross revenues from sales of products based on the licensed technology, subject to a reduction if it must make any payments to any third party whose proprietary rights would be infringed by sale of the products. To maintain its rights to the licensed technology, the Company must meet certain development and funding milestones. These milestones include, among others, commencing a Phase I clinical trial for a product candidate by March 31, 2007 and raising at least $5,000,000 in funding from equity or other sources by December 31, 2008. The Company satisfied the foregoing funding requirement in 2007 and commenced a Phase I clinical trial in May 2007, which was within the applicable cure period for the milestone requirement.

Technomedics Management & Systems Agreement

In July 2006, the Company retained Technomedics Management & Systems, Inc. (“Technomedics”) to assist it in identifying and acquiring new technologies and agreed to pay Technomedics a total of $80,000 in four equal monthly installments commencing upon the closing of the Cedars-Sinai licensing transaction. Dr. Manfred Mosk, the controlling shareholder of Technomedics, was not an officer or director of the Company at the time it retained Technomedics and the services were performed. He voluntarily resigned as interim part-time president in April 2005 and as a director in November 2005 of the predecessor company, and rejoined the Board of the Company in November 2006. He was a greater than 5% shareholder of the Company at the time it retained Technomedics.

The Company and Technomedics entered into an Agreement, dated as of November 17, 2006, pursuant to which Dr. Mosk agreed to serve as the Company’s Non-Executive Chairman of the Board on a part-time basis for a one-year term. Dr. Mosk was permitted to step down upon 30 days written

 

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notice to the Company. Pursuant to the terms of this Agreement, Technomedics was granted options with a seven-year term to purchase a total of 300,000 shares of common stock at an exercise price of $1.00 per share, with the option fully vested upon grant as to 150,000 shares and the option for the balance of the shares to vest in four equal quarterly installments following the date of grant. His fully vested options will be exercisable during their term for up to two years following his ceasing to serve as a director. Dr. Mosk voluntarily resigned as Non Executive Chairman of the Board in January 2007 but remains a director. The balance of Technomedics’ 150,000 unvested shares from the November 2006 option grant were cancelled as a result of Dr. Mosk’s voluntary resignation. Dr. Mosk did not receive a further grant of options covering 50,000 shares of common stock that were granted to certain other directors during the fourth quarter of 2006 for their future service as directors.

CDI Agreement

In November 2004, the Company entered into an assignment and license agreement (the “CDI Agreement”) with ChromoDynamics, Inc. (“CDI”), Dr. Daniel Farkas, who was at that time the Chairman, Chief Scientist, and a principal shareholder of SMI, and certain other individuals. Under this agreement Dr. Farkas and the other individuals assigned an invention in the spectral imaging field to the Company and CDI granted an exclusive worldwide sublicense to SMI of rights under United States Patents Nos. 5,796,512 issued in 1998 to Carnegie Mellon University to use the optical imaging technology covered by such patents for medical imaging clinical applications. In September 2005, the Company reached an agreement with Carnegie Mellon University to receive a direct license of the technology from that institution in lieu of the sublicense from CDI. Under the CDI Agreement, the Company was obligated to pay Dr. Farkas and the other individuals a royalty based on the Company’s sales of products incorporating their technology.

In April 2005, the Company purchased from CDI $40,000 of research equipment. In September 2006 in connection with the sale of OMI, the Company sold the research equipment purchased from CDI.

Legal Costs

At December 31, 2006 and 2007, the Company was indebted to a shareholder for legal services for $27,578 and $42,559, respectively, which are included in accrued expenses on the accompanying balance sheets. Legal services provided by the shareholder for the period from February 25, 2004 (date of inception) to December 31, 2007 was approximately $601,000.

Rent

From February 25, 2004 (date of inception) to December 31, 2007, the Company used on a rent-free basis office space of a shareholder. Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein.

5. Commitments and Contingencies:

Operating Lease

The Company utilized a portion of the office space of a related party at no cost and without a lease agreement so that either party may terminate this arrangement at any time. Total rent expense was zero for the periods from February 25, 2004 (date of inception) to December 31, 2007.

Employment Agreements

Effective as of November 5, 2007, the Company entered into a new agreement with C. Kirk Peacock under which Mr. Peacock agreed to serve as Interim-President and Chief Financial Officer for a one-

 

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year term, subject to earlier termination by the Company or Mr. Peacock on 30 days notice. Mr. Peacock will provide his services to the Company on a part-time basis. Under the agreement with Mr. Peacock, Mr. Peacock will be paid $8,000 per month and was granted an option to purchase 50,000 shares of common stock, which will vest monthly over a one-year period, and exercisable within its term during the period Mr. Peacock provides services to the Company and for 24 months after the grantee ceases providing services for any reason other than termination by the Company for cause.

Research and Development

In connection with the Cedars-Sinai Medical Center License Agreement, the Company has certain commitments as described in Note 4.

6. Shareholders’ Equity (Deficit)

Equity Investments

In April 2005, three individuals purchased a total of 541,800 shares of the Company’s common stock for an aggregate purchase price of $125,000.

In September 2005, the Company issued 154,800 shares of the Company’s common stock in connection with a licensing agreement valued at $152,760. These shares were cancelled in November 2006 in connection with the Company’s sale to Dr. Daniel Farkas of all of the outstanding stock of its SMI subsidiary.

Private Placements

In May 2007, the Company raised $2,262,252 (before offering expenses) from the sale of 1,508,168 shares of common stock and warrants to purchase 1,508,168 shares of common stock at $2.50 per share, to various investors in a private placement. The warrants have a term of two years from the date of issuance.

In April 2007, the Company raised $1,535,153 (before offering expenses) from the sale of 1,023,435 shares of common stock and warrants to purchase 1,023,435 shares of common stock at $2.50 per share, to various investors in a private placement. The warrants have a term of two years from the date of issuance.

In April 2007, the Company raised $300,000 (before offering expenses) from the sale of 200,000 shares of common stock and warrants to purchase 333,334 shares of common stock at $2.50 per share, to an institutional investor in a private placement. The warrants have a term of two years from the date of issuance.

In February 2007, the Company raised $1,200,000 (before offering expenses) from the sale of 800,000 shares of common stock and warrants to purchase 1,333,334 shares of common stock at $2.50 per share, to an institutional investor in a private placement. The warrants have a term of two years from the date of issuance.

In accordance with FAS 133 “Accounting for Derivative Instruments and Hedging Activities”, EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company’s Own Stock” and EITF 05-04 “The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument. Subject to EITF Issue No. 00-19,” the Company did not allocate amounts to the warrants issued in connection with the 2007 private placements that represent a derivative liability as no monetary damages will result as long as the Company uses its best efforts to register the shares underlying the warrants.

 

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On January 30, 2006, the Company raised $1,400,000 (before offering expenses) from the sale of 1,400,000 of its units, each unit after the Company’s stock split consisting of one share of common stock and one warrant, to accredited investors in a private placement. The Company granted warrants to purchase 300,000 shares of its common stock for services rendered by two individuals who located investors to make investments in the private placement. During 2006, two investors elected to have their units repurchased by the Company, and the Company acquired the 40,000 shares of common stock and warrants to purchase an additional 40,000 shares of common stock included in their units for $36,000. In October and November 2006, the Company raised an additional $150,000 (before offering expenses) from the sale of 150,000 additional units having the same terms as the units sold in January 2006.

Sale of SMI

On September 11, 2006, the Company sold all of the outstanding capital stock of its SMI subsidiary to Dr. Daniel Farkas, a co-founder of SMI, in exchange for $25,000 in cash and research equipment with a net book value of $40,000 and return of 1,904,300 shares of common stock of the Company held by Dr. Daniel Farkas. No gain or loss was recognized on this transaction.

Stock Options

In February 2005, the Company adopted an Equity Incentive Plan (“Plan”). Pursuant to the Plan, a committee appointed by the Board of Directors may grant, at its discretion, qualified or nonqualified stock options, stock appreciation rights and may grant or sell restricted stock to key individuals, including employees, nonemployee directors, consultants and advisors. Option prices for qualified incentive stock options (which may only be granted to employees) issued under the plan may not be less than 100% of the fair market value of the common stock on the date the option is granted (unless the option is granted to a person who, at the time of grant, owns more than 10% of the total combined voting power of all classes of stock of the Company; in which case the option price may not be less than 110% of the fair market value of the common stock on the date the option is granted). Option prices for nonqualified stock options issued under the plan are at the discretion of the committee and may be equal to, greater or less than fair market value of the common stock on the date the option is granted. The options vest over periods determined by the Board of Directors and are exercisable no later than ten years from date of grant (unless they are qualified incentive stock options granted to a person owning more than 10% of the total combined voting power of all classes of stock of the Company, in which case the options are exercisable no later than five years from date of grant.) As of December 31, 2007, the Company has reserved 1,500,000 shares of common stock for issuance under the plan and options to purchase 1,161,660 common shares have been granted under the stock option plan that are currently outstanding.

The following is a summary of stock option grants issued outside the Plan:

In January 2007, the Company granted an option to purchase 1,500,000 shares of its common stock at an exercise price of $1.10 per share to the Chairman of the Company’s Scientific Advisory Board.

In November 2006, the Company granted an option to purchase 300,000 shares of its common stock at an exercise price of $1.00 per share to a Board member.

In November 2006, the Company granted an option to purchase 5,933,424 shares of its common stock at an exercise price of $1.00 per share to a Board member in connection with the Cedars-Sinai license acquisition.

 

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The following table summarizes stock option activity for the Company during the years ended December 31, 2005, 2006 and 2007:

 

     Options     Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Contractual
Term
   Aggregate
Intrinsic
Value

Outstanding December 31, 2004

   —       $ —        

Granted

   328,887     $ 0.32      

Exercised

   —       $ —        

Forfeited or expired

   —       $ —        
                  

Outstanding December 31, 2005

   328,887     $ 0.32       $ —  

Granted

   6,763,424     $ 1.00      

Exercised

   (10,062 )   $ 0.35      

Forfeited or expired

   (118,165 )   $ 0.28      
                  

Outstanding December 31, 2006

   6,964,084     $ 0.98      

Granted

   1,956,000     $ 1.14      

Exercised

   (100,000 )   $ 1.10      

Forfeited or expired

   (175,000 )   $ 1.04      
                        

Outstanding December 31, 2007

   8,645,084     $ 1.02    8.6    $ 74,244
                        

Vested or expected to vest at December 31, 2007

   8,287,918     $ 1.00    8.7    $ 74,244
                        

As of December 31, 2006 and 2007, the total unrecognized compensation cost related to unvested stock options amounted to $188,800 and $292,996, respectively, which will be amortized over the weighted-average remaining requisite service period of less than one year. During 2005 the Company recorded no stock based compensation under APB 25.

Warrant Derivatives

In connection with the Company’s January 2006 private placement, the Company issued to the investors warrants to purchase 1,400,000 shares of the Company’s common stock at $2.50 per share and paid a finders fee in the form of warrants to purchase 300,000 shares of the Company’s common stock at $0.15 per share. Of the total proceeds from the January 2006 private placement, net of repurchases, $964,600 was allocated to the freestanding warrants associated with the units based upon the fair value of the warrants. The assumptions used in the Black Scholes model for determining the initial fair value of the warrants were as follows: (1) dividend yield of 0%; (2) expected volatility of 100%, (3) risk-free interest rate of 4.50%, and (4) contractual life of 3 years. In accordance with FAS 133 “Accounting for Derivative Instruments and Hedging Activities”, EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company’s Own Stock” and EITF 05-04 “The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No. 00-19,” the amounts allocated to the warrants represented a derivative liability that was recorded in the Company’s prior balance sheets. For the years ended December 31, 2006 and 2007, the Company recorded a change in fair value of warrant derivatives of $187,200 and $(1,456,200), respectively. Upon the declaration of effectiveness of the registration of the common

 

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shares underlying the warrants in June 2007, the carrying value of warrant derivatives was reclassified to additional paid in capital in the accompanying balance sheet, as the warrants no longer required derivative liability treatment under EITF Issue No. 00-19.

7. Income Taxes

Deferred taxes represent the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Temporary differences result primarily from the recording of tax benefits of net operating loss carryforwards and start-up costs that will be amortized for tax purposes once the Company begins doing business as defined by the Internal Revenue Code.

