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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-K

 

 

 

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

For the fiscal year ended December 31, 2010

or

 

¨ TRANSITION REPORT PURSUANT TO 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.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   93-1301885
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)

21900 Burbank Boulevard, 3 rd Floor

Woodland Hills, California

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

Registrant’s telephone number, including area code: (818) 992-2907

 

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     ¨   Yes     x   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.     ¨   Yes     x   No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     x   Yes     ¨   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ¨   Yes     ¨   No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K.   x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer   ¨   Accelerated filer   ¨   Non-accelerated filer   ¨   Smaller reporting company   x

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

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2010 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $23,065,468.

There were 28,725,624 shares of the registrant’s common stock outstanding on March 1, 2011.

Documents incorporated by reference: None

 

 

 


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Table of Contents

Form 10-K

 

 

         Page  
  PART I      1   

Item 1.

  Business      1   

Item 1A.

  Risk Factors      14   

Item 1B.

  Unresolved Staff Comments      28   

Item 2.

  Properties      28   

Item 3.

  Legal Proceedings      28   

Item 4.

  (Removed and Reserved)      28   
  PART II      28   

Item 5.

  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities      28   

Item 6.

  Selected Financial Data      29   

Item 7.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      29   

Item 7A.

  Quantitative and Qualitative Disclosures About Market Risk      34   

Item 8.

  Financial Statements and Supplementary Data      34   

Item 9.

  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure      34   

Item 9A.

  Controls and Procedures      34   

Item 9B.

  Other Information      35   
  PART III      35   

Item 10.

  Directors, Executive Officers and Corporate Governance      35   

Item 11.

  Executive Compensation      42   

Item 12.

  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters      52   

Item 13.

  Certain Relationships and Related Transactions, and Director Independence      54   

Item 14.

  Principal Accounting Fees and Services      54   
  PART IV      55   

Item 15.

  Exhibits and Financial Statement Schedules      55   


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Introductory Comment

Throughout this Annual Report on Form 10-K, 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 (the “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 (the “Exchange Act”). 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 of Financial Condition and Results of Operations,” 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 of Financial Condition and Results of Operations,” 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. 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 and cancer stem cell antigens, peptide based immunotherapies targeting cancer stem cells, and monoclonal antibodies to diagnose and treat several different cancers. We have completed a Phase I clinical trial of our dendritic cell based vaccine product candidate (ICT-107) to treat newly diagnosed glioblastoma multiforme (GBM) that was initiated in May 2007, and we initiated a multicenter Phase II clinical trial of this vaccine in January 2011. This product candidate may also

 

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be efficacious in the treatment of recurrent GBM, and we are planning to initiate a pilot trial of this vaccine for this indication in 2011. Another one of our vaccine product candidates is a peptide based off-the-shelf vaccine (ICT-121) to target multiple solid tumors which is undergoing preclinical development. This vaccine targets cancer stem cells, which are believed by many scientists to be roots of cancer, and may be applicable in multiple cancer indications. In addition, we have several monoclonal antibody product candidates targeting small cell lung cancer, pancreatic cancer, multiple myeloma and ovarian cancer. Through two important acquisitions in the last five 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 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 June 2008, we licensed an additional technology from Cedars-Sinai to target cancer stem cells that may be applicable for brain tumors as well as several other cancer indications.

In February 2008, we entered into an agreement with Molecular Discoveries LLC, a New York limited liability company, covering our 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 us 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 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 substantially all of our prior operations through the sale of securities, including a private placement of our securities that we completed in February 2011 that generated $8,090,644 of proceeds for us (before commissions and offering expenses).

The estimated cost of completing the development of either of our current vaccine product candidates and of obtaining all required regulatory approvals to market either of those product candidates is substantially greater than the amount of funds we currently have available. We believe that our existing cash balances, together with potential proceeds from our preferred stock purchase arrangement with Socius Capital Group, LLC, will be sufficient to fund our currently planned level of operations for at least the next twelve months. 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.

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.

 

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Technology and Proposed Products

Overview

The table below summarizes the status of our product candidates

 

Product candidate

  

Target Indication

  

Status

Active Immunotherapy :      
ICT-107 (DC vaccine targeting cancer stem cells and cancer antigens)    Newly Diagnosed Glioblastoma    Phase II ongoing
ICT-121 (off-the-shelf cancer stem cell vaccine)    Glioblastoma, Pancreatic cancer and other solid tumor 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-69 (Monoclonal Antibody)    Multiple myeloma and ovarian cancer    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.

Active 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. We have been developing two forms of these vaccines, one based on cancer stem cells and one based on dendritic cells.

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

 

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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.

Dendritic Cell Vaccines

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 (substances that stimulate the production of antibodies and combine specifically with them) to the T cells, which then effectuate the immune response. The goal of a cell-based vaccine is to (i) make use of and enhance the dendritic cell’s ability to trigger the T cell response and (ii) 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.

Peptide Vaccines Targeting Cancer Stem Cells

Cancer stem cells are considered as a subset of cancerous cells which are responsible for the growth and re-growth of the primary and metastatic tumors. Complete eradication of tumor masses requires elimination of these cells, which are resistant to standard chemotherapy and radiation therapy. There are a number of markers that have been identified on various cancer stem cells which could be exploited for targeting these cells. We are utilizing peptides in combination with an adjuvant that can elicit an immune response in the body by triggering T cells to identify and destroy these cancer stem cells. These peptides were specifically designed to elicit a T cell response targeting CD133 positive cancer stem cells that have been identified in a number of cancer types, including gliomas, colon cancer and pancreatic cancer.

Antibody Immunotherapy

Another 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.

 

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ICT-107: Dendritic Cell-Based Vaccine Targeting Tumor Associated Antigens

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.

Dr. Yu 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 results of these early studies preliminarily demonstrated the safety of dendritic cell vaccination as well as biological 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, ICT-107.

ICT-107 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 have tested ICT-107 in a Phase I clinical trial at Cedars-Sinai in patients with glioblastoma. The trial enrolled 19 patients and the vaccine was well tolerated, with no significant adverse events reported. Of the 16 newly diagnosed GBM patients treated in this trial, 11 patients are still alive, with 3 patients surviving at least 3 years after the surgery that preceded their vaccine treatment. Of the 11 patients who are still alive, 3 of the patients are completely free of the disease after 3 years, and an additional 3 of these patients are completely free of the disease after 2 years. The median progression free survival in the 16 newly diagnosed patients enrolled in the trial was 17 months and 6 of these 16 patients continue to show no signs of tumor recurrence at the present time.

In January 2010, we reported the results of a study in which it was shown that certain specific antigens are highly expressed on cancer stem cells. This suggests that ICT-107, which targets those antigens, potentially may effectively target not only the cells that make up the bulk of certain cancerous tumors, but also the cancer stem cells that are widely believed to give rise to them and to cause their recurrence.

In June 2010, ICT-107 was granted Orphan Drug status by the FDA, making this product candidate eligible, under certain circumstances, for marketing exclusivity and other potential benefits.

On September 1, 2010, we entered into a Master Services Agreement (the “MSA”) with Averion International Corp., a clinical research organization (“Averion”). Under the MSA, Averion will provide us with clinical trial support services in connection with and over the course of our Phase II clinical trial for ICT-107, our lead product candidate for the treatment of brain cancer. Under the MSA, Averion will oversee the enrollment of patients and execution of our Phase II trial. The MSA, which may be terminated by us at any

 

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time, provides for a limit of approximately $3.5 million on the fees that we will be obligated to pay Averion if all of the planned services are actually provided.

In January 2011, we entered into a sponsored research and vaccine production agreement with the University of Pennsylvania under which that institution, which has assisted us in optimizing the formulation of ICT-107 that we are using in our Phase II trial of that vaccine, will assist us in the GMP production of supplies of that vaccine for this trial.

ICT-121: Cancer Stem Cell Vaccine For Glioblastoma Multiforme

The laboratory at Cedars-Sinai Medical Center of Dr. John Yu, our Chairman of the Board and the Director of Surgical Neurooncology at the Maxine Dunitz Neurosurgical Institute at Cedars-Sinai, 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. Dr. Yu and his team have identified several peptides that can elicit an immune response targeting CD133, a common marker present on most cancer stem cells. These peptides are specific to certain HLA markers in humans.

Our vaccine product candidate, ICT-121, is a peptide that can elicit an immune response in a HLA-A*0201 serotype patient population to target CD133 positive cancer stem cells in brain tumors and other cancers. HLA is the molecule by which protein segments are presented to the immune system by antigen presenting cells. HLA-A2 represents the most prevalent HLA Class I type in North America. The current treatment of glioblastoma and other brain cancers involves a combination of surgery, radiation treatment and chemotherapy. One of the significant issues with this treatment is the recurrence of tumors after a few months of treatment, which may be due to cancer stem cells left intact as these cells are resistant to chemotherapy as well as radiation therapy. By combining conventional treatment with a vaccine to target remaining cancer stem cells, one could potentially significantly delay or eliminate recurrence of these tumors.

We are currently conducting additional preclinical studies to support an IND filing that we are targeting for ICT-121 in 2011. Subject to successfully obtaining the necessary preclinical data, we plan to initiate a Phase I clinical trial for this vaccine after the IND filing has been cleared by the FDA. This trial will be a multi-center clinical trial in both recurrent as well as newly diagnosed patients with clinical as well as immunological response as the end points. We plan to enroll 15-20 patients for this trial.

Monoclonal Antibodies Targeting Cancer

We acquired from Molecular Discoveries several monoclonal antibodies that react with small cell lung cancer 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 small cell lung cancer may save many lives and prolong the survival of patients afflicted with this devastating disease.

In collaboration with George Mason University, we recently completed a pilot study evaluating the cancer detection abilities of one of our monoclonal antibody product candidates, ICT-109. Data from this study demonstrated that ICT-109 had a statistically significant ability to discriminate between cancerous and non-cancerous samples, suggesting the potential to detect pancreatic and lung cancer in plasma and serum study sets. The study used reverse phase micro array technology to determine serum and plasma expression levels of glycosylated CEA, and was performed in collaboration with Dr. Emanuel Petricoin at George Mason University. Researchers at George Mason University investigated the ability of ICT-109 to detect pancreatic and lung cancer by binding specifically to glycosylated epitopes of CEA-CAM6 and CEA-CAM5, two common markers that are overly expressed in a majority of cancers. Glycosylated CEA is highly expressed in patients with pancreatic and lung cancers, and can be used to detect these cancers using a direct blood test. As CEA-CAM5 and CEA-CAM6 are also present on the normal tissue, any commercial product would require adding additional markers for developing a test with higher sensitivity and specificity.

 

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Small cell lung cancer is the most aggressive form of lung cancer tethered with cigarette smoking. Small cell lung cancer cases are estimated to constitute about 13% of all lung cancer cases. In the United States, the American Cancer Society estimated 210,000 new lung cancer cases, as well as 161,000 deaths, occurred in 2008. Early diagnosis of small cell lung cancer 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 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.

DIAAD focuses the immune response on the tumor 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.

We have conducted limited development activities for our monoclonal antibody product candidates, ICT-37 and ICT-109, for the diagnosis and treatment of small cell lung cancer and pancreatic cancer. We initiated a collaboration with Antitope, Ltd (UK) to humanize these antibodies by using their proprietary technologies, which was completed in August 2009. In light of the potential need to access other technology to combine our antibodies with other cancer killing technologies and the significant projected pre-clinical development costs for these antibodies, we plan during 2011 to continue to seek partners or licensees to develop these product candidates.

We also have another antibody product candidate, ICT-69, which targets ovarian cancer and multiple myeloma. ICT-69 was designed using our DIAAD (differential immunization for antigen and antibody discovery) technology with the purpose of targeting human multiple myeloma and ovarian cancer cells. In September 2009, we entered into a research and option license agreement with Roche Group, a leading global pharmaceutical company, giving them an option to acquire a license to develop and commercialize ICT-69, our monoclonal antibody product candidate targeting multiple myeloma and ovarian cancer. In September 2010, the Roche Group advised us that it had elected to not exercise this option to acquire a license to develop and commercialize ICT-69.

These monoclonal antibody programs are at a pre-clinical stage of development and will require further development before an IND can be potentially filed for human testing. We expect our potential partners or licensees to do this development work.

Cedars-Sinai Agreements

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

 

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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 with respect to our first product when we initiate patient enrollment in our first Phase III clinical trial and when we receive FDA marketing approval for our first product. If both of these milestones are met, the required milestone payments will total $1,250,000.

In June 2008, we licensed through an amendment to our original license agreement with Cedars-Sinai an additional cancer stem cell vaccine technology from Cedars-Sinai for which we paid 100,000 shares of our common stock.

We have agreed to pay Cedars-Sinai specified percentages of our gross revenues from sales of products (a percentage in the mid-single digits) and of all of our sublicensing income 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.

In September 2010, we entered into a sponsored research agreement with Cedars-Sinai under which Cedars-Sinai will provide services to us in developing standard operating procedures for dendritic cell vaccine preparations at a total cost of up to $446,000.

Molecular Discoveries Agreement

In February 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 consisted 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.

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

 

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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 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, Celldex Therapeutics, NeuralStem, Geron, NeuroNova, ReNeuron, Stemcells, Inc., Advanced Cell Technology and Osiris Therapeutics. Dendreon has received FDA marketing approval for a prostrate cancer vaccine utilizing dendritic cells, Northwest Biotherapeutics is developing a dendritic cell-based vaccine treating brain tumors, and Celldex Therapeutics has recently completed a Phase II clinical trial to treat glioblastoma with their cancer vaccines, 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

 

   

our ability to recruit and retain appropriate management and scientific personnel

 

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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.

Intellectual Property

Our dendritic cell based vaccine and cancer stem cell vaccine product candidates are currently covered by seven patent applications that have been filed in the United States and by patent applications that have been filed in certain foreign countries.

In addition, we have acquired exclusive worldwide ownership rights to eight granted U.S. and ten other patents for various European and Asian territories as well as several 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 and have expiration dates ranging from 2019 to 2023.

Employees

We have three full-time employees, including our President and Chief Executive Officer and our Vice-President – Product Development and Manufacturing. Our Chairman of the Board and Chief Financial Officer are part-time employees. In addition, we have a number of consulting agreements for clinical development, regulatory affairs, investor relations and business development.

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

 

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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.

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

 

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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.

Research and Development

Research and development expenditures for the years ended December 31, 2009 and December 31, 2010 were $962,526 and $2,292,630, respectively.

 

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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.
Cancer Stem Cell:    cancer cells (found within tumors or hematological cancers) that possess characteristics associated with normal stem cells, specifically the ability to give rise to all cell types found in a particular cancer sample.
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.
Epitope:    a localized region on the surface of an antigen that is capable of eliciting an immune response and of combining with a specific antibody to counter that response.
Glioblastoma multiforme (GBM):    the most common and most aggressive type of primary brain tumor in humans
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.
Peptide:    a compound containing two or more amino acids in which the carboxyl group of one acid is linked to the amino group of the other
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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Item 1A. Risk Factors.

The risks described below may not be the only ones relating to our company. Additional risks that we currently believe are immaterial may also impair our business operations. Our business, financial conditions and future prospects and the trading price of our common stock could be harmed as a result of any of these risks. Investors should also refer to the other information contained or incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 2010, including our financial statements and related notes, and our other filings from time to time with the Securities and Exchange Commission.

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 development-stage company that has only recently commenced any significant research and development activity. There is no assurance that we will be able to satisfactorily develop or market any of our current or proposed product candidates or that those product candidates will generate revenues or that any revenues generated will be sufficient for us to become profitable or thereafter maintain profitability. Only one of our product candidates has been clinically tested in an early stage trial. We have not generated any recurring revenues to date, and we do not expect to generate any such revenues for a number of years.

Our cell-based vaccine technologies are our primary platform technologies, and our commercial prospects will be heavily dependent on the outcome of the contemplated clinical trials for our current lead vaccine product candidate (ICT-107). We have only three full-time employees, including our President and Chief Executive Officer and our Vice-President – Product Development and Manufacturing, 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 monoclonal 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 vaccine product candidates, our monoclonal antibody product candidates or any future product candidates;

 

   

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

 

   

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

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

With the exception of a one-time licensing fee payment that we previously received in connection with our entering into a research and license option agreement covering one of our monoclonal antibody product candidates with a third party who did not subsequently exercise that option, 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

 

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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 fund our currently planned level of operations for at least the next twelve months. We will need significant funding to carry out all of our development work on our vaccine product candidates, our monoclonal 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 is likely to 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.

In December 2009, we entered into an agreement with Socius Capital under which Socius Capital has agreed to purchase from time to time an aggregate of up to $10 million of our preferred stock and sold $4 million of these shares to them in May 2010. However, Socius Capital’s obligation to purchase the remaining shares of our preferred stock is subject to our satisfying certain conditions at that time. There is no assurance that we will be able to satisfy those conditions if we wish to sell shares of our preferred stock to Socius Capital or that Socius Capital will have the ability to complete these purchases. In connection with each sale of preferred stock to Socius Capital, a pro rata portion of a warrant held by an affiliate of Socius Capital to purchase shares of our common stock will become exercisable. Should the Socius Capital affiliate sell substantial amounts of the underlying shares of our common stock, those sales could have a material adverse effect on the trading market for our common stock and make it impractical for us to make future sales of preferred stock to Socius Capital without substantial dilution to our existing shareholders.

Except for our financing agreement with Socius Capital, 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 national securities exchange, 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. Except for one recently awarded grant under a federal tax credit/grant program for pharmaceutical research and development companies and one recently submitted grant application under the Orphan Drug Act, 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 candidates or any other or 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.

 

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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 our therapies creates significant challenges in regards to product development and optimization, manufacturing, government regulation, third-party reimbursement and market acceptance. For example, the FDA has limited experience with cancer stem cell or dendritic cell-based therapeutics and, with the exception of one dendritic cell-based vaccine for the treatment of prostrate cancer, has not yet approved any of these therapeutics for marketing, and the pathway to regulatory approval for our vaccine product candidates or any future vaccine product candidates may accordingly be more uncertain, complex and lengthy than the pathway for new conventional drugs. The targeting of cancer stem cells as a potential therapy is a recent development that may not become broadly accepted by scientists or pharmaceutical companies. In addition, the manufacture of biological products, including cancer stem cell or 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 vaccine product candidates or any other or future product candidates or clinical results with formulations used in earlier trials that are similar but not identical to our product candidate formulations may not be indicative of the results that will be obtained in later stages of preclinical or clinical research on our product candidates. In particular, the results generated in our Phase I trial of ICT-107 covered a small number of patients at a single trial site and may not be indicative of the results that will be obtained in our current multi-center Phase II trial of a new, optimized formulation of ICT-107. 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 cancer stem cell and dendritic cell based products represent new forms of therapy, the marketplace may not accept any products we may develop that utilize these technologies. 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 vaccine product candidates, 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 these product candidates or the FDA’s approval thereof. If we experience substantial delays, we may not have the financial resources to continue development of these product candidates or the development of any of our other or future product candidates. Delays in clinical trials could reduce the commercial viability of our vaccine product candidates and any other or future product candidates. Delays in patient enrollment may be caused by a number of factors, including patient reluctance to participate in blinded trials where the patient is not assured of receiving the treatment being tested in the trial.

 

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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 vaccine product candidates and in the raising of funding. There is no assurance that we will be successful in meeting all of the milestones in the future on a timely basis or at all.

Before we can market our vaccine product candidates or any other or 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, with the exception of Dendreon Corp.’s dendritic cell vaccine for the treatment of prostate cancer, no cancer stem cell or 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 monoclonal 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 cancer stem cell vaccine product candidate needs to be completed and certain animal testing must be successfully completed with this formulation before we can test this product candidate in humans. Our cancer stem cell 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.

 

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Certain of our current 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. We have obtained orphan drug status for our dendritic cell vaccine (ICT-107) to treat glioblastoma multiforme and may also seek this status for our cancer stem cell vaccine to treat glioblastoma multiforme and other diseases if we meet the eligibility criteria. However, even if we obtain orphan drug exclusivity for any of our 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 vaccine product candidates 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 candidates 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 vaccine product candidates 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. Certain of our cell-based vaccine product candidates may be formulated with cells harvested and processed from individual target patients, which could limit the target patient population for these vaccines and could require complex and costly manufacturing processes to produce these vaccines on a commercial basis. As a

 

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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 and 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;

 

   

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 stem cell, dendritic or other cell therapy clinical trials or to the failure of such trials to demonstrate that these therapies are efficacious could materially and 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 we have, 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.

 

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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 and cancer vaccine technologies, which may include among others Dendreon, Northwest Biotherapeutics, Antigenics, Celldex Therapeutics, NeuralStem, Geron, NeuroNova, ReNeuron, Stemcells, Inc., Advanced Cell Technology and Osiris Therapeutics. Dendreon has received FDA marketing approval for a prostate cancer vaccine utilizing dendritic cells, Northwest Biotherapeutics is developing a dendritic cell-based vaccine for treating brain tumors, and Celldex Therapeutics has recently completed a Phase II clinical trial to treat glioblastoma with their cancer vaccine. Other existing and new companies that may enter the field may also be developing vaccines of this type.

Drugs targeting cancer stem cells is a new emerging field, and a number of companies are developing products that are in various stages of clinical or preclinical development. We will be competing with these companies, which may have more resources than we have. This list may include among others ChemGenex, GlaxoSmithKline, Geron, Stemline Therapeutics, OncoMed Pharmaceuticals, Raven and Arius Research. In addition, a number of academic and research centers are doing research in this area which may be commercialized by new or existing companies.

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 a number of 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 vaccine product candidates or any other or 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 rely on a firm with expertise in producing a humanized form of our monoclonal 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. We currently are seeking a partner or licensee to be responsible for the early stage development of our monoclonal antibody product candidates. Since we do not have any significant efficacy data for these product candidates, it will be more difficult for us to obtain partners or licensees on attractive terms or at all at this stage. 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. 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

 

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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 monoclonal 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 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 vaccine product candidates and any other or 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 for a clinical trial 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

 

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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.

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. We have recently filed a provisional patent application covering our cancer stem cell vaccine product candidate. Another patent application that we licensed from Cedars-Sinai and that we have been pursuing was rejected by the U.S. Patent and Trademark Office based on prior art. This patent application covers the treatment of brain and other cancers by a combination of a dendritic cell-based vaccine and chemotherapy. We are seeking patent protection for our dendritic cell-based vaccine product candidate primarily through our licensed multiple antigen patent application. We are not dependent on any of the claims in the combination therapy application being granted in order to complete the development of or to commercialize either of our cancer vaccine product candidates. We may in the future elect to abandon one of more of our pending patent applications that do not provide significant coverage for the product candidates or technologies that we have focused on for strategic purposes.

Even if we are able to obtain patent protection for our vaccine product candidates or any of our other 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. 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.

 

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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 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, monoclonal 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 monoclonal antibody fields, we anticipate that many parties will be seeking patent rights for many cellular or monoclonal antibody based technologies and that licensing and cross licensing of these rights among various competitors may arise. Our dendritic cell-based vaccine product candidate utilizes six antigens for which we will be required to obtain licenses from one or more other parties before we can commercialize this product candidate. There is no assurance that we will be able to obtain all of the licenses that we may need on attractive terms or at all, which could result in our having to reformulate or abandon this product candidate. In addition, 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.

 

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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 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 and our Vice President – Product Development and Manufacturing, we do not have any full-time management personnel. We are dependent on our officers and directors for their scientific or managerial skills, 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 and our Vice President – Product Development and Manufacturing) are associated with us on a part-time basis only. We do not currently maintain key man life insurance on Drs. Yu and Singh. The terms of the current employment agreement for Dr. Singh and the agreement for Dr. Yu have expired and they have continued to serve as our President and Chief Executive Officer and Chief Scientific Officer, respectively, under the terms of the foregoing agreements pending the negotiation of new agreements. Although we anticipate concluding these new agreements in the near future, there can be no assurance that we will be successful in entering into these agreements on satisfactory terms or at all. Our employment contract with Dr. Singh and our agreement with Dr. Yu under which he serves as our Chief Scientific Officer permit them to terminate providing their services to us without cause. The loss of the services of either Dr. Singh or Dr. Yu would materially and adversely affect our business.

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 candidates and any future product candidates is likely to depend significantly on the availability of reimbursement for our lead product candidate or any other or 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 are 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. Comprehensive health care reform legislation that was enacted in 2010 could adversely affect our business and financial condition. Among other provisions, the legislation provides that a “biosimilar” product may be approved by the FDA on the basis of analytical tests and certain clinical studies demonstrating that such product is highly similar to an existing, approved product and that switching between an existing product

 

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and the biosimilar product will not result in diminished safety or efficacy. This abbreviated regulatory approval process may result in increased competition if we are able to bring a biopharmaceutical product to market. The legislation also includes more stringent compliance programs for companies in various sectors of the life sciences industry with which we may need to comply and enhanced penalties for non-compliance with the new health care regulations. Complying with new regulations may divert management resources, and inadvertent failure to comply with new regulations may result in penalties being imposed on us.

Some states and localities have established drug importation programs for their citizens, and federal drug import legislation has been introduced in Congress. The Medicare Prescription Drug Plan legislation, which became law in December 2003, required the Secretary of Health and Human Services to promulgate regulations for drug reimportation from Canada into the United States under some circumstances, including when the drugs are sold at a lower price than in the United States. The Secretary, however, retained the discretion not to implement a drug reimportation plan if he finds that the benefits do not outweigh the costs, and has so far declined to approve a reimportation plan. Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under certain circumstances. Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products that we may develop and adversely affect our future revenues and prospects for profitability.

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 insurance for coverage of our clinical trial activities and obtained this coverage for the recently completed and current clinical trials of our dendritic cell-based vaccine product candidate. 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

 

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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 a national securities exchange, 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 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-national securities exchange 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 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, 2011, our directors and executive officers beneficially owned approximately 25% 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

 

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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 clinical trials of our vaccine product candidates. 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 several clinical trials with dendritic cell based vaccines that have been completed or are planned to be initiated. These studies may compete for patients to be enrolled in clinical trials with our current or future clinical trials.

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

There are currently 23,505,856 outstanding shares of our common stock and another 13,629,428 shares of our common stock issuable upon exercise of currently exercisable options or warrants that are eligible to be sold pursuant to Rule 144 or currently effective registration statements. We have also agreed to register the 5,219,768 shares of our common stock that were issued in connection with the private placement that we completed in February 2011 as well as the 2,609,898 shares to investors and 208,791 shares to placement agents of our common stock currently issuable upon exercise of the warrants that were issued in that private placement. 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 or a national securities 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 listed on a national securities exchange. 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 a national securities 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 a national securities 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:

 

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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 1B. Unresolved Staff Comments.

Not applicable.

 

Item 2. Properties.

We currently maintain our corporate office in Woodland Hills, California under a month-to-month lease at a monthly rental rate of $3,493. We do not lease or own any other real property.

 

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. (Removed and Reserved).

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and 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.” The following price information reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions:

 

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Quarter Ended

   High      Low  

March 31, 2009

     0.35         0.15   

June 30, 2009

     0.59         0.22   

September 30, 2009

     1.38         0.28   

December 31, 2009

     1.22         0.61   

March 31, 2010

     1.10         0.82   

June 30, 2010

     2.44         0.97   

September 30, 2010

     1.18         0.84   

December 31, 2010

     1.58         0.87   

Stockholders

As of March 1, 2011, there were approximately 259 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 pay 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.

Issuances of Unregistered Securities; Purchases of Securities

We did not issue any unregistered securities during the three-month period ended December 31, 2010 that were not previously reported in a Current Report on Form 8-K, and we did not repurchase any securities during that period.

Equity Compensation Plan Information

See Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, of this Annual Report on Form 10-K for information regarding securities authorized for issuance under our equity compensation plans.

 

Item 6. Selected Financial Data.

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the information in this Item 7 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.A of Part I 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

 

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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.

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

In February 2008, we acquired certain monoclonal antibody related technology owned by Molecular Discoveries LLC. This technology consists of (1) 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 (2) 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 one of our vaccine product candidates, and have not generated any recurring revenues. As a result, we have incurred operating losses and, as of December 31, 2010, we had an accumulated deficit of $22,953,788. We expect to incur significant research, development and administrative expenses before any of our products can be launched and recurring revenues, if ever, are generated.

For additional information about our plan of business operation, see the “Business” section of this Annual Report included in Item 1 of Part I.

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 financial statements for the period from February 25, 2004 to December 31, 2010. 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 FASB ASC Topic 915, “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 are 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 the year ended December 31, 2009 and December 31, 2010, we recorded an expense of $962,526 and $2,292,630, respectively, related to research and development activities.

Stock-Based Compensation

Stock-based compensation expense is estimated as of the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally equals the vesting period, based on the number of awards that are expected to vest. Estimating the fair value for stock options requires judgment, including the expected term of our stock options, volatility of our stock, expected dividends, risk-free interest rates over the expected term of the options and the expected forfeiture rate. In connection with our performance based programs, we make assumptions principally related to the number of awards that are expected to vest after assessing the probability that certain performance criteria will be met.

Results of Operations

For the Twelve Months Ended December 31, 2009 and 2010

Revenues

We had $300,000 in revenues during the period for the twelve months ended December 31, 2009 related to a license fee payment we received under a research and license option agreement regarding our ICT-69 antibody product candidate with the Roche Group and no revenues during the period for the twelve months ended December 31, 2010. We do not expect to generate any additional operating revenues during 2011.

Expenses

General and administrative expenses for the twelve months ended December 31, 2009 and for the twelve months ended December 31, 2010 were $1,677,421 and $2,035,526, respectively. During 2009 and 2010, the Company accrued $84,667 and $158,750 in bonuses that are contingent on reaching certain clinical development milestones. Research and development expenses for the twelve months ended December 31, 2009 and for the twelve months ended December 31, 2010 were $962,526 and $2,292,630, respectively. We had $311,700 of non-cash expense for the twelve months ended December 31, 2009, consisting of $308,303 in stock based compensation and $3,397 in depreciation expense. We had $1,829,724 of non-cash expense for the twelve months ended December 31, 2010, including $1,018,238 in change in warrant liability expense, $807,853 in stock based compensation and $3,633 in depreciation expense. On November 10, 2010, the Company received a grant under the Patent Protection and Affordable Care Act of 2010. The grant, which totaled $244,479, will be used to fund ongoing projects, including the continued development of ICT-107 and was recorded as an offset to research and development costs for fiscal year ended December 31, 2010.

We expect the amount of our general and administrative cash expenses in 2011 to be higher than those cash expenses incurred in 2010, primarily due to increased employee compensation and costs associated with our phase II clinic trial. We estimate that the cost of our research and development work to be approximately $5,000,000 in 2011, and we may incur significant additional research and development expenses should we

 

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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.

Loss

We incurred a net loss of $2,626,205 for the twelve months ended December 31, 2009 and a net loss of $6,150,142 for the twelve months ended December 31, 2010.

For the Twelve Months Ended December 31, 2008 and 2009

Revenues

We had no revenues during the period for the twelve months ended December 31, 2008 and $300,000 in revenues during the period for the twelve months ended December 31, 2009 related to a license fee payment we received under a research and license option agreement regarding our ICT-69 antibody product candidate with the Roche Group. We do not expect to generate any additional operating revenues during 2010.

Expenses

General and administrative expenses for the twelve months ended December 31, 2008 and for the twelve months ended December 31, 2009 were $1,366,146 and $1,677,421, respectively. During 2008 and 2009, the Company accrued $34,952 and $84,667 in bonuses that are contingent on reaching certain clinical development milestones. Research and development expenses for the twelve months ended December 31, 2008 and for the twelve months ended December 31, 2009 were $1,296,772 and $962,526, respectively. We had $1,004,432 of non-cash expense for the twelve months ended December 31, 2008, consisting of $513,357 in stock based compensation, $489,000 paid in common stock for in process research and development and $2,075 in depreciation expense. We had $311,700 of non-cash expense for the twelve months ended December 31, 2009, including $308,303 in stock based compensation and $3,397 in depreciation expense.

We expect the amount of our general and administrative cash expenses in 2010 to be higher than those cash expenses incurred in 2009, primarily due to increased employee compensation and costs associated with financing and investor relations activities. We estimate that the cost of our research and development work to be approximately $3,000,000 in 2010, 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.

Loss

We incurred a net loss of $3,059,730 for the twelve months ended December 31, 2008 and a net loss of $2,626,205 for the twelve months ended December 31, 2009.

Liquidity and Capital Resources

As of December 31, 2010, we had working capital of $4,896,360, compared to working capital of $1,053,438 as of December 31, 2009.

The estimated cost of completing the development of either of our current vaccine product candidates and of obtaining all required regulatory approvals to market either of those product candidates is substantially greater than the amount of funds we currently have available. However, we believe that our existing cash balances, together with the $8 million in proceeds, before offering costs, from our February 2011 private placement and potential proceeds under our preferred stock purchase arrangement with Socius Capital Group, LLC, will be sufficient to fund our currently planned level of operations through at least the third quarter of 2012, although there is no assurance that such proceeds will be sufficient for this purpose.

 

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We do not have any bank credit lines. In February 2011, we completed an $8,090,644 private placement, before commissions and costs, of 5,219,768 units at a price of $1.55 per unit, with each unit consisting of one share of our common stock and a warrant to purchase 0.5 of a share of our common stock at an exercise price of $2.25 per share. We may also in the future seek to obtain funding through strategic alliances with larger pharmaceutical or biomedical companies. In December 2009, we entered into an agreement with Socius Capital under which Socius Capital has agreed to purchase our preferred stock from us from time to time with an aggregate of up to $6 million remaining. However, Socius Capital’s obligation to purchase shares of our preferred stock is subject to our satisfying certain conditions at that time. There is no assurance that we will be able to satisfy those conditions if we wish to sell shares of our preferred stock to Socius Capital or that Socius Capital will have ability to complete these purchases. We cannot be sure that we will be able to obtain any additional funding from either financings or alliances, 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, 2010, 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.

Cash Flows

For the Twelve Months Ended December 31, 2009 and 2010

We used $4,253,560 of cash in our operations for the twelve months ended December 31, 2010, compared to $2,151,781 for the twelve months ended December 31, 2009, as the non-cash portion of our net loss for the 2010 period was $1,829,724 and the non-cash portion of our net loss for the 2009 period was $311,700.

We provided $1,065,331 of cash from our investing activities for the twelve months ended December 31, 2010, consisting of $1,075,903 in sales of certificates of deposit offset by $10,572 in purchases of equipment and $1,923,284 of cash in our investing activities for the twelve months ended December 31, 2009, consisting of $1,924,097 in sales of certificates of deposit offset by $813 in purchases of equipment.