As of December 31, 2007, the Company has an insufficient history to support the likelihood of ultimate realization of the benefit associated with the deferred tax asset. Accordingly, a valuation allowance has been established for the full amount of the net deferred tax asset.

Deferred taxes consisted of the following:

 

     December 31,
2006
    December 31,
2007
 

Net operating loss carryforwards

   $ 579,605     $ 1,449,941  

Stock-based compensation

     1,641,458       2,160,144  

Less valuation allowance

     (2,221,063 )     (3,610,085 )
                

Net deferred tax asset

   $ —       $ —    
                

At December 31, 2006 and December 31, 2007, the Company had approximately $579,605 and $1,449,941, respectively, of net operating loss carryforwards, subject to certain limitations. Such losses expire in 2024 through 2027 as of December 31, 2007. The utilization of the carryforwards is dependent upon the Company’s ability to generate sufficient taxable income during the carryforward period.

8. Subsequent Events

Increase in authorized number of shares under 2006 Equity Incentive Plan

The Company’s Board of Directors approved by a written consent executed January 28, 2008 an increase in the authorized number of shares of the Company’s common stock available to be issued under the Company’s 2006 Equity Incentive Plan from 1,500,000 to 2,250,000 shares, with such increase to be subject to approval by the Company’s shareholders.

Agreement with Molecular Discoveries

On February 14, 2008, the Company entered into an Agreement, dated as of February 14, 2008, with Molecular Discoverie s LLC ( “Molecular Discoveries”), covering the Company’s acquisition of certain monoclonal antibody related technology owned by Molecular Discoveries and completed the acquisition of the technology on that date. The Molecular Discoveries agreement also was acknowledged and agreed to by Dr. Cohava Gelber, an inventor of the technology acquired by the Company under this agreement and an equity owner of Molecular Discoveries.

The technology acquired under the Molecular Discoveries agreement and now owned by the Company consists of (i) a platform technology referred to by Molecular Discoveries as DIAAD for the potentially rapid discovery of monoclonal antibodies to detect and treat cancer and other chronic

 

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diseases and (ii) certain monoclonal antibody candidates for the potential detection and treatment of multiple myeloma, small cell lung, pancreatic and ovarian cancers. The monoclonal antibodies are covered by issued patents and pending patent applications in the fields of multiple myeloma, small cell lung and ovarian cancers.

The Company contemplates commencing the initial phase of development of a diagnostic/prognostic product for small cell lung cancer and a therapeutic product for the treatment of small cell lung and pancreatic cancers, based upon the acquired monoclonal antibody candidates. The monoclonal antibody technology is at a pre-clinical stage of development and will require further development before an IND can potentially be filed for human testing of any of the acquired product candidates.

The terms of the Molecular Discoveries agreement are substantially the same as those set forth in a Memorandum of Agreement entered into by the Company and Molecular Discoveries on November 21, 2007. The Memorandum of Agreement was a binding summary agreement of the parties under which they agreed to work together to sign the Molecular Discoveries agreement within 30 days and to close the acquisition transaction within 60 days of the signing of the Memorandum of Agreement.

As provided in the Molecular Discoveries agreement, the consideration for the intellectual property and related assets comprising the technology acquired by the Company consisted of (i) the issuance of 800,000 shares of the Company’s common stock to Molecular Discoveries and (ii) the reimbursement by the Company to Molecular Discoveries or its managing member of $250,000 of previously incurred patent expenses. The Company will be required to register the shares issued to Molecular Discoveries, but Molecular Discoveries has agreed that it will not publicly resell any of these shares until after such registration is completed and not more than 100,000 shares in any 90-day period thereafter. To secure Molecular Discoveries’s potential obligations to the Company under the Molecular Discoveries agreement, all of the shares also will be placed in escrow, with 400,000 shares subject to release after one year and the balance after two years from the closing of the transaction.

As contemplated by the Molecular Discoveries agreement, the Company entered into a consulting agreement with Dr. Gelber concurrently with the Company’s acquisition of the monoclonal antibody related technology from Molecular Discoveries under which she will provide certain consulting services to the Company on a part-time basis in connection with its development of the acquired technology during the ten-month period from the closing of the acquisition. For these services, the Company (i) will pay Dr. Gelber $30,000 per month for February 2008 and March 2008 and $10,000 per month for April 2008, May 2008, June 2008 and July 2008 (a total of $100,000 unless the Company terminates the consulting agreement prior to the expiration of its ten-month term), (ii) will pay Dr. Gelber a success payment of $50,000 if Dr. Gelber is able during the term of the consulting agreement to generate an interim analysis of pre-clinical data satisfactory to the Company that demonstrates the feasibility of a small cell lung cancer product candidate as a medical diagnostic and predictor of responders for this indication and (iii) will issue Dr. Gelber a five-year option under the Company’s stock option plan to purchase 75,000 shares of the Company’s common stock at a purchase price equal to the closing price of the Company’s common stock on the date of the closing of the acquisition, with such option to vest at the rate of 5,000 shares each month during the term of the consulting agreement and with 25,000 shares to vest upon generation of the interim analysis of pre-clinical data described above.

Employment Agreement with Dr. Manish Singh

The Company entered into an Employment Agreement, effective as of February 18, 2008, with Dr. Manish Singh pursuant to which Dr. Singh will serve on a full-time basis as the Company’s President and Chief Executive Officer for a one-year term commencing February 18, 2008. The Company is required under the Employment Agreement to use its commercially reasonable efforts to have Dr. Singh serve as a member of the Company’s Board of Directors during the term of the Employment Agreement.

 

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The Employment Agreement provides for an annual base salary of $200,000, payable monthly, and a $100,000 bonus if the Company generates aggregate net financing proceeds of at least $5,000,000 during the term of the agreement and an additional bonus of $100,000 if the Company generates aggregate net financing proceeds of at least $10,000,000 during the term of the agreement. Pursuant to the Employment Agreement, the Company granted Dr. Singh a seven-year nonqualified stock option on February 18, 2008 under the Company’s 2006 Equity Incentive Plan to purchase 600,000 shares of the Company’s common stock at an exercise price of $1.00 per share. This option is subject to cancellation in the event of, and may not be exercised unless and until, the Company’s shareholders approve an increase in the authorized number of shares covered by the 2006 Equity Incentive Plan to at least 1,850,000 shares. The option vests in twelve equal monthly installments over the one-year term of the agreement. The option may be exercised during the period that Dr. Singh provides services to the Company and for 24 months after termination for any reason except termination for cause by the Company, provided that such exercise is within the seven-year term of the option.

In the event that the Company terminates the Employment Agreement without cause or does not extend the Employment Agreement upon its expiration for an additional one-year term or Dr. Singh terminates the Employment Agreement due to (i) his principal place of work for the Company being relocated by more than 50 miles, (ii) a material change in his duties, (iii) a failure by the Company to pay him any of his contractual compensation, (iv) a constructive termination of Dr. Singh or unlawful harassment or retaliation against him or (v) a failure by the Company to obtain approval of the increase in the number of authorized shares covered by 2006 Equity Incentive Plan described above and the cancellation of Dr. Singh’s option by the Company, then the Company upon such termination will be required to make a lump sum payment to Dr. Singh equal to six months of his base annual salary and 50% of the shares covered by his option that have not yet vested will immediately become vested.

Office Lease

Effective March 1, 2008, the Company entered into a one-year lease at a monthly rental rate of $1,507.

 

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Exhibit Index

 

Exhibit
Number

 

Description

2.1

  Agreement and Plan of Reorganization dated as of May 5, 2005 among the Registrant, Patco Industries Subsidiary, Inc., William C. Patridge, and Spectral Molecular Imaging, Inc., as amended on June 30, 2005, September 26, 2005 and January 20, 2006. (1)

2.2

  Agreement, dated as of September 11, 2006, by and between Optical Molecular Imaging, Inc. and Daniel L. Farkas. (2)

3.1

  Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (3)

3.2

  Certificate of Amendment to Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (3)

3.3

  Amended and Restated Bylaws of ImmunoCellular Therapeutics, Ltd. (4)

3.4

  Certificate of Amendment to Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (9)

4.1

  Form of Common Stock Certificate (6)

4.2

  Form of Subscription Agreement containing registration rights issued by Spectral Molecular Imaging, Inc. in January 2006 and assumed by ImmunoCellular Therapeutics, Ltd. (4)

4.3

  Form of Warrant issued in January 2006 to purchase shares of the common stock of Spectral Molecular Imaging, Inc. and assumed by ImmunoCellular Therapeutics, Ltd. (4)

4.4

  Subscription Agreement dated February 16, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (8)

4.5

  Letter Agreement dated February 16, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited (8)

4.6

  Subscription Agreement dated April 19, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (8)

4.7

  Warrant dated February 16, 2007 issued by ImmunoCellular Therapeutics, Ltd. to Credit Suisse Client Nominees (UK) Limited, as nominee for RAB Special Situations (Master) Fund Limited, for the purchase of 800,000 shares of the common stock of ImmunoCellular Therapeutics, Ltd. (8)

4.8

  Warrant dated February 16, 2007 issued by ImmunoCellular Therapeutics, Ltd. to Credit Suisse Client Nominees (UK) Limited, as nominee for RAB Special Situations (Master) Fund Limited, for the purchase of 533,334 shares of the common stock of ImmunoCellular Therapeutics, Ltd. (8)

4.9

  Warrant dated April 19, 2007 issued by ImmunoCellular Therapeutics, Ltd. to Credit Suisse Client Nominees (UK) Limited, as nominee for RAB Special Situations (Master) Fund Limited, for the purchase of 200,000 shares of the common stock of ImmunoCellular Therapeutics, Ltd. (8)

4.10

  Warrant dated April 19, 2007 issued by ImmunoCellular Therapeutics, Ltd. to Credit Suisse Client Nominees (UK) Limited, as nominee for RAB Special Situations (Master) Fund Limited, for the purchase of 133,334 shares of the common stock of ImmunoCellular Therapeutics, Ltd. (8)

 

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4.11

  Form of Subscription Agreement containing registration rights between the participants in the April/May 2007 private placement and the Registrant. (10)

4.12

  Form of Warrant issued to participants in the April/May 2007 private placement to purchase shares of common stock of the Registrant. (10)

4.13

  Form of Non-Qualified Stock Option Agreement for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (13)

4.14

  Form of Incentive Stock Option Agreement for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (13)

10.1

  Exclusive License Agreement, dated as of November 17, 2006, by and between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd.† (5)

10.2

  Agreement, dated as of November 17, 2006, by and between Dr. John Yu and ImmunoCellular Therapeutics, Ltd.* (5)

10.3

  Stock Purchase Agreement, dated as of November 17, 2006, by and between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (5)

10.4

  Registration Rights Agreement, dated as of November 17, 2006, by and between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (5)

10.5

  Securities Purchase Agreement, dated as of November 17, 2006, by and between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. (5)

10.6

  Nonqualified Stock Option Agreement, dated as of November 17, 2006, by and between Dr. John Yu and ImmunoCellular Therapeutics, Ltd.* (5)

10.7

  Registration Rights Agreement, dated as of November 17, 2006, by and between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. (5)

10.8

  2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (4)

10.9

  Amendment No. 1 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (11)

10.10

  Amendment No. 2 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. **

10.11

  Agreement, dated July 7, 2006, by and between Technomedics Management & Systems, Inc. and ImmunoCellular Therapeutics, Ltd. (7)

10.12

  Agreement, dated November 17, 2006, by and between Technomedics Management & Systems, Inc. and ImmunoCellular Therapeutics, Ltd.* (6)

10.13

  Agreement, dated April 22, 2005, by and between David Wohlberg and ImmunoCellular Therapeutics, Ltd.* (4)

10.14

  Agreement, dated October 30, 2006, by and between David Wohlberg and ImmunoCellular Therapeutics, Ltd.* (7)

10.15

  Agreement, dated May 16, 2005, by and between Kirk Peacock and ImmunoCellular Therapeutics, Ltd.* (4)

10.16

  Agreement, dated October 30, 2006, by and between Kirk Peacock and ImmunoCellular Therapeutics, Ltd.* (7)

10.17

  Agreement, dated June 28, 2007, by and between David Wohlberg and ImmunoCellular Therapeutics, Ltd. (10)

10.18

  Agreement, dated November 5, 2007, by and between Kirk Peacock and ICT.* (12)

 

Ex - 2


Table of Contents

10.19

  Memorandum of Agreement, dated November 21, 2007, by and between Molecular Discoveries LLC and ImmunoCellular Therapeutics, Ltd. **

10.20

  Agreement, dated February 14, 2008, by and between Molecular Discoveries, LLC and ImmunoCellular Therapeutics, Ltd. **

10.21

  Agreement, dated February 14, 2008, by and between Dr. Cohava Gelber and ImmunoCellular Therapeutics, Ltd.* **

10.22

  Agreement, dated February 18, 2008, by and between Dr. Manish Singh and ICT.* **

10.23

  Amendment No. 3 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. **

23.1

  Consent of Stonefield Josephson, Inc. **

31.1

  Certification of the Registrant’s Principal Executive Officer under Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

31.2

  Certification of the Registrant’s Principal Financial Officer under Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

32.1

  Certification of the Registrant’s Principal Executive Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2

  Certification of the Registrant’s Principal Financial Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

 

Certain portions of the exhibit have been omitted based upon a request for confidential treatment filed by the Registrant with the Securities and Exchange Commission. The omitted portions of the exhibit have been separately filed by the Registrant with the Securities and Exchange Commission.
* Indicates a management contract or compensatory plan or arrangement.
** Filed with this Annual Report on Form 10-KSB.
(1) Previously filed by us on January 26, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(2) Previously filed by us on September 15, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(3) Previously filed by us on November 3, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(4) Previously filed by us on February 6, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(5) Previously filed by us on November 22, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(6) Previously filed by us on February 12, 2007 as an exhibit to our Registration Statement on Form SB-2 and incorporated herein by reference.
(7) Previously filed by us on April 2, 2007 as an exhibit to our Form 10-KSB dated December 31, 2006.
(8) Previously filed by us on May 1, 2007 as an exhibit to our Registration Statement on Form SB-2 and incorporated herein by reference.
(9) Previously filed by us on May 9, 2007 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(10) Previously filed by us on July 12, 2007 as an exhibit to our Registration Statement on Form SB-2 and incorporated herein by reference

 

Ex - 3


Table of Contents
(11) Previously filed by us on September 14, 2007 as an exhibit to our Registration Statement on Form SB-2/A and incorporated herein by reference.
(12) Previously filed by us on November 6, 2007 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(13) Previously filed by us on November 9, 2007 as an exhibit to our Registration Statement on Form S-8 and incorporated herein by reference.

 

Ex - 4

EXHIBIT 10.10

IMMUNOCELLULAR THERAPEUTICS, LTD.

AMENDMENT NO. 2 TO 2006 EQUITY INCENTIVE PLAN

This Amendment No. 2 to the 2006 Equity Incentive Plan (this “Amendment”), dated as of January 28, 2008, of ImmunoCellular Therapeutics, Ltd., a Delaware corporation (the “Company”). All capitalized terms shall have the meanings set forth in the 2006 Equity Incentive Plan (the “Plan”).

WHEREAS, the Company’s Board of Directors have determined to amend the Plan to increase the aggregate number of shares of Common Stock available for grant under the Plan, with such increase to be subject to approval by the Company’s stockholders;

NOW, THEREFORE, the Company hereby amends the Plan as set forth herein:

Subsection 3 is hereby deleted in its entirety and is restated to read as follows, with such amendment and restatement to be subject to approval by the Company’s stockholders:

“3. STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS

Subject to the provisions of Sections 6.1.1 and 8.2 of this Plan, the total number of shares of Common Stock which may be offered, or issued as restricted stock or on the exercise of Options or SARs under the Plan shall not exceed two million two hundred Fifty thousand (2,250,000) shares of Common Stock. The shares subject to an Option or SAR granted under the Plan which expire, terminate or are cancelled unexercised shall become available again for grants under this Plan. If shares of restricted stock awarded under the Plan are forfeited to the Company or repurchased by the Company, the number of shares forfeited or repurchased shall again be available under the Plan. Where the exercise price of an Option is paid by means of the optionee’s surrender of previously owned shares of Common Stock or the Company’s withholding of shares otherwise issuable upon exercise of the Option as may be permitted herein, only the net number of shares issued and which remain outstanding in connection with such exercise shall be deemed “issued” and no longer available for issuance under this Plan. No eligible person shall be granted Options or other awards during any twelve-month period covering more than four hundred thousand (400,000) shares.”

IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed as of the date first written above.

 

ImmunoCellular Therapeutics, Ltd.
By:  

/s/ C. Kirk Peacock

Name:   C. Kirk Peacock
Title:   Interim President

EXHIBIT 10.19

MEMORANDUM OF AGREEMENT

This Memorandum of Agreement (“Memorandum”), dated as of this 21st day of November, 2007, by and between ImmunoCellular Therapeutics, Ltd., a Delaware corporation with its principal office at 1999 Avenue of the Stars, 11 th Floor, Los Angeles, California 90067 (“ICT”), and Molecular Discoveries LLC, a New York limited liability company with its principal office at 551 Fifth Avenue, New York, New York 10176 (“MDC”), is intended to summarize the basic terms of a technology acquisition agreement between the parties hereto, which will be embodied in a subsequent and more comprehensive agreement (the “Final Agreement”) that will include not only the provisions of this Memorandum, but also certain other terms and conditions that are customarily included in technology acquisition arrangements. This Memorandum is entered into with reference to the following facts:

A. MDC is the sole owner of certain patents, patent applications, data and other proprietary intellectual property (collectively, the “Intellectual Property”), relating primarily to the work of Dr. Cohava Gelber (“Gelber”) covering what is referred to as the DIAAD technology, monoclonal antibodies for the detection and treatment of ovarian cancer and small cell lung cancer, and such other items as are described in the patents and patent applications listed in the attached Exhibit A entitled Molecular Discoveries, LLC Patent Portfolio to be acquired by ICT (the “Acquired Technology”).

B. Gelber is an employee of American Type Culture Corporation (“ATCC”), a 10% shareholder of MDC and also serves as a consultant to MDC.

C. Gelber is the inventor of the Acquired Technology, and Gelber has significant expertise and experience in the field of the Acquired Technology.

D. ICT wishes to acquire ownership of the Acquired Technology from MDC for the purpose of developing and commercializing products based on the Acquired Technology, and MDC is willing to sell and assign the Acquired Technology to ICT in accordance with the basic terms of this Memorandum and the Final Agreement.

Now, therefore, the parties agree as follows:

1. Agreement and Closing . This Memorandum is a binding agreement of the parties to enter into the Final Agreement, subject only to the closing conditions set forth in this Memorandum. The parties to this Memorandum agree to work diligently to prepare and execute the Final Agreement within 30 days from the date of this Memorandum and to use their best efforts to close the transactions contemplated herein (the “Closing”) within 60 days from the date of this Memorandum.

2. Assets . The assets to be acquired by ICT from MDC pursuant to the Final Agreement (the “Assets”) shall consist of all of the Intellectual Property and any equipment, biological materials and other physical assets owned by MDC that are used in connection with the Acquired Technology.


3. Representations of MDC . MDC represents and warrants to ICT that:

(a) MDC is the sole owner of the Acquired Technology and the patents and patent applications listed in Exhibit A to this Memorandum; that the patents listed in Exhibit A to this Memorandum have been validly issued or applied for; and that Acquired Technology does not, to the best knowledge of MDC, infringe the proprietary rights of any third party;

(b) MDC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of New York and has the power and authority to enter into and perform its obligations under this Memorandum and the Final Agreement;

(c) the execution and delivery of this Memorandum by MDC and the performance by MDC of its obligations hereunder have been, and the execution and delivery of the Final Agreement and the performance by MDC of its obligations thereunder will be, duly authorized by all necessary action under MDC’s limited liability agreement or otherwise; and

(d) neither the execution or delivery of this Memorandum or the Final Agreement nor the performance by MDC or Gelber of their obligations hereunder or thereunder, (i) requires the consent or approval of any third party (except for approval of the Final Agreement by MDC’s members and approval of the holders of MDC’s senior debt); (ii) shall constitute a default under any material contract by which MDC or any of its material assets or Gelber is bound (or any event which, with notice or lapse of time or both, would constitute such a default); or (iii) shall constitute a violation of any judgment, order or decree of any court, arbitrator, governmental agency or binding authority upon MDC or Gelber.

4. Representations of ICT . ICT represents and warrants to MDC that:

(a) ICT is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, is qualified to do business in the State of California and has the corporate power and authority to enter into and perform its obligations under this Memorandum and the Final Agreement;

(b) the execution and delivery of this Memorandum by ICT and the performance by ICT of its obligations hereunder have been, and the execution and delivery of the Final Agreement and the performance by ICT of its obligations thereunder will be, duly authorized by all necessary corporate action; and

(c) neither the execution or delivery of this Memorandum or the Final Agreement by ICT, nor the performance by ICT of its obligations hereunder or thereunder, (i) requires the consent or approval of any third party; (ii) shall constitute a default under any material contract by which ICT or any of its material assets is bound (or any event which, with notice or lapse of time, or both, would constitute such a default); or (iii) shall constitute a violation of any judgment, order or decree of any court, arbitrator, governmental agency or authority binding upon ICT.

 

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5. Final Agreement Terms . The Final Agreement shall include, among other terms and conditions that are customarily included in technology acquisition arrangements, the following terms, but not necessarily limited to the exact language set forth below.

5.1 Asset Assignment . Subject to the approval of the holders of MDC’s senior debt (which will be obtained by MDC prior to the Closing), all of the Assets will be assigned by MDC to ICT at the Closing, free and clear of any lien, claim or encumbrance. Following this assignment, ICT shall have sole right, title and ownership of all of the Assets and to thereafter use, develop, license, sell or otherwise employ the Assets for any purpose and in any field.

5.2 Consideration . As payment in full for the Assets and the other covenants of MDC under the Final Agreement, at the Closing, ICT will:

(a) issue MDC 800,000 shares of ICT common stock (the “MDC Shares”). The MDC Shares will be duly and validly issued, fully paid for and nonassessable shares and will be registered under the Securities Act of 1933 pursuant to a registration statement that will be filed within 60 days of the Closing. MDC shall not publicly sell any of the MDC Shares until the later of (i) at least 90 days after the effective date of the registration statement covering the MDC Shares and thereafter shall not sell more than 100,000 shares in any 90-day period and (ii) the release of the MDC Shares to be sold from the escrow described in Section 5.1(b) of this Memorandum; and

(b) All of the MDC Shares shall be placed in escrow (the “Escrow”) at the Closing to secure MDC’s liability to ICT in the event of the breach of any representation, warranty or covenant of MDC under the Agreement. The Escrow shall be with a third party acceptable to MDC and ICT. In addition to any other remedies, ICT may at its option cancel MDC Shares at the rate of $1.50 per share to satisfy any liability owed by MDC to ICT under the Agreement. One year after the Closing, 400,000 of the MDC Shares (less any shares cancelled pursuant to the Escrow) will be delivered to MDC. Two years after the Closing, all of the remaining MDC Shares in the Escrow (less any shares cancelled pursuant to the Escrow) will be delivered to MDC.

(c) ICT will pay or reimburse MDC and/or Leonard Gordon for patent legal and filing fees incurred by MDC in connection with the Acquired Technology, up to a maximum amount of $225,000.

5.3 Representations and Warranties . The Final Agreement shall contain customary representations and warranties by ICT and MDC concerning the status of the Assets, litigation, etc. (including customary disclaimers as to the commercial value and fitness for any specific purpose of the Assets).

5.4 Legal Opinions . ICT and MDC shall each receive at the Closing a legal opinion from counsel to the other party covering customary legal matters to be agreed to by the parties.

5.5 Best Efforts . Leonard Gordon shall use his best efforts to cause MDC to satisfy all of the obligations of MDC under this Memorandum and the Final Agreement, including without limitation obtaining the approval of the holders of MDC’s limited liability company interests and senior debt holders.

 

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5.6 Closing Conditions .