We received $8,176,652 of cash from financing activities for the twelve months ended December 31, 2010, consisting of $26,500 from the exercise of stock options, $3,779,158 from sales of preferred stock and $4,370,994 from the sale of common stock and $474,560 of cash from financing activities for the twelve months ended December 31, 2009, consisting of $11,812 from the exercise of stock options and $462,748 from the exercise of warrants.

For the Twelve Months Ended December 31, 2008 and 2009

We used $2,151,781 of cash in our operations for the twelve months ended December 31, 2009, compared to $1,945,447 for the twelve months ended December 31, 2008, as the non-cash portion of our net loss for the 2009 period was $311,700 and the non-cash portion of our net loss for the 2008 period was $1,004,432.

We provided $1,923,284 of cash from our investing activities for the twelve months ended December 31, 2009, consisting of $1,924,097 in sales of certificates of deposit offset by $813 in purchases of equipment and $3,010,087 of cash in our investing activities for the twelve months ended December 31, 2008, consisting of $3,000,000 in purchases of certificates of deposit and $10,087 in purchases of equipment.

We received $474,560 of cash from financing activities for the twelve months ended December 31, 2009, consisting of $11,812 from the exercise of stock options and $462,748 from the exercise of warrants and no cash from financing activities for the twelve months ended December 31, 2008.

 

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K.

 

Item 8. Financial Statements and Supplementary Data.

Our consolidated financial statements and notes thereto and the related report of Stonefield Josephson, Inc. are included in this Annual Report on Form 10-K beginning at page F-1 and are incorporated herein by reference.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

 

Item 9A. Controls and Procedures.

Evaluation of Disclosure 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, 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 December 31, 2010, which is 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 were effective as of December 31, 2010.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 15d-15(f) under the Exchange Act, and for assessing the effectiveness of internal control over financial reporting.

Internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (2) 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 and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use, or disposition of our assets that could have a material effect on our financial statements.

Management, with the participation of our principal executive and financial officers, conducted an evaluation of the effectiveness of our internal control over financial reporting, as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management concluded that, as of December 31, 2010, our internal control over financial reporting was effective.

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

 

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controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Pursuant to applicable law, this annual report is not required to include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

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

 

Item 9B. Other Information.

None.

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

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.       47       Chairman of the Board
Manish Singh, Ph.D. (4)       42       President, Chief Executive Officer and Director
James Bender, Ph.D.       61       Vice President – Product Development and Manufacturing
C. Kirk Peacock       42       Treasurer and Chief Financial Officer
Rahul Singhvi, Sc.D. (1) (2)(3)(4)       46       Lead Director
Jacqueline Brandwynne (1) (2)       73       Director
Richard A. Cowell (2)(3)       63       Director
Navdeep Jaikaria, Ph.D. (1)(2) (3)(4)       48       Director

 

(1)

Member of our Compensation Committee

(2)

Member of our Nominating and Corporate Governance Committee

(3)

Member of our Audit Committee

(4)

Member of Our Finance Committee

Business Experience and Directorships

The following describes the backgrounds of current executive officers and directors. Our Board of Directors has determined that (1) all of our directors other than Dr. Singh are independent directors as defined in the Nasdaq rules governing members of boards of directors and (2) the members of our Audit Committee are independent under applicable SEC rules. 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. Martuza resigned as a director in February 2011.

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

 

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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 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.

Dr. Yu, as a recognized leader in the field of neurosurgery, has extensive knowledge of current therapies and therapies under development for the treatment of brain tumors and has participated in numerous clinical trials for potential therapies in this field. As our Chief Scientific Officer and the co-inventor of our brain tumor vaccine technologies, Dr. Yu brings to the Board significant scientific expertise directly relevant to our product research and development activities.

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. 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.

Dr. Singh has had extensive prior experience as both an operating executive and board member in the biotechnology field. He also brings to the Board extensive knowledge and experience in the area of financing early stage healthcare companies through his prior work in the venture capital field.

James Bender, Vice President – Product Development and Manufacturing

Dr. Bender served as our Vice President – Clinical Development on a part time basis from September 2008 to February 2010 and has served as our Vice President – Product Development and Manufacturing on a full-time basis since February 2010. From 2002 through 2008 Dr. Bender held various positions at IDM Pharma, most recently as director of product development where he led that company’s efforts relating to the clinical development of a cancer vaccine for the treatment of lung cancer. Prior to that, he held various positions at Nexell Therapeutics relating to the development of therapeutic stem cell and cancer vaccine products. Prior to that, Dr. Bender spent 10 years with Baxter Healthcare Corporation, eight years with the University of New Mexico School of Medicine and five years with St. Joseph’s Hospital in Albuquerque, New Mexico. He has over 75 scientific publications, is an inventor of 11 U.S. patents and holds a Ph.D. degree in immunology from the University of New Mexico and an M.P.H. in laboratory management from the University of Michigan.

 

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C. Kirk Peacock, Treasurer and Chief Financial Officer

Mr. Peacock has served as our Treasurer and 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.

Rahul Singhvi, Sc.D., Lead Director

Dr. Singhvi has served as a director since June 2010 and as Lead Director since December 2010. He has been with Novavax, Inc., a biopharmaceutical company focused on developing novel, highly potent recombinant vaccines since 2004 and has served as President, Chief Executive Officer and Director of Novavax since August 2005. Dr. Singhvi was the Senior Vice President and Chief Operating Officer of Novavax from April 2005 to August 2005 and Vice President - Pharmaceutical Development and Manufacturing Operations from April 2004 to April 2005. For ten years prior to joining Novavax, he served in various positions with Merck & Co., Inc., culminating as Director of the Merck Manufacturing Division., where he helped develop several vaccines including Zostavax ® , the only vaccine on the market to prevent shingles. Dr. Singhvi received his M.S. and Sc.D. degree in Chemical Engineering from the Massachusetts Institute of Technology. He also holds an M.B.A. from the Wharton School.

Dr. Singhvi currently serves as the President and Chief Executive Officer of a public biopharmaceutical company and brings to the Board experience and knowledge in the operation and leadership of early stage public healthcare companies. He also has extensive expertise and experience in the development and manufacturing of vaccines, which may assist the Board in its oversight of our cancer vaccine programs.

Jacqueline Brandwynne, Director

Ms. Brandwynne has served as a director since January 2007. Since 1981, Ms. Brandwynne has 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 board of the Proteus Venture Biotech Fund and on several non-profit boards, including the Cedars-Sinai Health Systems Board of Governors. Ms. Brandwynne also serves on the Board of Advisors of Histogen, Inc.

Ms. Brandwynne’s extensive involvement with early stage healthcare and biotech companies provides the Board with valuable expertise in the operation and development of the Company. With an extensive background as a business strategist for major corporations she also assists the Board in its strategic planning activities.

 

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

Mr. Richard A. Cowell, USA, (Ret.) has served as a director since June 2007. Mr. 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, Mr. 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.

Mr. Cowell brings to the Board both financial and accounting expertise as well as experience in the handling of Audit Committee matters for a public company. As consultant with a major consulting firm in the fields of technology experimentation and establishing new business operations, he brings to the Board strategic and business planning experience.

Navdeep Jaikaria, Ph.D., Director

Dr. Jaikaria has served as a director since June 2008. He currently is CEO of SGN Advisors, Inc., an advisory firm that conducts global biopharmaceutical due diligence for private equity funds and hedge funds as well as companies. Dr. Jaikaria held various positions with Rodman & Renshaw from 2003 until 2008, when he retired as Managing Director, Senior Equity Research Analyst – Biotechnology. Dr. Jaikaria previously held positions in equity research with Leerink Swann and Mehta Partners from 2000 to 2003 and consulting positions with Merck & Co. and Antigenics, Inc. from 1996 until 1999. Dr. Jaikaria holds a Ph.D. in Cell Biology and Anatomy from New York Medical College, conducted a research fellowship at Rockefeller University and holds a B.S. in Human Biology from All India Institute of Medical Sciences.

As a highly regarded and experienced former healthcare analyst for major healthcare investment banks, Dr. Jaikaria brings to the Board extensive healthcare industry knowledge in the area of capital raising and investment banking as well as a broad understanding of the healthcare market and competitive conditions.

Committees of the Board

Our Board of Directors has established an Audit Committee currently consisting of Mr. Cowell, as Chairman, and Drs. Jaikaria and Singhvi.

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 independent auditors, reviews with the independent 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. The Audit Committee currently consists of Mr. Cowell, as Chairman, and Drs. Jaikaria and Singhvi. Mr. Cowell has been designated as an “audit committee financial expert” as defined under Item 407(d)(5) of Regulation S-K of the Exchange Act.

Our Board of Directors has established a Compensation Committee currently consisting of Dr. Jaikaria, as Chairman, Ms. Brandwynne, and Dr. Singhvi. 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.

 

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Our Board of Directors has established a Nominating and Corporate Governance Committee currently consisting of Ms. Brandwynne, as Chairwoman, Mr. Cowell, Dr. Jaikaria and Dr. Singhvi. 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.

Our Board of Directors has established a Finance Committee currently consisting of Dr. Singhvi, as Chairman, and Dr. Jaikaria and Dr. Singh. The Finance Committee has oversight responsibility for all material financial matters affecting the Company, including capital management, funding strategy and investing activities related to our financial position and financing activities.

Scientific Advisory Board

We have established a Scientific Advisory Board (“SAB”) currently consisting of Dr. Keith Black, as Chairman, Dr. Peter Brooks, Dr. Sherie Morrison, Dr. Cohava Gelber, Dr. George Peoples, Dr. Constantine Ioannides and Dr. Zvi Ram to assist our management in the areas of expertise of the members of our SAB. We have compensated the members of our SAB from time to time through the grant of options to purchase our stock. In September 2009, we granted a five-year non-qualified option to purchase 10,000 shares of our common stock to each of four members of our SAB for service as members on the SAB for the coming year at an exercise price of $0.95 per share, with such option to vest quarterly for the one-year period following the date of grant. In May 2010, we also granted a five-year non-qualified option to purchase 10,000 shares of our common stock to another member of our SAB for services as a member for the coming year at an exercise price of $1.20 per share, with such option to vest quarterly for the one-year period following the date of grant.

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.”

 

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John Boockvar, M.D.

Dr. Boockvar currently is Co-Director of the Brain and Spinal Tumor Program at Weill Cornell Medical College. Dr. Boockvar heads the Brain Tumor and Stem Cell Research Laboratory and directs the institution’s Brain Tumor Research Group. Dr. Boockvar’s laboratory interests have focused on studying adult human neural stem cell biology to investigate brain tumor formation and brain tumor and stem cell migration and survival. Dr. Boockvar served as Editor-in-Chief of the journal Current Stem Cell Research and Therapy and is an editorial board member of the journal Neurosurgery, and Recent Patents on Anti-Cancer Drug Discovery. He is an ad-hoc reviewer for Neurosurgery, Brain Research and Human Gene Therapy. He is a member of the Executive Committee (2009-2011) of the Joint Section of Brain Tumors of the American Association of Neurological Surgeons and Congress of Neurological Surgeons. Dr. Boockvar is the principal investigator of new clinical trials using super selective intraarterial infusion techniques for the delivery of novel therapeutics such as Avastin or Cetuximab for the treatment of malignant brain cancer. Dr. Boockvar received a B.A. and graduated Cum Laude from the University of Pennsylvania. Dr. Boockvar received an M.D. from SUNY Brooklyn-Downstate Medical Center where he graduated Summa Cum Laude with Distinction in Research. Dr. Boockvar did his surgical internship and neurosurgical residency at the Hospital of the University of Pennsylvania. Dr. Boockvar did specialized NIH/National Cancer Institute supported fellowship training in Neuro-oncology (Brain and Spinal Tumors) at the University of Pennsylvania Cancer Center.

Peter Brooks, Ph.D.

Dr. Brooks has served on our Scientific Advisory Board since October 2008. Dr. Brooks serves as a Senior Scientist at the Maine Medical Center Research Institute, where he is focused on studying mechanisms that regulate angiogenesis, tumor growth and metastasis. Prior to joining that Institute, Dr. Brooks served as associate professor and director of Antiogenesis and Radiation Research at New York University (NYU) School of Medicine. Prior to association with NYU, Dr. Brooks was an assistant professor at the USC School of Medicine, during which time he co-founded Cell Matrix Incorporated, a biotechnology company focuses on anti-antiogenic drugs targeting cryptic ECM epitopes. Dr. Brooks’ studies have led to a recent clinical trial to evaluate the effects of D93, a humanized antibody directed to a cryptic collagen epitope for the treatment of malignant tumors. Dr. Books obtained his Ph.D. in Cell and Developmental Biology from the State University of New York at Stony Brook.

Cohava Gelber, Ph.D.

Dr. Gelber currently serves as the Chief Scientific & Technology Officer of ATCC, a position she has held since 2005. In this capacity she is responsible for a large group of scientists in numerous disciplines. Prior to joining ATCC, she served as Vice President - Research and Development for MannKind Corp., a public company developing therapeutics for diabetes, cancer and autoimmune diseases. She was responsible at that company for non clinical development and clinical immune safety of drugs from pre IND through phase III clinical trials. Dr. Gelber received her Ph.D. from the Weizmann Institute, her MBA degree from Cornell University and post doctorate training at Stanford University. Dr. Gelber has published numerous scientific manuscripts and textbook chapters and is the inventor of 7 granted patents and 49 patent applications. Dr. Gelber is one of the inventors of several monoclonal antibodies that we are developing, including ICT-69 and ICT-109, and has served as a consultant to our company in the past two years.

Constantine Ioannides, Ph.D.

Dr. Ioannides is a well-known and highly respected cancer immunologist, with over one hundred peer-reviewed articles in the scientific literature. Dr. Ioannides’s current primary research interests are focused specifically on cancer stem cells. Dr. Ioannides has been involved with some of the most important advancements in the field of cancer immunology over the past 20 years and is the co-discoverer of the NeuVaxT (E75) vaccine. We recently entered into an option agreement with M.D. Anderson Cancer Center for some of the cancer stem cell technologies that were developed at Dr. Ioannides’s laboratory.

 

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Sherie Morrison, Ph.D.

Dr. Morrison is a distinguished professor of Microbiology, Immunology and Molecular Genetics at the University of California, Los Angeles. Dr. Morrison joined the faculty of UCLA in 1988 and acted as department chair for 10 years. Prior to that, Dr. Morrison served as professor in the Department of Microbiology at Columbia University College of Physicians and Surgeons, which followed various post-doctoral fellowships at Columbia University, University of California, Berkeley and Albert Einstein College of Medicine. Her long-time research interest has been the functional properties of antibodies and novel antibody-related proteins, and she is well published in this area. Dr. Morrison holds Ph.D. and B.A. degrees from Stanford University.

George Peoples, M.D.

Dr. Peoples is the Director of the Cancer Vaccine Development Program and Deputy Director of the United States Military Cancer Institute. Prior to being appointed to that position, Dr. Peoples held positions as Chief of Surgical Oncology at the Walter Reed Army Medical Center and Director of the Cancer Vaccine Developmental Laboratory. He received his medical degree from the Johns Hopkins School of Medicine prior to receiving surgical training at Harvard Medical School’s Brigham and Women’s Hospital, where he was also a research fellow. In addition to his appointments at some of the military’s most prestigious cancer research institutions, Dr. Peoples has significant research experience in the oncology field, with multiple peer-reviewed publications to his credit, including co-discovery credits on HER2/neu vaccines and a number of other anti-cancer vaccines from his time at the M.D. Anderson Cancer Center, where he completed training in surgical oncology.

Zvi Ram, M.D.

Dr. Ram serves as the Chairman of the Department of Neurosurgery at Tel Aviv Medical Center in Israel. His emphasis is on brain tumor therapy, pituitary surgery, and technology development projects with various companies. Dr. Ram is the Chairman of the European Association of Neurosurgical Societies (EANS) Neurooncology Committee, member of the Executive Steering Committees and lead PI for several pharmaceuticals companies conducting multicenter international phase III clinical studies, scientific advisor for a number of biotechnology groups, and a member of editorial boards and reviewer for leading scientific journals in his areas of expertise. Dr. Ram previously led a variety of basic and clinical research projects, including leading the first gene therapy trial for patients with brain tumors, at the Surgical Neurology Branch at the National Institutes of Health in Bethesda, MD.

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.

 

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Item 11. 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, 2010 to Dr. Manish Singh, who has served as our President and Chief Executive Officer since February 18, 2008, and to C. Kirk Peacock, who served as our Interim President from November 5, 2007 to February 17, 2008 and who has served as our Chief Financial Officer since May 16, 2005.

Summary Compensation Table

 

Name and Principal Position

   Year      Salary
($)
    Bonus
($)
     Stock
Awards
($)
    Option
Awards
($) (6)
    Non-Equity
Incentive Plan
Compensation
($)
     Nonqualified
Deferred
Compensation
Earnings
($)
     All Other
Compensation
($)
     Total
($)
 

Manish Singh, Ph.D.

President and Chief Executive Officer

    
 
2009
2010
  
  
   $

$

243,750

293,287

(1)  

(2)  

   

$

—  

100,000

  

  

    

 

—  

—  

  

  

  $

$

87,500

222,500

(7)  

(8)  

    —           —           —         $

$

331,250

615,787

  

  

James Bender, Vice President – Product Development and Manufacturing      2010       $ 155,833 (3)     $ 15,000         —          73,625 (9)              $ 244,458   

C. Kirk Peacock

Chief Financial Officer

    

 

2009

2010

  

  

   $

$

80,000

76,000

(4)  

(5)  

   

 

—  

—  

  

  

    

$

—  

20,390

  

(11)  

  $

 

15,194

—  

(10)  

  

    —           —           —         $

$

95,194

96,390

  

  

 

(1) Includes $16,667 per month for the period from January 1, 2009 through February 17, 2009 and $20,833 from February 18, 2009 through December 31, 2009 for services rendered to us as President and Chief Executive Officer.
(2) Includes $20,833 per month for the period from January 1, 2010 through February 17, 2010 and $25,000 from February 18, 2010 through December 31, 2010 for services rendered to us as President and Chief Executive Officer.
(3) Includes $14,167 per month for the period from February 1, 2010 through December 31, 2010 for services as Vice President – Product Development and Manufacturing.
(4) Includes $8,000 per month for the period from January 1, 2009 through April 30, 2009 and $6,000 from May 1, 2009 through December 31, 2009 for services rendered to us as Chief Financial Officer and Treasurer.
(5) Includes $6,000 per month for the period from January 1, 2009 through October 31, 2010 and $8,000 per month from November 1, 2010 through December 31, 2010 for services as Chief Financial Officer and Treasurer.
(6) This column represents option awards computed in accordance with FASB ASC Topic 718, excluding the effect 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 do not correspond to the actual value that will be recognized by the named executives from these awards.
(7)

Includes (i) a seven-year option to purchase 600,000 shares of our common stock granted February 18, 2008 at an exercise price of $1.00 per share, vesting monthly over a one-year period following the date of grant and (ii) a seven-year option to purchase 300,000 shares of our common stock granted February 18, 2009 at an exercise price of $0.15 per share, vesting monthly over a one-year period following the date of grant and (iii) a seven-

 

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year option to purchase 200,000 shares of our common stock granted February 18, 2009 at an exercise price of $0.15 per share, vesting if the Company achieves during term of the agreement either (a) a volume weighted average trading price for its common stock of greater than $1.00 for any 30-day period during the term of the agreement on average daily trading volume of at least 10,000 shares, or (b) working capital at the end of the term of the agreement of at least $5,000,000, for services rendered as President and Chief Executive Officer.

(8) Includes (i) a seven-year option to purchase 300,000 shares of our common stock granted February 18, 2009 at an exercise price of $0.15 per share, vesting monthly over a one-year period following the date of grant, (ii) a seven-year option to purchase 360,000 shares of our common stock granted February 18, 2010 at an exercise price of $0.90 per share, vesting monthly over a one-year period following the date of grant, (iii) a seven-year option to purchase 240,000 shares of our common stock granted February 18, 2010 at an exercise price of $0.90 per share, vesting in certain increments if the Company achieves during term of the agreement (a) vesting of 30,000 shares for a volume weighted average trading price for its common stock of greater than $1.60 for any 15-day period during the term of the agreement on average daily trading volume of at least 20,000 shares, or (b) vesting of 90,000 shares for a volume weighted average trading price for its common stock of greater than $2.00 for any 15-day period during the term of the agreement on average daily trading volume of at least 20,000 shares, or (c) vesting of 30,000 shares for treating the first patient in a phase II clinical trial, or (d) vesting of 90,000 shares if the Corporation completes a financing, a strategic alliance or licensing agreement with upfront licensing payments to the Corporation or a merger or acquisition that generates at least $5,000,000 of net proceeds, for services rendered as President and Chief Executive Officer.
(9) Includes (i) a seven-year option to purchase 75,000 shares of our common stock granted February 1, 2010 at an exercise price of $0.90 per share, vesting monthly over a one-year period following the date of grant, (ii) a seven-year option to purchase 25,000 shares of our common stock granted February 1, 2010 at an exercise price of $0.90 per share, vesting if the Company completes by September 30, 2010 the tech transfer to a contract manufacturer organization for ICT-107, including without limitation validation/qualification runs, (iii) a seven-year option to purchase 25,000 shares of our common stock granted February 1, 2010 at an exercise price of $0.90 per share, vesting if the Company completes by December 31, 2010 FDA acceptance of a Phase II clinical trial plan for ICT-107, and (iv) a seven-year option to purchase 25,000 shares of our common stock granted February 1, 2010 at an exercise price of $0.90 per share, vesting if the Company completes by December 31, 2010 enrollment of the first patient into the Phase II clinical trial for ICT-107, for services as Vice President – Product Development and Manufacturing.
(10) Includes (i) a seven-year option to purchase 50,000 shares of our common stock granted October 30, 2008 at an exercise price of $0.30 per share, vesting monthly over a one-year period following the date of grant, for services rendered as Chief Financial Officer and Treasurer commencing October 30, 2008 and (ii) a seven-year option to purchase 50,000 shares of our common stock granted October 30, 2009, at an exercise price of $0.80 per share, vesting monthly over a one-year period following the date of grant, for services rendered as Chief Financial Officer and Treasurer commencing October 30, 2009 and (iii) a seven-year option to purchase 6,000 shares of our common stock granted October 30, 2009, at an exercise price of $0.80 per share, vesting upon the completion of the Company’s internal documentation and internal testing necessary to subsequently complete the Company’s Sarbanes-Oxley Section 404 audit.
(11) Includes 19, 231 shares of restricted common stock, vesting monthly over a five-month period following the date of grant, for services rendered as Chief Financial Officer and Treasurer.

Stock Option Grants

The following table sets forth information as of December 31, 2010 concerning unexercised options, unvested stock and equity incentive plan awards for the executive officers named in the Summary Compensation Table.

 

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OUTSTANDING EQUITY AWARDS AT YEAR ENDED DECEMBER 31, 2010

 

     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
($)
 

Manish Singh, Ph.D.

     700,000 (1)          $ 1.00         02-17-15               
     25,000 (2)            0.27         09-28-15               
     250,000 (8)       50,000 (8)          0.15         02-17-16               
       400,000 (9)          0.15         02-17-16               
     7,846 (10)       23,538 (10)          0.95         09-13-16               

C. Kirk Peacock

     50,181 (3)       —             0.35         05-15-10               
     25,000 (4)       —             1.00         10-29-13               
     50,000 (5)       —             1.00         10-29-13               
     50,000 (6)       —             1.30         10-29-14               
     50,000 (7)            0.30         10-29-15               
     50,000 (11)            0.80         10-29-16               

James Bender

     36,000 (12)            0.68         8-31-15               
     15,000 (13)            0.95         8-31-16               
     5,000 (14)       5,000 (15)          0.95         8-31-16               
     68,750 (16)       6,250 (16)          0.90         1-31-17               
     50,000 (17)            0.90         1-31-17               

 

(1) Vested monthly following grant on February 18, 2008
(2) Vested 25% quarterly following grant on September 29, 2008
(3) Vested monthly following grant on May 16, 2005.
(4) Vested upon grant, October 30, 2006.
(5) Vested 25% quarterly following grant on October 30, 2006.
(6) Vested monthly following grant on October 30, 2007.
(7) Vested monthly following grant on October 30, 2008.
(8) Vested monthly following grant on February 18, 2009 as to 300,000 shares.
(9) Vests upon completion of milestones pursuant to contract.
(10) Vests 25% quarterly following grant on September 14, 2009.
(11) Vests monthly following grant on October 30, 2009.
(12) Vested monthly following grant on September 1, 2008.
(13) Vests 3,000 shares monthly following grant on September 1, 2009
(14) Vested upon achievement of milestone pursuant to contract.
(15) Vests upon completion of milestones pursuant to contract.
(16) Vests monthly following grant on February 1, 2010.
(17) Vests upon completion of milestones pursuant to contract.

 

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Compensation of Directors

The following table sets forth information concerning the compensation paid to each of our non-employee directors during 2010 for their services rendered as directors. The non-employee directors also each received 10,000 shares of our restricted common stock as part of their annual compensation with such grant to vest 25% on January 4, 2011, 25% on March 27, 2011, 25% on June 27, 2011 and 25% on September 27, 2011. The compensation of Dr. Singh, who serves as a director and as our President and Chief Executive Officer, is described above in the Summary Compensation Table.

DIRECTOR COMPENSATION FOR FISCAL YEAR 2010

 

Name

   Fees
Earned
or Paid
in Cash
     Stock
Awards
     Option
Awards (1)(7)
    Non-Equity
Incentive Plan
Compensation
     Nonqualified
Deferred
Compensation
Earnings
     All Other
Compensation
     Total  

Jacqueline Brandwynne

   $ 20,500         —         $ 27,900 (2)       —           —           —         $ 48,400   

Richard A. Cowell

   $ 24,500         —         $ 34,100 (3)       —           —           —         $ 58,600   

Navdeep Jaikaria

   $ 24,250         —         $ 34,100 (4)       —           —           —         $ 58,350   

Robert L. Martuza

   $ 27,000         —           —          —           —           —         $ 27,000   

Rahul Singhvi

   $ 13,861         —         $ 41,900 (5)       —           —           —         $ 55,761   

John Yu

   $ 30,750         —         $ 31,000 (6)       —           —           —         $ 61,750   

 

(1) This column represents the aggregate grant date fair value of options awarded computed in accordance with FASB ASC Topic 718, excluding the effect 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 do not correspond to the actual value that will be recognized by the named directors from these awards.
(2) On September 27, 2010 we granted to Ms. Brandwynne a seven-year non-qualified option to purchase 45,000 shares of the Company’s common stock at an exercise price of $0.90 per share, vesting quarterly over a one-year period for her services as a director.
(3) On September 27, 2010 we granted to Mr. Cowell a seven-year non-qualified option to purchase 55,000 shares of the Company’s common stock at an exercise price of $0.90 per share, vesting quarterly over a one-year period for his services as a director.
(4) On September 27, 2010 we granted to Dr. Jaikaria a seven-year non-qualified option to purchase 55,000 shares of the Company’s common stock at an exercise price of $0.90 per share, vesting quarterly over a one-year period for his services as a director.
(5) On September 27, 2010 we granted to Dr. Yu a seven-year non-qualified option to purchase 50,000 shares of the Company’s common stock at an exercise price of $0.90 per share, vesting quarterly over a one-year period for his services as a director.
(6) As of December 31, 2010, our non-employee directors held vested and unvested options, which they received as compensation for their services as directors, to purchase the following number of shares of our common stock: Jacqueline Brandwynne – 170,401 shares; Richard A. Cowell – 218,301 shares; Navdeep Jaikaria – 55,000 shares; Robert L. Martuza – 137,767 shares; and John Yu – 176,068 shares.

Stock Incentive Plan

We have adopted an equity incentive plan, the 2006 Equity Incentive Plan, as amended (the “Equity Plan”), pursuant to which we are authorized to grant options, restricted stock and stock appreciation rights to purchase up to 6,000,000 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 Equity 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 Equity 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 725,000.

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 Equity Plan are not transferable other than by will or by the laws of descent and distribution.

The Equity Plan provides that, except as set forth in an individual award agreement, upon the occurrence of a corporate transaction: (i) our Board of Directors or its committee shall notify each participant at least 30 days prior to the consummation of the corporate transaction or as soon as may be practicable and (ii) 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.

As of December 31, 2010, there were outstanding options under the Equity Plan to purchase approximately 3,761,421 shares of our common stock at a weighted average exercise price of approximately $0.78 per share and 61,537 shares of unvested restricted stock. The grants of options and restricted stock under the Equity Plan during 2010 are described below.

In December 2010, we granted 10,000 restricted shares of our common stock to each of five of our non-employee directors as part of their compensation for services as a director with such shares to vest in four equal installments on January 4, 2011, March 27, 2011, June 27, 2011, and September 27, 2011.

In September 2010, we granted a non-qualified option to purchase shares of common stock to each of our directors for their service as a director for the one-year period commencing September 27, 2010. Each of the options granted to the directors has a term of seven years, has an exercise price of $0.90 per share, vests in four equal quarterly installments following the date of grant, and may be exercised within their term during the period 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. The amounts of the annual grants were: Jacqueline

 

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Brandwynne, 45,000 shares; Richard Cowell, 55,000 shares; Dr. Navdeep Jaikaria, 55,000 shares; Dr. Manish Singh, 30,000 shares; Dr. Rahul Singhvi, 55,000 shares and Dr. John Yu, 65,000 shares.

In June 2010, we granted a non-qualified option to purchase 12,500 shares of common stock at an exercise price of $1.14 per share to Dr. Rahul Singhvi for his service on our board until the next annual grant, with such option to vest in four equal quarterly installments following the date of grant, and may be exercised within its term during the period 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 June 2010, we granted a five-year non-qualified option to purchase 10,000 shares of our common stock at an exercise price of $1.10 per share to Dr. John Boockvar for service as a member of our Scientific Advisory Board, with such option to vest in four equal quarterly installments for the one-year period following the date of grant.

In May 2010, we granted a five-year non-qualified option to purchase 10,000 shares of our common stock at an exercise price of $1.20 per share to Dr. Ram Zvi for service as a member of our Scientific Advisory Board, with such option to vest in four equal quarterly installments for the one-year period following the date of grant.

In March 2010, we granted a five-year non-qualified option to purchase 150,000 shares of our common stock at an exercise price of $0.90 to Dr. Elma Hawkins for services as Consultant – Clinical Affairs, with such option to vest as to 100,000 shares in equal monthly installments for one year following the date of grant, and 50,000 shares to vest upon the achievement of certain specified milestones.

In March 2010, we granted a seven-year non-qualified option to purchase 125,000 shares of our common stock at an exercise price of $0.90 to Dr. John Yu for services rendered as our Chief Scientific Officer, with 75,000 shares of such option to vest in four equal quarterly installments following the date of grant and with 50,000 shares of such option to vest in accordance with the achievement of milestones contained in his employment agreement, and such option may be exercised within its term during the period 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 February 2010, we granted a seven-year incentive option to purchase 600,000 shares of our common stock at an exercise price of $0.90 per share to Dr. Manish Singh upon the renewal of his employment as our President and Chief Executive Officer, with 360,000 of the shares to vest at the rate of 30,000 shares per month during the term of his agreement and with the remaining 240,000 shares to vest in accordance with the achievement of milestones contained in his employment agreement, and such option may be exercised within its term during the period 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 February 2010, we granted a seven-year non-qualified option to purchase 150,000 shares of our common stock at an exercise price of $0.90 per share to James Bender in accordance with his employment agreement to serve as our Vice President – Product Development and Manufacturing for a one-year term, with such option to vest at the rate of 6,250 shares per month during the term of the employment agreement and with the remaining 75,000 shares to vest in accordance with the achievement of milestones contained in his employment agreement.

Employment Agreements

John S. Yu, M.D.

Dr. John Yu and the Company entered into an 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 that Agreement, Dr. Yu agreed to serve as our Chief Scientific Officer for an initial one-year term on a part-time basis. Pursuant to that Agreement, the Company agreed that (i) for so long as Dr. Yu owns

 

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Company shares or fully vested immediately exercisable options to purchase Company shares totaling at least 2,000,000 shares, the Company will use commercially reasonable efforts to enable Dr. Yu to continue to serve on its Board of Directors and (ii) for so long as Dr. Yu owns shares of the Company’s common stock or fully vested immediately exercisable options to purchase shares of the Company’s common stock totaling at least 4,000,000 shares or at least 5,000,000 shares, the Company will 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 March 1, 2010, the Company entered into an Agreement with Dr. Yu under which he agreed to serve on a part-time basis as the Company’s Chief Scientific Officer for a one-year term. The Agreement provides for an annual base salary of $70,000 and for cash bonuses of $15,000 each if prior to December 31, 2010 (i) the FDA has accepted a Phase II clinical trial plan for ICT-107 and (ii) a Physicians Investigator IND submission for one of the Company’s specified product candidates has been accepted by the FDA. Subsequent to February 28, 2011, Dr. Yu has continued to serve as the Company’s Chief Scientific Officer under the terms of the foregoing Agreement pending the negotiation of a new agreement.

Pursuant to the Agreement, the Company granted to Dr. Yu a seven-year nonqualified stock option under the Company’s 2006 Equity Incentive Plan, or a new qualified option plan, to purchase 125,000 shares of the Company’s common stock at an exercise price equal to $0.90 per share, which was the closing market price of the common stock on the option grant date. The option grant is subject to the approval by the Company’s stockholders of an increase in the authorized number of shares under the Plan. The option may be exercised during the period that Dr. Yu 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.

The option granted to Dr. Yu under the Agreement will vest (i) as to 75,000 shares in four equal quarterly installments following the date of grant and (ii) as to the remaining 50,000 shares, 25,000 shares shall each vest upon timely satisfying the two milestones described above for the payment of cash bonuses to Dr. Yu.

Manish Singh, Ph.D.

Effective February 18, 2009, the Company entered into an Employment Agreement with Dr. Manish Singh (the “2009 Employment Agreement”) pursuant to which Dr. Singh continued to serve on a full-time basis as the Company’s President and Chief Executive Officer for a one-year term. The Company was required under the 2009 Employment Agreement to use its commercially reasonable efforts to have Dr. Singh continue to serve as a member of the Company’s Board of Directors during the term of the 2009 Employment Agreement.