(a) MDC’s obligation to close the transactions contemplated by this Memorandum shall be subject to MDC obtaining approval of these transactions by the holders of a majority of MDC’s outstanding limited liability company interests. Leonard Gordon herby agrees that he and his affiliates will vote their MDC limited liability interests to approve these transactions.

(b) ICT’s obligation to close the transactions contemplated by this Memorandum shall be subject to:

 

  (i) ICT entering into the consulting agreement with Gelber described in Section 6 of this Memorandum;

 

  (ii) ICT obtaining an appraisal from an independent third party appraisal firm confirming that the Assets have a fair market value of at least $1,500,000; and

 

  (iii) MDC obtaining the consent of all of the holders of its senior debt to the transactions contemplated by this Memorandum.

6. Services of Gelber . ICT and Gelber will enter into an agreement subject to and concurrently with the Closing for ICT to employ Gelber as a consultant in the form set forth in the attached Exhibit B. Prior to the Closing, Gelber will deliver to ICT a letter from ATCC acknowledging that she is entering into the consulting agreement.

7. Finders . No party to this Memorandum will be required to pay any finders fee to any third party in connection with consummating the transactions contemplated herein.

8. Disclosure . The terms of this Memorandum may be publicly disclosed by ICT to the extent ICT’s counsel determines that such disclosure is required by law. ICT shall provide MDC with a copy of any such disclosure for its review one day prior to making such disclosure.

9. No Shop . MDC shall not solicit or enter into any discussions with any third party concerning the sale or license of any of the Assets or any other transaction inconsistent with the terms of this Memorandum until such time, if ever, as ICT and MDC agree to abandon the transactions contemplated by this Memorandum.

10. Governing Law . The terms of this Memorandum and the Final Agreement shall be governed by the internal laws of the State of California. Venue shall be Los Angeles County. In any action between the parties seeking enforcement of any of the provisions of this Memorandum or the Final Agreement, the prevailing party in such action

 

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shall be awarded, in addition to damages, injunctive or other relief, its reasonable costs and expenses, not limited to taxable costs, and reasonable attorneys’ fees.

 

    Molecular Discoveries LLC
    By:  

/s/ C. Leonard Gordon

    Name:   C. Leonard Gordon
    Title:   Manager
    ImmunoCellular Therapeutics, Ltd.
    By:  

/s/ John S. Yu

    Name:   John S. Yu, M. D.
    Title:   Chairman of the Board
Acknowledged and Agreed to:      

/s/ C. Leonard Gordon

     
C. Leonard Gordon      

/s/ Cohava Gelber

     
Dr. Cohava Gelber      

 

5

EXHIBIT 10.20

AGREEMENT

This Agreement (“ Agreement ”), dated as of this 14th day of February, 2008, by and among ImmunoCellular Therapeutics, Ltd., a Delaware corporation with its principal office at 1999 Avenue of the Stars, 11 th Floor, Los Angeles, California 90067 (“ ICT ”), Molecular Discoveries LLC, a New York limited liability company with its principal office at 551 Fifth Avenue, New York, New York 10176 (“ MDC ”) and, as to those matters specifically referring to her by her name, Dr. Cohava Gelber (“Gelber”), is entered into with reference to the following facts:

A. MDC is the sole owner of certain patents, patent applications, data and other proprietary intellectual property relating primarily to the research work of Dr. Cohava Gelber (“ Gelber ”) covering a platform technology referred to by MDC as DIADD for the rapid discovery of monoclonal antibodies to detect and treat cancer and other chronic diseases and all monoclonal antibody candidates developed by MDC, including without limitation, certain candidates for the detection and treatment of multiple myeloma, small cell lung, pancreatic and ovarian cancers, and such other items as are described in the patents and patent applications listed in Exhibit A hereto (collectively, the “ Acquired Technology ”).

B. Gelber is an employee of American Type Culture Corporation (“ ATCC ”), a 10% shareholder of MDC and also serves as a consultant to MDC.

C. Gelber is the inventor of the Acquired Technology, and Gelber has significant expertise and experience in the field of the Acquired Technology.

D. ICT wishes to acquire ownership of the Acquired Technology from MDC for the purpose of developing and commercializing products based on the Acquired Technology, and MDC is willing to sell and assign the Acquired Technology to ICT in accordance with the terms of this Agreement.

E. On November 21, 2007, MDC and ICT entered into a binding Memorandum of Agreement covering ICT’s acquisition of the Acquired Technology from MDC that provided for the parties to negotiate and enter into this more comprehensive Agreement.

Now, therefore, the parties agree as follows:

1. Definitions .

1.1 “ Assets ” means the Acquired Technology, the Patents and Patent Applications, the inventory of manufactured antibody candidates, physical library of antibody candidates, any detailed research databases, any submissions to regulatory authorities, correspondence or documents to and from regulatory authorities, correspondence or documents with any third party related to the process, humanization, development or manufacture of all antibody candidates or intermediates, scientific data derived from mechanism of action studies and archives of study reports, including laboratory and animal studies, clinical, pharmacology, toxicology, biology and chemistry studies, the notebooks used during the research leading up to the applications for the Patents and the Patent Applications and all other documentation related to the research, Patents, the Patent Applications and the antibody candidates and any other equipment, biological materials or other physical assets owned by MDC that are used in connection with the Acquired Technology.

 

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1.2 “ Closing ” is defined in Section 2 hereof.

1.3 “ Closing Date ” is defined in Section 2 hereof.

1.4 “ Damages ” is defined in Section 11 hereof.

1.5 “ Escrow ” means the escrow described in Section 6.2 hereof.

1.6 “ Escrow Agreement ” means the escrow agreement described in Section 2 hereof.

1.7 “MDC” Shares means the 800,000 shares of ICT common stock to be issued to MDC as provided in Section 2 hereof.

1.8 “ Patents ” means the issued patents set out in Exhibit A hereto, which patents constitute all patents owned by MDC or Gelber with respect to the Acquired Technology.

1.9 “ Patent Applications ” means the applications for patents set out in Exhibit A hereto, which applications constitute all applications for patents filed or to be filed by MDC or Gelber with respect to the Acquired Technology.

2. Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place on the date of this Agreement (the “ Closing Date ”) at the offices of Troy & Gould Professional Corporation at 1801 Century Park East, Los Angeles, California 90067. At the Closing (i) ICT shall deliver to MDC or to Gordon, as MDC shall direct ICT in writing, a check or checks in the amount of all out-of-pocket patent expenses incurred by MDC or Gordon in connection with the Acquired Technology that are documented with invoices provided to ICT prior to the Closing Date, with the total of such payments by ICT to in no event exceed $250,000; (ii) ICT shall issue two certificates in the name of MDC bearing customary restrictive legends under the Securities Act of 1933, as amended for 400,000 shares each (a total of 800,000 shares) of ICT’s common stock (the “MDC Shares”) and shall deliver these certificates to MDC; (iii) MDC shall assign all of the Assets to ICT and deliver a bill of sale to ICT in substantially the form set forth as Exhibit B hereto; (iv) ICT and MDC shall enter into the escrow agreement in substantially the form set forth in Exhibit C hereto (the “Escrow Agreement”); and (v) MDC shall deliver the two certificates evidencing the MDC Shares to the escrow agent provided for in the Escrow Agreement.

3. Conveyance of Assets . MDC shall convey, assign, transfer and deliver at the Closing all of the Assets automatically without any need for ICT to take any further action, free and clear of any lien, claim, encumbrance or other restrictions on title or transfer of any nature. MDC and Gelber shall also assign to ICT after the Closing any improvements to the Acquired Technology developed or acquired by either of them subsequent to the Closing. Following the assignment of the Assets to ICT, ICT shall have the sole right, title and ownership of all of the Assets and to thereafter use, develop, license, sell or otherwise employ the Assets for any purpose and in any field. The conveyance of the Assets shall include as to the rights the following:

(i) the Patents, all the right, title and interest therein and all the rights, powers, privileges and immunities conferred on the proprietor thereof by the grant of the Patents.

 

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(ii) the Patent Applications, all the right, title and interest therein and all the rights, powers, privileges and immunities arising or accrued therefrom with the intent and to the extent that the grant of patents pursuant to the Patent Applications shall be in the name of and shall vest in ICT;

(iii) the right to sue for damages and other remedies in respect of any infringement of the Patents before as well as after the date of this Agreement (with no such incidents of infringement of any Patent known to MDC on the date hereof) and the right to sue for damages and other remedies in respect of any acts carried out by another person within the scope of the claims of any published specification of the Patent Applications before as well as after the date of this Agreement; and

(iv) all of MDC’s rights to apply for, prosecute, obtain patents, and claim priority from (a) Patent Applications and any applications based thereon or claiming priority thereto; (b) any patents issued from any such applications described in (a) above anywhere in the world; (c) any divisions, registrations, confirmations, reissues, re-examinations, extensions, renewals, continuations, continuations-in-part, revalidations, additions, substitutions or renewals entitled to claim priority to any such patent applications or patents described in (a) ; and (d) all national, regional and foreign counterparts or other forms of protection, including supplementary protection certificates, directed to the inventions covered by the Patents or Patent Applications.

ICT shall not assume any of the debts or liabilities of MDC relating to any of the Assets that have accrued through the Closing Date, all of which shall be paid and discharged by MDC.

4. Representations of MDC . MDC represents and warrants to ICT that:

(i) MDC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of New York and has the power and authority to enter into and perform its obligations under this Agreement and the other agreements contemplated by this Agreement;

(ii) the execution and delivery of this Agreement by MDC and the performance by MDC of its obligations hereunder have been duly authorized by all necessary action under MDC’s limited liability agreement or otherwise;

(iii) MDC is the sole owner of, and has good, valid and marketable title to, all of the Assets; that the Patents and Patent Applications have been validly issued or applied for; and that the Acquired Technology does not, to the best knowledge of MDC, infringe the proprietary rights of any third party and MDC has not received notice from any third party challenging the validity or ownership or claiming infringement with respect to any of the Patents or Patent Applications;

 

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(iv) MDC has not granted or entered into any agreement to grant any license or other interest in any portion of the Acquired Technology to any third party.

(v) neither the execution or delivery of this Agreement and the other agreements contemplated by this Agreement nor the performance by MDC or Gelber of their obligations thereunder (a) requires the consent or approval of any third party (except for approval by MDC’s members and approval of the holders of MDC’s senior debt, both of which have been obtained); (b) shall constitute a default under any material contract by which MDC or any of its material assets or Gordon or Gelber is bound (or any event which, with notice or lapse of time or both, would constitute such a default); or (c) shall constitute a violation of any material law or regulation or any judgment, order or decree of any court, arbitrator, governmental agency or binding authority upon MDC, Gordon or Gelber;

(vi) the performance by MDC and Gelber of their obligations under this Agreement and the other agreements contemplated by this Agreement constitute valid and legally binding obligations of those parties and are enforceable against them in accordance with their respective terms;

(vii) to its best knowledge, any preclinical and clinical documents or data included in the Assets that is relevant to the technology covered by the Patents and Patent Applications was performed and has been presented in accordance with any good scientific practices;

(viii) except for the specific representations made by MDC in this Agreement, MDC makes no express or implied warranty of merchantability or fitness for any particular purpose of any of the Acquired Technology; and

(ix) there is no litigation or regulatory proceeding pending or, to MDC’s best knowledge, threatened against MDC, Gelber or Gordon that could prevent the consummation by them of the transactions contemplated by this Agreement or adversely affect the value of any of the Assets.

5. Representations of ICT . ICT represents and warrants to MDC that:

(i) ICT is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, is qualified to do business in the State of California and has the corporate power and authority to enter into and perform its obligations under this Agreement and the other agreements contemplated by this Agreement;

(ii) the execution and delivery of this Agreement and the other agreements contemplated by this Agreement by ICT and the performance by ICT of its obligations thereunder have been duly authorized by all necessary corporate action;

(iii) neither the execution or delivery of this Agreement and the other agreements contemplated by this Agreement by ICT, nor the performance by ICT of its obligations thereunder, (a) requires the consent or approval of any third party; (b) shall constitute a default under any material contract by which ICT or any of its material assets is bound (or any event which, with notice or lapse of time, or both, would constitute such a default); or (c) shall constitute a violation of material law or regulation or any judgment, order or decree of any court, arbitrator, governmental agency or authority binding upon ICT;

 

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(iv) the performance by ICT of its obligations under this Agreement and the other agreements contemplated by this Agreement constitute valid and binding obligations of ICT and are enforceable against ICT in accordance with their respective terms; and

(v) there is no litigation or regulatory procedure pending or, to ICT’s best knowledge, threatened against ICT that could prevent the consummation of the transactions contemplated by this Agreement or that otherwise would have a material adverse effect upon ICT.