The 2009 Employment Agreement provided for an annual base salary of $250,000 and cash bonuses of (1) $50,000 if the Company completed a financing, a strategic alliance or a merger or acquisition that generates at least $2,500,000 of net proceeds (after commissions) during the term of the agreement; (2) $100,000 if the Company completed a financing, a strategic alliance or a merger or acquisition that generates at least $5,000,000 of net proceeds (after commissions) during the term of the agreement; or (3) $200,000 if the Company completed a financing, a strategic alliance or a merger or acquisition that generates at least $10,000,000 of net proceeds (after commissions) during the term of the agreement. The total cash bonus payable would in no event exceed $200,000. Pursuant to the 2009 Employment Agreement, the Company granted Dr. Singh a seven-year non-qualified stock option on February 18, 2009 under the Equity Plan to purchase 700,000 shares of the Company’s common stock at an exercise price of $0.15 per share. The option vests (i) as to 300,000 shares in twelve equal monthly installments of 25,000 shares each over the twelve-month period from and immediately following the grant date, (ii) as to 200,000 shares if the Company achieved during term of the agreement either (a) a volume weighted average trading price for its common stock of greater than $1.00 for any 30-day period during the term of the agreement on average daily trading volume of at least 10,000 shares, or (b) working capital at the end of the term of the agreement of at least $5,000,000; and (iii) as to 200,000 shares if the Company achieved during term of the agreement either (a) a volume weighted average trading price for its common stock of greater than $1.50 for any 30-day period during the term of the agreement on average daily trading volume of at least 10,000 shares or (b) working

 

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capital at the end of the term of the agreement of at least $8,000,000. 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 terminated the 2009 Employment Agreement without cause or did not extend the 2009 Employment Agreement upon its expiration for an additional one-year term or Dr. Singh terminated the 2009 Employment Agreement due to (1) his principal place of work for the Company being relocated by more than 50 miles, (2) a material change in his duties, (3) a failure by the Company to pay him any of his contractual compensation, or (4) a constructive termination of Dr. Singh or unlawful harassment or retaliation against him, then the Company upon such termination was 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 (or 100% of all such shares if the Company is not the surviving entity in a Corporate Transaction (as defined by the Equity Plan) that had not yet vested would immediately become vested. In the event the Company completed a merger in which Dr. Singh was offered an executive position with the Company or surviving corporation for at least a one-year term, with an annual base salary of $250,000 and a cash bonus and option compensation package having an aggregate value of at least $75,000 (as determined in good faith by the Company or surviving corporation), Dr. Singh was not entitled to terminate the 2009 Employment Agreement based on a change in duties and responsibilities or a location change.

Effective as of February 18, 2010, the Company entered into a new Employment Agreement with Dr. Manish Singh (the “2010 Employment Agreement”) pursuant to which Dr. Singh will continue to serve on a full-time basis as the Company’s President and Chief Executive Officer for a one-year term. The Company is required under the 2010 Employment Agreement to use its commercially reasonable efforts to have Dr. Singh continue to serve as a member of the Company’s Board of Directors during the term of the 2010 Employment Agreement. The 2010 Employment Agreement may be extended for an additional one-year period upon the mutual agreement of the Company and Dr. Singh. Subsequent to February 17, 2010, Dr. Singh has continued to serve as the Company’s President and Chief Executive Officer under the terms of the 2010 Employment Agreement pending the negotiation of a new employment agreement.

The 2010 Employment Agreement provides for an annual base salary of $300,000. In addition, provided that Dr. Singh continues to serve as the Company’s President and Chief Executive Officer for the entire one-year term of the 2010 Employment Agreement, the Company will pay Dr. Singh a discretionary cash bonus of up to $50,000 upon completion of the one-year term.

The 2009 Employment Agreement with Dr. Singh provided that Dr. Singh was entitled to receive cash milestone bonuses, not to exceed an aggregate amount of $200,000, of (1) $50,000 upon the Company’s completion of a financing, a strategic alliance or a merger or acquisition generating at least $2,500,000 of net proceeds (after commissions) during the term of that agreement, (2) $100,000 upon the Company’s completion of a financing, a strategic alliance or a merger or acquisition generating at least $5,000,000 of net proceeds (after commissions) during the term of that agreement, or (3) $200,000 upon the Company’s completion of a financing, a strategic alliance or a merger or acquisition generating at least $10,000,000 of net proceeds (after commissions) during the term of that agreement. The 2009 Employment Agreement also provided that an option granted to Dr. Singh to purchase 200,000 shares of the Company’s common stock would vest if the Company’s working capital is at least $8,000,000 at the end of the term of that agreement.

The 2010 Employment Agreement amends the 2009 Employment Agreement to provide that the milestones described in the preceding paragraph may be satisfied by including the net proceeds received by the Company at any time prior to August 17, 2010 from (1) a financing by the Socius Capital Group or (2) any private placement financing that is covered by a signed term sheet that was entered into by the Company prior to February 18, 2010 or from another source at the same or better terms as contemplated by such signed term sheet. Also, for purposes of determining whether the $8,000,000 working capital milestone in the preceding paragraph has been satisfied, the 2010 Employment Agreement provides that working capital will be calculated as of the date of the Company’s receipt of the proceeds that are being included to satisfy the milestone.

 

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Pursuant to the 2010 Employment Agreement, the Company granted to Dr. Singh a seven-year incentive stock option under the Company’s 2006 Equity Incentive Plan, or a new qualified option plan, to purchase 600,000 shares of the Company’s common stock at an exercise price equal to $0.90 per share, which was the closing market price of the common stock on the option grant date. The option grant is subject to the approval by the Company’s stockholders of an increase in the authorized number of shares under the Plan and an increase in the number of shares that may be granted to any individual during a twelve-month period. 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.

The option granted to Dr. Singh under the 2010 Employment Agreement will vest (1) as to 360,000 shares, in twelve equal monthly installments of 30,000 shares each over the twelve-month period from and immediately following the grant date, (2) as to 30,000 shares, if the Company achieves during the term of the that agreement a volume-weighted average trading price for its common stock of greater than $1.60 for any consecutive 15-day trading period during the term of that agreement on average daily trading volume of at least 20,000 shares, (3) as to 90,000 shares, if the Company achieves during the term of that agreement a volume-weighted average trading price for its common stock of greater than $2.00 for any consecutive 15-day trading period during the term of that agreement on average daily trading volume of at least 20,000 shares, (4) as to 30,000 shares, upon treating during the term of that agreement the first patient in a Phase II clinical trial, and (5) as to 90,000 shares, if during the term of the agreement the Company completes a financing, a strategic alliance or a licensing agreement with upfront licensing payments to the Company or a merger or acquisition that generates at least $5,000,000 of net proceeds (after commissions) for the Company beyond the $10,000,000 achieved by August 17, 2010, with any financing proceeds received by the Company during the first six months of the 2010 Employment Agreement that are used to satisfy milestones under the 2009 Employment Agreement not being included as proceeds to satisfy the milestones described in this paragraph.

In the event that the Company terminates the 2010 Employment Agreement without cause or does not extend the 2010 Employment Agreement upon its expiration for an additional one-year term, then (1) 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, (2) any stock options granted to Dr. Singh, to the extent vested, will be retained by Dr. Singh and will be exercisable on the terms described above, and (3) the vesting of an additional number of shares subject to all options granted to Dr. Singh equal to 50% of all shares subject to such options that have not already vested will immediately accelerate and will be exercisable on the terms described above. If Dr. Singh terminates his employment for “good reason” as defined in the Employment Agreement, he will receive the severance benefits described in the preceding sentence, except that 100% of his options will vest if his employment terminates for good reason following a merger or similar corporate transaction in which the Company is not the surviving entity.

James Bender, Ph.D.

Effective February 1, 2010, the Company entered into an Employment Agreement with Dr. James Bender pursuant to which Dr. Bender will serve on a full-time basis as the Company’s Vice President – Product Development and Manufacturing for a one-year term commencing February 1, 2010. Prior to February 1, 2010, Dr. Bender had been serving on a part-time basis as the Company’s Vice President – Clinical Development pursuant to an Agreement dated as of September 1, 2009, as amended on September 14, 2009. Subsequent to January 31, 2011, Dr. Bender has continued to serve as the Company’s Vice President – Product Development and Manufacturing under the terms of the foregoing Employment Agreement pending the negotiation of a new employment agreement.

The Employment Agreement provides for an annual base salary of $170,000. Pursuant to the Employment Agreement, the Company granted to Dr. Bender a seven-year incentive stock option under the Company’s 2006 Equity Incentive Plan to purchase 150,000 shares of the Company’s common stock at an exercise price equal to $0.90 per share, which was the closing market price of the common stock on the option grant date. The option grant is subject to the approval by the Company’s stockholders of an increase in the authorized number of shares under the Plan.

 

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The option granted to Dr. Bender under the Employment Agreement will vest at the rate of 6,250 shares per month over the term of the Employment Agreement as to 75,000 shares. The option will vest as to the remaining 75,000 shares upon the Company’s attainment of the following development milestones, and Dr. Bender will also be entitled to receive the following cash bonuses upon attainment of these milestones: (1) completion by September 30, 2010 of the technology transfer to a contract manufacturer for the Company’s ICT-107 product will result in a $10,000 cash bonus and the vesting of 25,000 option shares; (2) completion by December 31, 2010 of FDA acceptance of a Phase II clinical trial plan for ICT-107 will result in a $10,000 cash bonus and the vesting of 25,000 option shares; and (3) completion by December 31, 2010 of the enrollment of the first patient into the Phase II clinical trial for ICT-107 will result in a $10,000 bonus and the vesting of 25,000 option shares.

The Employment Agreement provides that all of the rights and obligations of the Company and Dr. Bender under his prior agreement to provide services to the Company (including Dr. Bender’s right to work for another organization) terminated as of January 31, 2010, except that Dr. Bender’s right under that agreement to receive cash bonuses and the vesting of options upon the Company’s achievement of specified development milestones will remain in effect. The Employment Agreement provides that, except as described in the following sentence, if Dr. Bender’s employment terminates prior to the expiration of the one-year term, Dr. Bender will not have any right to receive further compensation under the Employment Agreement other than compensation that was accrued as of his employment termination date. If the Company terminates Dr. Bender’s employment without “cause” as defined in the Employment Agreement, 50% of any unvested options held by Dr. Bender as of the employment termination date will vest, and he will also have the right to receive any compensation that was accrued as of the employment termination date.

C. Kirk Peacock

Effective October 30, 2008, the Company entered into an Employment Agreement with Mr. Peacock under which he continued to serve on a part-time basis as the Company’s Chief Financial Officer for a one-year term. Under this agreement, Mr. Peacock received a monthly salary of $8,000 and was granted a seven-year non-qualified option to purchase 50,000 shares of the Company’s common stock at a price of $0.30 per share, with such option to vest in equal monthly installments over the one-year term of the agreement, with 50% of any then unvested option shares to become vested if Mr. Peacock’s employment was terminated by the Company without cause and with all vested options to be exercisable for 24 months after termination of Mr. Peacock’s employment for any reason other than termination by the Company for cause.

Effective October 30, 2009, the Company entered into a new Employment Agreement with Mr. Peacock under which he will continue to serve on a part-time basis as the Company’s Chief Financial Officer for a one-year term. Under this agreement, Mr. Peacock receives a monthly salary of $6,000 and was granted a seven-year non-qualified option to purchase 56,000 shares of the Company’s common stock at a price of $0.80 per share, with 50,000 shares covered by such option to vest in equal monthly installments over the one-year term of the agreement and with 50% of any those then unvested option shares to become vested if Mr. Peacock’s employment is terminated by the Company without cause.

Provided that by October 29, 2010, all of the Company’s internal documentation and internal testing necessary to subsequently complete the Company’s Sarbanes-Oxley Section 404 audit has been finished, the Company will pay Mr. Peacock an additional $6,000 and a further 6,000 of his option shares will become vested. Due to the elimination of the Sarbanes-Oxley Section 404 audit requirement for smaller issuers, this milestone was not met.

Effective October 30, 2010, the Company renewed the Consulting Agreement with Mr. Peacock under which he will continue to serve on a part-time basis as the Company’s Chief Financial Officer for five months. Under this agreement, Mr. Peacock receives a monthly salary of $8,000 and was granted 19,231 shares of restricted common stock, with such shares to vest in equal monthly installments over the five-month term of the agreement and with 100% of any unearned compensation to become payable and any unvested option shares to become vested if Mr. Peacock’s services are terminated by the Company without cause.

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

 

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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.

 

Item 12. 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, 2011 (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, 2011, there were 28,725,624 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.

     6,489,492 (3)       18.43

Socius CG II, Ltd.

Socius Capital Group, LLC

Terren S. Peizer

Patricia Peizer 11150 Santa Monica Boulevard, Suite 1500 Los Angeles, CA 90025

     3,073,000 (5 )       9.99

Donald R. Scifres 2010 Annuity Trust R One First Street, Ste. 14 Los Altos, CA 94022

     1,789,784 (5)       6.09

Keith Black, M.D. 8631 West Third Street, Suite 800E Los Angeles, CA 90048

     1,400,000 (3)       4.65

Dr. Manish Singh

     1,725,223 (7)       5.79

James Bender

     164,000 (3)       *   

C. Kirk Peacock

     174,262 (8)       *   

Jacqueline Brandwynne

     267,901 (9)       *   

Richard A. Cowell

     195,801 (10)       *   

Navdeep Jaikaria

     18,750 (11)       *   

Rahul Singhvi

     26,932 (12)       *   

All executive officers and directors as a group (8 persons)

     9,200,128        24.81

 

* 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 after March 1, 2011, 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) Includes 5,000 shares of our restricted stock and 6,484,492 shares of our common stock issuable upon the exercise of stock options.
(5) Includes 1,025,000 shares owned of record and 2,048,000 shares subject to warrants. Socius CG II, Ltd. holds currently exercisable warrants to exercise up to 2,375,000 shares, but the exercise of these warrants is limited by their terms so that beneficial ownership by Socius CG II, Ltd. shall not exceed at any time 9.99% of our common shares outstanding. The address of Socius CG II, Ltd. is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The address of Socius Capital Group, LLC, Terren S. Peizer and Patricia Peizer is 11150 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025. Socius Capital Group, LLC, Mr. Peizer and Mrs. Peizer each disclaims beneficial ownership of the securities described in the first sentence of this note 4, all of which are held of record by Socius CG II, Ltd. Information regarding the entities and individuals described in this note 4 is based upon a Schedule 13G/A filed by such persons with the SEC on February 14, 2011.
(6) Includes 1,107,966 shares owned of record and 681,818 shares of our common stock issuable upon exercise of warrants.
(7) Includes 663,839 shares owned of record and 1,061,384 shares of our common stock issuable upon exercise of options.
(8) Includes 80,031 shares owned of record, 19,231 shares of our restricted stock and 75,000 shares of our common stock issuable upon exercise of options.
(9) Includes 40,000 shares owned of record, 5,000 shares of our restricted stock and 222,901 shares of our common stock issuable upon exercise of options.
(10) Includes 5,000 shares of our restricted stock and 190,801 shares of our common stock issuable upon exercise of stock options.
(11) Includes 5,000 shares of our restricted stock and 13,750 shares of our common stock issuable upon exercise of stock options.
(12) Includes 8,182 shares owned of record, 5,000 shares of our restricted stock and 13,750 shares of our common stock issuable upon exercise of options.

Equity Compensation Plan Information

The following table summarizes, as of December 31, 2010, (i) the number of shares of our common stock that are issuable under our equity compensation plans upon the exercise of outstanding options, warrants and other rights, (ii) the weighted-average exercise price of such options, warrants and rights, and (iii) the number of securities remaining available for future issuance under our equity compensation plans.

 

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

        9,764,076          $ 0.91            1,541,772   

Equity compensation plans not approved by stockholders

        1,400,000          $ 1.10            —     
                                   

Total

        11,164,076          $ 0.94            1,541,772   

 

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Our stockholders approved our Equity Plan. The only awards that are outstanding under that plan as of March 1, 2010 are options to acquire 2,978,671 shares of our common stock and restricted stock totaling 69,231 shares. In September 2008 the shareholders increased the authorized number of shares of our common stock available to be issued under our Equity Plan from 1,500,000 shares to 3,400,000 shares. In March 2010, our Board approved an increase in the number of shares of our common stock available to be issued under our Equity Plan from 3,400,000 shares to 6,000,000 shares, which was approved by our shareholders in September 2010.

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. Dr. Black has exercised 100,000 shares of this option.

In November 2006, we granted to Dr. John Yu (1) 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 (2) 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.

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 and resigned as a director on March 19, 2008. The balance of Technomedics’ 150,000 unvested option shares were cancelled as a result of Dr. Mosk’s voluntary resignation: The Technomedics’ option covering the remaining 150,000 vested option shares expired unexercised on March 18, 2010.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Transactions with Related Persons

None

Independent Directors

Information regarding our independent directors is set forth above in Item 10 under the captions “Business Experience and Directorships” and “Committees of the Board”.

 

Item 14. Principal Accounting Fees and Services.

On October 1, 2010, the Company’s independent registered public accounting firm, Stonefield Josephson, Inc. (“Stonefield”), combined its practice with Marcum LLP. Accordingly, effective October 1, 2010, Stonefield effectively resigned as the Company’s independent registered public accounting firm and MarcumStonefield, a division of Marcum LLP, became the Company’s independent registered public accounting firm. The Audit Committee has appointed MarcumStonefield as our independent registered public accounting firm for the fiscal year ending December 31, 2010. The following table shows the fees that were paid or accrued by us for audit and other services provided by Stonefield for the fiscal 2009 and by MarcumStonefield for fiscal year 2010.

 

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     2009      2010  

Audit Fees (1)

   $ 49,249       $ 54,770   

Audit-Related Fees (2)

     —           —     

Tax Fees (3)

   $ 2,915       $ 3,000   

All Other Fees

   $ 13,495       $ 39,650   
                 

Total

   $ 65,659       $ 97,420   
                 

 

(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-Q quarterly reports and services that are normally provided in connection with statutory or regulatory filings for the 2009 and 2010 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 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 of the services that were performed for us by Stonefield and that are now performed for us by MarcumStonefield. 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 was compatible with maintaining the independence of Stonefield and subsequently with maintaining the independence of MarcumStonefield.

PART IV

 

Item 15. Exhibits and Financial Statement Schedules.

The Company’s financial statements and related notes thereto are listed and included in this Annual Report beginning on page F-1. The following exhibits are filed with, or are incorporated by reference into, this Annual Report.

 

Exhibit
Number

  

Description

2.1

   Agreement and Plan of Reorganization dated as of May 5, 2005, as amended, among 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)

3.1

   Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (2)

3.2

   Certificate of Amendment to Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (2)

3.3

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

3.4

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

3.5

   Amended and Restated Bylaws of ImmunoCellular Therapeutics, Ltd. (25)

3.6

   Amended and Restated 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (25)

4.1

   Form of Common Stock Certificate for ImmunoCellular Therapeutics, Ltd. (5)

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)

 

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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 as of February 16, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (6)
4.5    Letter Agreement dated as of February 16, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (6)
4.6    Subscription Agreement dated as of April 19, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (6)
4.7    Warrant dated as of 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. (6)
4.8    Warrant dated as of 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. (6)
4.9    Warrant dated as of 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. (6)
4.10    Warrant dated as of 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. (6)
4.11    Form of Subscription Agreement containing registration rights between the participants in the April/May 2007 private placement and ImmunoCellular Therapeutics, Ltd. (7)
4.12    Form of Warrant issued to participants in the April/May 2007 private placement to purchase shares of common stock of ImmunoCellular Therapeutics, Ltd. (7)
4.13    Form of Notice of Exercise of Warrants delivered by ImmunoCellular Therapeutics, Ltd. in January 2009 in connection with the reduction from $2.50 to $0.25 per share of the exercise price of warrants to purchase a total of 6,112,583 shares of common stock of ImmunoCellular Therapeutics, Ltd. and in connection with the extension of the expiration date of warrants to purchase a total of 6,412,583 shares of common stock of ImmunoCellular Therapeutics, Ltd. (17)
4.14    Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock dated December 3, 2009. (20)
4.15    Warrant dated December 3, 2009 issued by ImmunoCellular Therapeutics, Ltd. to Socius Capital Group, LLC d/b/a Socius Life Sciences Capital Group, LLC (20)
4.16    Amended Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock dated May 3, 2010. (22)
4.17    Form of Warrant issued to participants in the March 2010 private placement to purchase shares of common stock of ImmunoCellular Therapeutics, Ltd. (22)
4.18    Warrant dated May 2, 2010 for 1,350,000 shares issued by ImmunoCellular Therapeutics, Ltd. to Socius CG II, Ltd. (22)

 

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4.19    Form of Warrant issued to participants in the February 2011 private placement to purchase shares of common stock of ImmunoCellular Therapeutics, Ltd. (26)
10.1    Exclusive License Agreement dated as of November 17, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd.† (8)
10.2    First Amendment to Exclusive License Agreement dated as of June 16, 2008 2006, between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd.† (9)
10.3    Stock Purchase Agreement dated as of November 17, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (8)
10.4    Registration Rights Agreement dated as of November 17, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (8)
10.5    Securities Purchase Agreement dated as of November 17, 2006 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. (8)
10.6    Agreement dated as of November 17, 2006 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd.* (8)
10.7    Nonqualified Stock Option Agreement dated as of November 17, 2006 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd.* (8)
10.8    Registration Rights Agreement dated as of November 17, 2006 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. (8)
10.9    2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (4)
10.10    Amendment No. 1 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (10)
10.11    Amendment No. 2 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (11)
10.12    Amendment No. 3 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (11)
10.13    Amendment No. 4 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (9)
10.14    Form of Non-Qualified Stock Option Agreement for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (12)
10.15    Form of Incentive Stock Option Agreement for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (12)
10.16    Employment Agreement dated as of February 18, 2008 between Dr. Manish Singh and ImmunoCellular Therapeutics, Ltd.* (11)
10.17    Employment Agreement dated as of February 18, 2009 between Dr. Manish Singh and ImmunoCellular Therapeutics, Ltd.* (17)
10.18    Employment Agreement dated as of November 5, 2007 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd. (13)
10.19    Employment Agreement dated as of October 30, 2008 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd.* (17)
10.20    Agreement dated as of July 7, 2006 between Technomedics Management & Systems, Inc. and ImmunoCellular Therapeutics, Ltd. (14)
10.21    Agreement dated as of November 17, 2006 between Technomedics Management & Systems, Inc. and ImmunoCellular Therapeutics, Ltd.* (5)

 

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10.22    Memorandum of Agreement dated as of November 21, 2007 between Molecular Discoveries LLC and ImmunoCellular Therapeutics, Ltd. (11)
10.23    Agreement dated as of February 14, 2008 between Molecular Discoveries, LLC and ImmunoCellular Therapeutics, Ltd. (11)
10.24    Registration Rights Agreement dated as of April 14, 2008, between Molecular Discoveries, LLC and ImmunoCellular Therapeutics, Ltd. (15)
10.25    Agreement dated as of February 14, 2008 between Dr. Cohava Gelber and ImmunoCellular Therapeutics, Ltd. (11)*
10.26    Agreement dated as of August 1, 2008 between Dr. Cohava Gelber and ImmunoCellular Therapeutics, Ltd.. * (17)
10.27    Agreement dated as of September 1, 2008 between James G. Bender and ImmunoCellular Therapeutics, Ltd. (16) *
10.28    Office lease dated April 28, 2008 between Regent Business Centers and ImmunoCellular Therapeutics, Ltd., as amended. (17)
10.29    Amendment No. 1 to Agreement dated as of May 1, 2009 to Agreement dated October 30, 2008 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd. *(18)
10.30    Second Amendment dated August 1, 2009 to Exclusive License Agreement dated as of November 1, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (19)
10.31    Preferred Stock Purchase Agreement dated as of December 3, 2009 between ImmunoCellular Therapeutics, Ltd. and Socius Capital Group, LLC d/b/a Socius Life Sciences Capital Group, LLC. (20)
10.32    Employment Agreement dated as of October 30, 2009 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd. * (21)
10.33    Employment Agreement dated as of February 1, 2010 between James G. Bender and ImmunoCellular Therapeutics, Ltd. * (27)
10.34    Employment Agreement dated as of February 18, 2010 between Dr. Manish Singh and ImmunoCellular Therapeutics, Ltd. * (27)
10.35    Agreement dated March 1, 2010 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. * (27)
10.36    Securities Purchase Agreement dated March 29, 2010 between participants in the March 2010 private placement and ImmunoCellular Therapeutics, Ltd. (23)
10.37    Form of Registration Rights Agreement dated as of March 29, 2010 between participants in the March 2010 private placement and ImmunoCellular Therapeutics, Ltd. (22)
10.38    Agreement dated as of March 4, 2010 between Dr. Elma Hawkins and ImmunoCellular Therapeutics, Ltd.* (22)
10.39    Office Lease dated April 1, 2010 between Regent Business Centers and ImmunoCellular Therapeutics, Ltd. (22)
10.40    Modification Agreement dated May 2, 2010 among Socius CG II, Ltd., Socius Life Sciences Capital Group, LLC and ImmunoCellular Therapeutics, Ltd. (22)
10.41    Third Amendment dated March 26, 2010 to Exclusive License Agreement dated as of November 1, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (22)

 

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10.42    Securities Purchase Agreement dated May 12, 2010 between participants in the May 2010 private placement and ImmunoCellular Therapeutics, Ltd. (23)
10.43    Form of Registration Rights Agreement between participants in the May 2010 private placement and ImmunoCellular Therapeutics, Ltd. (23)
10.44    Employment Agreement dated as of October 30, 2010 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd.* (24)
10.45    Office Lease dated May 7, 2010 between Regent Business Centers and ImmunoCellular Therapeutics, Ltd. (23)
10.46    Purchase Agreement, dated as of February 22, 2011, by and between each investor named therein and ImmunoCellular Therapeutics, Ltd. (26)
10.47    Registration Rights Agreement, dated as of February 22, 2011, by and among the investors named therein and ImmunoCellular Therapeutics, Ltd. (26)
10.48    Exclusive Sublicense Agreement dated May 28, 2010 between Targepeutics, Inc. and ImmunoCellular Therapeutics, Ltd. † **
10.49    Sponsored Research and Vaccine Production Agreement dated January 1, 2011 between The Trustees of the University of Pennsylvania and ImmunoCellular Therapeutics, Ltd. † **
10.50    Placement agent agreement dated March 30, 2010 between Gilford Securities Incorporated and ImmunoCellular Therapeutics, Ltd. **
10.51    Placement agent agreement dated April 7, 2010 between Scarsdale Equities LLC and ImmunoCellular Therapeutics, Ltd. **
10.52    Consulting Agreement dated October 1, 2010 between JFS Investments and ImmunoCellular Therapeutics, Ltd.. **
10.53    Advisory services agreement dated October 1, 2010 between Garden State Securities Inc. and ImmunoCellular Therapeutics, Ltd. **
10.54    Co-placement Agents Agreement dated January 31, 2011 among Summer Street Research Partners, Dawson James Securities, Inc. and ImmunoCellular Therapeutics, Ltd. **
23.1    Consent of Marcum LLP. **
23.2    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 us with the Securities and Exchange Commission. The omitted portions of the exhibit have been separately filed by us with the Securities and Exchange Commission.
* Indicates a management contract or compensatory plan or arrangement.
** Filed with this Annual Report on Form 10-K.
(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.

 

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(2) Previously filed by us on November 3, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(3) Previously filed by us on May 9, 2007 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 February 12, 2007 as an exhibit to our Registration Statement on Form SB-2, File No. 333-140598, and incorporated herein by reference.
(6) Previously filed by us on May 1, 2007 as an exhibit to our Registration Statement on Form SB-2, File No. 333-142480, and incorporated herein by reference.
(7) Previously filed by us on July 12, 2007 as an exhibit to our Registration Statement on Form SB-2, File No. 333-144521, and incorporated herein by reference
(8) Previously filed by us on November 22, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(9) Previously filed by us on August 14, 2008 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(10) 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.
(11) Previously filed by us on March 25, 2008 as an exhibit to our Annual Report on Form 10-KSB and incorporated herein by reference.
(12) Previously filed by us on November 9, 2007 as an exhibit to our Registration Statement on Form S-8, File No. 333-147278, and incorporated herein by reference.
(13) Previously filed by us on November 6, 2007 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(14) Previously filed by us on April 2, 2007 as an exhibit to our Annual Report on Form 10-KSB and incorporated herein by reference.
(15) Previously filed by us on April 16, 2008 as an exhibit to our Registration Statement on Form S-1, File No. 333-150277, and incorporated herein by reference.
(16) Previously filed by us on November 13, 2008 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(17) Previously filed by us on March 30, 2009 as an exhibit to our Annual Report on Form 10-K and incorporated herein by reference.
(18) Previously filed by us on August 14, 2009 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(19) Previously filed by us on November 13, 2009 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(20) Previously filed by us on December 7, 2009 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(21) Previously filed by us on December 23, 2009 as an exhibit to our Registration Statement on Form S-1 and incorporated herein by reference.
(22) Previously filed by us on May 12, 2010 as an exhibit to our Registration Statement on Form S-1 to SB-2, File No. 333-144521 and incorporated herein by reference.
(23) Previously filed by us on May 18, 2010 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(24) Previously filed by us on November 15, 2010 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(25) Previously filed by us on January 11, 2011 as an exhibit to our Registration Statement on Form S-8 and incorporated herein by reference.
(26) Previously filed by us on February 25, 2011 as an exhibit to our current report on Form 8-K and incorporated herein by reference.
(27) Previously filed by us on March 31, 2010 as an exhibit to our Annual Report on Form 10-K and incorporated herein by reference.

 

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SIGNATURES

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

 

    IMMUNOCELLULAR THERAPEUTICS, LTD.

Date: March 31, 2011

    By:   /s/ Manish Singh
      Manish Singh, Ph.D.
      President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and 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 31, 2011

/s/ C. Kirk Peacock

C. Kirk Peacock

   Chief Financial Officer (Principal Financial and Accounting Officer)   March 31, 2011

/s/ Jacqueline Brandwynne

Jacqueline Brandwynne

   Director   March 31, 2011

/s/ Richard A. Cowell

Richard A. Cowell

   Director   March 31, 2011

/s/ Navdeep Jaikaria

Navdeep Jaikaria, Ph.D.

   Director   March 31, 2011

/s/ Rahul Singhvi

Rahul Singhvi, Sc.D.

   Director   March 31, 2011

/s/ John Yu

John Yu, M.D.

   Director   March 31, 2011

 

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ImmunoCellular Therapeutics, Ltd.

(a Development Stage Company)

Index to Financial Statements

 

       Page  

Financial Statements:

  

Report of Independent Registered Public Accounting Firm – Marcum LLP

     F-2   

Report of Independent Registered Public Accounting Firm – Stonefield Josephson, Inc.

     F-3   

Balance Sheets as of December 31, 2009 and 2010

     F-4   

Statements of Operations for each of the three fiscal years in the period ended December  31, 2010 and from February 25, 2004 (Inception) to December 31, 2010

     F-5   

Statements of Shareholders Equity (Deficit) from February 25, 2004 (Inception) to December  31, 2010

     F-6   

Statements of Cash Flows for each of the three years in the period ended December  31, 2010 and from February 25, 2004 (Inception) to December 31, 2010

     F-7   

Notes to Consolidated Financial Statements

     F-8   

 

F-1


Table of Contents

Report of Independent Registered Public Accounting Firm

To the Audit Committee of the

Board of Directors and Shareholders of ImmunoCellular Therapeutics, Ltd.

We have audited the accompanying balance sheet of ImmunoCellular Therapeutics, Ltd. (a development stage company) (the “Company”) as of December 31, 2010, and the related statements of operations, changes in shareholders’ equity (deficit) and cash flows for the year then ended, and for the period from February 25, 2004 (inception) to December 31, 2010. 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. The accompanying financial statements of the Company for the period from February 25, 2004 (inception) to December 31, 2009 were not audited by us. Those statements were audited by other auditors whose report, dated March 29, 2010 expressed an unqualified opinion on those statements and included an explanatory paragraph regarding the Company s ability to continue as a going concern. The financial statements for the period from February 25, 2004 (inception) to December 31, 2009 reflect a net loss of $14,711,146. Our opinion, insofar as it relates to the amounts included for such prior periods as indicated in the accompanying financial statements for such periods from February 25, 2004 (inception) through December 31, 2009, is based solely on the report of such other auditors.

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. The Company is not required to have, nor were we engaged to perform, an audit of its 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of ImmunoCellular Therapeutics, Ltd. (a development stage company) as of December 31, 2010 and the results of its operations and its cash flows for the year then ended and for the period from February 25, 2004 (inception) to December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.

Marcum LLP

Los Angeles, California

March 31, 2011

 

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Table of Contents

Report of Independent Registered Public Accounting Firm

To the Audit Committee of the

Board of Directors and Stockholders of ImmunoCellular Therapeutics, Ltd.

We have audited the accompanying balance sheet of ImmunoCellular Therapeutics, Ltd. (a development stage company) (the “Company”) as of December 31, 2009, and the related statements of operations, shareholders’ equity (deficit) and cash flows for the years ended December 31, 2009 and 2008, and for the period from February 25, 2004 (inception) to December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ImmunoCellular Therapeutics, Ltd. (a development stage company) as of December 31, 2009, and the results of its operations and its cash flows for the years ended December 31, 2009, and for the period from February 25, 2004 (inception) to December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

Stonefield Josephson, Inc.

Los Angeles, California

March 31, 2010

 

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ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Balance Sheets

 

     December 31,
2009
    December 31,
2010
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 331,353      $ 5,319,776   

Short-term investments

     1,075,903        —     

Other assets

     21,903        24,033   
                

Total current assets

     1,429,159        5,343,809   

Fixed assets, net

     5,428        12,367   

Deferred financing costs

     30,282        —     

Other assets

     7,847        8,974   
                

Total assets

   $ 1,472,716      $ 5,365,150   
                

Liability and Shareholders’ Equity (Deficit)

    

Current liabilities:

    

Accounts payable

   $ 225,601      $ 171,065   

Accrued liabilities

     150,120        276,384   
                

Total current liabilities

     375,721        447,449   
                

Warrant liabilities

     —          2,581,871   
                

Commitments and contingencies (note 5)

     —          —     
                

Shareholders’ equity:

    

Preferred stock $0.0001 par value, 1,000,000 shares authorized; 0 shares outstanding as of December 31, 2009 and December 31, 2010

     —          —     

Common stock, $0.0001 par value; 74,000,000 shares authorized; 14,867,842 shares and 22,213,602 shares issued and outstanding as of December 31, 2009 and December 31, 2010, respectively

     1,487        2,221   

Additional paid in capital

     15,859,322        25,341,679   

Promissory note

     (52,668     (54,282

Deficit accumulated during the development stage

     (14,711,146     (22,953,788
                

Total shareholders’ equity

     1,096,995        2,335,830   
                

Total liabilities and shareholders’ equity

   $ 1,472,716      $ 5,365,150   
                

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

 

F-4


Table of Contents

ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Statements of Operations

 

     For the Year
Ended
December 31,
2008
    For the Year
Ended
December 31,
2009
    For the Year
Ended
December 31,
2010
    February 25,
2004
(Inception) to
December 31,
2010
 

Revenues

   $ —        $ 300,000      $ —        $ 300,000   

Expenses:

        

Research and development

     1,296,772        962,526        2,292,630        5,560,267   

Merger costs

     —          —          —          73,977   

Stock-based compensation

     513,357        308,303        807,853        7,029,872   

General and administrative

     1,366,146        1,677,421        2,035,526        6,544,723   
                                

Total expenses

     3,176,275        2,948,250        5,136,009        19,208,839   
                                

Loss before other income and income taxes

     (3,176,275     (2,648,250     (5,136,009     (18,908,839

Other income:

        

Interest income

     116,545        22,045        4,105        334,789   

Change in fair value of warrant liability

     —          —          (1,018,238     (2,287,238
                                
     (3,059,730     (2,626,205     (6,150,142     (20,861,288

Income taxes

     —          —          —          —     
                                

Net loss

     (3,059,730     (2,626,205     (6,150,142     (20,861,288

Deemed dividend on redemption of preferred stock

     —          —          2,092,500        2,092,500   
                                

Net loss attributable to common stock

   $ (3,059,730   $ (2,626,205   $ (8,242,642   $ (22,953,788
                                

Weighted average number of common shares:

        

Basic and diluted

     12,540,301        13,719,991        19,188,541        11,295,755   
                                

Earnings (loss) per common share:

        

Basic and diluted

   $ (0.24   $ (0.19   $ (0.43   $ (2.03
                                

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

 

F-5


Table of Contents

ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Statements of Shareholders’ Equity (Deficit)

 

     Preferred Stock      Common Stock     Additional
Paid-In
    Promissory     Deficit
Accumulated
During the
Development
    Total  
   Shares     Amount      Shares     Amount     Capital     Note     Stage    

Initial capitalization at $0.00002 per share

     —        $ —           6,256,500      $ 10      $ 87      $ —        $ —        $ 97   

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

     —          —           193,500        15        135        —          —          150   

Net loss

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

Balance at December 31, 2004

     —          —           6,450,000        25        222        —          (11,741     (11,494

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

     —          —           387,000        659        74,341        —          —          75,000   

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

     —          —           154,800        16        49,984        —          —          50,000   

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

     —          —           154,800        15        152,745        —          —          152,760   

Net loss

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

Balance at December 31, 2005

     —          —           7,146,600        715        277,292        —          (257,745     20,262   

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

     —          —           73,093        7        36,539        —          —          36,546   

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

     —          —           1,510,000        151        549,249        —          —          549,400   

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

     —          —           694,000        69        693,931        —          —          694,000   

Shares issued in connection with reverse merger

     —          —           825,124        83        (83     —          —          —     

Shares cancelled in connection with the sale of Optical Molecular Imaging, Inc.

     —          —           (2,059,100     (206     (64,794     —          —          (65,000

Exercise of stock options

     —          —           10,062        1        3,521        —          —          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        820        5,599,300        —          (5,410,458     189,662   

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

     —          —           3,531,603        353        4,892,133        —          —          4,892,486   

Exercise of stock options

     —          —           51,111        5        (5     —          —          —     

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        1,178        14,021,742        —          (9,025,211     4,997,709   

Common stock issued for research and development during 2008 at $0.53 per share

     —          —           800,000        80        423,920        —          —          424,000   

Common stock issued for research and development during 2008 at $0.65 per share

     —          —           100,000        10        64,990        —          —          65,000   

Stock based compensation (options)

     —          —           —          —          513,357        —          —          513,357   

Net loss

     —          —           —          —          —          —          (3,059,730     (3,059,730
                                                                 

Balance at December 31, 2008

     —          —           12,682,493        1,268        15,024,009        —          (12,084,941     2,940,336   

Exercise of warrants

     —          —           1,970,992        1,97        462,551        —          —          462,748   

Exercise of stock options

     —          —           214,357        22        64,460        (52,668     —          11,814   

Stock based compensation (options)

     —          —           —          —          308,302        —          —          308,302   

Net loss

     —          —           —          —          —          —          (2,626,205     (2,626,205
                                                                 

Balance at December 31, 2009

     —          —           14,867,842        1,487        15,859,322        (52,668     (14,711,146     1,096,995   

Common stock and warrants issued for cash during 2010 at $1.00 per share, net of offering costs

     —          —           4,230,910        423        3,248,315        —          —          3,248,738   

Preferred stock and warrants issued for cash during 2010 at $10,000 per share, net of offering costs

     400        —           —          —          —          —          —          —     

Exercise of warrants in exchange for promissory note

     —          —           2,700,000        270        5,399,730        (5,400,000     —          —     

Redemption of preferred stock for repayment of promissory note

     (400     —           —          —          —          5,400,000        (2,092,500     3,307,500   

Exercise of stock options

     —          —           50,000        5        26,495        —          —          26,500   

Cashless exercise of stock options

     —          —           297,156        30        (30     —          —          —     

Common stock issued for services during 2010 at $0.90 per share

     —          —           60,000        6        53,994        —          —          54,000   

Common stock issued for services during 2010 at $1.06 per share

     —          —           7,694        —          8,156        —          —          8,156   

Stock based compensation

     —          —           —          —          745,697        —          —          745,697   

Interest on promissory note

     —          —           —          —          —          (1,614     —          (1,614

Net loss

     —          —           —          —          —          —          (6,150,142     (6,150,142
                                                                 

Balance at December 31, 2010

     —        $ —           22,213,602      $ 2,221      $ 25,341,679      $ (54,282   $ (22,953,788   $ 2,335,830   
                                                                 

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,
2008
    For the Year
Ended
December 31,
2009
    For the Year
Ended
December 31,
2010
    February 25,
2004
(Inception) to
December 31,
2010
 

Cash flows from operating activities:

        

Net loss

   $ (3,059,730   $ (2,626,205   $ (6,150,142   $ (20,861,288

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

        

Depreciation and amortization

     2,075        3,397        3,633        9,105   

Interest accrued on promissory note

     —          —          (1,264     (1,264

Change in fair value of warrant liability

     —          —          1,018,238        2,287,238   

Stock based compensation

     513,357        308,303        745,697        6,967,716   

Common stock issued for services

     —          —          62,156        98,703   

Common stock issued for research and development

     489,000        —          —          1,335,760   

Changes in assets and liabilities:

        

Other assets

     (5,440     (24,951     (3,256     (63,288

Accounts payable

     102,753        92,652        (54,536     171,065   

Accrued liabilities

     12,538        95,023        126,264        276,384   
                                

Net cash used in operating activities:

     (1,945,447     (2,151,781     (4,253,560     (9,780,219
                                

Cash flows from investing activities:

        

Sale (purchase) of short-term investments, net

     (3,000,000     1,924,097        1,075,903        —     

Purchase of property and equipment

     (10,087     (813     (10,572     (61,472

Cash paid for sale of OMI

     —          —          —          (25,000
                                

Net cash provided by (used in) investing activities:

     (3,010,087     1,923,284        1,065,331        (86,472
                                

Cash flows from financing activities:

        

Exercise of stock options

     —          11,812        26,500        41,834   

Exercise of warrant

     —          462,748        —          462,748   

Proceeds from issuance of common stock under private placement, net of offering costs

     —          —          4,370,994        10,777,480   

Proceeds from issuance of preferred stock under private placement, net of offering costs

     —          —          3,779,158        3,779,158   

Proceeds from issuance of common stock

     —          —          —          125,247   
                                

Net cash provided by financing activities

     —          474,560        8,176,652        15,186,467   
                                

Increase in cash and cash equivalents

     4,955,534        246,063        4,988,423        5,319,776   

Cash and cash equivalents at beginning of period

     (5,040,824     85,290        331,353        —     
                                

Cash and cash equivalents at end of period

   $ 85,290      $ 331,353      $ 5,319,776      $ 5,319,776   
                                

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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ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Notes to Financial Statements

1. Nature of Organization and Development Stage Operations

ImmunoCellular Therapeutics, Ltd. (the Company) is a development stage company that is seeking to develop and commercialize new therapeutics to fight cancer using the immune system.

In February 2008, the Company entered into an Agreement with Molecular Discoveries 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 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.

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. Molecular Discoveries has agreed that it will not publicly resell more than 100,000 shares in any 90-day period.

Since the Company’s inception on February 25, 2004, the Company has been primarily engaged in the acquisition of certain intellectual property, together with development of its product candidates and the recent clinical testing activities for one of its vaccine product candidates, and has not generated any recurring revenues. As a result, the Company has incurred operating losses and, as of December 31, 2010, the Company had an accumulated deficit of $22,953,788. The Company expects to incur significant research, development and administrative expenses before any of its products can be launched and recurring revenues generated.

2. Summary of Significant Accounting Policies

Development Stage Enterprise – We are a development stage enterprise as defined by Financial Accounting Standard Board’s Topic 915, “Accounting and Reporting by Development Stage Enterprises.” We are devoting substantially all our present efforts to research and development. All losses accumulated since inception are considered part of our development stage activities.

Liquidity – As of December 31, 2010, we had working capital of $4,896,360, compared to working capital of $1,053,438 as of December 31, 2009. The estimated cost of completing the development of either of our current vaccine product candidates and of obtaining all required regulatory approvals to market either of those product candidates is substantially greater than the amount of funds we currently have available. However, we believe that our existing cash balances, together with the $8 million in proceeds, before offering costs, from our February 2011 private placement and potential proceeds under our preferred stock purchase arrangement with Socius Capital Group, LLC, will be sufficient to fund our currently planned level of operations through at least the third quarter of 2012, although there is no assurance that such proceeds will be sufficient for this purpose.

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. As of December 31, 2009 and December 31, 2010, the Company had $0 and $4,500,000, respectively, of certificates of deposit with an original maturity of 90 days or less. These securities were fully covered by FDIC insurance.

Short-Term Investments – As of December 31, 2009 and December 31, 2010, the Company had $1,075,903 and $0, respectively, of certificates of deposit which mature within an original maturity of six months. These securities were fully covered by FDIC insurance. They are classified as held-to-maturity and under ASC Topic 320, “Investments in Debt Securities,” are measured at cost since the Company has the intent and ability to hold these securities to maturity.

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. Computer and computer equipment are depreciated over 3 years. Management continuously monitors and

 

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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. Repairs and maintenance costs are expensed as incurred.

Research and Development Costs – Research and development expenses consist of costs incurred for direct research and development and are expensed as incurred. On November 10, 2010, the Company received a grant under the Patent Protection and Affordable Care Act of 2010. The grant, which totaled $244,479, will be used to fund ongoing projects, including the continued development of ICT-107 and was recorded as an offset to research and development costs for fiscal year end December 31, 2010.

Stock Based Compensation – Stock-based compensation expense is estimated as of the grant date based on the fair value of the award. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options and quoted market prices of our common stock to estimate fair value of restricted stock. The expected term is estimated using the simplified method, as defined in Staff Accounting Bulletin No. 107. The risk free interest rate for each grant is equal to the U.S. Treasury rate in effect at the time of grant for instruments with an expected life similar to the expected option term. Because of our limited trading history as a public company, the stock volatility assumption is based on an analysis of our historical volatility and the volatility of the common stock of comparable companies in the medical industry and on the historical volatility of our stock. The dividend yield of zero is based upon the fact that we have not historically granted cash dividends, and do not expect to issue dividends in the foreseeable future.

The Company recognizes stock-based compensation expense over the requisite service period, which generally equals the vesting period. For awards that vest based on employment, the Company recognizes the associated compensation expense on a straight-line basis. For performance based awards, the Company recognizes expense using the graded vesting methodology based on the number of shares expected to vest. Compensation expense associated with these performance based awards is adjusted quarterly to reflect subsequent changes in the estimated outcome of performance-related conditions until the date the results are determined.

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,
2008
    Year Ended
December 31,
2009
    Year Ended
December 31,
2010
 

Risk-free interest rate

     2.65     1.40     1.24

Expected dividend yield

     None        None        None   

Expected term

     3.9 years        3.8 years        3.7 years   

Expected volatility

     100.0     118.0     102.0

The weighted-average grant-date fair value of options granted during the years ended December 31, 2008, 2009 and 2010 was $0.35, $0.32 and $0.62, 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. The Company has not declared or paid any dividends and does 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.

 

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Expected volatility is based on market prices of traded options for comparable entities within our industry and on the historical volatility of our stock.

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, 2010, the Company had 51.8 million shares of authorized but unissued 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 ASC Topic 740, “Accounting for Income Taxes”. Under the liability method, 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. FASB ASC 740, Income Taxes, (“ASC 740”), clarifies the accounting for uncertainty in income tax positions (“tax positions”). The provisions of ASC 740 require the Company to recognize in its financial statements the impact of a tax position if the position will more likely than not be sustained upon examination by a taxing authority, based on the technical merits of the position. The Company periodically analyzes its tax positions taken and expected to be taken and has determined that since inception there has been no need to record a liability for uncertain tax positions. The Company recognizes interest and penalties for uncertain tax positions in income tax expense. There was no accrued interest or penalties related to uncertain tax positions as of December 31, 2008, 2009 or 2010. The Company is neither under examination by any taxing authority, nor has it been notified of an impending examination. Due to the Company’s recognition of losses since inception, all of the Company’s reporting periods are effectively open to examination by the applicable taxing authorities.

Fair Value Measurements – The Company measures the fair value of financial assets and liabilities recorded at fair value based on the guidance of ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 - quoted prices in active markets for identical assets or liabilities

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

Warrant liabilities represent the only financial assets or liabilities recorded at fair value by the Company. The fair value of warrant liabilities are determined based on Level 3 inputs.

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 16,113,917 shares, 10,555,927 shares and 12,358,018 shares at December 31, 2008, December 31, 2009 and December 31, 2010, respectively.

Recently Issued Accounting Standards – Effective January 1, 2010, the Company adopted an accounting standard update regarding fair value measurements. As codified under ASC 820, this update

 

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requires additional disclosures about fair value measurements including transfers in and out of Levels 1 and 2 and a higher level of disaggregation for the different types of financial instruments. For the reconciliation of Level 3 fair value measurements, information about purchases, sales, issuances and settlements should be presented separately. Because this update addresses disclosure requirements, the adoption of this update did not impact our financial position, results of operations or cash flows.

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

3. Property and Equipment

As of December 31, 2009 and December 31, 2010, $10,900 and $21,472 of equipment had been purchased, respectively. Depreciation expense was $2,075, $3,397 and $3,633 for the years ended December 31, 2008, December 31, 2009 and December 31, 2010, respectively. Depreciation expense was $9,105 for the period from February 25, 2004 (date of inception) to December 31, 2010.

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 cancer stem cell and 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. Through December 31, 2009, the Company has paid Cedars-Sinai a total of $166,660 in connection with the Phase I clinical trial. The Company also was required to commence a Phase II clinical trial for a product candidate by December 31, 2008 and a waiver of this requirement was obtained from Cedars-Sinai (see Second Amendment below).

On June 16, 2008, the Company entered into a First Amendment to Exclusive License Agreement (the “Amendment”) with Cedars-Sinai. The Amendment amended the License Agreement to include in the Company’s exclusive license from Cedars-Sinai under that agreement an epitope to CD133 and certain related intellectual property. This technology will be covered by a U.S. patent application that will be filed by the parties. Pursuant to the Amendment, the Company issued Cedars-Sinai 100,000 shares of the Company’s common stock as an additional license fee for the licensed CD133 epitope technology, which will be subject to the royalty and other terms of the License Agreement.

 

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On July 22, 2009, the Company entered into a Second Amendment to Exclusive License Agreement (the “Second Amendment”) with Cedars-Sinai to become effective August 1, 2009. The Second Amendment amended the License Agreement to revise the milestones set forth in the License Agreement that the Company must achieve in order to maintain its license rights under that agreement. The revised milestones include the replacement of a milestone that required commencement of a Phase II clinical trial for the Company’s first product candidate by no later than December 31, 2008 with milestones that require commencement of a Phase I clinical trial for the Company’s second product candidate by no later than June 30, 2010 and commencement of a Phase II clinical trial for one of the Company’s product candidates by no later than March 31, 2012.

Effective March 23, 2010, the Company entered into a Third Amendment to the Exclusive License Agreement (the “Third Amendment”) with Cedars-Sinai. The Third Amendment amended the License Agreement to revise the milestones set forth in the License Agreement that the Company must achieve in order to maintain its license rights under that agreement. The revised milestones include the replacement of a milestone that required commencement of a Phase I clinical trial for the Company’s second product candidate by no later than June 30, 2010 and commencement of a Phase II clinical trial for one of the Company’s product candidates by no later than March 31, 2012 with a requirement that the Company by September 30, 2011 either commence a Phase II clinical trial for its dendritic cell vaccine candidate or a Phase I clinical trial for its cancer stem cell vaccine candidate. The amendment also added a requirement that the Company obtain certain defined forms of equity or other funding in the amount of at least $2,500,000 by December 31, 2010 and a total of at least $5,000,000 by September 30, 2011. These funding requirements were fully satisfied as of June 30, 2010.

On September 20, 2010, the Company entered into a sponsored research agreement with Cedars-Sinai to provide services to develop standard operating procedures for dendritic cell vaccine preparation over the next twelve months for $446,142.

5. Commitments and Contingencies

Operating Lease

Effective March 1, 2010, the Company renewed its lease through March 31, 2011 at a monthly rental rate of $2,779. In May 2010, the Company amended its lease to a monthly rental rate of $2,320 for three months and to a monthly rental rate of $2,894 for the remaining months through June 30, 2011. In August 2010, the Company amended its lease to a monthly rental rate of $3,140 for September 2010 and to a monthly rental rate of $3,493 for the remaining months through June 30, 2011.

Employment Agreement with Dr. Manish Singh

On March 4, 2010, the Company entered into an Employment Agreement, effective as of February 18, 2010, with Dr. Manish Singh pursuant to which Dr. Singh will continue to serve on a full-time basis as the Company’s President and Chief Executive Officer for a one-year term commencing February 18, 2010. The Company is required under the Employment Agreement to use its commercially reasonable efforts to have Dr. Singh continue to serve as a member of the Company’s Board of Directors during the term of the Employment Agreement. The Employment Agreement may be extended for an additional one-year period upon the mutual agreement of the Company and Dr. Singh.

The Employment Agreement provides for an annual base salary of $300,000. In addition, provided that Dr. Singh continues to serve as the Company’s President and Chief Executive Officer for the entire one-year term of the Employment Agreement, the Company will pay Dr. Singh a discretionary cash bonus of up to $50,000 upon completion of the one-year term.

The Employment Agreement dated as of February 18, 2009 between the Company and Dr. Singh (the “Prior Agreement”) provides that Dr. Singh is entitled to receive cash milestone bonuses, not to exceed an

 

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aggregate amount of $200,000, of (i) $50,000 upon the Company’s completion of a financing, a strategic alliance or a merger or acquisition generating at least $2,500,000 of net proceeds (after commissions) during the term of the Prior Agreement, (ii) $100,000 upon the Company’s completion of a financing, a strategic alliance or a merger or acquisition generating at least $5,000,000 of net proceeds (after commissions) during the term of the Prior Agreement, or (iii) $200,000 upon the Company’s completion of a financing, a strategic alliance or a merger or acquisition generating at least $10,000,000 of net proceeds (after commissions) during the term of the Prior Agreement. The Prior Agreement also provides that an option granted to Dr. Singh to purchase 200,000 shares of the Company’s common stock will vest if the Company’s working capital is at least $8,000,000 at the end of the term of the Prior Agreement.

The Employment Agreement amends the Prior Agreement to provide that the milestones described in the preceding paragraph may be satisfied by including the net proceeds received by the Company at any time prior to August 17, 2010 from (i) a financing by the Socius Capital Group or (ii) any private placement financing that is covered by a signed term sheet that was entered into by the Company prior to February 18, 2010 or from another source at the same or better terms as contemplated by such signed term sheet. Also, for purposes of determining whether the $8,000,000 working capital milestone in the preceding paragraph has been satisfied, the Employment Agreement provides that working capital will be calculated as of the date of the Company’s receipt of the proceeds that are being included to satisfy the milestone. This funding milestone was fully satisfied as of June 30, 2010.

Pursuant to the Employment Agreement, the Company granted to Dr. Singh a seven-year incentive stock option under the Company’s 2006 Equity Incentive Plan (the “Plan”), or a new qualified option plan, to purchase 600,000 shares of the Company’s common stock at an exercise price equal to $0.90 per share, which was the closing market price of the common stock on the option grant date. The option grant was subject to the approval by the Company’s stockholders of an increase in the authorized number of shares under the Plan and an increase in the number of shares that may be granted to any individual during a 12-month period, which approval was subsequently obtained. 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.

The option granted to Dr. Singh under the Employment Agreement will vest (i) as to 360,000 shares, in 12 equal monthly installments of 30,000 shares each over the 12-month period from and immediately following the grant date, (ii) as to 30,000 shares, if the Company achieves during the term of the Employment Agreement a volume-weighted average trading price for its common stock of greater than $1.60 for any consecutive 15-day trading period during the term of the agreement on average daily trading volume of at least 20,000 shares, (iii) as to 90,000 shares, if the Company achieves during the term of the Employment Agreement a volume-weighted average trading price for its common stock of greater than $2.00 for any consecutive 15-day trading period during the term of the agreement on average daily trading volume of at least 20,000 shares, (iv) as to 30,000 shares, upon treating the first patient in a Phase II clinical trial, and (v) as to 90,000 shares, if during the term of the Employment Agreement the Company completes a financing, a strategic alliance or a licensing agreement with upfront licensing payments to the Company or a merger or acquisition that generates at least $5,000,000 of net proceeds (after commissions) for the Company beyond the $10,000,000 achieved by August 17, 2010, with any financing proceeds received by the Company during the first 6 months of the Employment Agreement that are used to satisfy milestones under the Prior Agreement not being included as proceeds to satisfy the milestones described in this paragraph.

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, then (i) the Company upon such termination will be required to make a lump sum payment to Dr. Singh equal to 6 months of his base annual salary, (ii) any stock options granted to Dr. Singh, to the extent vested, will be retained by Dr. Singh and will be exercisable on the terms described above, and (iii) the vesting of an additional number of shares subject to all options granted to Dr. Singh equal to 50% of all shares subject to such options that have not already vested will immediately accelerate and will be exercisable on the terms described above. If

 

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Dr. Singh terminates his employment for “good reason” as defined in the Employment Agreement, he will receive the severance benefits described in the preceding sentence, except that 100% of his options will vest if his employment terminates for good reason following a merger or similar corporate transaction in which the Company is not the surviving entity.

Employment Agreement with Dr. James Bender

On March 4, 2010, the Company entered into an Employment Agreement, effective as of February 1, 2010, with Dr. James Bender pursuant to which Dr. Bender will serve on a full-time basis as the Company’s Vice President – Product Development and Manufacturing for a one-year term commencing February 18, 2010. Prior to February 1, 2010, Dr. Bender had been serving on a part-time basis as the Company’s Vice President – Clinical Development pursuant to an Agreement dated as of September 1, 2009, as amended on September 14, 2009 (the “Prior Agreement”).

The Employment Agreement provides for an annual base salary of $170,000. Pursuant to the Employment Agreement, the Company granted to Dr. Bender a seven-year incentive stock option under the Company’s Plan to purchase 150,000 shares of the Company’s common stock at an exercise price equal to $0.90 per share, which was the closing market price of the common stock on the option grant date. The option grant was subject to the approval by the Company’s stockholders of an increase in the authorized number of shares under the Plan, which approval was subsequently obtained.

The option granted to Dr. Bender under the Employment Agreement will vest at the rate of 6,250 shares per month over the term of the Employment Agreement as to 75,000 shares. The option will vest as to the remaining 75,000 shares upon the Company’s attainment of the following development milestones, and Dr. Bender will also be entitled to receive the following cash bonuses upon attainment of these milestones: (i) completion by September 30, 2010 of the technology transfer to a contract manufacturer for the Company’s ICT-107 product will result in a $10,000 cash bonus and the vesting of 25,000 option shares; (ii) completion by December 31, 2010 of FDA acceptance of a Phase II clinical trial plan for ICT-107 will result in a $10,000 cash bonus and the vesting of 25,000 option shares; and (iii) completion by December 31, 2010 of the enrollment of the first patient into the Phase II clinical trial for ICT-107 will result in a $10,000 bonus and the vesting of 25,000 option shares.

The Employment Agreement provides that all of the rights and obligations of the Company and Dr. Bender under the Prior Agreement (including Dr. Bender’s right to work for another organization) terminated as of January 31, 2010, except that Dr. Bender’s right under the Prior Agreement to receive cash bonuses and the vesting of options upon the Company’s achievement of specified development milestones will remain in effect.

The Employment Agreement provides that, except as described in the following sentence, if Dr. Bender’s employment terminates prior to the expiration of the one-year term, Dr. Bender will not have any right to receive further compensation under the Employment Agreement other than compensation that was accrued as of his employment termination date. If the Company terminates Dr. Bender’s employment without “cause” as defined in the Employment Agreement, 50% of any unvested options held by Dr. Bender as of the employment termination date will vest, and he will also have the right to receive any compensation that was accrued as of the employment termination date.

Agreement with Dr. John Yu

Effective March 1, 2010, the Company entered into an Agreement with Dr. Yu under which he agreed to serve on a part-time basis as the Company’s Chief Scientific Officer for a one-year term. The Agreement provides for an annual base salary of $70,000 and for cash bonuses of $15,000 each if prior to December 31, 2010 (i) the FDA has accepted a Phase II clinical trial plan for ICT-107, and (ii) a Physicians Investigator IND submission for one of the Company’s specified product candidates has been accepted by the FDA.

 

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Pursuant to the Agreement, the Company granted to Dr. Yu a seven-year nonqualified stock option under the Company’s 2006 Equity Incentive Plan to purchase 125,000 shares of the Company’s common stock at an exercise price equal to $0.90 per share, which was the closing market price of the common stock on the option grant date. The option grant was subject to the approval by the Company’s stockholders of an increase in the authorized number of shares under the Plan, which approval was subsequently obtained. The option may be exercised during the period that Dr. Yu 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.

The option granted to Dr. Yu under the Agreement will vest (i) as to 75,000 shares in four equal quarterly installments following the date of grant and (ii) as to the remaining 50,000 shares, 25,000 shares shall each vest upon timely satisfying the two milestones described above for the payment of cash bonuses to Dr. Yu.

Agreement with C. Kirk Peacock

Effective as of October 30, 2008, the Company renewed, under similar terms, the consulting agreement with C. Kirk Peacock under which Mr. Peacock agreed to serve as Chief Financial Officer for a one-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. Effective May 2009, the consulting agreement dated October 30, 2008 with C. Kirk Peacock was amended to reduce the amount to be paid to $6,000 per month. No other terms of the agreement were changed.

Effective October 30, 2009, the Company renewed the Consulting Agreement with Mr. Peacock under which he will continue to serve on a part-time basis as the Company’s Chief Financial Officer for a one-year term. Under this agreement, Mr. Peacock receives a monthly salary of $6,000 and was granted a seven-year non-qualified option to purchase 56,000 shares of the Company’s common stock at a price of $0.80 per share, with 50,000 shares covered by such option to vest in equal monthly installments over the one-year term of the agreement and with 50% of any those then unvested option shares to become vested if Mr. Peacock’s services are terminated by the Company without cause.

Provided that by October 29, 2010, all of the Company’s internal documentation and internal testing necessary to subsequently complete the Company’s Sarbanes-Oxley Section 404 audit has been finished, the Company will pay Mr. Peacock an additional $6,000 and a further 6,000 of his option shares will become vested. Due to the elimination of the Sarbanes-Oxley Section 404 audit requirement for smaller issuers, this milestone was not met.

Effective October 30, 2010, the Company renewed the Consulting Agreement with Mr. Peacock under which he will continue to serve on a part-time basis as the Company’s Chief Financial Officer for five months. Under this agreement, Mr. Peacock receives a monthly salary of $8,000 and was granted 19,231 shares of restricted common stock, with such shares to vest in equal monthly installments over the five-month term of the agreement and with 100% of any unearned compensation to become payable and any unvested option shares to become vested if Mr. Peacock’s services are terminated by the Company without cause.

Agreements for Financial Advisory Services

On October 1, 2010, the Company entered into an agreement with JFS Investments to provide certain financial advisory services to the Company on a non-exclusive basis (the “JFS Agreement”). The Company will issue an aggregate of up to 144,000 shares of the Company’s common stock as follows: 24,000 shares to

 

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JFS Investments and 12,000 shares to Samel, LLC upon the signing of the JFS Agreement and 108,000 shares to be issued at the rate of 8,000 shares to JFS Investments and 4,000 shares to Samel, LLC each month for months four through twelve following the signing of the JFS Agreement if the Agreement is in effect and has not been terminated by the Company as of that time. Pursuant to the JFS Agreement, the Company also granted three-year warrants to purchase 80,000 shares of the Company’s common stock at an exercise price of $1.00 per share to JFS Investments to vest as to 20,000 shares upon issuance and 6,667 shares on the first day of each of the fourth through the eleventh months and 6,664 shares in the twelfth month and 40,000 shares to Samel, LLC to vest as to 10,000 shares upon issuance and 3,333 shares on the first day of each of the fourth through the eleventh months and 3,336 shares in the twelfth month. Pursuant to the JFS Agreement, the Company also granted three-year warrants to purchase 80,000 shares of the Company’s common stock at an exercise price of $2.00 per share to JFS Investments to vest as to 20,000 shares upon issuance and 6,667 shares on the first day of each of the fourth through the eleventh months and 6,664 shares in the twelfth month and 40,000 shares to Samel, LLC to vest as to 10,000 shares upon issuance and 3,333 shares on the first day of each of the fourth through the eleventh months and 3,336 shares in the twelfth month. The vesting of each of the foregoing warrants will terminate in the event the JFS Agreement is terminated by the Company.

On October 1, 2010, the Company entered into an agreement with Garden State Securities Inc. (“GSS”) to provide certain financial advisory services to the Company on a non-exclusive basis (the “GSS Agreement”). The Company will issue an aggregate of up to 96,000 shares of the Company’s common stock as follows: 24,000 shares to GSS upon the signing of the GSS Agreement and 72,000 shares to be issued at the rate of 8,000 shares for months four through twelve following the signing of the GSS Agreement if the GSS Agreement is in effect and has not been terminated by the Company as of that time. Pursuant to the GSS Agreement, the Company also granted a three-year warrant to purchase 80,000 shares of the Company’s common stock at an exercise price of $1.00 per share to GSS to vest as to 20,000 shares upon issuance and 6,667 shares on the first day of each of the fourth through the eleventh months and 6,664 shares in the twelfth month. Pursuant to the GSS Agreement, the Company also granted a three-year warrant to purchase 80,000 shares of the Company’s common stock at an exercise price of $2.00 per share to vest as to 20,000 shares upon issuance and 6,667 shares on the first day of each of the fourth through the eleventh months and 6,664 shares in the twelfth month. The vesting of each of the foregoing warrants will terminate in the event the GSS Agreement is terminated by the Company.

Research and Development

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

In August 2010, the Company entered into a master service agreement with Averion International Corporation, a clinical research contract organization (“Averion”), to provide us with services in connection with our planned Phase II clinical study for our dendritic cell-based cancer vaccine product candidate for the treatment of glioblastoma at an estimated total cost for such services during the course of the trial of approximately $3.5 million over the next three years.

6. Shareholders’ Equity

Common Stock

In March 2010, the Company raised $1,654,686 (after commissions and offering expenses) from the sale of 1,740,000 shares of common stock and warrants to purchase 696,000 shares of common stock at an exercise price of $1.15 per share, to various investors in a private placement. (See “Warrants and Warrant Liabilities” below.)

In May 2010, the Company raised $2,716,308 (after commissions and offering expenses) from the sale of 2,490,910 shares of common stock and warrants to purchase 1,245,455 shares of common stock at an

 

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exercise price of $1.50 per share, to various investors in a private placement. (See “Warrants and Warrant Liabilities” below)

Preferred Stock

On December 3, 2009, the Company entered into a Preferred Stock Purchase Agreement dated as of December 3, 2009 (the “Preferred Stock Agreement”) with Socius Capital Group, LLC, a Delaware limited liability company d/b/a Socius Life Sciences Capital Group, LLC (the “Investor”). Pursuant to the Preferred Stock Agreement, the Company will issue to the Investor up to $10,000,000 of the Company’s newly created Series A Preferred Stock (the “Preferred Stock”). The purchase price of the Preferred Stock is $10,000 per share. The shares of Preferred Stock that are issued to the Investor will bear a cumulative dividend of 10.0% per annum, payable in shares of Preferred Stock, will be redeemable under certain circumstances and will not be convertible into shares of the Company’s common stock. Subject to the terms and conditions of the Preferred Stock Agreement, the Company has the right to determine (1) the number of shares of Preferred Stock that it will require the Investor to purchase from the Company, up to a maximum purchase price of $10,000,000, (2) whether it will require the Investor to purchase Preferred Stock in one or more traunches, and (3) the timing of such required purchase or purchases of Preferred Stock.

The terms of the Preferred Stock are set forth in a Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock that the Company filed with the Delaware Secretary of State on December 3, 2009.

Pursuant to the Preferred Stock Agreement, the Company agreed to pay the Investor a commitment fee of $500,000 (the “Commitment Fee”), with $250,000 payable when the Company makes its first election to require the Investor to purchase shares of Preferred Stock and with the remaining $250,000 payable when the aggregate amount of Preferred Stock purchased by the Investor equals at least $5,000,000; provided, however, that the first $250,000 portion of the Commitment Fee will be due and payable on the six-month anniversary of the effective date of the registration statement described below even if no sales of Preferred Stock to the Investor have occurred by that date. The Company has the right to elect to pay each installment of the Commitment Fee in immediately available funds or by issuance of shares of common stock. In January 2010, the Company accrued $250,000 in commitment fees associated with the Preferred Stock Agreement.