6. MDC Shares .

6.1 Upon their issuance at the Closing, the MDC Shares will be duly and validly issued, fully paid for and nonassessable shares and will be registered under the Securities Act of 1933 pursuant to a registration statement that will be filed within 60 days of the Closing Date. MDC shall not publicly sell any of the MDC Shares until the later of (i) after the effective date of the registration statement covering the MDC Shares and thereafter shall not sell more than 100,000 shares in any 90-day period and (ii) the release of the MDC Shares to be sold from the Escrow.

6.2 At the Closing, all of the MDC Shares shall be placed in escrow (the “ Escrow ”) pursuant to the Escrow Agreement to secure MDC’s liability to ICT in the event of the breach of any representation, warranty or covenant of MDC under this Agreement. ICT’s sole remedy to recover such liability of MDC shall be the cancellation of the MDC Shares held in the Escrow as provided by the terms of the Escrow Agreement; provided, however, that if such cancellation of MDC Shares is insufficient to recover the full amount of the liability, ICT shall be entitled to recover any deficiency up to $250,000) in cash from MDC but shall not be entitled to recover any amounts personally from Leonard Gordon or any other member of MDC, or its officers, directors, or debt holders.

6.3 For so long as MDC owns any of the MDC Shares, Leonard Gordon, on behalf of MDC, shall be entitled to receive copies of all agendas and approved minutes for all meetings of ICT’s board of directors and its committees within two business days of delivery of these documents to ICT’s directors, provided that Leonard Gordon has signed on behalf of MDC and himself ICT’s customary nondisclosure agreement and insider trading policy and Mr. Gordon and MDC continue to be in compliance with these agreements.

7. Legal Opinions .

7.1 At the Closing, MDC shall receive a legal opinion from counsel to ICT in substantially the form set forth as Exhibit D hereto.

7.2 At the Closing, ICT shall receive a legal opinion from counsel to MDC in substantially the form set forth as Exhibit E hereto.

 

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8. Services of Gelber . ICT and Gelber will enter into an agreement subject to and concurrently with the Closing for ICT to employ Gelber as a consultant in substantially the form set forth in Exhibit F hereto. Prior to the Closing, Gelber has delivered to ICT a letter from ATCC acknowledging that she is entering into the consulting agreement and that such agreement is permitted under ATCC’s policies applicable to her. Gelber hereby represents to ICT that none of the Acquired Technology has been developed by her using the resources of or under a contractual arrangement with any third party except MDC and that to the best of her knowledge, no other party has any ownership rights in the Acquired Technology and the Acquired Technology does not infringe the rights of any third party.

9. Finders . No party to this Agreement will be required to pay any finders fee to any third party in connection with consummating the transactions contemplated herein.

10. Disclosure . The terms of this Agreement may be publicly disclosed by ICT to the extent ICT’s counsel determines that such disclosure is required by law. ICT shall provide MDC with a copy of any such disclosure for its review one day prior to making such disclosure. MDC shall not disclose to any third party any of the confidential information that it has provided to ICT relating to the Acquired Technology except if required by law, in which case it will use its best efforts to restrict disclosure and to obtain confidential treatment.

11. Indemnification .

11.1 MDC shall defend and indemnify and hold harmless ICT and each of its officers, directors, shareholders, employees, agents and attorneys (each, an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and costs of investigation) suffered or incurred by any of the Indemnified Parties in any action, suit, litigation, arbitration or dispute of any kind (“Action”) or other loss incurred by the Indemnified Party arising or resulting from any breach of any material representation or warranty or covenant by MDC (“Damages”). The foregoing indemnification shall not apply to any claim, damage, loss, liability, cost or expense to the extent attributable to the negligent activities or intentional misconduct of any of the Indemnified Parties. No Indemnified Party shall enter into any settlement of any such Action without first notifying MDC. In the event an Indemnified Party and MDC cannot resolve a dispute over Damages, the matter, upon written demand by the Indemnified Party or MDC shall be submitted to arbitration as provided in the Escrow Agreement.

12. Miscellaneous .

12.1 Notices . Any notice, request, instruction or other document required by this Agreement shall be in writing and shall be deemed to have been given when sent by e-mail together with at least one of the three following forms of delivery: (a) if mailed with the United States Postal Service by prepaid, first class, certified mail, return receipt requested, at the time of receipt by the intended recipient, (b) if sent by Federal Express®, Airborne®, or other overnight carrier, signature of delivery required, at the time of receipt by the intended recipient, or (c) if sent by facsimile transmission, when so sent and when receipt has been acknowledged by appropriate telephone or facsimile receipt, addressed as follows:

 

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In the case of MDC, to:

Molecular Discoveries LLC

c/o C. Leonard Gordon

1400 Fifth Avenue

New York, New York 10026

Fax: (212) 599-4496

lgordon@Moleculardiscoveries.com

In the case of Gelber to:

Dr. Cohava Gelber

14645 Sulky Run Court

Nokesville, Virginia 20181

Fax: (703) 594-3746

gelber@msn.com

In the case of ICT, to:

ImmunoCellular Therapeutics, Ltd.

11 th Floor

1999 Avenue of the Stars

Los Angeles, California 90067

Fax: (310) 423-1038

yuj@cshs.org

with a copy to:

Sanford J. Hillsberg

Troy & Gould Professional Corporation

1801 Century Park East, Suite 1600

Los Angeles, California 90067

Fax: (310) 201-4746

sjhillsberg@troygould.com

or to such other address or to such other person(s) as may be given from time to time under the terms of this Section 12.1. After any change of an address, facsimile number, or e-mail address delivered in accordance with this Section 12.1, that address, facsimile number or e-mail address shall be substituted as the new address, facsimile number or e-mail address for purposes of this Section 12.1.

12.2 Governing Law . This Agreement shall be construed and enforced in accordance with the laws of the United States of America and of the State of California, irrespective of choice of laws provisions. The parties agree that Los Angeles, California shall be the situs of any legal proceeding arising out of or relating to this Agreement.

 

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12.3 Waiver . Failure of any party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to assert that right relative to the particular situation involved.

12.4 Enforceability . If any provision of this Agreement shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of the remainder of this Agreement.

12.5 Modification . No change, modification, or addition or amendment to this Agreement, or waiver of any term or condition of this Agreement, is valid or enforceable unless in writing and signed by each of the parties to this Agreement.

12.6 Entire Agreement . This Agreement, the Exhibits hereto (which are incorporated herein by this reference as if fully set forth herein) and the Escrow Agreement constitute the entire agreements among the parties with respect to the subject matter hereof and thereof, and replace and supersede as of the date hereof and thereof any and all prior agreements and understandings, whether oral or written, between the parties with respect to the subject matter of such agreements.

12.7 Successors . Except as otherwise expressly provided in this Agreement, this Agreement shall be binding upon, inures to the benefit of, and is enforceable by, the parties and their respective heirs, legal representatives, successors and permitted assigns.

12.8 Construction . This Agreement has been prepared, examined, negotiated and revised by each party and their respective attorneys, and no implication shall be drawn and no provision shall be construed against any party to this Agreement by virtue of the purported identity of the drafter of this Agreement or any portion thereof.

12.9 Counterparts . This Agreement may be executed simultaneously in one or more counterparts, each of which shall constitute one and the same instrument. This Agreement may be executed by facsimile.

12.10 Attorneys’ Fees . In the event of any action at law or in equity between the parties hereto to enforce any of the provisions hereof, the unsuccessful party to such litigation shall pay to the successful party all reasonable costs and expenses, including reasonable attorneys’ fees, incurred therein by such successful party; and if such successful party shall recover a judgment in any such action or proceeding, such reasonable costs, expenses and attorneys’ fees may be included in and as part of such judgment.

12.11 Assignment . This Agreement shall be binding upon and shall inure to the benefit of each party and its respective successors and permitted assigns.

12.12 Further Assurances . At any time and from time to time after the Closing Date, each party shall do, execute, acknowledge and deliver, and cause to be done, executed,

 

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acknowledged or delivered, all such further acts, transfers, conveyances, assignments or assurances as may be reasonably required to consummate the transactions contemplated by this Agreement.

12.13 Survival . The representations and warranties set forth in this Agreement shall survive for two years from the Closing Date.

12.14 Force Majeure . Neither party will be responsible for delays resulting from causes beyond its reasonable control, including without limitation fire, earthquake, acts of terrorism, war or riot, provided that the nonperforming party uses commercially reasonable efforts to avoid or remove these causes of nonperformance and continues performance under this Agreement with reasonable dispatch whenever the delaying causes are removed.

IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this Agreement as of the date first above written.

 

IMMUNOCELLULAR THERAPEUTICS, LTD.,

A DELAWARE CORPORATION

By:  

/s/ C. Kirk Peacock

  C. Kirk Peacock
  President

MOLECULAR DISCOVERIES LLC,

A NEW YORK LIMITED LIABILITY COMPANY

By:  

/s/ C. Leonard Gordon

  C. Leonard Gordon
  Managing Member

Acknowledged and agreed to:

 

/s/ Cohava Gelber

Dr. Cohava Gelber

 

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EXHIBIT 10.21

CONSULTING AGREEMENT

This Consulting Agreement, dated as of February 14, 2008 (the “ Agreement ”) is entered into by and between ImmunoCellular Therapeutics, Ltd., a Delaware corporation (the “ Company ”), and Dr. Cohava Gelber (“ Consultant ”) with reference to the following facts:

A. Consultant is the inventor of certain intellectual property covering what is referred to as the DIAAD technology, monoclonal antibodies for the detection and treatment of ovarian cancer and small cell lung cancer, and such other items as are described in the patents and patent applications listed in the attached schedule entitled Molecular Discoveries, LLC Patent Portfolio to be acquired by ICT (the “ Acquired Technology ”) and has significant expertise in the field of the Acquired Technology.

B. Consultant is a 10% shareholder of and consultant to Molecular Discoveries LLC (“ MDC ”).

C. The Company and MDC have entered into an Agreement, dated as of February 14, 2008 (the “ Acquisition Agreement ”), pursuant to which the Company will acquire ownership of the Acquired Technology at a closing of the transactions contemplated by the Acquisition Agreement (the “ Closing ”).

D. The Acquisition Agreement provides as a condition to the Company’s obligation to complete the transactions contemplated by the Acquisition Agreement that Consultant enter into a consulting agreement with the Company.

NOW, THEREFORE, the parties agree as follows:

1. Services . In consideration for the Company agreeing to enter into and perform the Acquisition Agreement and the additional compensation described in Section 3 hereof, Consultant agrees to serve on a part-time basis as a consultant to the Company during the term of this Agreement. Consultant shall advise the Company upon request by the Company on scientific and other related matters pertaining to the Acquired Technology. The Company and Consultant contemplate that most of her services will be performed from her home office outside of the Los Angeles, California area. However, Consultant will use reasonable efforts to be available for meetings in Los Angeles, California or other locations as may be requested from time to time by the Company, provided that such meetings do not interfere with Consultant’s ability to properly perform her current full-time job with American Type Culture Corporation (“ATCC”). The Company will reimburse Consultant for all travel expenses to attend meetings at the request of the Company.

2. Term . The term of this Agreement shall commence on the date of the Closing and continue for a ten-month period, unless terminated in writing earlier by the Company or extended in writing by both parties.

3. Compensation . In consideration for the services provided by Consultant pursuant to this Agreement (including without limitation all services provided by Consultant to the Company prior to the date of this Agreement), Consultant will receive the following compensation and reimbursements:

(a) Consultant shall be granted an option under the Company’s stock option plan to purchase 75,000 shares of the Company’s common stock at an exercise price equal to the closing price of the Company’s common stock on the OTC Bulletin Board on the date of the Closing. The option shall vest with respect to 5,000 shares each month for ten months, on the last business day of each month; and shall vest with respect to 25,000 shares when Consultant attains the milestone set forth below in paragraph 3(c). The option shall have a term of five years and such other terms as are set forth in the Company’s customary stock option agreement.


(b) $100,000 in the following monthly installments: February 2008 and March 2008 - $30,000 each; April 2008, May 2008, June 2008 and July 2008 - $10,000 each. The monthly installments shall be paid on the last business day of each month.

(c) A success payment of $50,000, subject to the Consultant generating during the term of this Agreement an interim analysis of pre-clinical data satisfactory to the Company that demonstrates the feasibility of the small cell lung cancer product candidate included in the Acquired Technology (non-humanized) as a medical diagnostic and predictor of responders for this indication. The data shall be generated at a contract research organization or an academic laboratory (or another institution approved by the Company) under a research contract and protocol that shall be approved and funded by the Company. No ATCC resources will be used in the generation of data. Consultant and the Company shall in good faith mutually decide on the timing for delivery of and the method of the interim analysis. The foregoing $50,000 milestone payment shall be paid by the Company promptly following its receipt and approval of the interim analysis.

(d) Business Expenses . The Company shall promptly reimburse Consultant in connection with her performance of the services and duties hereunder for all reasonable, ordinary and necessary business expenses, including telephone charges, actually incurred by Consultant in connection with that performance, including expenses incurred in connection with travel on the Company’s business. Travel expenses will be reimbursed in accordance with the Company’s travel reimbursement policy. The Company shall provide a laptop computer for Consultant’s use on Company business and either purchase or reimburse Consultant for any other supplies necessary to facilitate Consultant’s work.

4. Compliance with Agreements . Consultant represents to the Company that she may perform this Agreement without violating any agreement or understanding that she has with MDC or ATCC.

5. Confidential Information . Consultant will hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses. Consultant will not, without the prior written consent of the Company, or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than to the Company and those designated by the Company in writing. Furthermore, upon termination of this Agreement or of Consultant’s service to the

 

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Company, Consultant will promptly deliver to the Company all books, memoranda, records and written data of every kind relating to the business and affairs of the Company that may then be in her personal possession. Consultant acknowledges and agrees that this provision regarding confidential information will survive termination of this Agreement or of the Consultant’s service to the Company.

6. Conflicts of Interest . Should a conflict if interest arise between ICT and ATCC with respect to the Consultant, Consultant shall work to cure said conflict, including, if necessary, her resignation as a consultant for ICT. Consultant’s resignation due to a conflict of interest between ICT and ATCC shall not constitute a breach of this Agreement, but no compensation under paragraph 3 shall be payable or accrue to Consultant for any period subsequent to her resignation.

7. No Conflict . Consultant represents that Consultant’s performance of all the terms of this Agreement and that Consultant’s retention as a consultant by the Company does not and will not breach any agreement to keep in confidence any proprietary information acquired by Consultant in confidence prior to Consultant’s retention as a consultant by the Company. Consultant has not entered into, and agrees Consultant will not enter into, any agreement, either written or oral, in conflict with the foregoing sentence. Consultant understands as part of the consideration for the offer to retain Consultant as a consultant, and of Consultant’s retention as a consultant by the Company, that Consultant has not brought and will not bring with Consultant any equipment, supplies, facility or trade secret information of any current or former employer which are not generally available to the public. Consultant also understands that, in Consultant’s retention as a consultant with the Company, Consultant is not to breach any obligation of confidentiality that Consultant has to others, and Consultant agrees that Consultant shall fulfill all such obligations during Consultant’s retention as a consultant with the Company.

8. License and Assignment of Rights . Consultant acknowledges that all inventions, original works of authorship, developments, concepts, know-how, improvements or trade secrets which are made by Consultant (solely or jointly with others) within the scope of and as part of Consultant’s consultancy with the Company (collectively referred to herein as “Inventions”) are “works made for hire” (to the greatest extent permitted by applicable law) and are compensated by the consideration provided by the Company as described in this Agreement, unless regulated otherwise by the mandatory law of the State of California. Consultant also agrees and warrants that Consultant will not use or incorporate third party proprietary materials into Inventions, disclose third party proprietary information to Company or knowingly engage in any activities or use any facilities in the course of providing services under this Agreement that could result in claims of ownership to any Inventions being made by any third party.

9. Resolution of Disputes . Any dispute arising under or in connection with any matter related to this Agreement or any related agreement shall be resolved exclusively by arbitration. The arbitration will be in conformity with and subject to the applicable rules and procedures of JAMS. All parties agree to be (i) subject to the jurisdiction and venue of the arbitration in Los Angeles, California; and (ii) bound by the decision of the arbitrator as the final decision with respect to the dispute.

 

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10. Governing Law . This agreement shall be governed by and construed in accordance with the laws of the State of California without regard to the choice of law rules thereof.

11. Amendment . This Agreement may only be amended by a writing executed by both parties.

12. Nature and Disclosure of Relationship . It is agreed by the parties that Consultant is an independent contractor and that this Agreement shall not create any employee-employer relationship between the parties. The parties each shall be entitled to disclose that Consultant is serving as a consultant to the Company, including in any business plan, press release, advertisement, prospectus or other offering document of the Company or its affiliates. No mention of ATCC or International BioResources Group (“IBG”) can be made without prior review of such communications by ATCC/IBG.

13. Entire Agreement . Except for any agreement between MDC and the Company to which Consultant is a party or has acknowledged or for any non-disclosure agreement previously entered into by the parties, this Agreement constitutes the entire agreement between the parties hereto with respect to Consultant’s service as a consultant, and supercedes all prior oral or written understandings or agreements between the parties hereto.

14. Severability . If any provision of this Agreement is held to be unenforceable under applicable law, such provision shall be severed and the remaining provisions of this Agreement shall continue in full force and effect.

15. Advice of Counsel . Each party acknowledges that, in executing this Agreement, such party has had the opportunity to seek the advice of independent legal counsel and has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any party by reason of the drafting or preparation thereof.

IN WITNESS WHEREOF , the parties have executed this Agreement as of the date first above written.

 

IMMUNOCELLULAR THERAPEUTICS, LTD.

By:  

/s/ C. Kirk Peacock

Name:   C. Kirk Peacock
Title:   President & CFO

CONSULTANT

By:  

/s/ Cohava Gelber

  Dr. Cohava Gelber

 

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EXHIBIT 10.22

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made as of the 18th day of February, 2008, by and between ImmunoCellular Therapeutics, Ltd., a Delaware corporation (the “Corporation”), and Dr. Manish Singh (hereinafter called “Executive”).

W I T N E S S E T H:

WHEREAS, the Corporation desires to employ Executive under the terms of this Agreement, and Executive is willing to accept such employment on the terms and subject to the conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:

1. Employment by Corporation . The Corporation hereby agrees to employ Executive to perform the duties on behalf of the Corporation as the Corporation’s full-time President and Chief Executive Officer of the Corporation. As President and Chief Executive Officer, Executive will report to the Corporation’s Chairman of the Board, and shall have such duties consistent with that of a President and Chief Executive Officer that may from time to time be designated or assigned to Executive pursuant to the directives of the Corporation’s Board of Directors (the “Board”), including without limitation the overseeing and implementation of the Corporation’s business plan as adopted by the Board. Executive will perform his duties under this Agreement at the Corporation’s corporate headquarters in the metropolitan Los Angeles area, with such office currently contemplated to be in the Woodland Hills, California area, or at such other location as shall be mutually agreed upon by the Corporation and Executive; and he will do such traveling as may be required of him in the performance of his duties as the President and Chief Executive Officer. The Corporation will use its commercially reasonable efforts to have Executive serve as a member of the Board during the term of this Agreement.

2. Executive’s Acceptance of Employment . Executive hereby accepts such employment and agrees that throughout the period of his employment hereunder: he will devote his full time, attention, knowledge and skills, faithfully, diligently and to the best of his ability, in furtherance of the business of the Corporation, and he will perform the duties assigned to him pursuant to Paragraph 1 hereof, subject, at all times, to the direction and control of the Board.

Executive shall at all times be subject to, observe and carry out such reasonable rules, regulations, policies, directions and restrictions as the Corporation shall from time to time establish. During the period of his employment by the Corporation, Executive agrees to be bound by the Corporation’s Code of Ethics and any amendments adopted thereto, copies of which Executive hereby acknowledges he has received and read, and Executive agrees that he shall not, without the prior written approval of the Chairman of the Board, directly or indirectly, accept employment or compensation from or perform services of any nature for, any business enterprise other than the Corporation, other than as explicitly set forth herein.

3. Term . Executive shall be employed for a term of one year commencing on February 18, 2008 (the “Commencement Date”), and ending on February 17, 2009 unless his


employment is terminated prior thereto pursuant to the provisions hereof. The term of this Agreement may be extended for an additional year, if both the Corporation and the Executive deliver a written extension notice to each other no later than the 60th calendar day prior to the expiration of the term of this Agreement. This Agreement shall automatically expire on February 17, 2009 and shall not be extended or renewed except in a writing signed by an authorized officer of the Corporation following approval by the Board. Executive hereby acknowledges and agrees that, except in the case of the Corporation and Executive agreeing in writing to extend the term of the Agreement beyond the expiration date of this Agreement, his employment by the Corporation, if any, beyond the expiration date of this Agreement shall be terminable by either party at will and shall not, under any circumstances, be deemed to expressly or impliedly renew the terms of this Agreement.

4. Compensation/Benefits .

4.1 The Corporation will pay to Executive as compensation for his services hereunder an initial base salary of $200,000 per annum, payable in equal monthly installments on the last business day of each month. In addition, the Board of Directors of the Corporation shall annually review Executive’s performance and base salary to determine whether an increase in the amount thereof is warranted.

4.2 The Corporation also shall pay Executive lump sum cash milestone bonuses of (i) $100,000 if during the term of this Agreement the Corporation completes one or more financings that generate aggregate net proceeds to the Corporation (after commissions) of at least $5,000,000 and (ii) an additional $100,000 if during the term of this Agreement completes one or more financings that generate aggregate net proceeds to the Corporation (after commissions) of at least $10,000,000. Any financing shall be undertaken and the terms of such financing shall be at the discretion of the Board. The bonuses, if any, shall be paid to Executive immediately following the Corporation’s receipt of the financing proceeds.

4.3 The Corporation shall grant the Executive on February 18, 2008 under the Corporation’s 2006 Equity Incentive Plan (the “Plan”) a nonqualified stock option to purchase 600,000 shares of the Corporation’s common stock having an exercise price per share equal to $1.00 and having a term of seven years from the date of grant. This option is subject to cancellation in the event of, and may not be exercised as to any of the shares covered by the option unless and until, the Corporation’s shareholders approve an increase in the authorized number of shares covered by the Plan to at least 1,850,000 shares. The option shall vest in twelve equal monthly installments over the twelve month period from and immediately following the Commencement Date.

The option will be exercisable within the seven year term of the option during the period that Executive provides services to the Corporation and for 24 months after termination for any reason except termination for cause by the Corporation, provided that such exercise is effected within the seven-year term of the option. In the event of a Corporate Transaction (as such term is defined in the Plan), vesting of the option (and any other options granted to Executive) shall be governed by the provisions contained in the Corporation’s standard stock option agreement under the Plan for the Corporation’s officers and directors. The option will have such other terms and conditions as are included in the Corporation’s standard stock option agreement under

 

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the Plan. If the term of this Agreement is extended beyond February 17, 2009, or if Executive’s employment hereunder continues at-will beyond February 17, 2009, the Board of Directors of the Corporation shall review the aggregate number of stock options granted to the Executive promptly following such date (and thereafter not less frequently than annually) in order to determine whether an increase in the number thereof is warranted. Any such option shall have substantially the same terms and conditions as the initial option contemplated hereunder. Within thirty (30) days following the grant of any stock option to Executive, the Corporation shall file with the U.S. Securities and Exchange Commission a registration statement on Form S-8 covering the shares of the Corporation’s common stock issuable pursuant to any options issued to Executive and then-outstanding, to the extent the shares so issuable are not covered by an existing Form S-8 registration statement.