Concurrently with its execution of the Preferred Stock Agreement, the Company issued to the Investor a warrant (the “Warrant”) to purchase shares of common stock with an aggregate exercise price of up to $13,500,000 depending upon the amount of Preferred Stock that is purchased by the Investor. Each time that the Company requires the Investor to purchase shares of Preferred Stock, a portion of the Warrant will become exercisable by the Investor over a five-year period for a number of shares of common stock equal to (1) the aggregate purchase price payable by the Investor for such shares of Preferred Stock multiplied by 135%, with such amount divided by (2) the per share Warrant exercise price. The initial exercise price under the Warrant is $1.04 per share of common stock. Thereafter, the exercise price for each portion of the Warrant that becomes exercisable upon the Company’s election to require the Investor to purchase Preferred Stock will equal the closing price of the common stock on the date that the Company delivers its election notice. The Investor is entitled to pay the Warrant exercise price in immediately available funds, by delivery of a secured promissory note or, if a registration statement covering the resale of the common stock subject to the Warrant is not in effect, on a cashless basis.

Pursuant to the Preferred Stock Agreement, the Company agreed to file with the Securities and Exchange Commission a registration statement covering the resale of the shares of common stock that are issuable to the Investor under the Warrant and in satisfaction of the Commitment Fee. The registration statement was deemed effective on January 22, 2010. The 1.2 million shares of common stock registered for the Commitment Fee are held in escrow by the Company.

 

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On May 2, 2010, the Company issued and sold 400 shares of the Preferred Stock to Socius Capital Group, LLC pursuant to the terms of the Preferred Stock Agreement. The aggregate purchase price for the Preferred Stock was $4,000,000 (less $220,842 in Commitment Fees and offering expenses). Under the terms of the Preferred Stock Agreement, Socius remains obligated, from time to time until December 3, 2012, to purchase up to an additional 600 shares of Preferred Stock at a purchase price of $10,000 per share upon notice from the Company to Socius, and subject to the satisfaction of certain conditions, as set forth in the Preferred Stock Agreement.

In connection with the foregoing transaction, a portion of the warrants held by an affiliate of Socius became vested and exercisable covering 2,700,000 shares of the Company’s common stock for a five-year period at an exercise price of $2.00 per share under the terms of the Preferred Stock Agreement. In consideration of Socius agreeing to grant the Company certain waivers under the Preferred Stock Agreement, this affiliate also became entitled to purchase up to an additional 1,350,000 shares of the Company’s common stock at an exercise price of $2.50 per share. On May 2, 2010, the affiliate of Socius exercised a portion of its warrant for 1,675,000 shares and paid the $3,350,000 exercise price for these shares by delivering a four-year full recourse promissory note for this amount, as permitted by the Preferred Stock Agreement. The Company immediately thereafter redeemed approximately 248 shares of the Preferred Stock by offsetting the $3,350,000 redemption price for these shares against the $3,350,000 owed to the Company under the note. On December 2, 2010, the affiliate of Socius exercised the remaining portion of its warrant for 1,025,000 shares and paid the $2,050,000 exercise price for these shares by delivering a four-year full recourse promissory note for this amount, as permitted by the Preferred Stock Agreement. The Company immediately thereafter redeemed approximately 152 shares of the Preferred Stock by offsetting the $2,050,000 redemption price for these shares against the $2,050,000 owed to the Company under the note. (See “Warrants” and “Warrant Liabilities” below.)

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, 2010, the Company has reserved 6,000,000 shares of common stock for issuance under the Plan and options to purchase 3,761,421 common shares have been granted under the 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 an affiliate of the Company’s then Chairman of the Board.

 

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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.

The following table summarizes stock option activity for the Company during the twelve months ended December 31, 2010:

 

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

Outstanding December 31, 2007

     8,645,084      $ 1.02         

Granted

     1,100,000      $ 0.77         

Exercised

     —        $ —           

Forfeited or expired

     (43,750   $ 0.86         
                                  

Outstanding December 31, 2008

     9,701,334      $ 0.99         

Granted

     1,494,822      $ 0.43         

Exercised

     (509,229   $ 0.69         

Forfeited or expired

     (131,000   $ 0.93         
                                  

Outstanding December 31, 2009

     10,555,927      $ 0.92         

Granted

     1,347,500      $ 0.91         

Exercised

     (455,332   $ 0.39         

Forfeited or expired

     (353,250   $ 1.04         
                                  

Outstanding December 31, 2010

     11,094,845      $ 0.94         5.6       $ 4,690,490   
                                  

Vested or expected to vest at December 31, 2010

     10,488,096      $ 0.94         5.9       $ 4,432,825   
                                  

As of December 31, 2010, the total unrecognized compensation cost related to unvested stock options amounted to $448,481, which will be amortized over the weighted-average remaining requisite service period of less than one year.

Warrants

In connection with the March 2010 common stock private placement, the Company issued to the investors warrants to purchase 696,000 shares of the Company’s common stock at $1.15 per share. The warrants have a term of 26 months from the date of issuance. On December 31, 2010, warrants to purchase 696,000 shares of the Company’s common stock were outstanding related to this private placement. (See “Warrant Liabilities” below.)

In connection with the May 2010 common stock private placement, the Company issued to the investors warrants to purchase 1,245,455 shares of the Company’s common stock at $1.50 per share. The warrants have a term of 36 months from the date of issuance. On December 31, 2010, warrants to purchase 1,245,455 shares of the Company’s common stock were outstanding related to this private placement. (See “Warrant Liabilities” below.)

In connection with the May 2010 Preferred Stock sale, the Company issued warrants to purchase 2,700,000 shares of common stock at an exercise price of $2.00 held by an affiliate of Socius. The warrants

 

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have a term of five-year from the date of issuance. In consideration of Socius agreeing to grant the Company certain waivers under the Preferred Stock Purchase Agreement, this affiliate also became entitled to purchase up to an additional 1,350,000 shares of the Company’s common stock at an exercise price of $2.50 per share. In May 2010, the affiliate of Socius exercised a portion of its warrant for 1,675,000 shares and paid the $3,350,000 exercise price for these shares by delivering a four-year full recourse promissory note for this amount, as permitted by the Preferred Stock Purchase Agreement. The Company immediately thereafter redeemed approximately 248 shares of the Preferred Stock by offsetting the $3,350,000 redemption price for these shares against the $3,350,000 owed to the Company under the note. In December 2010, the affiliate of Socius exercised the remaining portion of its warrant for 1,025,000 shares and paid the $2,050,000 exercise price for these shares by delivering a four-year full recourse promissory note for this amount, as permitted by the Preferred Stock Purchase Agreement. The Company immediately thereafter redeemed approximately 152 shares of the Preferred Stock by offsetting the $2,050,000 redemption price for these shares against the $2,050,000 owed to the Company under the note. On December 31, 2010, no warrants to purchase of the Company’s common stock at $2.00 were outstanding and warrants to purchase 1,350,000 shares of the Company’s common stock at $2.50 were outstanding related to this private placement. (See “Warrant Liabilities” below.)

In connection with an investor relations agreement in December 2010, the Company issued a two-year warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.60.

In January 2009, the Company delivered notice to warrant holders in connection with the reduction from $2.50 to $0.25 per share of the exercise price of warrants to purchase a total of 6,112,583 shares of the Company’s common stock and in connection with the extension of the expiration date of warrants to purchase a total of 6,412,583 shares of the Company’s common stock from earlier dates in 2009 to June 30, 2009. The Company valued the warrant modification at $611,258, using the Black-Scholes pricing model and the following assumptions: contractual term of 0.45 years, an average risk-free interest rate of 0.29% a dividend yield of 0% and volatility of 118%. In the footnotes to the Company’s financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, the Company disclosed that it anticipated taking a non-cash charge of approximately $500,000 in the first quarter of 2009. In the first quarter 2009, the Company determined that the warrant modification should be treated as a dividend in-kind and not a non-cash charge, and since the Company was in a deficit position at the time of the modification, no dividend was recorded.

On June 30, 2009, the Company issued 1,970,992 shares of its common stock to 58 purchasers upon their exercise of warrants. The exercise price of 1,670,992 shares was $0.25 per share, and the exercise price of 300,000 shares was $0.15 per share. The Company received an aggregate purchase price of $462,748, and the Company did not pay any underwriting discounts or commissions in the transaction. As of December 31, 2009, the Company had no outstanding stock purchase warrants issued to investors.

Warrant Liabilities

In connection with the March 2010 common stock private placement, the Company issued to the investors warrants to purchase 696,000 shares of the Company’s common stock at $1.15 per share. Of the total proceeds from the March 2010 common stock private placement, $257,520 was allocated to the freestanding warrants associated with the units based upon the fair value of the warrants determined under the Black Scholes option pricing model. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that certain future common stock issuances are made at a price less than $1.00.

Under ASC 815 “Derivatives and Hedging”, the March 2010 warrants do not qualify for equity treatment due to the potential variability of their exercise price, and therefore are recognized as a liability. The warrant liability will be adjusted to fair value each reporting period, and any changes in value will be recognized in the statement of operations. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that certain future common stock issuances are made at a price less than $1.00. We have concluded that the value of the conversion feature does not materially differ from the valuation of such warrants using the Monte Carlo or lattice simulation models, and therefore the use of the Black-Scholes valuation model is considered a reasonable method to value the warrants. The assumptions used in the Black Scholes model for determining the initial fair value of the warrants were as

 

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follows: (i) dividend yield of 0%; (ii) expected volatility of 102%, (iii) risk-free interest rate of 1.00%, and (iv) contractual life of 26 months. For the year ended December 31, 2010, the Company recorded an other expense charge for the change in fair value of warrant liability of $215,760, with a carrying value of $473,280 at December 31, 2010.

In connection with the May 2010 common stock private placement, the Company issued to the investors warrants to purchase 1,245,455 shares of the Company’s common stock at $1.50 per share. Of the total proceeds from the May 2010 common stock private placement, $834,455 was allocated to the freestanding warrants associated with the units based upon the fair value of the warrants determined under the Black Scholes option pricing model. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that certain future common stock issuances are made at a price less than $1.00.

Under ASC 815 “Derivatives and Hedging”, the May 2010 warrants do not qualify for equity treatment due to the potential variability of their exercise price, and therefore are recognized as a liability. The warrant liability will be adjusted to fair value each reporting period, and any changes in value will be recognized in the statement of operations. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that certain future common stock issuances are made at a price less than $1.00. We have concluded that the value of the conversion feature does not materially differ from the valuation of such warrants using the Monte Carlo or lattice simulation models, and therefore the use of the Black-Scholes valuation model is considered a reasonable method to value the warrants. The assumptions used in the Black Scholes model for determining the initial fair value of the warrants were as follows: (i) dividend yield of 0%; (ii) expected volatility of 102%, (iii) risk-free interest rate of 1.375%, and (iv) contractual life of 36 months. For the year ended December 31, 2010, the Company recorded an other income charge for the change in fair value of warrant liability of $99,636 with a carrying value of $934,091 at December 31, 2010.

In connection with the May 2010 Preferred Stock sale, the Company vested warrants to purchase 2,700,000 shares of common stock at an exercise price of $2.00 held by an affiliate of Socius and issued warrants to purchase an additional 1,350,000 shares of the Company’s common stock at an exercise price of $2.50 per share. Of the total proceeds from the May 2010 preferred stock sale, $5,710,500 was allocated to the freestanding warrants associated with the units based upon the fair value of these warrants determined under the Black Scholes option pricing model. The excess of the value of the freestanding warrants over the net proceeds of $1,931,342 was charged to change in fair value of warrant liability in the statement of operations. The warrants contain a provision whereby the warrant may be settled for cash in connection with a change of control with a private company. In May 2010, the affiliate of Socius exercised a portion of its warrant for 1,675,000 shares, which reduced warrant liabilities by $2,395,250. In December 2010, the affiliate of Socius exercised a portion of its warrant for 1,025,000 shares, which reduced warrant liabilities by $912,250.

Under ASC 815 “Derivatives and Hedging”, the May 2010 Preferred Stock warrants do not qualify for equity treatment, and are recognized as a liability. The warrant liability will be adjusted to fair value each reporting period, and any changes in value will be recognized in the statement of operations. The warrants contain a provision whereby the warrant may be settled for cash in connection with a change of control with a private company. Since settlement feature included in the warrant agreement is calculated using the Black-Scholes valuation model, the Company uses the Black-Scholes valuation model to value the warrants. The assumptions used in the Black Scholes model for determining the initial fair value of the warrants were as follows: (i) dividend yield of 0%; (ii) expected volatility of 102%, (iii) risk-free interest rate of 2.50%, and (iv) contractual life of 60 months. For the year ended December 31, 2010, the Company recorded an other income charge for the change in fair value of warrant liability of $1,228,500, with a carrying value of $1,174,500 at December 31, 2010.

The following is a reconciliation of the beginning and ending balances for warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period ended December 31, 2010:

 

     Warrant
Liabilities
 

Balance – January 1, 2010

   $ —    

Issuance of warrants

     6,907,609   

Exercise of warrants

     (3,307,500

(Gain) or Loss included in earnings

     (1,018,238

Transfers in and/or out of Level 3

     —    
        

Balance – December 31, 2010

   $ 2,581,871   
        

Promissory Note

In October 2009, the Company’s former President exercised stock options for 150,479 shares of common stock and as provided under the stock option agreement provided the Company with a full recourse

 

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five-year promissory note bearing interest of 2.59% per annum. The promissory note is secured by a pledge of shares being acquired with all proceeds of any sale to be applied first to retire in full the promissory note. The Company recorded the promissory note as an offset against shareholders’ equity. For the year ended December 31, 2010, the Company recorded interest income of $1,614.

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 carry forwards 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, 2010, 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.

The Company’s effective income tax rate differs from the amount computed by applying the federal statutory income tax rate to loss before income taxes as follows:

 

         2008             2009             2010      

Income tax benefit at the federal statutory rate

     (34 %)      (34 %)      (34 %) 

State income tax benefit, net of federal tax benefit

     (6 %)      (6 %)      (6 %) 

Change in fair value of warrant liability

     —          —          (7 %) 

Change in valuation allowance for deferred tax assets

     40     40     47
                        

Total

     —          —          —     
                        

Deferred taxes consisted of the following:

 

     December 31,
2009
    December 31,
2010
 

Net operating loss carryforwards

     $2,888,051      $ 4,617,671   

Stock-based compensation

     2,488,808        2,811,949   

Less valuation allowance

     (5,376,859     (7,429,620
                

Net deferred tax asset

   $ —        $ —     
                

At December 31, 2009 and December 31, 2010, the Company had approximately $7,220,127 and $11,544,178, respectively, of net operating loss carryforwards. Due to our equity financing transactions, and other owner shifts as defined in Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, we incurred “ownership changes” pursuant to the Code. Accordingly, our use of net operating loss carryforwards is limited. We are currently studying the impact of Section 382 on the future realization of our various tax attributes. Such losses expire in 2024 through 2030 as of December 31, 2010. The utilization of the carryforwards is dependent upon the Company’s ability to generate sufficient taxable income during the carryforward period.

As of the date of adoption of ASC 740 and the years ended December 31, 2010, 2009 and 2008, the tax returns for 2008 through 2010 remain open to examination by the Internal Revenue Service and state tax authority.

8. Comprehensive Loss

For the year ended December 31, 2010, there was no other comprehensive loss and accordingly a Statement of Other Comprehensive Loss has not been presented. Comprehensive income would normally include: foreign currency translation adjustments, a change in the market value of a futures contract that qualifies as a hedge of an asset reported at fair value, a net loss recognized as an additional pension liability not yet recognized as net periodic pension cost, and unrealized holding gains and losses on available-for-sale securities.

9. Subsequent Events

Private Placement

In February 2011, the Company raised $8,090,664 (before commissions and offering expenses) from the sale of 5,219,768 shares of common stock and warrants to purchase 2,609,898 shares of common stock at an exercise price of $2.25 per share, to various investors in a private placement. The warrants have a term of

 

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60 months from the date of issuance. As a result of the Financing Transaction, the Company at the Closing issued to Summer Street Research Partners and Dawson James Securities, Inc. (collectively, the “Placement Agents”), who served as the placement agents for the Financing Transactions, warrants to purchase up to 208,791 shares of Common Stock (the “Placement Agent Warrants”) on the same terms and conditions as the Investor Warrants and paid a commission of $566,345 to the Placement Agents as well as certain of their expenses.

Sponsored Research and Vaccine Production Agreement

In January 2011, the Company entered in to a Sponsored Research and Vaccine Production Agreement with the University of Pennsylvania extending our existing sponsored research agreement with that institution and providing certain manufacturing services for ICT-107 vaccine for use in our Phase II clinical trial.

Research Agreement

In January 2011, the Company amended the agreement with Averion to provide additional services in connection with our planned Phase II clinical study for our dendritic cell-based cancer vaccine product candidate for the treatment of glioblastoma for an additional cost of $469,807.

 

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Exhibit Index

 

Exhibit
Number

  

Description

2.1

   Agreement and Plan of Reorganization dated as of May 5, 2005, as amended, among 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)

3.1

   Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (2)

3.2

   Certificate of Amendment to Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (2)

3.3

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

3.4

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

3.5

   Amended and Restated Bylaws of ImmunoCellular Therapeutics, Ltd. (25)

3.6

   Amended and Restated 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (25)

4.1

   Form of Common Stock Certificate for ImmunoCellular Therapeutics, Ltd. (5)

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 as of February 16, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (6)

4.5

   Letter Agreement dated as of February 16, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (6)

4.6

   Subscription Agreement dated as of April 19, 2007 between ImmunoCellular Therapeutics, Ltd. and RAB Special Situations (Master) Fund Limited. (6)

4.7

   Warrant dated as of 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. (6)

4.8

   Warrant dated as of 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. (6)

4.9

   Warrant dated as of 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. (6)

 

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4.10    Warrant dated as of 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. (6)
4.11    Form of Subscription Agreement containing registration rights between the participants in the April/May 2007 private placement and ImmunoCellular Therapeutics, Ltd. (7)
4.12    Form of Warrant issued to participants in the April/May 2007 private placement to purchase shares of common stock of ImmunoCellular Therapeutics, Ltd. (7)
4.13    Form of Notice of Exercise of Warrants delivered by ImmunoCellular Therapeutics, Ltd. in January 2009 in connection with the reduction from $2.50 to $0.25 per share of the exercise price of warrants to purchase a total of 6,112,583 shares of common stock of ImmunoCellular Therapeutics, Ltd. and in connection with the extension of the expiration date of warrants to purchase a total of 6,412,583 shares of common stock of ImmunoCellular Therapeutics, Ltd. (17)
4.14    Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock dated December 3, 2009. (20)
4.15    Warrant dated December 3, 2009 issued by ImmunoCellular Therapeutics, Ltd. to Socius Capital Group, LLC d/b/a Socius Life Sciences Capital Group, LLC (20)
4.16    Amended Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock dated May 3, 2010. (22)
4.17    Form of Warrant issued to participants in the March 2010 private placement to purchase shares of common stock of ImmunoCellular Therapeutics, Ltd. (22)
4.18    Warrant dated May 2, 2010 for 1,350,000 shares issued by ImmunoCellular Therapeutics, Ltd. to Socius CG II, Ltd. (22)
4.19    Form of Warrant issued to participants in the February 2011 private placement to purchase shares of common stock of ImmunoCellular Therapeutics, Ltd. (26)
10.1    Exclusive License Agreement dated as of November 17, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd.† (8)
10.2    First Amendment to Exclusive License Agreement dated as of June 16, 2008 2006, between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd.† (9)
10.3    Stock Purchase Agreement dated as of November 17, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (8)
10.4    Registration Rights Agreement dated as of November 17, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (8)
10.5    Securities Purchase Agreement dated as of November 17, 2006 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. (8)
10.6    Agreement dated as of November 17, 2006 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd.* (8)
10.7    Nonqualified Stock Option Agreement dated as of November 17, 2006 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd.* (8)
10.8    Registration Rights Agreement dated as of November 17, 2006 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. (8)
10.9    2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (4)

 

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10.10    Amendment No. 1 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (10)
10.11    Amendment No. 2 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (11)
10.12    Amendment No. 3 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (11)
10.13    Amendment No. 4 to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (9)
10.14    Form of Non-Qualified Stock Option Agreement for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (12)
10.15    Form of Incentive Stock Option Agreement for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd. (12)
10.16    Employment Agreement dated as of February 18, 2008 between Dr. Manish Singh and ImmunoCellular Therapeutics, Ltd.* (11)
10.17    Employment Agreement dated as of February 18, 2009 between Dr. Manish Singh and ImmunoCellular Therapeutics, Ltd.* (17)
10.18    Employment Agreement dated as of November 5, 2007 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd. (13)
10.19    Employment Agreement dated as of October 30, 2008 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd.* (17)
10.20    Agreement dated as of July 7, 2006 between Technomedics Management & Systems, Inc. and ImmunoCellular Therapeutics, Ltd. (14)
10.21    Agreement dated as of November 17, 2006 between Technomedics Management & Systems, Inc. and ImmunoCellular Therapeutics, Ltd.* (5)
10.22    Memorandum of Agreement dated as of November 21, 2007 between Molecular Discoveries LLC and ImmunoCellular Therapeutics, Ltd. (11)
10.23    Agreement dated as of February 14, 2008 between Molecular Discoveries, LLC and ImmunoCellular Therapeutics, Ltd. (11)
10.24    Registration Rights Agreement dated as of April 14, 2008, between Molecular Discoveries, LLC and ImmunoCellular Therapeutics, Ltd. (15)
10.25    Agreement dated as of February 14, 2008 between Dr. Cohava Gelber and ImmunoCellular Therapeutics, Ltd. (11)*
10.26    Agreement dated as of August 1, 2008 between Dr. Cohava Gelber and ImmunoCellular Therapeutics, Ltd. * (17)
10.27    Agreement dated as of September 1, 2008 between James G. Bender and ImmunoCellular Therapeutics, Ltd. (16) *
10.28    Office lease dated April 28, 2008 between Regent Business Centers and ImmunoCellular Therapeutics, Ltd., as amended. (17)
10.29    Amendment No. 1 to Agreement dated as of May 1, 2009 to Agreement dated October 30, 2008 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd. *(18)

 

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10.30    Second Amendment dated August 1, 2009 to Exclusive License Agreement dated as of November 1, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (19)
10.31    Preferred Stock Purchase Agreement dated as of December 3, 2009 between ImmunoCellular Therapeutics, Ltd. and Socius Capital Group, LLC d/b/a Socius Life Sciences Capital Group, LLC. (20)
10.32    Employment Agreement dated as of October 30, 2009 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd. *(21)
10.33    Employment Agreement dated as of February 1, 2010 between James G. Bender and ImmunoCellular Therapeutics, Ltd. * (27)
10.34    Employment Agreement dated as of February 18, 2010 between Dr. Manish Singh and ImmunoCellular Therapeutics, Ltd. * (27)
10.35    Agreement dated March 1, 2010 between Dr. John Yu and ImmunoCellular Therapeutics, Ltd. * (27)
10.36    Securities Purchase Agreement dated March 29, 2010 between participants in the March 2010 private placement and ImmunoCellular Therapeutics, Ltd. (23)
10.37    Form of Registration Rights Agreement dated as of March 29, 2010 between participants in the March 2010 private placement and ImmunoCellular Therapeutics, Ltd. (22)
10.38    Agreement dated as of March 4, 2010 between Dr. Elma Hawkins and ImmunoCellular Therapeutics, Ltd.* (22)
10.39    Office Lease dated April 1, 2010 between Regent Business Centers and ImmunoCellular Therapeutics, Ltd. (22)
10.40    Modification Agreement dated May 2, 2010 among Socius CG II, Ltd., Socius Life Sciences Capital Group, LLC and ImmunoCellular Therapeutics, Ltd. (22)
10.41    Third Amendment dated March 26, 2010 to Exclusive License Agreement dated as of November 1, 2006 between Cedars-Sinai Medical Center and ImmunoCellular Therapeutics, Ltd. (22)
10.42    Securities Purchase Agreement dated May 12, 2010 between participants in the May 2010 private placement and ImmunoCellular Therapeutics, Ltd. (23)
10.43    Form of Registration Rights Agreement between participants in the May 2010 private placement and ImmunoCellular Therapeutics, Ltd. (23)
10.44    Employment Agreement dated as of October 30, 2010 between C. Kirk Peacock and ImmunoCellular Therapeutics, Ltd.* (24)
10.45    Office Lease dated May 7, 2010 between Regent Business Centers and ImmunoCellular Therapeutics, Ltd. (23)
10.46    Purchase Agreement, dated as of February 22, 2011, by and between the Company and each investor named therein. (26)
10.47    Registration Rights Agreement, dated as of February 22, 2011, by and among the Company and the investors named therein. (26)
10.48    Exclusive Sublicense Agreement dated May 28, 2010 between Targepeutics, Inc. and ImmunoCellular Therapeutics, Ltd. † **

 

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10.49    Sponsored Research and Vaccine Production Agreement dated January 1, 2011 between The Trustees of the University of Pennsylvania and ImmunoCellular Therapeutics, Ltd. † **
10.50    Placement agent agreement dated March 30, 2010 between Gilford Securities Incorporated and ImmunoCellular Therapeutics, Ltd. **
10.51    Placement agent agreement dated April 7, 2010 between Scarsdale Equities LLC and ImmunoCellular Therapeutics, Ltd. **
10.52    Consulting Agreement dated October 1, 2010 between JFS Investments and ImmunoCellular Therapeutics, Ltd. **
10.53    Advisory services agreement dated October 1, 2010 between Garden State Securities Inc. and ImmunoCellular Therapeutics, Ltd. **
10.54    Co-placement Agents Agreement dated January 31, 2011 among Summer Street Research Partners, Dawson James Securities, Inc. and ImmunoCellular Therapeutics, Ltd. **
23.1    Consent of Marcum LLP. **
23.2    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 us with the Securities and Exchange Commission. The omitted portions of the exhibit have been separately filed by us with the Securities and Exchange Commission.
* Indicates a management contract or compensatory plan or arrangement.
** Filed with this Annual Report on Form 10-K.
(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 November 3, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(3) Previously filed by us on May 9, 2007 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 February 12, 2007 as an exhibit to our Registration Statement on Form SB-2, File No. 333-140598, and incorporated herein by reference.
(6) Previously filed by us on May 1, 2007 as an exhibit to our Registration Statement on Form SB-2, File No. 333-142480, and incorporated herein by reference.
(7) Previously filed by us on July 12, 2007 as an exhibit to our Registration Statement on Form SB-2, File No. 333-144521, and incorporated herein by reference
(8) Previously filed by us on November 22, 2006 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.

 

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(9) Previously filed by us on August 14, 2008 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(10) 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.
(11) Previously filed by us on March 25, 2008 as an exhibit to our Annual Report on Form 10-KSB and incorporated herein by reference.
(12) Previously filed by us on November 9, 2007 as an exhibit to our Registration Statement on Form S-8, File No. 333-147278, and incorporated herein by reference.
(13) Previously filed by us on November 6, 2007 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(14) Previously filed by us on April 2, 2007 as an exhibit to our Annual Report on Form 10-KSB and incorporated herein by reference.
(15) Previously filed by us on April 16, 2008 as an exhibit to our Registration Statement on Form S-1, File No. 333-150277, and incorporated herein by reference.
(16) Previously filed by us on November 13, 2008 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(17) Previously filed by us on March 30, 2009 as an exhibit to our Annual Report on Form 10-K and incorporated herein by reference.
(18) Previously filed by us on August 14, 2009 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(19) Previously filed by us on November 13, 2009 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(20) Previously filed by us on December 7, 2009 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(21) Previously filed by us on December 23, 2009 as an exhibit to our Registration Statement on Form S-1 and incorporated herein by reference.
(22) Previously filed by us on May 12, 2010 as an exhibit to our Registration Statement on Form S-1 to SB-2, File No. 333-144521 and incorporated herein by reference.
(23) Previously filed by us on May 18, 2010 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(24) Previously filed by us on November 15, 2010 as an exhibit to our Quarterly Report on Form 10-Q and incorporated herein by reference.
(25) Previously filed by us on January 11, 2011 as an exhibit to our Registration Statement on Form S-8 and incorporated herein by reference.
(26) Previously filed by us on February 25, 2011 as an exhibit to our current report on Form 8-K and incorporated herein by reference.
(27) Previously filed by us on March 31, 2010 as an exhibit to our Annual Report on Form 10-K and incorporated herein by reference.

 

Ex - 6

EXHIBIT 10.48

T EXT MARKED BY [ * * *] HAS BEEN OMITTED PURSUANT TO A R EQUEST FOR C ONFIDENTIAL T REATMENT

AND   WAS FILED SEPARATELY WITH THE S ECURITIES AND E XCHANGE C OMMISSION .

EXCLUSIVE SUBLICENSE AGREEMENT

This Exclusive Sublicense License Agreement (“Agreement”), dated as of May 28, 2010 (the “Effective Date”), is made by and between Targepeutics, Inc., a corporation organized under the laws of the State of Delaware (“TI”), having its principal office at 475 Governor Road, Hershey, PA 17033, and ImmunoCellular Therapeutics, Ltd., a Delaware corporation having its principal office at 21900 Burbank Boulevard, 3 rd Floor, Woodland Hills, California 91367 (“SUBLICENSEE”).

WITNESSETH

WHEREAS, The Penn State Research Foundation (“PSRF”) is the owner of U.S. Patent Application No. 10/104,408 (now U.S. Patent No. 7,338,929), and all pending and issued U.S. and foreign counterparts of such application (now patent), and has the right to grant licenses thereunder;

WHEREAS, pursuant to a license agreement, effective as of October 27, 2004, between PSRF and TI (the “Master License Agreement”), PSRF has granted TI exclusive license rights to U.S. Patent Application No. 10/104,408 (now U.S. Patent No. 7,338,929), and all pending and issued U.S. and foreign counterparts of such application (now patent), on the terms and conditions set forth in the Master License Agreement; and

WHEREAS, SUBLICENSEE desires and TI is willing to grant an exclusive sublicense to U.S. Patent Application No. 10/104,408 (now U.S. Patent No. 7,338,929), and all pending and issued U.S. and foreign counterparts of such application (now patent), covered by the Master License Agreement on the terms and conditions set forth in this Agreement.

NOW THEREFORE, in consideration of the mutual promises and covenants set forth herein and for good and valuable consideration, the adequacy and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement, the following words and phrases shall have the following meanings:

1.1 “AFFILIATE” shall mean any entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with SUBLICENSEE.

1.2 “FIELD” shall mean discovery, research, development, preparation and commercialization of (a) anti-cancer therapeutics, (b) cancer treatments, (c) cancer diagnostics and (d) processes related to (a), (b) or (c).

 

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1.3 “LICENSED PROCESS” shall mean any process or method the practice of which, in the absence of the license granted herein, would constitute an infringement of any unexpired claim within PATENT RIGHTS.

1.4 “LICENSED PRODUCT” shall mean any article, composition, apparatus, substance, chemical, composition or formulation or any other material, or part thereof, which the manufacture, use, sale, offering for sale, or importation of, is covered in whole or in part by at least one unexpired claim of PATENT RIGHTS in the country in which any such product or part thereof is made, used, practiced, leased, transferred, distributed, sold or consigned.

1.5 “NET SALES” shall mean SUBLICENSEE’s and its AFFILIATES’ billings for sales of LICENSED PRODUCTS or LICENSED PROCESSES, less the sum of the following:

(a) discounts actually allowed and granted (including, without limitation, cash discounts and quantity discounts), retroactive price reductions, charge-back payments and rebates granted to managed health care organizations or to federal, state and local governments, their agencies, and purchasers and reimbursers or to trade customers (a “Discount”); provided however, that where any such Discount is based on sales of a bundled set of products in which such LICENSED PRODUCT is included, the Discount shall be allocated to such LICENSED PRODUCT on a pro rata basis based on the sales value (i.e., the unit average selling price multiplied by the unit volume) of the LICENSED PRODUCT relative to the sales value contributed by the other constituent products in the bundled set, with respect to such sale;

(b) credits or allowances actually granted upon claims, damaged goods, rejections or returns of such LICENSED PRODUCT, including such LICENSED PRODUCT returned in connection with recalls or withdrawals;

(c) freight out, postage, shipping and insurance charges for delivery of such LICENSED PRODUCT;

(d) taxes or duties levied on, absorbed or otherwise imposed on the sale of such LICENSED PRODUCT, including, without limitation, value-added taxes, or other governmental charges otherwise imposed upon the billed amount, as adjusted for rebates and refunds, to the extent not paid by a third party; and

(e) bad debts and uncollectible receivables.

NET SALES shall not include any payments among the SUBLICENSEE, its AFFILIATES and any sub-sublicensees.

1.6 “PATENT RIGHTS” shall include U.S. Patent Application No. 10/104,408 (now U.S. Patent No. 7,338,929), and all pending and issued U.S. and foreign counterparts of such application (now patent).

1.7 “SUB-SUBLICENSING REVENUE” shall mean all cash, sublicensing fees, option fees, maintenance fees, other lump sum payments and all other payments (including equity instruments and/or securities) and the cash equivalent thereof paid or transferred to SUBLICENSEE by each sub-sublicensee of SUBLICENSEE or third party as royalties on sales

 

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of LICENSED PRODUCTS or LICENSED PROCESSES or in consideration for license rights and/or technology rights covering manufacturing, practice, use, marketing, lease, transfer, sale or distribution provided hereunder pursuant to sublicenses entered hereunder. SUB-SUBLICENSING REVENUE, however, shall exclude bona fide, arm’s length cash payments paid to SUBLICENSEE by any sub-sublicensee in order to perform additional research or development required or requested by any sub-sublicensee on a LICENSED PRODUCT or LICENSED PROCESS, and (b) any bona fide, arm’s length equity investments made by any sub-sublicensee in SUBLICENSEE. SUBLICENSEE shall provide documentation as provided under Article V herein of any such payment(s).

1.8 “TERRITORY” shall mean the countries in which there is at least one pending or unexpired patent claim under PATENT RIGHTS.

ARTICLE II

THE LICENSE

2.1 Grant of Sublicense . Subject to any preexisting rights, if any, of the Government of the United States created by the use of Government funding, TI hereby grants to SUBLICENSEE an exclusive right and sublicense in the TERRITORY for the FIELD, with right to sub-sublicense, as set forth below, to PATENTS RIGHTS and, to the extent not prohibited by other patents, to make, have made, use, lease, practice, provide as service, sell, offer to sell LICENSED PRODUCTS or LICENSED PROCESSES for the term set forth herein, unless this Agreement shall be earlier terminated according to the terms and conditions contained herein.

2.2 Reservation of Rights . SUBLICENSEE acknowledges and agrees that PSRF expressly reserves the rights for itself and the UNIVERSITY to practice under PATENT RIGHTS and to use the associated technology in the FIELD for their own research and educational purposes, except research funded by for-profit entities or research subject to licensing or other obligations to third parties which conflict with licenses granted herein.

2.3 Manufacture of Products in U.S. SUBLICENSEE agrees that LICENSED PRODUCTS leased or sold in the United States will be manufactured substantially in the United States. SUBLICENSEE acknowledges and agrees that PATENT RIGHTS that have resulted from federally-supported research, and their assignment are governed by the applicable provisions of the Federal funding agreements, including 35 U.S.C. Chapter 18 (the “Bayh-Dole Act”), 37 C.F.R. Part 401.

2.4 Grant of Sub-Sublicenses . As set forth below, SUBLICENSEE shall have the exclusive right to sub-sublicense any of the rights, privileges and license granted hereunder in any jurisdiction in which SUBLICENSEE has exclusive rights during the term of this Agreement.

2.5 Sub-Sublicenses Subject to Agreement . All sub-sublicenses granted by SUBLICENSEE of its rights hereunder shall be subject to the terms of this Agreement. SUBLICENSEE shall have the right to grant sub-sublicenses (which may be exclusive or non-exclusive) of any of its rights hereunder, in whole or in part, to any third party so long as TI and PSRF have been given prior written notice, and such sub-sublicensee shall: (a) be an arm’s

 

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length, bona fide transaction, and (b) constitute a stand-alone transaction, and shall not be a part of any other contractual or other obligation of SUBLICENSEE to that party or other third parties.

(a) Sub-sublicensees shall not be permitted to grant any further sublicenses. Third-party sub-sublicensees that are granted rights hereunder as contemplated in Section 2.5 shall not have the right to assign or otherwise transfer their sub-sublicense rights (including by granting a further sub-sublicense), absent the prior written consent of TI and PSRF.

(b) SUBLICENSEE shall be responsible for its sub-sublicensees and shall not grant any rights which are inconsistent with the rights granted to and obligations of SUBLICENSEE hereunder.

(c) Any act or omission of a sub-sublicensee which would be a breach of this Agreement if performed by SUBLICENSEE shall be deemed to be a breach by SUBLICENSEE of this Agreement.

(d) Each sub-sublicense agreement entered into by SUBLICENSEE shall include an audit right by PSRF and TI of the same scope as provided in Article V hereof with respect to SUBLICENSEE. No such sub-sublicense agreement shall contain any provision which would cause it to extend beyond the term of this Agreement.

(e) Upon termination of this Agreement at SUBLICENSEE’s option or for a material breach by SUBLICENSEE not resulting from sub-sublicensee actions, sub-sublicensees shall have the rights under Paragraph 14.6.

2.6 Payments for Sub-Sublicenses . SUBLICENSEE shall not receive from sub-sublicensees anything of value in lieu of cash payments in consideration for any sub-sublicense under this Agreement.

2.7 Rights Under Sublicense . The license rights granted hereunder shall not be construed to confer any rights upon SUBLICENSEE by implication, estoppel or otherwise to any technology or patent rights owned, co-owned, or controlled by PSRF or TI which is not specifically set forth herein.

2.8 Sub-Sublicense to Incorporate Sublicense Provisions . In each sub-sublicense agreement, SUBLICENSEE agrees to incorporate paragraphs 2.1 through 2.3, and Articles VII, VIII, IX, X, XII, XIII and XIX of this Agreement.

ARTICLE III

PAYMENTS

3.1 Sublicense Payments . For the rights, privileges and sublicense granted hereunder, SUBLICENSEE shall pay to TI during the term of this Agreement the following amounts:

(a) A sublicense issue fee of [***] payable immediately upon signing of this Agreement.

 

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(b) Royalties as follows:

(i) A royalty in an amount equal to [***] of the NET SALES by SUBLICENSEE of LICENSED PRODUCTS and LICENSED PROCESSES. In the event that a generic version of such LICENSED PRODUCT or LICENSED PROCESS is first marketed in the Territory, TI agrees to enter into discussions with SUBLICENSEE regarding potential renegotiation of this Agreement. In the event the LICENSED PRODUCT or LICENSED PROCESS does not utilize any peptide or antigen other than IL Ra2 the parties shall negotiate in good faith an increased royalty rate under this Paragraph 3.1(b)(i) that reflects the relative value of the contribution to such product or process by the intellectual property that has been licensed to SUBLICENSEE under this Agreement.

(ii) [***] of all SUB-SUBLICENSING REVENUE.

3.2 Currency Conversions . For converting into United States dollars any payment accrued hereunder in the currency of any other country, the rate of exchange for the purchase of United States dollars with such currency quoted by The Chase Manhattan Bank, New York, New York, on the last business day of the payment period in question shall be used.

3.3 Late Payments . All payments set forth in this Agreement shall, if overdue, bear interest until payment at a per annum rate of [***] . The payment of such interest shall not foreclose TI from exercising any other rights it may have as a consequence of the lateness of any payment.

3.4 Failure to Make Payments . SUBLICENSEE’s failure to make payments in accordance with this Article III shall constitute a material breach or default and shall be grounds for termination of this Agreement pursuant to Paragraph 14.3 hereof.

ARTICLE IV

MARKETING EFFORTS AND DUE DILIGENCE

4.1 Diligence . Upon the execution of this Agreement, SUBLICENSEE shall diligently proceed with the development, refinement, testing, manufacture, sale and commercialization of at least one LICENSED PRODUCT or LICENSED PROCESS, and must diligently endeavor to have the LICENSED PRODUCT or LICENSED PROCESS approved for marketing in the United States and such other countries as shall be determined by SUBLICENSEE and must have LICENSED PRODUCT marketed effectively within a reasonable time using efforts reasonable within the industry after execution of this Agreement, and in quantities sufficient to meet the market demands for them. SUBLICENSEE shall use reasonable efforts to diligently bring one or more LICENSED PRODUCTS or LICENSED PROCESSES into the commercial market as soon as practicable and to continue active, diligent marketing efforts for one or more LICENSED PRODUCTS or LICENSED PROCESSES throughout the term of this Agreement. SUBLICENSEE’s efforts to develop a LICENSED PRODUCT shall be reasonably consistent with the development plan and timetable set forth in Appendix A ; provided, however, that the parties acknowledge that (i) SUBLICENSEE may reasonably modify the foregoing plan and timetable based on various factors, including, without limitation, pre-clinical data that is generated with respect to SUBLICENSEE’s product

 

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candidate, intellectual property issues or competitive market conditions directly affecting the product candidate, and (ii) SUBLICENSEE’s failure to meet any deadline set forth in the foregoing timetable shall not constitute a material breach of this Agreement, provided that it is using reasonable efforts to diligently bring one or more products to market.

4.2 Failure to Perform Diligently . SUBLICENSEE’s failure to perform in accordance with Paragraph 4.1 shall constitute a material breach or default and shall be grounds for termination of this Agreement pursuant to Paragraph 14.4 hereof.

4.3 Assignment Upon Termination . In the event that SUBLICENSEE in its sole discretion decides to market one or more LICENSED PRODUCTs or LICENSED PROCESS in any country, then SUBLICENSEE shall exert reasonable efforts to have such LICENSED PRODUCT or LICENSED PROCESS cleared for marketing by the responsible government agencies of that country requiring such clearance. Should SUBLICENSEE terminate this Agreement, SUBLICENSEE agrees, if permitted by applicable law, to assign its full right, title, and interest in and to such market clearance application, including all data relating thereto, to TI at no cost to TI, without prejudice to any sub-sublicensee of SUBLICENSEE.

ARTICLE V

REPORTS AND RECORDS

5.1 Books and Records . SUBLICENSEE shall keep and preserve, in accordance with generally accepted accounting principles and procedures, complete and accurate books, records and accounts containing all particulars that may be necessary for the purpose of showing the amounts payable to TI hereunder. Said books, records and accounts shall be kept at SUBLICENSEE’s principal place of business or the principal place of business of the appropriate division of SUBLICENSEE to which this Agreement relates. Said books and supporting data shall be open, upon reasonable notice at all reasonable times and places during business hours for five (5) years following the end of the calendar year to which they pertain, to the inspection of TI and PSRF, or their agents, for the purpose of verifying SUBLICENSEE’s royalty and other payment statements or compliance in other respects with this Agreement. Should such inspection lead to the discovery of a greater than ten percent (10%) discrepancy in reporting to TI’s detriment, SUBLICENSEE agrees to reimburse TI and PSRF for the full cost of such inspection.

5.2 Delivery of Reports . SUBLICENSEE shall, within thirty (30) days of June 30 and December 31 of each year, beginning the first June 30 or the first December 31 after the Effective Date of this Agreement, whichever occurs first, deliver to TI true and accurate reports, giving such particulars of the business conducted by SUBLICENSEE and its sub-sublicensees during the preceding semi-annual period under this Agreement as shall be pertinent to a royalty and other payment accounting hereunder.

5.3 Report Payments . With each such report submitted, SUBLICENSEE shall pay to TI all payments and royalties owed, due and payable under this Agreement. If no payments or royalties shall be due, SUBLICENSEE shall so report.

 

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5.4 Progress Reports . Along with the royalty report, SUBLICENSEE shall also submit to TI semiannual progress reports (“Progress Reports”) covering SUBLICENSEE’s activities describing its development and testing of LICENSED PRODUCTS and LICENSED PROCESSES, its collaborations, joint ventures and other commercialization efforts, occurring in each six-month period ending June 30 and December 31 during the term of this Agreement beginning with the six-month period ending December 31, 2010. Progress Reports shall be due within 30 days of the end of the preceding six-month period.

5.5  Scientific Advisory Board Observer Seat . The President and CEO of TI or his designee (“Observer”) has right to act as a non-participating observer to the Scientific Advisory Board and any successors to the Scientific Advisory Board in any meeting (whether in-person or remotely attended meetings) in which the LICENSED PROCESS and/or the LICENSED PRODUCT and/or topics ancillary thereto may be or are discussed. The President and CEO shall be given reasonable notice of any and all such meetings under the provisions of Section 11.1 of the Agreement unless receipt is expressly acknowledged in writing by the President and CEO of another form of communication. All such meetings will be reasonably accessible to the Observer. The Observer shall receive a [***] stipend for attending each such meeting, if travel of more then 100 miles is involved in attending same.

ARTICLE VI

PATENT PROSECUTION AND MAINTENANCE

6.1 Patent Prosecution . SUBLICENSEE acknowledges and agrees that PSRF shall be responsible for applying for, seeking prompt issuance of and maintaining the PATENT RIGHTS during the term of the Master License Agreement. TI agrees to provide SUBLICENSEE with copies of all patents, patent applications, patent office correspondence and all other material correspondence between TI and PSRF or its patent counsel relating to the PATENT RIGHTS that it receives or is entitled to receive under Article VI of the Master License Agreement. In exercising any of its comment or approval rights with respect to the PATENT RIGHTS under Article VI of the Master License Agreement, TI shall not exercise any of those rights without taking reasonable efforts to obtain the prior consent of SUBLICENSEE, which consent shall not be unreasonably withheld or delayed.

6.2 Payment for Patent Filing, Prosecution, Maintenance, and Defense . SUBLICENSEE shall reimburse TI for all fees and costs incurred by TI relating to the filing, prosecution, maintenance, and defense of the PATENT RIGHTS incurred after the Effective Date. In the event SUBLICENSEE elects to not make these payments with respect to any country within the Territory, the Territory for purposes of this Agreement shall thereafter exclude that country and SUBLICENSEE shall have no obligation to make the foregoing payments.

 

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ARTICLE VII

INFRINGEMENT AND OTHER ACTIONS

7.1 Notice of Infringement . In the event that SUBLICENSEE learns of infringement in the FIELD of any PATENT RIGHTS (an “Infringement”), SUBLICENSEE shall inform TI in writing promptly and shall provide reasonable evidence of the Infringement and any relevant information on the infringing party. During the period and in a jurisdiction where SUBLICENSEE has exclusive rights under this Agreement, SUBLICENSEE will not notify a third party of the Infringement of any of PATENT RIGHTS without first obtaining consent of TI.

7.2 PSRF Action Against Infringement . During the term of the Agreement, SUBLICENSEE may request in writing that TI request PSRF to take legal action against the Infringement. PSRF shall have the initial right, but not the obligation, to prosecute and/or defend, at its own expense and utilizing counsel of its choice, any infringement of, and/or challenge to, the PATENT RIGHTS. PSRF shall have the right to (a) commence suit on its own account; (b) commence suit jointly with SUBLICENSEE upon SUBLICENSEE’S consent; or (c) refuse to participate in a suit. TI will provide SUBLICENSEE with any notice provided by PSRF regarding its election

7.3 PSRF and/or TI Intervention in Legal Action . In the event that a declaratory judgment action alleging invalidity or noninfringement of any of the PATENT RIGHTS shall be brought against SUBLICENSEE, PSRF and/or TI, at their respective options, shall have the right, within thirty (30) days after commencement of such action, to intervene and take over the sole defense of the action at their own expense.

7.4 Cooperation . In any infringement suit regarding the PATENT RIGHTS pursuant to this Agreement, the other party hereto shall, at the request and expense of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like.

ARTICLE VIII

INDEMNIFICATION

8.1 Indemnification . SUBLICENSEE shall at all times during the term of this Agreement and thereafter, indemnify, defend and hold PSRF and TI, and each of their respective trustees, directors, officers, employees and AFFILIATES, harmless against all claims, proceedings, demands and liabilities of any kind whatsoever, including legal expenses and reasonable attorneys fees, arising out of the death of or injury to any person or persons or out of any damage to property, or resulting from the production, manufacture, sale, use, lease, consumption or advertisement of the LICENSED PRODUCTS or arising from any obligation of SUBLICENSEE hereunder; provided however, that the above indemnification for the benefit of TI and its officers, directors, employees and AFFILIATES shall not apply to any liability, damage, loss or expense to the extent it is attributable to the gross negligence or misconduct of

 

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such indemnitee or to a material breach by TI of any of its representations, warranties or obligations under this Agreement.

8.2 Insurance . Prior to the first commercial sale of a LICENSED PRODUCT, SUBLICENSEE shall obtain and carry in full force and effect commercial, general liability insurance which shall protect SUBLICENSEE, TI and PSRF with respect to events covered by Paragraph 8.1 above. Such insurance shall be written by a reputable insurance company, shall list PSRF and TI as additional named insureds thereunder, shall be endorsed to include product liability coverage and shall require thirty (30) days’ written notice to be given to PSRF and TI prior to any cancellation or material change thereof. The limits of such insurance shall not be less than One Million Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars ($3,000,000) for personal injury or death, and One Million Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars ($3,000,000) for property damage. SUBLICENSEE shall provide PSRF and TI with Certificates of Insurance evidencing the same.

8.3 Limited Warranty . EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, TI AND PSRF, AND THEIR RESPECTIVE TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY PSRF THAT THE PRACTICE BY SUBLICENSEE OF THE LICENSE GRANTED HEREUNDER SHALL NOT INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY. IN NO EVENT SHALL PSRF OR TI OR THEIR RESPECTIVE TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER PSRFOR TI SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY.

8.4 TI Representations . TI represents that

(a) TI is the exclusive licensee in the Territory of the PATENT RIGHTS, has the sole right to grant to SUBLICENSEE the rights granted herein and the rights are unencumbered by any liens, and PSRF has consented to TI entering into this Agreement with SUBLICENSEE;

(b) TI is not aware of any third party patents that would block the commercialization of LICENSED PRODUCTS or LICENSED PROCESSES;

(c) TI has not received any notice, including written notice, alleging any infringement by TI of any intellectual property rights of a third party in respect of the PATENT RIGHTS;

 

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(d) The rights granted under this Agreement do not conflict with the rights granted by TI to any third party; and

(e) TI has disclosed to SUBLICENSEE all potential and existing patent rights in the control of TI or in control of a third party known to TI which may be needed to commercialize any LICENSED PRODUCT or LICENSED PROCESS.

ARTICLE IX

ARTICLE IX - EXPORT CONTROLS

9.1 Export Controls . It is understood that PSRF is subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended and the Export Administration Act of 1979), and that its obligations under the Master License Agreement are contingent on compliance with applicable United States export laws and regulations. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and/or written assurances by SUBLICENSEE that SUBLICENSEE shall not export data or commodities to certain foreign countries without prior approval of such agency. SUBLICENSEE shall be responsible for the payment of all costs attendant to securing said license.

ARTICLE X

NON-USE OF NAMES

10.1 Use Of Names . SUBLICENSEE shall not use the names or trademarks of Penn State, PSRF, TI or any of their respective employees, or any adaptation thereof, in any advertising, promotional or sales literature without prior written consent obtained from PSRF (through TI) or TI, in each case, except that SUBLICENSEE may, without prior written consent, state that it is licensed by TI and sublicensed by PSRF, under one or more of the patents and/or applications comprising the PATENT RIGHTS.

ARTICLE XI

PAYMENTS, NOTICES AND OTHER COMMUNICATIONS

11.1 Notices . Any payment, notice or other communication pursuant to this Agreement shall be sufficiently made or given on the date of mailing if sent to such party by certified or registered first class mail, postage prepaid, addressed to it at its address below or as it shall designate by written notice given to the other party as follows:

In the case of TI:

President and Chief Executive Officer

Targepeutics, Inc.

475 Governor Road

Hershey, PA 17033

Phone (717) 533-7772

Fax      (717) 520-9298

 

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In the case of SUBLICENSEE:

President and Chief Executive Officer

ImmunoCellular Therapeutics, Ltd.

21900 Burbank Boulevard, 3 rd Floor

Woodland Hills, California 91367

Phone (818) 992-2907

Fax      (818) 992-2908

ARTICLE XII

ASSIGNMENT

12.1 Assignment . This Agreement shall not be assignable by either party without the prior written consent of the other party, except with regard to SUBLICENSEE, an assignment to an adequately capitalized successor corporation with an appropriate business focus (and expressly excluding asset sales), and which successor shall expressly assume in writing the performance of all the terms and conditions of this Agreement to be performed by the assigning party.

ARTICLE XIII

DISPUTE RESOLUTION

13.1 Dispute Resolution . Except for the right of either party to apply to a court of competent jurisdiction for a temporary restraining order, a preliminary injunction, or other equitable relief to preserve the status quo or prevent irreparable harm, any and all claims, disputes or controversies arising under, out of, or in connection with this Agreement, including any dispute relating to patent validity or infringement, which the parties shall be unable to resolve within sixty (60) days, shall be mediated in good faith. The party raising such dispute shall promptly advise the other party of such claim, dispute or controversy in a writing which describes in reasonable detail the nature of such dispute. By not later than five (5) business days after the recipient has received such notice of dispute, each party shall have selected for itself a representative who shall have the authority to bind such party, and shall additionally have advised the other party in writing of the name and title of such representative. By not later than ten (10) business days after the date of such notice of dispute, the party against whom the dispute shall be raised shall select a mediation firm in Pennsylvania and such representatives shall schedule a date with such firm for a mediation hearing. The parties shall enter into good faith mediation and shall share the costs equally. If the representatives of the parties have not been able to resolve the dispute within fifteen (15) business days after such mediation hearing, the parties shall have the right to pursue any other remedies legally available to resolve such dispute in either the Centre County Court of Common Pleas or in the United States District Court for the Middle District of Pennsylvania, to whose jurisdiction for such purposes TI and SUBLICENSEE each hereby irrevocably consents and submits.

13.2 No Waiver . Notwithstanding the foregoing, nothing in this Article XIII shall be construed to waive any rights or timely performance of any obligations existing under this Agreement.

 

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ARTICLE XIV

TERM AND TERMINATION

14.1 SUBLICENSEE Termination . SUBLICENSEE shall have the right to terminate this Agreement at any time on six (6) months’ notice to TI. SUBLICENSEE shall also have the right to immediately terminate this Agreement for cause upon any material breach by TI of its representations, warranties or obligations under this Agreement that remains uncured by TI for more than sixty (60) days following written notice of such breach by SUBLICENSEE. In the event of a dispute as to whether TI has cured the alleged breach, the matter shall be resolved pursuant to Article XIII of this Agreement.

14.2 Financial Solvency of SUBLICENSEE . SUBLICENSEE agrees that as a part of its material inducement to TI to enter into this Agreement, it shall provide TI with at least one hundred twenty (120) days’ written notice hereunder of its intent to file a petition in bankruptcy, whether it be for a Chapter 7, 11, 13 or any other such petition. TI shall have the right to immediately terminate this Agreement by giving written notice to SUBLICENSEE, in the event SUBLICENSEE does any of the following: (a) provides notice hereunder of its intent to file (or does actually file without providing said notice) a petition in bankruptcy, (b) attempts to make an assignment hereof for the benefit of creditors, (c) discontinues or dissolves its business, or (d) if a receiver is appointed for SUBLICENSEE.

14.3 Financial Payments . In the event SUBLICENSEE has breached its obligations to pay royalties or fees under Article III of this Agreement, pay fees and costs under Article VI of this Agreement, and/or fails to file royalty reports in accordance with Article V of this License Agreement (hereafter “Financial Breach”), TI shall provide SUBLICENSEE with written notice of said breach, and SUBLICENSEE shall have a period of thirty (30) days to cure said breach. In the event SUBLICENSEE does not fully cure the breach within that thirty (30) day period, and fails within that thirty (30) days to commence mediation pursuant to Article XIII of this Agreement alleging grounds for its nonpayment thereof, this Agreement shall be automatically terminated without further notice or action by TI. Notwithstanding SUBLICENSEE’s rights to cure herein, in the event SUBLICENSEE commits a Financial Breach more than two times within any calendar year within the term of this Agreement and has received notice by TI of each such breach at the time of such breach, TI shall be entitled to give notice of breach which shall become effective immediately upon SUBLICENSEE’s receipt of said Notice, and for which SUBLICENSEE shall not have any further right of “cure.”

14.4 Failure of Other Performance . Upon any material breach of performance under this Agreement, by SUBLICENSEE, other than those occurrences set out in Paragraphs 14.2 or 14.3, which shall always take precedence in that order over any material breach or default referred to in this Paragraph 14.4, TI shall have the right to terminate this Agreement and the rights, privileges and license granted hereunder effective sixty (60) days after TI first notifies SUBLICENSEE of the alleged breach under the notice provisions contained in Article XIV of this Agreement. As used in this Agreement, the term “Material Breach of Performance” shall include, but not be limited to the following: breach of due diligence provisions in Article IV, repeated inaccuracies of royalty reports, failure to notify TI of infringement, failure to assume duty to indemnify and defend, failure to provide adequate levels of insurance, and attempt to assign rights hereunder. Such termination shall become effective upon final notification by TI

 

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after the sixty (60) days, unless SUBLICENSEE shall have fully cured any such material breach or default prior to the expiration of the sixty (60) day period. In the event of a dispute as to whether SUBLICENSEE has cured the alleged breach, the matter shall be resolved pursuant to Article XIII of this Agreement.

14.5 Survival . Upon termination of this Agreement for any reason, nothing herein shall be construed to release either party from any obligation that matured prior to the effective date of such termination; and Articles I, VIII, IX, X, XIII, XV and Paragraphs 14.5 and 14.6 shall survive any such termination. SUBLICENSEE and any sub-sublicensee thereof may, however, after the effective date of such termination, sell all LICENSED PRODUCTS, and complete LICENSED PRODUCTS in the process of manufacture at the time of such termination and sell the same, provided that SUBLICENSEE submits the reports required by Article V hereof. Except in the case of termination of this Agreement by SUBLICENSEE for cause, SUBLICENSEE’s obligation to make royalty payments pursuant to Paragraph 3.1(b) shall survive the termination of this Agreement.

14.6 License to Sub-Sublicensee . Upon termination of this Agreement at SUBLICENSEE’s option or for material breach by SUBLICENSEE not resulting from any sub-sublicensee’s actions, any sub-sublicensee not then in default shall have the right to obtain a license from TI on terms no less favorable than those originally held by the sub-sublicensee.

14.7 Termination of Patent Rights . SUBLICENSEE shall have the right at any time to terminate this Agreement in whole or with respect to any portion of the PATENT RIGHTS by giving written notice to TI. This notice of termination shall be effective sixty (60) days after the date of TI’s receipt of such notice.

14.8 Sale and Payments . Upon termination of this Agreement, SUBLICENSEE shall have the right to dispose of all previously made or partially made LICENSED PRODUCTS. Upon such termination, SUBLICENSEE shall submit the latest Progress Report and royalty report for activity up to the time of termination, and shall make payment for royalties or any other payment incurred prior to, owed, due and payable at the time of termination under this Agreement.

ARTICLE XV

MISCELLANEOUS PROVISIONS

15.1 Entire Agreement . This Agreement embodies the entire understanding of the parties and shall supersede all previous communications, representations, or undertakings, either verbal or written, between the parties relating to the subject matter hereof.

15.2 Amendment . This Agreement may be amended only by a written agreement embodying the full terms of the amendment signed by authorized representatives of both parties.

15.3 Severability . Should any provision of this Agreement be held to be illegal, invalid or unenforceable, by any court of competent jurisdiction, such provision shall be modified by such court in compliance with the law and, as modified, enforced. The remaining provisions of this Agreement shall be construed in accordance with the modified provision as if such illegal, invalid or unenforceable provision had not been contained herein.

 

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15.4 No Strict Construction . The language used in this Agreement shall be deemed to be the language chosen by both parties hereto to express their mutual intent and no rule of strict construction against either party shall apply to any term or condition of this Agreement.

15.5 No Partnership, etc. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency or an association of any kind between the parties.

15.6 No Waiver . The failure of one party hereto to enforce at any time any of the provisions of this Agreement, or any rights in respect thereto, or to exercise any election herein provided, shall in no way be considered to be a waiver of such provision, rights or elections or in any way to affect the validity of this Agreement, or excuse a similar subsequent failure to perform any such term or condition by the other party. Any waiver must be in writing.

15.7 Interpretation . The headings of sections contained herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

15.8 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the Commonwealth of Pennsylvania, except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent was granted.

15.9 Product Marking . SUBLICENSEE agrees to mark the LICENSED PRODUCTS sold in the United States with all applicable United States patent numbers. All LICENSED PRODUCTS shipped to or sold in other countries shall be marked in such a manner as to conform with the patent laws and practices of the country of manufacture or sale.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have each caused a duly authorized representative to execute this Agreement as of the day and year set forth above.

 

TARGEPEUTICS, INC.     IMMUNOCELLULAR THERAPEUTICS, LTD.
By:   /s/ Silvan B. Lutkewitte, III     By:   /s/ Manish Singh
Name:   Silvan B. Lutkewitte, III     Name:   Manish Singh, Ph.D.
Title:   President & CEO     Title:   President & CEO
Date:   5-28-10     Date:   6-10-10

 

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Appendix A

DEVELOPMENT PLAN

(TO BE DETERMINED)

 

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EXHIBIT 10.49

T EXT MARKED BY [ * * *] HAS BEEN OMITTED PURSUANT TO A R EQUEST FOR C ONFIDENTIAL T REATMENT

AND   WAS FILED SEPARATELY WITH THE S ECURITIES AND E XCHANGE C OMMISSION .

SPONSORED RESEARCH AND VACCINE PRODUCTION AGREEMENT

[GMP MANUFACTURING OF ICT-107 DENDRITIC CELL-BASED

VACCINE FOR GLIOBLASTOMA]

This Sponsored Research and Vaccine Production Agreement (“Agreement”) is made by and between The Trustees of the University of Pennsylvania, a Pennsylvania nonprofit corporation (“Institution”), with offices located at 3160 Chestnut Street, Suite 200, Philadelphia, PA, Philadelphia, PA 19104-6205, and ImmunoCellular Therapeutics, Ltd., a corporation organized and existing under the laws of California (“Sponsor”), having a place of business at 21900 Burbank Blvd., 3rd Floor, Woodland Hills, CA 91367.

This Agreement is effective as of the 1 st day of January, 2011 (“Effective Date”).

RECITALS

WHEREAS, the parties entered into a Sponsored Research Agreement (“SRA”), having an effective date of 04/1/2010 and a total budget of $[***] , to support research, process development, and validation work for the production of Sponsor’s ICT-107 dendritic cell based vaccine for the treatment of glioblastoma; and

WHEREAS, the parties executed Amendment No. 1 of the SRA (“Amendment”), having an effective date of 09/29/2010, to extend the term of the SRA by three (3) months at [***] ; and

WHEREAS, the parties entered into an exclusive option agreement (“Option Agreement”), having an effective date of 03/01/2010 and a term of twelve (12) months, to permit Sponsor to conduct due diligence analysis of certain Institution Background Intellectual Property (as defined below) relating to the production and cryopreservation of dendritic cell vaccines with the intent of entering into license negotiations with Institution for certain Institution Background Intellectual Property; and

WHEREAS, the parties wish to extend their existing relationship(s) to further support research, process development, validation work, and the GMP production of ICT-107 dendritic cell vaccines for use in Sponsor’s IND-supported Phase II clinical trials; and

WHEREAS, the Sponsored Research (as defined below) contemplated by this Agreement is currently available on a limited basis from Institution, is of mutual interest and benefit to Institution and to the Sponsor, and will further Institution’s public mission as an academic institution in a manner consistent with its status as a non-profit, tax-exempt corporation;

WHEREAS, in furtherance of Sponsor’s exploitation of the rights granted pursuant to the Sponsored Research Agreement, the Amendment, and the Option Agreement, Sponsor desires to have Institution produce, and Institution desires to produce and supply certain dendritic cell vaccines for Sponsor in accordance with the terms and conditions of this Agreement;


NOW, THEREFORE, In consideration of the promises and mutual covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:

1. DEFINITIONS

1.1 “Background Intellectual Property” means any information, data, material, inventions, processes, protocols, methods, techniques, technologies, software, patents, or other items patentable or otherwise that are (i) owned or controlled by Institution prior to the Effective Date and (ii) made available by or on behalf of Institution hereunder solely for the conduct of the Sponsored Research, excluding Institution Materials.

1.2 “Field” means process development and GMP production of ICT-107 for use as a dendritic cell-based vaccine for glioblastoma.

1.3 “Institution Inventions” means all inventions or discoveries, whether or not patentable, conceived and/or reduced to practice solely by employees of Institution that arise during the Term of the Sponsored Research.

1.4 “Institution Materials” means standard operating procedures and forms of the Clinical Cell and Vaccine Production Facility (CVPF) of the Institution, including all parts, unmodified derivatives and unmodified progeny thereof, and related information disclosed by Institution being provided to Sponsor for the performance of the Sponsored Research in the Field during the Term.

1.5 “Joint Inventions” means all inventions or discoveries, whether or not patentable, conceived and/or reduced to practice jointly by employees and/or agents of Institution and by employees and/or agents of Sponsor that arise during the Term of the Sponsored Research.

1.6 “Principal Investigator” means Dr. Bruce Levine who has agreed to serve as faculty investigator for the Sponsored Research and shall be responsible for the conduct, supervision and administration of the Sponsored Research.

1.7 “Project Materials” means ICT-107 dendritic cell vaccines produced by the CVPF during the Term of the Sponsored Research.

1.8 “Research Results” means all data and information which are generated in the performance of the Sponsored Research during the Term of this Agreement. Research Results expressly excludes Background Intellectual Property, Institution Inventions, Institution Materials, Joint Inventions, and Sponsor Inventions.

1.9 “Sponsor Information” means all information, data, material and other items that are supplied to Institution by or on behalf of Sponsor for the purposes of conducting the Sponsored Research, excluding Research Results.

1.10 “Sponsor Inventions” means all inventions or discoveries, whether or not patentable, conceived and/or reduced to practice solely by employees of Sponsor relating to ICT-107 that arise during the Term of the Sponsored Research.

 

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1.11 “Sponsor Option” is defined in Section 7.4.

1.12 “Sponsored Research” means the research program and GMP production of the ICT-107 dendritic cell vaccine as described in Attachment A to this Agreement.

1.13 “Term” is defined in Section 3.1.

2. SPONSORED RESEARCH

2.1 Institution shall commence the Sponsored Research after the Effective Date of this Agreement and upon payment by Sponsor of any funds owed, and shall use good faith efforts to conduct such Sponsored Research substantially in accordance with the terms and conditions of this Agreement. Sponsor acknowledges that Institution and the Principal Investigator shall have the freedom to conduct and supervise the Sponsored Research in a manner consistent with Institution’s educational and research missions.

2.2 If the services of the Principal Investigator become unavailable to Institution for any reason, Institution shall be entitled to designate another member of its faculty who is acceptable to Sponsor to serve as the Principal Investigator of the Sponsored Research. If a substitute Principal Investigator has not been designated within sixty (60) days after the original Principal Investigator ceases his or her services under this Agreement, either party may terminate this Agreement upon written notice thereof to the other party, subject to the provisions of Article 9.

2.3 Institution shall manufacture the Project Materials in compliance with all GMP practices and regulations. Institution shall deliver the Project Materials within the timeframes set forth in Attachment A.

3. TERM OF AGREEMENT

3.1 The Term of this Agreement shall begin on the Effective Date of this Agreement and shall end one (1) year following the Effective Date unless terminated sooner pursuant to Sections 2.2 or 9.1 hereof. This Agreement may be extended or renewed only by mutual written agreement executed by duly authorized representatives of the parties.

4. REIMBURSEMENT OF COSTS, PAYMENT

4.1 Sponsor shall reimburse Institution for an amount equal to its expenditures and reasonable overhead incurred in the conduct of the Sponsored Research in an amount not to exceed the total amount of $ [***] as set forth in Attachment A. Sponsor acknowledges that this amount is a good faith estimate only and not a guarantee of the cost to conduct the Sponsored Research. If at any time Institution determines that it will require additional funds for the Sponsored Research due to a change in the scope of the Sponsored Research, it shall notify Sponsor and provide an estimate of the additional amount. Sponsor shall not be liable for any costs in excess of the amount of $ [***] unless it has agreed in writing to provide additional funds.

 

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4.2 Sponsor shall make payments in advance to Institution in accordance with the payment schedule set forth in Attachment A. All payments shall clearly identify the Principal Investigator and Sponsored Research. All payments are to be made by check payable in United States dollars, to “The Trustees of the University of Pennsylvania”, and sent to:

Office of Research Services

University of Pennsylvania

P-221 Franklin Building

3451 Walnut Street

Philadelphia, PA 19104-6205

Attention: Executive Director

23-1352685

Institution Tax Identification Number

4.3 Title to any equipment, laboratory animals, or any other materials made or acquired with funds provided under this Agreement shall vest in Institution (excluding Project Materials and ICT-107 formulations), and such equipment, animals, or materials shall remain the property of Institution following termination of this Agreement.