5. Business Expenses . The Corporation will promptly reimburse Executive for all business expenses incurred by Executive in connection with the business of the Corporation in accordance with the Corporation’s policy regarding the nature and amount of expenses and the maintenance and submission of receipts and records necessary for the Corporation to document them as proper business expenses.

6. Vacation . In addition to holidays observed by the Corporation, Executive shall be entitled to paid vacation of three (3) weeks per year or such greater amount of vacation as is approved by the Chairman of the Board. Any such vacations are to be taken at times mutually agreeable to Executive and the Chairman of the Board. Executive shall not be entitled to accrue more than six (6) weeks of accrued vacation time at any given time. In the event that Executive has accrued the maximum of six (6) weeks accrued and unused vacation time, Executive shall cease accruing further vacation time until such time as Executive’s accrued and unused vacation time is less than such maximum amount.

7. Benefits . Executive shall be entitled to all rights and benefits for which he shall be eligible under any benefit or other plans (including, without limitation, dental, medical, medical reimbursement and hospital plans, pension plans, employee stock purchase plans, profit sharing plans, bonus plans and other so-called “fringe” benefits) as the Corporation shall make available to its executive officers from time to time.

8. Termination .

8.1 In addition to all other rights and remedies which the parties may have under applicable law, the Corporation may terminate this Agreement and the services of Executive, effective upon the occurrence of any of the following events, any of which shall constitute a termination for “cause” under this Agreement: (i) a failure by Executive to perform any of his material obligations under this Agreement; (ii) the death of Executive or his disability resulting in his inability to perform his reasonable duties assigned hereunder for a period of three consecutive months; (iii) Executive’s theft, dishonesty, or falsification of any Corporation documents or records; (iv) Executive’s improper use or disclosure of the Corporation’s confidential or proprietary information; or (v) Executive’s conviction (including any plea of guilty or nolo contendere) of any criminal act which impairs Executive’s ability to perform his or her duties hereunder or which in the Board’s judgment may materially damage the business or reputation of the Corporation; provided, however, that prior to termination for cause arising

 

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under clause (i), Executive shall have a period of ten (10) days after written notice from Corporation to cure the event or grounds constituting such cause. Any notice of termination provided by Corporation to Executive under this Section 8 shall identify the events or conduct constituting the grounds for termination with sufficient specificity so as to enable Executive to take steps to cure the same if such default is a failure by Executive to perform any of his material obligations under this Agreement. In the event Corporation terminates Executive for cause, (i) Executive shall be entitled as of the termination date to no further base salary other than such portion of Executive’s base salary as shall have accrued but remain unpaid as of the termination date, which shall be due immediately upon termination, (ii) Executive shall be entitled to receive payment of any earned but unpaid bonus, as well as any expense reimbursement amounts owed by the Corporation to the Executive through the date of termination and (iii) any then unexercised but outstanding stock options granted to Executive shall be cancelled. The Corporation shall have no further obligations to Executive under this Agreement.

8.2 The Corporation may terminate Executive without cause upon sixty (60) days written notice delivered to Executive. In the event the Corporation terminates Executive’s employment without cause (including a failure by the Corporation upon the expiration of the original term of this Agreement to extend the term of Executive’s employment for an additional one year beginning February 18, 2009) all of the following will apply: (i) immediately upon termination, the Corporation will pay to Executive any base salary as shall have accrued but remain unpaid as of the termination date, any earned but unpaid bonus and any expense reimbursement amounts owed by the Corporation to the Executive through the date of termination; (ii) immediately upon termination, the Corporation will pay to Executive severance compensation in a lump sum cash payment equal to Executive’s then effective base salary for a period of six (6) months; (iii) any stock options granted to Executive, to the extent vested, will be retained by the Executive and will be exercisable as detailed in Section 4.3 above, the Plan and related stock option agreement (which shall reflect the terms set forth in Section 4.3 above); and (iv) the vesting of an additional number of shares subject to all options granted to Executive equal to fifty percent (50%) of all such shares subject to such options that have not already vested shall immediately accelerate and become fully vested and exercisable by Executive and will continue to be exercisable as provided in Section 4.3, the Plan and related stock option agreement (which shall reflect the terms set forth in Section 4.3 above).

8.3 Executive may terminate Executive’s employment at will (without “Good Reason” as defined below) by giving sixty (60) days’ prior written notice to Corporation. Executive shall be entitled to (i) all base salary up to and through the 60-day period after Executive’s notice of termination is given to Corporation, any earned but unpaid bonus and any expense reimbursement amounts owed by the Corporation to the Executive through the date of termination and (ii) any stock options, to the extent vested, may be retained by Executive and will be exercisable as detailed in Section 4.3 above, the Plan and applicable stock option agreement (which shall reflect the terms set forth in Section 4.3 above). Executive has the right to terminate Executive’s employment for “Good Reason” due to, and within a reasonable period of time following, the occurrence of any of the following: (i) Corporation’s requirement that Executive’s principal place of work relocate more than fifty (50) miles from its location as of the Effective Date without the written consent of Executive to such relocation, (ii) a material adverse change in Executive’s duties and responsibilities; (iii) any failure by Corporation to pay, or any material reduction by Corporation of, the base salary or any failure by Corporation to pay any

 

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incentive compensation to which Executive may be entitled pursuant to Section 4; (iv) Corporation creates a work environment designed to constructively terminate Executive or to unlawfully harass or retaliate against Executive or (v) the Corporation fails to obtain shareholder approval of an increase in the size of the Plan and cancels the stock option as described in Section 4.3 In the event that Executive terminates his employment for Good Reason all of the following will apply: (A) within five days after the termination date, Corporation will pay to Executive any base salary as shall have accrued but remain unpaid as of the termination date, any earned but unpaid bonus and any expense reimbursement amounts owed by the Corporation to the Executive through the date of termination; (B) within 5 days after the termination date, Corporation will pay to Executive severance compensation in a lump sum cash payment equal to Executive’s base salary then in effect equal to six (6) months; (C) any stock options granted to Executive, to the extent vested, will be retained by the Executive and will be exercisable as detailed in Section 4.3 above, the Plan and related stock option agreement (which shall reflect the terms set forth in Section 4.3 above); and (D) the vesting of an additional number of shares subject to all options granted to Executive equal to fifty percent (50%) of all such shares subject to such options that have not already vested shall immediately accelerate and become fully vested and exercisable by Executive and will continue to be exercisable as provided in Section 4.3, the Plan and related stock option agreement (which shall reflect the terms set forth in Section 4.3 above).

9. Indemnity . Executive warrants and represents that he has full power and authority to enter into and perform this Agreement and that his performance of this Agreement will not violate the provisions of any other agreement to which he is a party. The Corporation agrees to indemnify and hold Executive harmless from and against any and all claims, demands, causes of action, losses, damages, liability, costs and expenses, including attorneys fees arising out of his services hereunder, other than those arising from or attributable to or resulting from his gross negligence or willful misconduct. The Corporation will name Executive as an officer on any policy of directors and officers liability insurance it secures throughout the term of this Agreement.

10. Non-Competition . In consideration of the Corporation’s entering into this Agreement:

10.1 Executive agrees that during the term of this Agreement he will not directly or indirectly own, manage, operate, join, control, participate in, perform any services for, invest in, or otherwise be connected with, in any manner, whether as an officer, director, employee, consultant, partner, investor or otherwise, any business entity which is engaged in any business in which the Corporation is currently engaged or is engaged at the termination of this Agreement. Nothing herein contained shall be deemed to prohibit (i) Executive from maintaining any investments in, and the holding of any securities of, any company to the extent such investments were made or such securities held by Executive prior to the Commencement Date or (ii) investing his funds in securities of a company if the securities of such company are listed for trading on a national securities exchange or traded in the over the counter market and Executive’s holdings therein represent less than five percent (5%) of the total number of shares or principal amount of other securities of such company outstanding. Notwithstanding the foregoing, Executive shall be permitted to continue to serve, for a period of up to sixty (60) days after the Commencement Date, as a consultant and/or member of the board of directors of any other company to the extent Executive was serving as a consultant and/or member of such board of directors, as applicable, as of immediately prior to the Commencement Date.

 

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10.2 Executive agrees that Executive will not, during the term hereof or prior to the expiration of one year following the termination of the Executive’s employment for any reason, without the written consent of the Corporation, directly or indirectly, by action alone or in concert with others, solicit for employment or engagement, or advise or recommend to any other person or entity that such person or entity solicit for employment or engagement, any person or entity employed or engaged by the Corporation.

11. Confidentiality Agreement .

11.1 As used herein, the term “Confidential Information” shall mean the any and all information of the Corporation, including, but not limited to, all data, compilations, programs, devices, strategies, or methods concerning or related to (i) the Corporation’s finances, financial condition, results of operations, employee relations, amounts of compensation paid to officers and employees and any other data or information relating to the internal affairs of the Corporation and its operations; (ii) the terms and conditions (including prices) of sales and offers of sales of the Corporation’s products and services; (iii) the terms, conditions and current status of the Corporation’s agreements and relationship with any customer or supplier; (iv) the customer and supplier lists and the identities and business preferences of the Corporation’s actual and prospective customers and suppliers or any employee or agent thereof with whom the Corporation communicates; (v) the trade secrets, manufacturing and operating techniques, price data, costs, methods, systems, plans, procedures, formulas, processes, hardware, software, machines, inventions, designs, drawings, artwork, blueprints, specifications, tools, skills, ideas, and strategic plans possessed, developed, accumulated or acquired by the Corporation; (vi) any communications between the Corporation, its officers, directors, shareholders, or employees, and any attorney retained by the Corporation for any purpose, or any person retained or employed by such attorney for the purpose of assisting such attorney in his or her representation of the Corporation; (vii) any other non-public information and knowledge with respect to the Corporation’s products, whether developed or in any stage of development by the Corporation; (viii) the abilities and specialized training or experience of others who as employees or consultants of the Corporation during the Executive’s employment have engaged in the design or development of any such products; and (ix) any other matter or thing, whether or not recorded on any medium, (a) by which the Corporation derives actual or potential economic value from such matter or thing being not generally known to other persons or entities who might obtain economic value from its disclosure or use, or (b) which gives the Corporation an opportunity to obtain an advantage over its competitors who do not know or use the same.

11.2 Executive acknowledges and agrees that the Corporation is engaged in a highly competitive business and has expended, or will expend, significant sums of money and has invested, or will invest, a substantial amount of time to develop and maintain the secrecy of the Confidential Information. The Corporation has thus obtained, or will obtain, a valuable economic asset which has enabled, or will enable, it to develop an extensive reputation and to establish long-term business relationships with its suppliers and customers. If such Confidential Information were disclosed to another person or entity or used for the benefit of anyone other than the Corporation, the Corporation would suffer irreparable harm, loss and damage.

 

6


Accordingly, Executive acknowledges and agrees that, unless the Confidential Information was (a) in the public domain or becomes publicly known through legitimate origins not involving an act or omission by Executive, (b) was in Executive’s possession free of any obligation of confidence at or subsequent to the time such Confidential Information was communicated to Executive; (c) was developed by Executive prior to the date of this Agreement or after the expiration of the term of this Agreement independently of and without reference to any Confidential Information; (c) was known to Executive at the time of disclosure; or (v) was approved for release by written authorization of the Corporation, then:

(i) the Confidential Information is, and at all times hereafter shall remain, the sole property of the Corporation;

(ii) Executive shall use his best efforts and the utmost diligence to guard and protect the Confidential Information from disclosure to any competitor, customer or supplier of the Corporation or any other person, firm, corporation or other entity; and

(iii) unless the Corporation gives Executive prior express written permission, during his employment and thereafter, Executive shall not use for his own benefit, or divulge to any competitor or customer or any other person, firm, corporation, or other entity, any of the Confidential Information which Executive may obtain, learn about, develop or be entrusted with as a result of Executive’s employment by the Corporation.

11.3 Executive also acknowledges and agrees that all documentary and tangible Confidential Information including, without limitation, such Confidential Information as Executive has committed to memory, is supplied or made available by the Corporation to the Executive solely to assist him in performing his services under this Agreement. Executive further agrees that after his employment with the Corporation is terminated for any reason:

(i) Executive shall not remove from the property of the Corporation and shall immediately return to the Corporation, all documentary or tangible Confidential Information in his possession, custody, or control and not make or keep any copies, notes, abstracts, summaries or other record of any type of Confidential Information; and

(ii) Executive shall immediately return to the Corporation any and all other property of the Corporation in his possession, custody or control, including, without limitation, any and all keys, security cards, passes, credit cards and marketing literature.