5. RECORDS AND REPORTS

5.1 Each party shall keep the other party reasonably informed of the progress of its obligations under the Sponsored Research by written reports on a regular basis in accordance with a schedule agreed to by the parties but not more frequently than once per month following the Effective Date. Principal Investigator shall maintain records of the results of the Sponsored Research and shall provide Sponsor with reports of the progress, results of the Sponsored Research, and the deliverables outlined in Attachment A. Institution shall maintain records of the use of the funds provided by Sponsor and shall make such records available to Sponsor upon reasonable notice during Institution’s normal business hours, but not more frequently than once per six (6) month period following the Effective Date.

6. RESEARCH RESULTS, REPORTS, OWNERSHIP OF INFORMATION, SPONSOR REPORTS

6.1 Sponsor shall have the right to use Research Results disclosed to Sponsor in records and reports and the Project Materials for any reasonable purpose, including regulatory submissions and the conduct of clinical trials. Institution shall be entitled to use the Research Results solely for its own academic research purposes, patenting, and publication as provided under Section 8. Research Results will be owned jointly by the parties. Principal Investigator shall not disclose Sponsor Confidential Information, or Sponsor Confidential Information contained within the deliverables whether generated by Institution or by Sponsor, to any party outside of the Institution without the prior written consent of Sponsor, except for patenting and publication as provided under Section 8.

6.2 Institution and the Principal Investigator hereby grant Sponsor a royalty-free, nontransferable, non-exclusive right to copy, reproduce and distribute any research reports

 

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furnished to Sponsor under this Agreement. Sponsor may not charge fees for said research reports, use said research reports for advertising or promotional activities, or alter or modify said research reports without the prior written permission of Institution.

6.3 Ownership of all right, title and interest in and to Sponsor Information and Project Materials shall reside solely with Sponsor. Ownership of all right, title and interest in and to Background Intellectual Property and Institution Materials shall reside with Institution. Except as specifically set forth in this Agreement, neither party shall acquire any license or other intellectual property interest, by implication or otherwise, in any information, know-how or materials disclosed to it under this Agreement or under any patents or patent applications owned or controlled by the other party. Background Intellectual Property and Institution Materials are considered proprietary to Institution. Sponsor shall not distribute or release the Background Intellectual Property or Institution Materials to any person who is not a Sponsor’s employee. Sponsor shall ensure that no one will be allowed to take or send the Background Intellectual Property or Institution Materials to any location other than Sponsor’s facility, unless prior written permission is obtained from the Principal Investigator at Institution.

6.4 Sponsor shall promptly report to Institution any findings from monitoring or safety reporting of this Sponsored Research or studies using the Research Results or Project Materials that could influence the conduct of the research or alter the IRB’s approval to continue the Sponsored Research.

7. INTELLECTUAL PROPERTY

7.1 It is recognized that the existing and/or previously (prior to the Effective Date) conceived inventions, discoveries and technologies of Sponsor and Institution are their separate property and are not affected by this Agreement. Institution shall promptly inform Sponsor in writing of the development, making, conception or reduction to practice of any Institution Inventions and any Joint Inventions and Sponsor shall promptly inform Institution in writing of the development, making, conception or reduction to practice of any Sponsor Inventions and any Joint Inventions. Inventorship of Institution Inventions, Joint Inventions, and Sponsor Inventions shall be determined in accordance with United States patent law. Ownership shall follow inventorship. Subject to the rights granted to the parties under Section 7.4, each party shall have the right to use, sell, keep, license or assign its interest in Joint Inventions without the consent of and without accounting to the other party.

7.2 Principal Investigator shall provide Institution and Sponsor a written disclosure of any Institution Inventions and Joint Inventions reasonably considered patentable. Sponsor shall advise Institution in writing, no later than thirty (30) days after receipt of such disclosure, whether it requests Institution to file and prosecute patent applications related to such Institution Inventions and/or Joint Inventions. If Sponsor does not request Institution to file and prosecute such patent applications, Institution may proceed with such preparation and prosecution at its own cost and expense; but such patent applications shall be excluded from Sponsor’s option under Section 7.5 hereof. Sponsor shall provide Institution with a written disclosure of any Joint Inventions and Sponsor Inventions.

 

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7.3 Institution shall control the preparation and prosecution of all patent applications and the maintenance of all patents related to Institution Inventions and Joint Inventions. With regard to any patent applications filed at the request and expense of Sponsor, Institution will consult with Sponsor on patent prosecution. Sponsor shall reimburse Institution upon receipt of invoice for all documented expenses incurred in connection with the filing and prosecution of the patent applications and maintenance of the patents that Sponsor has requested Institution to prosecute under Section 7.2 hereof.

7.4 In consideration of Sponsor’s funding of the Sponsored Research and payment for intellectual property expenses as provided for in Section 7.3, Institution grants Sponsor an exclusive option (the “Sponsor Option”) to negotiate to acquire an exclusive, worldwide, sublicensable license in the Field to practice under the Background Intellectual Property, Institution Inventions, and Institution’s ownership interest in the Joint Inventions on commercially reasonable terms to be negotiated in good faith by the parties. If Sponsor and Institution fail to execute a license agreement within six (6) months after disclosure of the Background Intellectual Property, Institution Inventions, and/or Joint Inventions to Sponsor, or if Sponsor fails to make payment for intellectual property expenses as provided for in Section 7.3, Institution shall be free to license the Background Intellectual Property, Institution Inventions and Institution’s ownership interest in the Joint Inventions to any party upon such terms as Institution deems appropriate, without any further obligation to Sponsor.

7.5 Any license granted to Sponsor pursuant to Section 7.4 hereof shall be subject to Institution’s right to use and permit other non-profit organizations to use Background Intellectual Property, Institution Inventions and Joint Inventions for educational and research purposes and, if applicable, to the rights of the United States government reserved under Public Laws 96-517, 97-256 and 98-620, codified at 35 U.S.C. 200-212, and any regulations issued thereunder.

8. CONFIDENTIALITY, PUBLICATION, USE OF NAME

8.1 Institution shall not be obligated to accept any confidential information from Sponsor. If Sponsor desires to furnish any confidential information to the Principal Investigator, Sponsor may request the Principal Investigator to sign the “Agreement between Sponsor and Principal Investigator concerning Sponsor’s Confidential Information” that is attached as Attachment B. Institution bears no responsibility for maintaining the confidentiality of any confidential information of Sponsor provided under such an individual agreement.

8.2 In order to preserve the patentability of Background Intellectual Property, Institution Inventions, Institution Materials, and Joint Inventions, Sponsor shall maintain Background Intellectual Property, Institution Inventions, Institution Materials and Joint Inventions and information provided pursuant to the Sponsored Research (whether oral or written) as confidential and shall not disclose such information to any third party until the publication of such information by the Principal Investigator or until Institution provides Sponsor with written verification that all desirable patentable inventions have been protected, whichever occurs sooner. The limitations set forth in this Section 8.2 shall not apply to any Research Results that Sponsor provides to any regulatory authority in connection with the clinical testing or commercialization of any ICT-107 based product.

 

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8.3 Institution shall be free to publish, present or otherwise disclose Research Results or other information and material resulting from the Sponsored Research for any purpose, except that Institution shall not publish or otherwise publicly disclose any Sponsor Confidential Information or any Sponsor Confidential Information contained within the deliverables that will or have been filed by Sponsor on a confidential basis with any regulatory authority in connection with the clinical testing or commercialization of any ICT-107 based product. Institution shall furnish the Sponsor with a copy of any proposed disclosure, publication or presentation at least thirty (30) days in advance of the submission of said proposed disclosure, in order for Sponsor to review and comment on said proposed disclosure.

8.4 Institution shall not use Sponsor’s name without Sponsor’s prior written consent except that Institution may acknowledge Sponsor’s funding of this Sponsored Research and any scientific contributions in scientific publications and in listings of sponsored research projects. Sponsor shall not use Institution’s name, mark or symbol, or the name of any trustee, officer, faculty member, student or employee thereof, without Institution’s prior written consent, provided, that Sponsor may disclose or file a copy of this Agreement with any applicable securities regulatory agency or securities exchange if Sponsor’s counsel determines that such filing or disclosure is required.

8.5 Institution shall not manufacture for research and development or commercial purposes for itself or any third party during or at any time after the term of this Agreement any vaccine that is identical or substantially identical to ICT-107.

9. TERMINATION

9.1 In addition to the termination right set forth in Section 2.2 hereof, either party may terminate this Agreement effective upon written notice to the other party, if the other party breaches any of the terms or conditions of this Agreement and fails to cure such breach within thirty (30) days after receiving written notice thereof. In the event of an incurable breach, the non-breaching party may terminate this Agreement effective immediately upon written notice to the breaching party.

9.2 In the event of termination of this Agreement prior to its stated term whether for breach or for any other reason whatsoever, Institution shall be entitled to retain from the payments made by Sponsor prior to termination Institution’s reasonable costs of concluding the work in progress, and Institution shall deliver to Sponsor all Project Materials produced through the date of termination. Allowable costs include, without limitation, all costs or noncancellable commitments incurred prior to the receipt, or issuance, by Institution of the notice of termination, and the full cost of each employee, student and faculty member supported hereunder through the end of such commitments. In the event of termination, Institution shall submit a final report of all costs incurred and all funds received under this Agreement within ninety (90) days after the effective termination date. The report shall be accompanied by a check in the amount of any excess of funds advanced over costs and allowable commitments incurred. In case of a deficit of funds, Sponsor shall pay Institution the amount needed to cover costs and allowable commitments incurred by Institution under this Agreement.

 

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9.3 Termination of this Agreement shall not affect the rights and obligations of the parties accrued prior to termination hereof. The provisions of Article 4, entitled Reimbursement of Costs, Payment; Article 6, entitled Sponsor’s Rights in Research Results, Reports, Ownership of Information; Article 7, entitled Intellectual Property; Article 8 entitled Confidentiality, Publication, Use of Name; Article 10, entitled Disclaimer of Warranties, Indemnification, Insurance; and Article 11, entitled Additional Provisions, shall survive such termination.

10. DISCLAIMER OF WARRANTIES, INDEMNIFICATION, INSURANCE

10.1 INSTITUTION MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, WARRANTIES WITH RESPECT TO THE CONDUCT, COMPLETION, SUCCESS OR PARTICULAR RESULTS OF THE SPONSORED RESEARCH, OR THE CONDITION, OWNERSHIP, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE SPONSORED RESEARCH OR ANY BACKGROUND INTELLECTUAL PROPERTY, INSTITUTION INVENTIONS, JOINT INVENTIONS, INSTITUTION MATERIALS, PROJECT MATERIALS OR RESEARCH RESULTS OR THAT USE OF THE BACKGROUND INTELLECTUAL PROPERTY, INSTITUTION INVENTIONS, JOINT INVENTIONS, INSTITUTION MATERIALS, PROJECT MATERIALS OR RESEARCH RESULTS WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT OF A THIRD PARTY. INSTITUTION SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, PUNITIVE OR OTHER DAMAGES SUFFERED BY SPONSOR OR ANY OTHER PERSON RESULTING FROM THE SPONSORED RESEARCH OR THE USE OF ANY BACKGROUND INTELLECTUAL PROPERTY RIGHTS, INSTITUTION INVENTIONS, JOINT INVENTIONS, INSTITUTION MATERIALS, PROJECT MATERIALS, RESEARCH RESULTS OR ANY PRODUCTS RESULTING THEREFROM.

10.2 Sponsor shall defend, indemnify and hold harmless Institution, the Principal Investigator and any of Institution’s faculty, students, representative and employees, trustees, officers, affiliates and agents (hereinafter referred to collectively as the “Indemnified Persons”) from and against any and all liability, claims, lawsuits, losses, damages, costs or expenses (including, without limitation attorneys’ fees for personal injury (including death) or economic loss arising out of or connected with performance of the Sponsored Research or clinical trials performed using materials produced for Sponsor under this Agreement, including the use by Sponsor or Sponsor’s clinical sites of Research Results and/or Project Materials), which the Indemnified Persons may hereafter incur, or be required to pay as a result of Sponsor’s or Sponsor’s clinical sites use of the results of Sponsored Research or any Background Intellectual Property, Institution Inventions, Institution Materials, Joint Inventions, Project Materials or Research Results or as a result of any breach of this Agreement or any act or omission of Sponsor, its employees, affiliates, contractors, licensees or agents. Institution shall notify Sponsor upon learning of the institution or threatened institution of any such liability, claims, lawsuits, losses, damages, costs and expenses and Institution shall cooperate with Sponsor in every proper way in the defense or settlement thereof at Sponsor’s request and expense. Sponsor shall not dispose or settle any claim admitting liability on the part of the Institution without Institution’s prior written consent.

 

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10.3 INSURANCE. Sponsor shall maintain during the performance of this Agreement a policy or policies of comprehensive general liability insurance at levels sufficient to support the indemnification obligations in this Agreement. This includes broad form and contractual liability and product liability, in a minimum amount of $3,000,000 combined single limit per occurrence and in the aggregate with respect to personal injury, bodily injury and property damage. Sponsor will provide Institution with a certificate of insurance evidencing such coverage at the request of Institution.

11. ADDITIONAL PROVISIONS

11.1 No rights hereunder may be assigned by either party, directly or by merger or other operation of law, without the express written consent of the other party. Any prohibited assignment of this Agreement or the rights hereunder shall be null and void. No assignment shall relieve a party of responsibility for the performance of any accrued obligations, which it has prior to such assignment.

11.2 A waiver by either party of a breach or violation of any provision of this Agreement will not constitute or be construed as a waiver of any subsequent breach or violation of that provision or as a waiver of any breach or violation of any other provision of this Agreement.

11.3 Nothing herein shall be deemed to establish a relationship of principal and agent between Institution and Sponsor, nor any of their agents or employees, nor shall this Agreement be construed as creating any form of legal association or arrangement which would impose liability upon one party for the act or failure to act of the other party. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto or their permitted assigns, any benefits, rights or remedies.

11.4 Notices, statements, reports and other communications under this Agreement shall be in writing and shall be deemed to have been received as of the date dispatched if sent by public overnight courier (e.g., Federal Express) and addressed as follows:

If to Institution:

Office of Research Services

University of Pennsylvania

P221 Franklin Building

3451 Walnut Street

Philadelphia, PA 19104-6205

Attn.: Executive Director

Center for Technology Transfer

University of Pennsylvania

3160 Chestnut Street, Suite 200

Philadelphia, PA 19104

Attn: Executive Director

 

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If to Principal Investigator:

Bruce Levine, PhD

M6.40 Maloney

3400 Spruce Street

Philadelphia, PA 19104

If to Sponsor:

ImmunoCellular Therapeutics, Ltd.

21900 Burbank Blvd., 3rd Floor

Woodland Hills, CA 91367

(818) 992-2907

ATTN: CEO

11.5 This Agreement shall be construed and governed in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to conflict of law provisions. The parties hereby submit to the exclusive jurisdiction of and venue in any state or federal courts located within the Eastern District of Pennsylvania with respect to any and all disputes concerning the subject of this Agreement. The parties agree that the provisions of this Agreement are intended to be interpreted and implemented so as to comply with all federal, state and local laws, rules and regulations applicable to the Institution, including, without limitation, Internal Revenue Service requirements regarding the avoidance of unrelated business income and appropriate use of the proceeds of tax exempt bonds. If it is determined by the Internal Revenue Service or any other federal, state or local agency, department or instrumentality that the provisions of this Agreement are not in compliance with laws, rules and regulations applicable to Institution or that performance by Institution under this Agreement would not be in compliance with such, then the parties agree to modify the provision and the implementation of this Agreement so as to be in compliance with all applicable federal, state and local laws, rules and regulations as determined by such governmental body.

11.6 Institution and Sponsor shall not discriminate against any employee or applicant for employment because of race, color, sex, sexual or affectional preference, age, religion, national or ethnic origin, handicap, or because he or she is a disabled veteran or veteran of the Vietnam Era.

11.7 Neither party shall be liable for any failure to perform as required by this Agreement to the extent such failure to perform is due to circumstances reasonably beyond such party’s control, including, without limitation, labor disturbances or labor disputes of any kind, accidents, failure of any governmental approval required for full performance, civil disorders or commotions, terrorism, acts of aggression, acts of God, energy or other conservation measures imposed by law or regulation, explosions, failure of utilities, mechanical breakdowns, material shortages, disease, or other such occurrences.

11.8 Sponsor shall comply with all laws, regulations and other legal requirements applicable to Sponsor in connection with this Agreement, including but not limited to any legal requirements applicable to Sponsor’s use of the results of the Sponsored Research or

 

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any Background Intellectual Property, Institution Inventions, Institution Materials, Joint Inventions or Research Results and laws controlling the export of technical data, computer software, laboratory prototypes, and all other export controlled commodities.

11.9 This Agreement inclusive of its Attachments embodies the entire understanding between the parties relating to the subject matter hereof and supersedes all prior understandings and agreements, whether written or oral. This Agreement may not be varied except by a written document signed by duly authorized representatives of both parties.

IN WITNESS WHEREOF, the duly authorized representatives of the parties hereby execute this Agreement as of the date first written above.

 

The Trustees of the University of Pennsylvania     ImmunoCellular Therapeutics, Ltd.
By:   /s/ John Swartley     By:   /s/ Manish Singh
Name:   John Swartley, Ph.D.     Name:   Manish Singh, Ph.D.
Title:   Deputy Executive Director     Title:   President & CEO
  Center for Technology Transfer      
Date:   December 21, 2010     Date:   Jan 3, 2011
I have read and agreed to the responsibilities of the Principal Investigator:      
By:   /s/ Bruce Levine      
Date:   December 23, 2010      

 

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Attachment A

Summary of Sponsored Research

[***]

 

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Attachment B

Sponsor Confidential Information

The free publication and dissemination of research results and information is an essential and long-standing policy of the University of Pennsylvania (“Institution”). Because of the negative impact confidentiality obligations can have on the educational mission of the Institution and the free communication of research results, the Institution does not undertake to keep proprietary information provided by a commercial sponsor confidential. Under certain circumstances, however, the Institution recognizes that an Institution principal investigator (the “Principal Investigator”) under a commercially sponsored research program may desire to receive confidential and proprietary information of the commercial sponsor (“Sponsor”) that the Principal Investigator considers essential for the conduct of the research program. Accordingly, the Institution will permit the Principal Investigator to accept confidential information of a Sponsor under the terms and conditions of the agreement between the Sponsor and Principal Investigator stated below.

Agreement between Sponsor and Principal Investigator

Concerning Sponsor Confidential Information

In connection with research to be conducted at the Institution sponsored by ImmunoCellular Therapeutics, Ltd.,(“Sponsor”) and relating to process development work and validation work for ICT-107 (the “Sponsored Research”), Sponsor desires to provide Dr. Bruce Levine (“Principal Investigator”) with certain information that Sponsor considers confidential.

 

  1. For purposes of this Agreement, “Confidential Information” means only confidential information of Sponsor related to the Sponsored Research that is disclosed to the Principal Investigator by Sponsor in writing and conspicuously marked as confidential and proprietary at the time of disclosure, or, if disclosed visually or orally, is stated to be confidential and proprietary at the time of disclosure and confirmed by a written summary describing the information in reasonable detail delivered by Sponsor to Principal Investigator within seven (7) days after disclosure. Notwithstanding anything to the contrary contained in this Agreement or the markings on any document disclosed by Sponsor, Confidential Information does not include :

 

  (a) subject to the limitations set forth in Section 8.3 of the Sponsored Research Agreement between Sponsor and Institution, information that is reasonably required by scientific standards for publication of the Sponsored Research, or any information that is necessary for other scholars to verify the results of the Sponsored Research;

 

  (b) information that is in the public domain at the time Sponsor discloses it to Principal Investigator or that thereafter enters the public domain through no fault of Principal Investigator;

 

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  (c) information that was known to Principal Investigator or to the Institution before the date Sponsor discloses it to Principal Investigator, or that becomes known to Principal Investigator or the Institution through a third party having an apparent bona fide right to disclose the information;

 

  (d) information that is independently developed by Institution personnel;

 

  (e) information that is disclosed by Principal Investigator or the Institution in accordance with the terms of Sponsor’s written approval;

 

  (f) information that is required to be disclosed for compliance with any Federal, state or local law or regulation, or required to be disclosed by a court of law or governmental authority, provided that the disclosing party provides Sponsor reasonable prior written notice of such disclosure.

 

  2. The Principal Investigator retains the right to refuse to accept any Confidential Information that the Principal Investigator does not consider to be essential to the performance of the Sponsored Research or that the Principal Investigator believes to be improperly designated as Confidential Information.

 

  3. In the event the Principal Investigator does accept any Confidential Information, for a period of five (5) years after Principal Investigator’s acceptance of Confidential Information, Principal Investigator agrees to use efforts no less than those Principal Investigator employs with respect to Principal Investigator’s own confidential information:

 

  (a) not to disclose the Confidential Information to third parties without Sponsor’s consent to such disclosure; and

 

  (b) to use the Confidential Information only in furtherance of the Sponsored Research.

 

  4. Sponsor specifically acknowledges its understanding that the Principal Investigator’s efforts hereunder will not necessarily conform to prevailing commercial standards for the protection of confidential and proprietary information. Sponsor expressly agrees that the Institution shall not be liable for any disclosure of Sponsor’s Confidential Information.

 

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  5. This Agreement sets forth the entire understanding of Sponsor and Principal Investigator with respect to the subject matter hereof, supersedes any prior agreement between Sponsor and Principal Investigator, and there are no other understandings or agreements, written or oral, between them relating to such subject matter. The Agreement may not be changed or supplemented in any way except by a written agreement duly executed by both Sponsor and Principal Investigator and approved by the Institution. This Agreement shall be governed by, enforced, and interpreted in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to its principles of conflict of laws.

 

Sponsor     Principal Investigator
/s/ Manish Singh     /s/ Bruce Levine
Date:   Jan. 3, 2011     By   December 23, 2010

 

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EXHIBIT 10.50

LOGO

March 30, 2010

Dr. Manish Singh, CEO

ImmunoCellular Therapeutics, Ltd.

21900 Burbank Boulevard

Woodland Hills, CA 91367

Dear Dr. Singh:

The purpose of this agreement (the “Agreement”) is to set forth the terms and conditions pursuant to which Gilford Securities, Inc. (“Gilford”) shall act as advisor and placement agent for ImmunoCellular Therapeutics, Ltd. (the “Company”). Gilford shall act on a non-exclusive basis as an advisor and placement agent for introducing the Company to institutional healthcare-focused investors, potential strategic investors/partners/acquirors and other potential investors in connection with a proposed placement (the “Private Placement”) of equity securities (the “Securities”) of the Company, potential partnering transactions, potential strategic investments and potential merger and acquisition opportunities. The gross proceeds from the Private Placement are proposed to be up to $15 Million. The terms of such “best efforts” Private Placement, including the identified use of proceeds, closing conditions and the Securities to be issued shall be agreed to by the Company in its sole discretion. The term of this engagement, unless extended by the Company and Gilford in writing, shall be six (6) months from the date of this Agreement.

The parties hereto hereby agree that the Company shall pay to Gilford the fees and compensation set forth below if there is any closing and funding of an equity financing, (including without limitation the Private Placement) for the Company (a “Financing”), a partnering transaction or a merger or acquisition transaction within eighteen (18) months of the date of this Agreement with any investors or strategic investors/partners/acquirors to whom the Company was introduced by Gilford or who was contacted by Gilford and who in each such case was identified in advance by Gilford to the Company and as to who the Company agrees in writing have been introduced by Gilford for the Private Placement or for a strategic transaction or merger or acquisition (“Investors”), regardless of whether this Agreement was previously terminated.

In consideration of the services rendered by Gilford under this Agreement, the Company agrees to pay Gilford the following fees and other compensation with respect to Financing amounts and proceeds from strategic transactions, mergers and acquisitions provided by Investors:


I MMUNO C ELLULAR T HERAPEUTICS , L TD .      M ARCH  30, 2010   

(a) a cash fee payable immediately upon the closing and funding of any placement of preferred stock, common stock, convertible debt or convertible preferred stock, or any other form of common stock-linked security equal to [7.0%] of the gross proceeds of such transaction plus warrants to purchase a number of shares of common stock of the Company equal to [7.0%] of the common shares or common share equivalents issued in any such financing at an exercise price equal to the Company’s then current stock price;

(b) a cash fee equal to 5% of the aggregate transaction value on any acquisition of the Company;

(c) a cash fee equal to 5% of the gross proceeds to the Company from any partnering transaction, including all up-front payments, milestones and any other pre-commercialization payments to the Company made in conjunction with such partnership other than research and development funding payments, as, when and if received by the Company;

(d) reimbursement of all direct out-of-pocket expenses on a monthly basis, such expenses not to exceed an aggregate of $4,000 without the written acceptance of the Company; and

(e) all amounts payable hereunder, with the exception of the reimbursement of out-of-pocket expenses, shall be paid to Gilford out of an attorney escrow account at the closing or by such other means acceptable to Gilford.

The Company may apply the $10,000 retainer paid to Gilford pursuant to the October 13, 2009 engagement agreement between the parties to any fees payable to Gilford under this Agreement upon the closing of any Financing.

Gilford represents and warrants to, and covenants with, the Company as follows:

(a) None of Gilford, its affiliates or any person acting on behalf of Gilford or any of such affiliates has engaged or will engage in any general solicitation.

(b) Gilford will use its best efforts to conduct the offering and sale of Securities so that Securities are sold in a transaction or series of transactions exempt from registration under the Securities Act.

(c) Gilford will send materials related to the Financings only to persons that Gilford reasonably believes are “accredited investors” (as defined under Rule 501(a) of the Securities Act).

(d) Gilford agrees that, except as otherwise required by law, regulation or court order or as contemplated by its engagement hereunder, the non-public Information furnished to Gilford by the Company shall be held by Gilford as confidential.

(e) Gilford is registered with FINRA and holds all federal and state licenses or registrations required to conduct its activities as contemplated by this Agreement.

 

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I MMUNO C ELLULAR T HERAPEUTICS , L TD .      M ARCH  30, 2010   

 

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of law principles.

The Company and Gilford hereby agree to the terms and conditions of the Indemnification Agreement attached hereto as Appendix A with the same force and effect as if such terms and conditions were set forth at length herein.

This Agreement constitutes the entire understanding and agreement between the parties hereto with respect to its subject matter and there are no agreements or understanding with respect to the subject matter hereof which are not contained in this Agreement. This Agreement may be modified only in writing signed by the party to be charged hereunder.

If the foregoing correctly sets forth our agreement, please confirm this by signing and returning to us the duplicate copy of this letter.

 

Very truly yours,
GILFORD SECURITIES, INC.
By:   /s/ Robert Maley
  Robert Maley, President
Date: 4/5/2010

 

ACCEPTED AND AGREED TO:
IMMUNOCELLULAR THERAPEUTICS, LTD.
By:   /s/ Manish Singh
  Dr. Manish Singh, CEO
Date: 4/12/2010

 

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I MMUNO C ELLULAR T HERAPEUTICS , L TD .      M ARCH  30, 2010   

 

APPENDIX A

INDEMNIFICATION AGREEMENT

Appendix A to Letter Engagement Agreement (the “Agreement”), dated March 30, 2010 by and between ImmunoCellular Therapeutics, Ltd. (the “Company”) and Gilford Securities, Inc. (“Gilford”).

The Company agrees to indemnify and hold Gilford and its affiliates, control persons, directors, officers, employees and agents (each an “Indemnified Person”) harmless from and against all losses, claims, damages, liabilities, costs or expenses, including those resulting from any threatened or pending investigation, action, proceeding or dispute whether or not Gilford or any such other Indemnified Person is a party to such investigation, action, proceeding or dispute, arising out of Gilford’s entering into or performing services under this Agreement, or arising out of any matter referred to in this Agreement. This indemnity shall also include Gilford’s and/or any such other Indemnified Person’s reasonable attorneys’ and accountants’ fees and out-of-pocket expenses incurred in such investigations, actions, proceedings or disputes which fees, expenses and costs shall be periodically reimbursed to Gilford and/or to any such other Indemnified Person by the Company as they are incurred; provided, however, that the indemnity herein set forth shall not apply to an Indemnified Person where a court of competent jurisdiction has made a final determination that such Indemnified Person acted in a grossly negligent manner or engaged in willful misconduct in the performance of the services hereunder which gave rise to the loss, claim, damage, liability, cost or expense sought to be recovered hereunder (but pending any such final determination the indemnification and reimbursement provisions hereinabove set forth shall apply and the Company shall perform its obligations hereunder to reimburse Gilford and/or each such other Indemnified Person periodically for its, his or their fees, expenses and costs as they are incurred). The Company also agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with any act or omission to act as a result of its engagement under this Agreement except for any such liability for losses, claims, damages, liabilities or expenses incurred by the Company that is found in a final determination by a court of competent jurisdiction to have resulted from such Indemnified Person’s breach of this Agreement or gross negligence or willful misconduct.

If any action, suit, proceeding or investigation is commenced, as to which Gilford proposes to demand indemnification, it shall promptly notify Company in writing and Company shall have the right to assume the defense of such action. If Company assumes the defense, an Indemnified Person shall have the right to retain counsel of it own choice to represent it; however, the fees, expenses and disbursements of such counsel shall be borne by the Indemnified Person. It is also understood and agreed that if Company does not elect to assume such defense, Company shall not, in connection with any one such action or separate substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one counsel for Gilford and all other Indemnified Persons combined, which counsel shall be mutually agreed upon by Company and Gilford.

 

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I MMUNO C ELLULAR T HERAPEUTICS , L TD .      M ARCH  30, 2010   

 

If for any reason, the foregoing indemnification is unavailable to Gilford or any such other Indemnified Person or insufficient to hold it harmless, then the Company shall contribute to the amount paid or payable by Gilford or any such other Indemnified Person as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the Company and its shareholders on the one hand and Gilford or any such other Indemnified Person on the other hand, but also the relative fault of the Company and Gilford or any such other Indemnified Person, as well as any relevant equitable considerations; provided that in no event will the aggregate contribution by Gilford and any such other Indemnified Person hereunder exceed the amount of fees actually received by Gilford pursuant to this Agreement. The reimbursement, indemnity and contribution obligations of the Company hereinabove set forth shall be in addition to any liability which the Company may otherwise have and these obligations and the other provisions hereinabove set forth shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, Gilford and any other Indemnified Person.

The terms and conditions hereinabove set forth in this Appendix A shall survive the termination and expiration of this Agreement and shall continue indefinitely thereafter.

 

GILFORD SECURITIES, INC.
By:   /s/ Robert Maley
  Robert Maley, President

 

ACCEPTED AND AGREED TO:
IMMUNOCELLULAR THERAPEUTICS, LTD.
By:   /s/ Manish Singh
  Dr. Manish Singh, CEO

 

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EXHIBIT 10.51

LOGO

April 7, 2010

Manish Singh, Ph.D., MBA

President and Chief Executive Officer

ImmunoCellular Therapeutics, Ltd.

21900 Burbank Blvd, 3rd Floor

Woodland Hills, CA 91367

Re: Scarsdale Equities LLC to serve as the non-exclusive placement agent (“Placement Agent”) for ImmunoCellular Therapeutics, Ltd. (the “Company”) for the purpose of offering and selling up to $12 million of securities (the “Securities”).

Dear Manish:

This letter agreement (the “Agreement”) will confirm the engagement of Scarsdale Equities LLC to serve as the non-exclusive placement agent (“Placement Agent”) for ImmunoCellular Therapeutics, Ltd (the “Company”) for the purpose of offering and selling up to $12 million of securities (the “Securities”) of the Company to the potential investors identified pursuant to Section 9 below (the “Private Investment in Public Entity”, herein “PIPE”).

This Agreement is based upon the following terms and conditions:

1. Responsibilities . The responsibilities of the Placement Agent shall be the following:

 

  (a) Assist and advise the Company with respect to the appropriate corporate, management and capital structures to facilitate the PIPE in the US markets;

 

  (b) Advise the Company with respect to suitable pricing, timing and deal size for the PIPE including valuation recommendations provided by the company;

 

  (c) Use its best efforts to arrange for purchase, by accredited and/or qualified institutional investors, of the Securities in the PIPE;

 

  (d) If desired by the Company, arrange for the opening, management and maintenance of the escrow account, if necessary, into which the funds received for the purchase of the Securities will be deposited prior to closing;

 

  (e) Provide such other financial and advisory services relating to the PIPE as the Company and the Placement Agent agree are appropriate under the circumstances

 

  (f) Comply and ensure that all affiliates, brokers and other persons associated with the PIPE comply with all laws, regulations and standards applicable to the PIPE.

2. Compensation and Fees . The Company shall pay to the Placement Agent the following compensation with respect to the PIPE:


  (a) A good faith retainer fee of $10,000 shall be paid upon execution of this agreement. An additional good faith retainer of $15,000 shall be paid as detailed below provided in the Company’s sole judgment good faith efforts and material progress has been achieved by the Placement Agent:

 

  i. $7,500 on 30 days after execution

 

  ii. $7,500 on 60 days after execution

 

  (b) All monies raised by the Placement Agent in PIPE of any equity and convertible instrument bridge capital financing shall earn the following cash and warrant fees (the “Fees”).

 

  i. Cash Fee of Six percent (6%) , in an equity or convertible financing minus any retainer fees paid as described in 2 (a), and

 

  ii. Warrants of Six percent (6%)  in an equity or convertible financing. Such warrants shall have the same terms as the warrants issued to the investors.

 

  (c) An accountable expense allowance to cover reasonable out-of-pocket expenses incurred to include, but not be limited to, due diligence and offering presentation purposes including legal and consulting services, escrow agent payments if any, cost of supplies, copying and mailing, other offering expenses and road show expenses; except for Placement Agent legal and consultant expenses which shall not exceed $2000.00 without company’s written permission , permission will be requested from the Company for individual expense items in excess of $50; Placement Agent will submit expense items from time to time to the Company, which items will be promptly reimbursed.

 

  (d) In the event the Company negotiates and accepts capital in excess of $12 million from investors or investor groups introduced by the Placement Agent, the compensation terms described in 2. (b i. & ii.) above shall apply.

 

  (e) The Company shall have the right, at their sole and complete discretion, to reject any investment proposal, without further obligation to the Placement Agent.