12. Invention Disclosure . Executive agrees to disclose to the Corporation promptly and fully all ideas, inventions, discoveries, developments or improvements (“Inventions”) that may be made, conceived, created or developed by him (whether such Inventions are developed solely by him or jointly with others) during his employment by the Corporation which either (i) in any way is connected with or related to the actual or contemplated business, work, research or undertakings of the Corporation or (ii) results from or is suggested by any task, project or work that he may do for, in connection with, or on behalf of the Corporation. Notwithstanding the foregoing, this Section 11 shall not apply to any Inventions that meet all of the following requirements: (a) do not relate, at the time of conception, reduction to practice, creation, derivation, development or making of such Invention to the Corporation’s business or actual or

 

7


demonstrably anticipated research, development or business; and (b) were developed entirely on Executive’s own time; and (c) were developed without use of any of the Corporation’s equipment, supplies, facilities or trade secret information; and (d) did not result from any work Executive performed for the Corporation. Executive agrees that such Inventions shall become the sole and exclusive property of the Corporation and Executive hereby assigns to the Corporation all of his rights to any such Inventions. With respect to Inventions, Executive shall during the period of his employment hereunder and at any time and from time to time hereafter (a) execute all documents requested by the Corporation for vesting in the Corporation the entire right, title and interest in and to the same, (b) execute all documents requested by the Corporation for filing and prosecuting such applications for patents, trademarks and/or copyrights as the Corporation, in its sole discretion, may desire to prosecute, and (c) give the Corporation all assistance it reasonably requires, including the giving of testimony in any suit, action or proceeding, in order to obtain, maintain and protect the Corporation’s right therein and thereto. If any such assistance is required following the termination of Executive’s employment with the Corporation, the Corporation shall reimburse Executive for his lost wages or salary and the reasonable expenses incurred by him in rendering such assistance.

13. Remedies . Executive acknowledges and agrees that the business of the Corporation is highly competitive and that the provisions of Paragraphs 10, 11 and 12 are reasonable and necessary for the protection of the Corporation and that any violation of such covenants would cause immediate, immeasurable and irreparable harm, loss and damage to the Corporation not adequately compensable by a monetary award. Accordingly, the Executive agrees, without limiting any of the other remedies available to the Corporation, that any violation of said covenants, or any one of them, may be enjoined or restrained by any court of competent jurisdiction, and that any temporary restraining order or emergency, preliminary or final injunctions may be issued by any court of competent jurisdiction, without notice and without bond.

14. Attorneys’ Fees and Costs . In any action between the parties based on this Agreement, the prevailing party shall be entitled to recovery of reasonable attorneys’ fees and out-of-pocket costs incurred by it/him in the action.

15. Entire Agreement . This Agreement constitutes the entire agreement of the parties hereto with respect to the matters set forth herein and no amendment or modification hereof shall be valid or binding unless made in writing and signed by both parties hereto.

16. Notices . Any notice, required, permitted or desired to be given pursuant to any of the provisions of this Agreement shall be deemed to have been sufficiently given or served for all purposes if delivered in person or sent by certified mail, return receipt requested, postage and fees prepaid as follows:

if to the Corporation at:

ImmunoCellular Therapeutics, Ltd.

1999 Avenue of the Stars

Los Angeles, CA, 11th Floor

Los Angeles, CA 90067

 

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with a copy to:

TroyGould PC

1801 Century Park East, Suite 1600

Los Angeles, California 90067

Attention: Sanford J. Hillsberg

and, if to Executive:

Dr. Manish Singh

23526 Dolorosa Street

Woodland Hills, California 91367

Either of the parties hereto may at any time and from time to time change the address to which notice shall be sent hereunder by notice to the other party given as provided herein. The date of the giving of any notice hereunder shall be the date delivered or if sent by mail, shall be the date of the posting of the mail.

17. Non Assignability . Neither this Agreement nor the right to receive any payments hereunder may be assigned by Executive. This Agreement shall be binding upon Executive and inure to the benefit of his heirs, executors and administrators and be binding upon the Corporation and inure to the benefit of its successors and assigns.

18. Choice of Law And Forum . This Agreement shall be governed, interpreted and construed under the laws of the State of California without regard to its conflict of law principles. In the event of any dispute under this Agreement, such dispute shall be resolved by binding arbitration with JAMS/ENDISPUTE in Los Angeles, California. The arbitrator shall be a retired judge with at least five years of experience on the bench. This provision shall not be interpreted so as to require arbitration of claims that the state and/or Federal courts of California have ruled may not be the subjects of compelled arbitration in employment matters, nor shall it be interpreted so as to restrict any remedy, right of appeal or discovery device available to either party in a manner that violates the rulings of the state and/or Federal courts of California with respect to employment-related arbitration. This provision shall not be interpreted so as to preclude the making of reports to governmental offices, or to preclude either party from seeking injunctive or provisional relief in a court of appropriate jurisdiction under such circumstances as may merit such relief.

19. Waiver . No course of dealing nor any delay on the part of any party in exercising any rights hereunder shall operate as a waiver of any such rights. No waiver of any default or breach of this Agreement shall be deemed a continuing waiver or a waiver of any other breach or default.

20. Severability . If any provision of this Agreement, including any paragraph, sentence, clause or part thereof, shall be deemed contrary to law or invalid or unenforceable in any respect by a court of competent jurisdiction, the remaining provisions of such paragraph,

 

9


sentence, clause or part thereof shall not be affected, but shall, subject to the discretion of such court, remain in full force and effect and any invalid and unenforceable provisions shall be deemed, without further action on the part of the parties hereto, modified, amended and limited to the extent necessary to render the same valid and enforceable.

21. Section 409A . If Executive becomes eligible for payments under this Agreement on account of his “separation from service,” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”) and Executive is a “specified employee” within the meaning of Section 409A of the Code, as determined by Corporation, any portion of the payments that either do not qualify under the “short-term deferral rule” or exceed two times the lesser of (A) Executive’s “annualized compensation” for the calendar year preceding Executive’s separation from service (in each case, as those terms are defined under Section 409A of the Code), or (B) the maximum amount that may be taken into account under Section 401(a)(17) of the Code for the year in which Executive’s separation from service occurs, and which are not otherwise exempt from Section 409A of the Code, shall be accrued, without interest, and its payment delayed until the first day of the seventh month following Executive’s separation from service, or if earlier, Executive’s death, at which point the accrued amount will be paid in a single, lump sum cash payment. Furthermore, Corporation shall not be required to make, and Executive shall not be required to receive, any severance or other payment or benefit under this Agreement at such time as the making of such payment or the provision of such benefit or the receipt thereof shall result in a tax to Executive arising under Section 409A of the Code. The preceding provisions, however, shall not be construed as a guarantee by the Corporation of any particular tax effect to Executive under this Agreement. The parties agree that for purposes of Section 409A of the Code, the severance amounts payable under this Agreement shall be treated as a right to a series of separate payments. This Agreement is intended to comply with, or otherwise be exempt from, Section 409A of the Code. This Agreement shall be administered, interpreted and construed in a manner consistent with Section 409A of the Code. The Corporation and Executive agree that they will execute any and all amendments to this Agreement as they mutually agree in good faith may be necessary to ensure compliance with the provisions of Section 409A of the Code.

22. Survival at Termination . The termination of Executive’s employment hereunder shall not affect his obligations to the Corporation hereunder which by the nature thereof are intended to survive any such termination including, without limitation, Executive’s obligations under Paragraphs 10, 11, 12 and 21.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above set forth.

 

IMMUNOCELLULAR THERAPEUTICS, LTD.     EXECUTIVE:
By:  

/s/ C. Kirk Peacock

   

/s/ Manish Singh

  C. Kirk Peacock     Dr. Manish Singh
Its:   President    

 

10

EXHIBIT 10.23

IMMUNOCELLULAR THERAPEUTICS, LTD.

AMENDMENT NO. 3 TO 2006 EQUITY INCENTIVE PLAN

This is Amendment No. 3 to the 2006 Equity Incentive Plan (this “Amendment”), dated as of March 19, 2008, of ImmunoCellular Therapeutics, Ltd., a Delaware corporation (the “Company”). All capitalized terms shall have the meanings set forth in the 2006 Equity Incentive Plan (the “Plan”).

WHEREAS, the Company’s Board of Directors have determined to amend the Plan to increase the aggregate number of shares of Common Stock available for grant to an eligible person during any twelve-month period under the Plan, with such increase to be subject to approval by the Company’s stockholders;

NOW, THEREFORE, the Company hereby amends the Plan as set forth herein:

Subsection 3 is hereby deleted in its entirety and is restated to read as follows, with such amendment and restatement to be subject to approval by the Company’s stockholders:

“3. STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS

Subject to the provisions of Sections 6.1.1 and 8.2 of this Plan, the total number of shares of Common Stock which may be offered, or issued as restricted stock or on the exercise of Options or SARs under the Plan shall not exceed two million two hundred Fifty thousand (2,250,000) shares of Common Stock. The shares subject to an Option or SAR granted under the Plan which expire, terminate or are cancelled unexercised shall become available again for grants under this Plan. If shares of restricted stock awarded under the Plan are forfeited to the Company or repurchased by the Company, the number of shares forfeited or repurchased shall again be available under the Plan. Where the exercise price of an Option is paid by means of the optionee’s surrender of previously owned shares of Common Stock or the Company’s withholding of shares otherwise issuable upon exercise of the Option as may be permitted herein, only the net number of shares issued and which remain outstanding in connection with such exercise shall be deemed “issued” and no longer available for issuance under this Plan. No eligible person shall be granted Options or other awards during any twelve-month period covering more than four hundred thousand (600,000) shares.”

IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed as of the date first written above.

 

ImmunoCellular Therapeutics, Ltd.
By:  

/s/ John S. Yu

Name:   Dr. John S. Yu
Title:   Secretary

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Registration Statement on Form S-8 and related Prospectus of ImmunoCellular Therapeutics, Ltd. pertaining to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. of our report of Independent Registered Public Accounting Firm dated March 21, 2008 covering the financial statements of ImmunoCellular Therapeutics, Ltd. as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005 and for the period from inception of operations (February 25, 2004) to December 31, 2007.

 

/s/ STONEFIELD JOSEPHSON, INC.
Los Angeles, California
March 20, 2008

Exhibit 31.1

Certification of the Principal Executive Officer Under Section 302 of the Sarbanes-Oxley Act

I, Manish Singh, certify that:

 

1. I have reviewed this report on Form 10-KSB of ImmunoCellular Therapeutics, Ltd.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

 

4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

 

5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

 

Date:   March 25, 2008     By:  

/s/ Manish Singh

      Name:   Manish Singh, Ph.D.
      Title:   President and Chief Executive Officer

Exhibit 31.2

Certification of the Principal Financial Officer Under Section 302 of the Sarbanes-Oxley Act

I, C. Kirk Peacock, certify that:

 

1. I have reviewed this report on Form 10-KSB of ImmunoCellular Therapeutics, Ltd.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

 

4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

 

5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

 

Date:   March 25, 2008     By:  

/s/ C. Kirk Peacock

      Name:   C. Kirk Peacock
      Title:   Chief Financial Officer

Exhibit 32.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of ImmunoCellular Therapeutics, Ltd. (the “Company”) hereby certifies that, to his knowledge:

(i) The Annual Report on Form 10-KSB of the Company for the fiscal year ended December 31, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date:   March 25, 2008     By:  

/s/ Manish Singh

      Name:   Manish Singh, Ph.D.
      Title:   President and Chief Executive Officer

Exhibit 32.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of ImmunoCellular Therapeutics, Ltd. (the “Company”) hereby certifies that, to his knowledge:

(i) The Annual Report on Form 10-KSB of the Company for the fiscal year ended December 31, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date:   March 25, 2008     By:  

/s/ C. Kirk Peacock

      Name:   C. Kirk Peacock
      Title:   Chief Financial Officer