 

  (f) Transactions and expenses defined in this Placement will be realized via wire using Account Number 890-051238-5: The Bank of New York, ABA: 021 000 018, Beneficiary: Pershing LLC, Account Number: 890-051238-5, Ultimate Beneficiary: Scarsdale Equities LLC with Ultimate Beneficiary Account: AXC-890313. For incoming wires from foreign banks in USD currency use SWIFT code IRVTUS3N. Please send Wire confirmation number on the day of wire to hfitzgerald@scarsdale-equities.com.

 

  (g) All fees and expenses shall be paid in US dollars. If applicable the foreign exchange conversion rate in to dollars shall be based upon the five days moving average at the time of the transaction date.

3. Use of Affiliated and Associated Broker-Dealers . In performing its responsibilities, the Placement Agent may utilize the services of other broker-dealers, provided that such broker dealers are registered as a “broker dealer” under federal and state securities laws and any other applicable laws promulgated by the Financial Industry Regulatory Authority (“FINRA”) and similarly situated governing bodies. So as to facilitate the


Company’s timely filings of Form D, the Placement Agent will provide the Company a listing of any and all “broker dealers” who solicited investors in connection with the PIPE and the states in which they solicited investors immediately after any investment of the PIPE has been completed. The parties acknowledge that the Placement Agent shall be responsible to ensure that any such broker-dealer complies with all applicable laws and the terms of any agreement between the Placement Agent and the Company. The parties agree that the Placement Agent shall be responsible for payment of any compensation to any such entities and that the Company will not compensate these entities or reimburse any expenses incurred by them in connection with performance of such duties.

4. Access to Information and Accuracy of Information . The Company shall provide the Placement Agent with all information reasonably requested and available, and access to its senior management, auditors, legal counsel and consultants as may reasonably be necessary. In carrying out our responsibilities, the Placement Agent will necessarily rely on information prepared or supplied by the Company. Placement Agent will consult with the Company in planning the PIPE and will review with the Company and its counsel the final revisions of the PIPE Documents (“Placement Documents”), including the PIPE Memorandum, investor questionnaire, and such local securities laws compliance as may be required as a result of PIPE of the Securities. All documents to be used in the Placement shall be reviewed by Placement Agent prior to use by the Company in making offers or sales. The Company will have primary responsibility for the preparation and contents of the Placement Documents. The Company will also be responsible for updating and supplementing the Placement Documents prior to closing as required.

5. Term and Exclusivity. The engagement hereunder shall terminate upon the final closing or 12 months from the execution of the Agreement provided the Placement Agent performs its duties in good faith and the agreement is not terminated prior by the company on its sole discretion. The Company agrees to use the Placement Agent as its non-exclusive agent in collaboration with other agents for all capital financings for the first twelve month during which this Agreement is in effect.

6. Not an Underwriter . The parties acknowledge that the Placement Agent is not to act as an underwriter of the Company’s securities whether in connection with the PIPE or in the future, unless subsequently mutually agreed.

7. No Guarantee . The Placement Agent has agreed to perform the services hereunder on a “best efforts” basis. Placement Agent does not make any guarantee as to the successful completion of the PIPE.

8. Representations, Warranties and Covenants of the Company . The Company represents and warrants as follows:

(a) The Company is duly organized and validly existing as a Corporation under the laws of The State of Delaware and has all requisite authority to own its property and conduct its business as currently conducted, to offer the Securities in the US markets and enter into this Agreement.


(b) The Securities will be offered and sold by the Company in compliance with an exemption from registration of the Securities Act of 1933 as amended and in compliance with all other securities laws and regulations. The Company will file appropriate notices with the Securities and Exchange Commission and with other applicable securities authorities.

(c) The Memorandum will disclose all material information required to be disclosed to investors under applicable securities laws and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated in the Memorandum or necessary to make the statements therein not misleading; provided, however, that these representations and warranties do not extend to written material furnished to the Company by Placement Agent relating to Placement Agent expressly for use in the Memorandum. Except as may be disclosed in the Memorandum, there are no obligations or liabilities, contingent or otherwise, that would be reasonably likely to result in any claims against the Company except for those in the ordinary course of business or that would not be reasonably likely to have a material adverse effect on the Company.

(d) The Company will not offer for sale or sell any additional securities unless, in the opinion of the Company’s counsel, such offer or sale does not violate the registration and qualification requirements under applicable securities laws in regard to the PIPE.

(e) The execution, delivery and performance of this Agreement will not violate any provision of the Articles of the Company or any agreement or other instrument to which the Company is a party or by which it is bound. Any necessary approvals, governmental and private, will be obtained by the Company prior to any closing.

9. Covenants by the Placement Agent and the Company . The Placement Agent will maintain and supply to the Company from time to time a list of the potential investors (a) that held a discussion with the Placement Agent or the Company regarding the Company and the PIPE, or (b) who invested in the PIPE (collectively, the “Potential Investors”). If within twelve months from the final closing date of the Securities, the Company accepts investments, whether equity or otherwise, from any of the Potential Investors that the Placement Agent so introduced to the Company, the Company will pay the Placement Agent the Success Fee. The terms in this paragraph do not apply to future public equity offerings of the Company. It is understood that current Company investors will not be subject to the provisions of this paragraph.

10. Publicity . The Company will agree, if requested by the Placement Agent, to include a reference to the Placement Agent in any press release or other public communication issued by the Company with respect to the PIPE.

11. Miscellaneous . This Agreement, including Exhibit A attached, contains the entire agreement between the Company and the Placement Agent concerning the engagement of the Placement Agent by the Company, and any modifications to this Agreement or any waiver of any term or condition hereof will not be binding unless approved in writing by both parties. This Agreement may be executed in several counterparts, all of which taken together shall constitute one (1) single agreement between the Parties hereto. Proof of a validly executed counterpart may be sent to the other party hereto via facsimile or email.


This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of laws.

Please confirm that the foregoing is in accordance with your understandings and agreements with the Placement Agent by signing and returning to us this Agreement.

 

Very truly yours,     SCARSDALE EQUITIES LLC
      By:   /s/ Francis A. Mlynarczyk
        Mr. Francis A. Mlynarczyk, Jr.
       

Chief Executive Officer

Scarsdale Equities LLC Member FINRA

10 Rockefeller Plaza Suite 720

New York NY 10020

 

Agreed to and Accepted:
IMMUNOCELLULAR THERAPEUTICS, LTD.
By:   /s/ Manish Singh
  Manish Singh, Ph.D., MBA
 

President and Chief Executive Officer

ImmunoCellular Therapeutics, Ltd.

21900 Burbank Blvd, 3rd Floor

Woodland Hills, CA 91367


Exhibit A

In consideration of the agreement of Placement Agent to act on behalf of the Company pursuant to the attached Agreement, the Company agrees to indemnify and hold harmless Placement Agent, its affiliates (within the meaning of the Securities Act of 1933), and each of their respective partners, directors, officers, agents, consultants, employees and controlling persons (within the meaning of the Securities Act of 1933) (Placement Agent and each such other person or entity are hereinafter referred to as an “Indemnified Person”), from and against any losses, damages, expenses and liabilities (collectively “Liabilities”) or actions, investigations, inquiries, arbitrations, claims or other proceedings in respect thereof, including enforcement of this agreement (collectively “Actions”) (Liabilities and Actions are herein collectively referred to as “Losses”), as they may be incurred (including all reasonable legal fees and other expenses incurred in connection with investigating, preparing, defending, paying, settling or compromising any Losses, whether or not in connection with any pending or threatened Action, and notwithstanding the absence of a final determination as set forth below as to the Company’s obligation to reimburse an Indemnified Person for such Losses and the possibility that such payments might later be held to have been improper) to which any of them may become subject and which are related to or arise out of any act, omission, transaction or event contemplated by the Agreement. The Company will not, however, be responsible under the foregoing provisions with respect to any Losses to the extent that it shall have been finally determined by a court of competent jurisdiction in accordance with the terms of the Agreement that such Losses resulted primarily from actions taken or omitted to be taken by an Indemnified Person due to its gross negligence or willful misconduct, and in such event the Placement Agent will so indemnify the Company and its affiliates. To the extent that any prior payment has been made by the Company to such Indemnified Person is so determined to have been improper by reason of such Indemnified Person’s gross negligence or willful misconduct, such Indemnified Person shall promptly pay such amount to the Company, together with interest, at the prime rate announced from time to time by U.S. Bank, N.A.

If the indemnity referred to in this Exhibit A should be, for any reason whatsoever, unenforceable, unavailable or otherwise insufficient to hold each Indemnified Person harmless, the Company shall pay to or on behalf of each Indemnified Person contributions for Losses so that each Indemnified Person ultimately bears only a portion of such Losses as is appropriate (i) to reflect the relative benefits received by each such Indemnified Person, respectively, on the one hand and the Company on the other hand in connection with the transaction or (ii) if the allocation on that basis is not permitted by applicable law, to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of each such Indemnified Person, respectively, and the Company as well as any other relevant equitable considerations; provided, however, that in no event shall the aggregate contribution of all Indemnified Persons to all Losses in connection with any transaction exceed the amount of the fee actually received by Placement Agent pursuant to the Engagement Letter. The respective relative benefits received by Placement Agent and the Company in connection with any transaction shall be deemed to be in the same proportion as the aggregate fee paid to Placement Agent in connection with the transaction bears to the total consideration of the transaction. The relative fault of each Indemnified Person and the Company shall be determined by reference to, among other things, whether the actions or omissions to act were by such Indemnified Person or the Company and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action or omission to act.


The Company also agrees that no Indemnified Person shall have any liability to the Company or its affiliates, directors, officers, employees, agents or shareholders, directly or indirectly, related to or arising out of the Agreement, except Losses incurred by the Company which it shall have been finally determined by arbitration in accordance with the terms of the Agreement to have resulted primarily from actions taken or omitted to be taken by such Indemnified Person due to its gross negligence or willful misconduct. In no event, regardless of the legal theory advanced, shall any person be liable for any consequential, indirect, incidental or special damages of any nature arising hereunder. The Company agrees that without Placement Agent’s prior written consent it shall not settle any pending or threatened claim, action, suit or proceeding related to the Agreement unless the settlement also includes an express unconditional release of all Indemnified Persons from all liability and obligations arising therefrom, or the Company reaffirms its obligations to indemnify for or contribute to Losses incurred by any unreleased Indemnified Person as herein provided.

Promptly after its receipt of notice of the commencement of any action, any Indemnified Person will, if a claim in respect thereof is to be made against the Company hereunder, notify in writing the Company of the commencement thereof; but omission so to notify the Company will not relieve the Company from any liability hereunder which it may have to any Indemnified Person unless the delay in such notification shall have resulted in such Liabilities. If the Company so elects, the Company may assume the defense of such Action in a timely manner, including the employment of counsel (reasonably satisfactory to Placement Agent) and payment of expenses, provided the Company provides to Placement Agent evidence reasonably satisfactory to Placement Agent that the Company will have the financial resources to conduct such defense actively and diligently and permits Placement Agent and counsel retained by Placement Agent at its expense to participate in such defense. Notwithstanding the foregoing, in the event Placement Agent determines in its sole discretion that it is advisable for the Indemnified Persons to be represented by separate counsel, then Placement Agent may employ on behalf of the Indemnified Persons a single separate counsel to represent or defend such Indemnified Persons in such action, claim, proceeding or investigation and Placement Agent will pay the fees and disbursements of such separate counsel as incurred.

In the event of any fundamental change involving the corporate structure of the Company, such as by merger, plan of exchange or sale of all or substantially all of its assets, any executory obligations of the Company in this engagement letter shall, if not assumed by operation of law, be assumed by contract by the acquiring entity or arrangements made to protect the interests of Placement Agent reasonably satisfactory to Placement Agent.

If multiple claims are brought against Placement Agent in any Action with respect to at least one of which indemnification is permitted under applicable law and provided for under this agreement, the Company agrees that any judgment, arbitration award or other monetary award shall be conclusively deemed to be based on claims as to which indemnification is permitted and provided for.

The obligations of the Company referred to above shall be in addition to any rights that any Indemnified Person may otherwise have

EXHIBIT 10.52

CONSULTING AGREEMENT

This Consulting Agreement (the “Agreement”) is made and entered into to be effective as of October 1, 2010 (the “Effective Date”) by and between ImmunoCellular Therapeutics, Ltd. (IMUC.OB) located at 21900 Burbank Boulevard, 3rd Floor, Woodland Hills, CA 91367 (the “Company”) and JFS Investments located at 35 Crest Loop, Staten Island, NY 10312, a Florida corporation (the “Consultant”).

WHEREAS:

A. The Consultant has the professional business and financial expertise and experience to assist the Company, and

B. The Consultant is offering its services as a consultant to the Company; and

C. The Company desires to retain the Consultant as an independent consultant and to memorialize the Consultant’s work for the Company by entering into this written Agreement.

D. The parties agree that this Agreement reflects the entire understanding and agreements between the parties hereto.

NOW, THEREFORE , in consideration of the premises and promises, warranties and representations herein contained, it is agreed as follows:

1. DUTIES . The Company hereby engages the Consultant and the Consultant hereby accepts engagement as a consultant. It is understood and agreed, and it is the express intention of the parties to this Agreement, that the Consultant is an independent contractor, and not an employee or agent of the Company for any purpose whatsoever. Consultant shall perform all duties and obligations as described on Exhibit A hereto and agrees to be available at such times as may be scheduled by the Company. It is understood, however, that the Consultant will maintain Consultant’s own business in addition to providing services to the Company. The Consultant agrees to promptly perform all services required of the Consultant hereunder in an efficient, professional, trustworthy and businesslike manner. A description of the Consultant’s services are attached hereto as Exhibit A and incorporated by reference herein. In such capacity, Consultant will utilize only materials, reports, financial information or other documentation that is approved in writing in advance by the Company.

2. CONSULTING SERVICES & COMPENSATION . Commencing on the Effective Date, the Consultant will be retained as a Consultant and independent contractor for the Company. For services rendered hereunder, the Consultant shall receive:

(a) JFS Investments and Assigns receive an aggregate of 144,000 restricted common shares of the Company (the “Shares”), to be issued as follows; 24,000 shares in the name of JFS Investments and 12,000 shares in the name of Samel, LLC to be issued upon signing of this Agreement and 108,000 shares to be issued at the rate of 8,000 shares in the name of JFS Investments and 4,000 shares in the name of Samel, LLC for months four through twelve. The Shares issued for each of months four through twelve shall be issued at the beginning of each such month and shall only be issued (or pro rata issued) for those months (or partial months) for which the term of this Agreement has been in effect and not terminated.


(b) A three-year warrant to purchase 120,000 shares of the Company’s common stock at an exercise price of $1.00 per share shall be divided as follows: 80,000 in the name of JFS Investments, Inc. and 40,000 in the name of Samel, LLC in the form attached hereto as Exhibit B , which shall vest as to 20,000 shares in the name of JFS Investments, Inc. and 10,000 shares in the name of Samel, LLC upon issuance and 6,667 shares for JFS Investments, Inc. and 3,333 shares for Samel, LLC, shall vest on the 1st day of each of the 4th month through the 11th month from the Effective Date and 6,664 shares for JFS Industries and 3,336 for Samel, LLC will vest in the 12th month.

(c) A three-year warrant to purchase 120,000 shares of the Company’s common stock at an exercise price of $2.00 per share shall be divided as follows: 80,000 in the name of JFS Investments, Inc. and 40,000 in the name of Samel, LLC in the form attached hereto as Exhibit C , which shall vest as to 20,000 shares in the name of JFS Investments, Inc. and 10,000 shares in the name of Samel, LLC upon issuance and 6,667 shares for JFS Investments, Inc. and 3,333 shares for Samel, LLC shall vest on the 1st day of each of the 4th month through the 11th month from the Effective Date and 6,664 shares for JFS Industries and 3,336 for Samel, LLC will vest in the 12th month.

3. EXPENSES . In addition to the compensation in Section 2 above, the Company agrees to reimburse JFS Investments from time to time, for reasonable out-of-pocket expenses incurred by JFS Investments in connection with its activities under this agreement, provided, however JFS Investments shall not incur any expense in excess of $1,000 or $2,500 cumulative nickel dime items without prior written Company consent. These expenses include but are not limited to airfare, hotel lodging, meals, transportation, outside consultants, printing and overnight express mail.

4. CONFIDENTIALITY . All knowledge and information of a proprietary and confidential nature relating to the Company which the Consultant obtains during the Consulting period, from the Company or the Company’s employees, agents or Consultants shall be for all purposes regarded and treated as strictly confidential for so long as such information remains proprietary and confidential and shall be held in trust by the Consultant solely for the Company’s benefit and use and shall not be directly or indirectly disclosed by the Consultant to any person without the prior written consent of the Company, which consent may be withhold by the Company in its sole discretion.

5. INDEPENDENT CONTRACTOR STATUS . Consultant understands that since the Consultant is not an employee of the Company, the Company will not withhold income taxes or pay any employee taxes on its behalf, nor will it receive any fringe benefits. The Consultant shall not have any authority to assume or create any obligations, express or implied, on behalf of the Company and shall have no authority to represent the Company as agent, employee or in any other capacity that as herein provided. The Consultant does hereby indemnify and hold harmless the Company from and against any and all claims, liabilities, demands, losses or expenses incurred by the Company if 1) the Consultant fails to pay any applicable income and/or employment taxes (including interest or penalties of whatever nature), in any amount, relating to the Consultant’s rendering of consulting services to the Company, including any attorney’s fees or costs to the prevailing party to enforce this indemnity or (2) Consultant takes any action or fails to take any action in accordance with the companies instructions. The Consultant shall be responsible for obtaining workers’ compensation insurance coverage and agrees to indemnify, defend and hold the Company harmless of and from any and all claims arising out of any injury, disability or death of the Consultant.

 

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6. REPRESENATIONS AND WARRANTS . For purposes of this Agreement and the Shares, the Consultant represents and warrants as follows:

(a) The Consultant (i) has adequate means of providing for the Consultant’s current needs and possible personal contingencies, (ii) is acquiring the Shares for investment and not with a view to their distribution and has no need for liquidity in this investment, (iii) is able to bear the substantial economic risks of an investment in the Shares for an indefinite period, (iv) at the present time, can afford a complete loss of such investment, and (v) is an “accredited investor” as defined in the Securities Act of 1933, as amended.

(b) The Consultant has a preexisting personal or business relationship with the Company or any of its directors or executive officers, or by reason of any business or financial experience or the business or financial experience of any professional advisors who are unaffiliated with and who are compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly, could be reasonably assumed to have the capacity to protect the Consultant’s interests in connection with the investment in the Company.

(c) The Consultant is aware that:

(i) The Shares are not transferable under this Agreement and applicable securities laws; and

(ii) The Articles of Incorporation and Bylaws of the Company contain provisions that limit or eliminate the personal liability of the officers, directors and agents of the Company and indemnify such parties for certain damages relating to the Company, including damages in connection with the Shares and the good-faith management and operation of the Company.

(d) The Consultant acknowledges that the Shares are not currently registered under any registration statement with the Securities and Exchange Commission (SEC).

(e) The Consultant has not been furnished any offering literature and has not been otherwise solicited by the Company.

(f) The Company and its officers, directors and agents have answered all inquiries that the Consultant has made of them concerning the Company or any other matters relating to the formation, operation and proposed operation of the Company and the offering and sale of the Shares.

(g) The Consultant, if a corporation, partnership, trust or other entity, is duly organized and in good standing in the state or country of its incorporation and is authorized and otherwise duly qualified to purchase and hold the Shares. Such entity has its principal place for business as set forth on the signature page hereof and has not been formed for the specific purpose of acquiring the Shares unless all of its equity owners qualify as accredited individual investors.

(h) All information that the Consultant has provided to the Company concerning the Consultant, the Consultant’s financial position and the Consultant’s knowledge of financial and business matters, or, in the case of a corporation, partnership, trust or other entity, the knowledge of financial and business matters of the person making the investment decision on behalf of such entity,

 

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including all information contained herein, is correct and complete as of the date set forth at the end hereof and may be relied upon, and if there should be any material adverse change in such information prior to this subscription being accepted, the Consultant will immediately provide the Company with such information.

(i) The Consultant certifies, under penalties of perjury (i) that the taxpayer identification number shown on the signature page of this Agreement is true, correct and complete, and (ii) that the Consultant is not subject to backup withholding as a result of a failure to report all interest or dividends, or because the Internal Revenue Service has notified the Consultant that the Consultant is no longer subject to backup withholding.

(j) In rendering the services hereunder and in connection with the Shares, the Consultant agrees to comply with all applicable federal and state securities laws, the rules and regulations thereunder, the rules and regulations of any exchange or quotation service on which the Company’s securities are listed and the rules and regulations of the Financial Industry Regulatory Authority.

7. TERMINATION . Either party may terminate this Agreement at any time with or without cause by giving ten (10) days written notice to the other party, provided, however, that any termination by either party without cause may not be effective prior to 90 days from the Effective Date. Should the Consultant default in the performance of this Agreement or materially breach any of its provisions, the Company may, in its sole discretion, terminate this Agreement immediately upon written notice to the Consultant.

8. NO THIRD PARTY RIGHTS . The parties warrant and represent that they are authorized to enter into this Agreement and that no third parties, other than the parties hereto, have any interest in any of the services or the Shares contemplated hereby.

9. ABSENCE OF WARRANTIES AND REPRESENTATIONS . Each party hereto acknowledges that they have signed this Agreement without having relied upon or being induced by any agreement, warranty or representation of fact or opinion of any person not expressly set forth herein. All representations and warranties of either party contained herein shall survive its signing and delivery.

10. GOVERNING LAW . This Agreement shall be governed by and construed in accordance with the law of the State of New York.

11. ATTORNEY’S FEES . In the event of any controversy, claim or dispute between the parties hereto, arising out of or in any manner relating to this Agreement, including an attempt to rescind or set aside, the prevailing party in any action brought to settle such controversy, claim or dispute shall be entitled to recover reasonable attorney’s fees and costs.

12. ARBITRATION . Any controversy between the parties regarding the construction or application of this Agreement, any claim arising out of this Agreement or its breach, shall be submitted to arbitration in Los Angeles, California before one arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association, upon the written request of one party after service of that request on the other party. The cost of arbitration shall be borne by the losing party. The arbitrator is also authorized to award attorney’s fees to the prevailing party.

 

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13. VALIDITY . If any paragraph, sentence, term or provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity enforceability of any other paragraph, sentence, term and provision hereof. To the extent required, any paragraph, sentence, term or provision of this Agreement may be modified by the parties hereto by written amendment to preserve its validity.

14. ON-DISCLOSURE OF TERMS . The terms of this Agreement shall be kept confidential, and no party, representative, attorney or family member shall reveal its contents to any third party except as required by law or as necessary to comply with law or preexisting contractual commitments.

15. ENTIRE AGREEMENT . This Agreement contains the entire understanding of the parties and cannot be altered or amended except by an amendment duly executed by all parties hereto. This Agreement shall be binding upon and inure to the benefit of the successors, assigns and personal representatives of the parties.

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

 

ImmunoCellular Therapeutics, Ltd.     JFS Investments
/s/ Manish Singh     /s/ Joseph M. Salvani
Manish Singh     Joseph M. Salvani
President and Chief Executive Officer     President
ImmunoCellular Therapeutics, Ltd.     JFS Investments, Inc.

 

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EXHIBIT 10.52

EXHIBIT A

DESCRIPTION OF CONSULTING SERVICES

The Consultant agrees, to the extent reasonably required in the conduct of its business with the Company, to place at the disposal of the Company its judgment and experience and to provide business development services to the Company including, but not limited, to, the following:

 

  (i) review the Company’s financial requirements;

 

  (ii) analyze and assess alternatives for the Company’s financial requirements;

 

  (iii) provide introductions to professional analysts and money managers;

 

  (iv) assist the Company in financing arrangement to be determined and governed by separate and distinct financing agreements;

 

  (v) provide analysis of the Company’s industry and competitors in the form of general industry reports provided directly to Company;

 

  (vi) assist the Company in developing corporate partnering relationships; and

 

  (vii) provide a weekly status report via e-mail detailing names, contact information and feedback.

 

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EXHIBIT 10.52

EXHIBIT B

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR UNLESS THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

COMMON STOCK PURCHASE WARRANT

 

 

THIS CERTIFIES that, for good and valuable consideration received, _____________ or a registered assignee (the “ Holder ”) is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from ImmunoCellular Therapeutics, Ltd., a Delaware corporation (the “ Corporation ”), up to __________________ (              ) fully paid and nonassessable shares of common stock, par value $0.0001, of the Corporation (“ Common Stock ”) at a purchase price per share (the “ Exercise Price ”) of Two Dollars ($2.00) (the “ Warrant ”). The Warrant shall vest as to ______________ shares upon issuance, shall vest as to ________ shares in each of months four through eleven following the issuance date, and the remaining ________ shares shall vest in the twelfth month following the issuance date. The vesting of shares under this Warrant shall continue only through the expiration or termination date of the Consulting Agreement dated as of October 1, 2010 by and between the Corporation and JFS Investments.

 

1. Term of Warrant

Subject to the terms and conditions set forth herein, this Warrant shall be exercisable with respect to the vested shares, in whole or in part, at any time commencing on the date hereof prior to 11:59 p.m., Pacific Standard Time, on September 30, 2013 (the “ Expiration Time ”).

 

2. Exercise of Warrant

(a) Exercise . The purchase rights represented by this Warrant are exercisable by the Holder, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation, ImmunoCellular Therapeutics, Ltd., Attention: President, 21900 Burbank, 3 rd Floor, Woodland Hills, California 91367; facsimile: (818) 992-2908 (or such other office or agency of the Corporation as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Corporation), and upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Corporation);

 

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whereupon the Holder shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of shares of Common Stock so purchased.

(b) Limited Net Cash Settlement Right .

If as of the date of such Warrant exercise there is no effective registration statement under the Securities Act registering, or the prospectus contained therein is not available for, the issuance or resale of the shares of Common Stock upon the exercise of this Warrant, then this Warrant may instead be exercised, upon the Holder’s election in the Notice of Exercise, by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of shares of Common Stock equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A)

  =   the VWAP on the trading day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the Notice of Exercise; provided that, for purposes of this Section 2(b), the date of such Warrant exercise shall be deemed to be the date on which the Corporation actually receives from the Holder the executed Notice of Exercise, either by facsimile transmission or by mail;

(B)

  =   the Exercise Price of this Warrant, as adjusted hereunder; and

(X)

  =   the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed on a national securities exchange, the daily volume-weighted average price of the Common Stock for such date (or the nearest preceding date) on the national securities exchange on which the Common Stock is then listed as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time), (b) if the Common Stock is not then listed on a national securities exchange, the volume-weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on a national securities exchange or the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Corporation.

Except as specifically set forth in the preceding portions of this Section 2(b), under no circumstances will the Corporation be required to net cash settle this Warrant upon its exercise.

 

3. Issuance of Shares; No Fractional Shares or Scrip

Certificates for shares purchased hereunder shall be delivered to the Holder by the Corporation’s transfer agent at the Corporation’s expense within a reasonable time after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the Holder and shall be

 

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registered in the name of the Holder or, subject to applicable laws, such other name as shall be requested by the Holder. If, upon exercise of this Warrant, fewer than all of the shares of Common Stock evidenced by this Warrant are purchased prior to the Expiration Time, one or more new Warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of shares of Common Stock not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all shares of Common Stock which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid, and nonassessable and free from all taxes, liens, and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the Holder). The Corporation agrees that the shares so issued shall be and will be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the Holder of this Warrant.

 

4. Charges, Taxes, and Expenses

Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by an Assignment Form to be provided by the Corporation duly executed by the Holder.

 

5. No Rights as a Stockholder

This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Corporation prior to the exercise of this Warrant.

 

6. Exchange and Registry of Warrant

This Warrant is exchangeable, upon the surrender hereof by the Holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered Holder of this Warrant. This Warrant may be surrendered for exchange, transfer, or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

 

7. Loss, Theft, Destruction, or Mutilation of Warrant

Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant and in case of loss, theft, or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the

 

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Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

 

8. Saturdays, Sundays and Holidays

If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, a Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

 

9. Merger, Sale of Assets and Similar Transactions

If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the Holder shall have the right to receive, upon exercise of this Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a Holder of a number of shares of Common Stock equal to the number of shares issuable upon exercise of this Warrant immediately prior to such reorganization, consolidation, merger, sale, or conveyance. The Corporation shall give the Holder of this Warrant ten business days’ prior written notice of the proposed effective date of any such merger, consolidation, reorganization, sale or conveyance, and the Corporation shall also give the Holder of this Warrant ten business days’ prior written notice of the commencement of the Corporation’s voluntary or involuntary dissolution, liquidation or winding up. If the property to be received upon such merger, consolidation, reorganization, sale or conveyance is not equity securities, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate.

 

10. Subdivision, Combination, Reclassification, Conversion and Similar Events

If the Corporation at any time shall by subdivision, combination, reclassification of securities or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Warrant shall thereafter entitle the Holder to acquire such number and kind of securities as would have been issuable in respect of the Common Stock (or other securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change) as the result of such change if this Warrant had been exercised in full for cash immediately prior to such change. The Exercise Price hereunder shall be adjusted if and to the extent necessary to reflect such change. If the Common Stock or other securities issuable upon exercise hereof are subdivided or combined into a greater or smaller number of shares of such security, the number of shares issuable hereunder shall be proportionately increased or decreased, as the case may be, and the Exercise Price shall be proportionately reduced or increased, as the case may be, in both cases according to the ratio which the total number of shares of such security to be outstanding immediately after such event bears to the total number of shares of such security outstanding immediately prior to such event. The Corporation shall give the Holder prompt written notice of any change in the type of securities issuable hereunder, any adjustment of the Exercise Price for the securities issuable hereunder, and any increase or decrease in the number of shares issuable hereunder.

 

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11. Transferability; Compliance with Securities Laws

(a) This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable United States, state, and foreign securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject to such restrictions, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the Holder hereof, in whole or in part, at the office or agency of the Corporation referred to in Section 2 above. Any such transfer shall be made in person or by the Holder’s duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed.

(b) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Common Stock issuable upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell, or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act or any state or foreign securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of Common Stock so purchased are being acquired solely for Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

(c) The Common Stock has not been registered under the Securities Act, and this Warrant may not be exercised except by (1) the original purchaser of this Warrant from the Corporation or (2) an “accredited investor” as defined in Rule 501(a) under the Securities Act. Each certificate representing shares of Common Stock issued on exercise of this Warrant or other securities issued in respect of such Common Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any other legend required under applicable securities laws):

THE SHARES OF COMMON STOCK EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR UNLESS THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SHARES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

 

12. Representations and Warranties

The Corporation hereby represents and warrants to the Holder that:

(a) During the period that this Warrant is outstanding, the Corporation will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant;

 

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(b) The issuance of this Warrant shall constitute full authority to the Corporation’s officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Common Stock issuable upon exercise of this Warrant;

(c) The Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to sell and issue the Common Stock hereunder, and to carry out and perform its obligations under the terms of this Warrant;

(d) All corporate action on the part of the Corporation, its directors and stockholders necessary for the authorization, execution, delivery, and performance of this Warrant by the Corporation, the authorization, sale, issuance, and delivery of the Common Stock, the grant of registration rights as provided herein, and the performance of the Corporation’s obligations hereunder has been taken;

(e) The shares of Common Stock, when issued in compliance with the provisions of this Warrant and the Corporation’s Certificate of Incorporation (as they may be amended from time to time), will be validly issued, fully paid, and nonassessable, and free of all taxes, liens, or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable United States and state securities laws; and

(f) The issuance of the shares of Common Stock upon exercise of this Warrant will not be subject to any preemptive rights, rights of first refusal, or similar rights.

 

13. Governing Law

This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officer.

 

Dated: October 1, 2010     IMMUNOCELLULAR THERAPEUTICS, LTD.
    By:    
      Manish Singh, Ph.D.
      President and Chief Executive Officer

 

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NOTICE OF EXERCISE

 

To: ImmunoCellular Therapeutics, Ltd.

 

(1) The undersigned hereby elects to purchase shares of common stock of ImmunoCellular Therapeutics, Ltd. pursuant to the terms of the attached Warrant (the “Warrant”) and (check the applicable box):

 

  ¨ Tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any, or

 

  ¨ Elects to exercise the Warrant on a “cashless” basis under the limited circumstances described in Section 2(b) of the Warrant.

 

(2) In exercising the Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state or foreign securities laws.

 

(3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below:

 

       
   (Name)   
       
   (Address)   
       
       
   (Tax I.D. No.)   

 

(4) The undersigned represents that (a) he, she, or it is the original purchaser from the Corporation of the Warrant or is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act of 1933, as amended, and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.

 

Date:                                                                      
   
(Signature)

 

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EXHIBIT 10.52

EXHIBIT C

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR UNLESS THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

COMMON STOCK PURCHASE WARRANT

 

 

THIS CERTIFIES that, for good and valuable consideration received, _______________ or a registered assignee (the “ Holder ”) is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from ImmunoCellular Therapeutics, Ltd., a Delaware corporation (the “ Corporation ”), up to ______________ (              ) fully paid and nonassessable shares of common stock, par value $0.0001, of the Corporation (“ Common Stock ”) at a purchase price per share (the “ Exercise Price ”) of One Dollar ($1.00) (the “ Warrant ”). The Warrant shall vest as to ______________ shares upon issuance, shall vest as to __________ shares in each of months four through eleven following the issuance date, and the remaining __________ shares shall vest in the twelfth month following the issuance date. The vesting of shares under this Warrant shall continue only through the expiration or termination date of the Consulting Agreement dated as of October 1, 2010 by and between the Corporation and JFS Investments.

 

1. Term of Warrant

Subject to the terms and conditions set forth herein, this Warrant shall be exercisable with respect to the vested shares, in whole or in part, at any time commencing on the date hereof prior to 11:59 p.m., Pacific Standard Time, on September 30, 2013 (the “ Expiration Time ”).

 

2. Exercise of Warrant

(a) Exercise . The purchase rights represented by this Warrant are exercisable by the Holder, in whole or in part, at any time and from time to time at or prior to the Expiration Time by the surrender of this Warrant and the Notice of Exercise form attached hereto duly executed to the office of the Corporation, ImmunoCellular Therapeutics, Ltd., Attention: President, 21900 Burbank, 3 rd Floor, Woodland Hills, California 91367; facsimile: (818) 992-2908 (or such other office or agency of the Corporation as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Corporation), and upon payment of the Exercise Price for the shares thereby purchased (by cash or by check or bank draft payable to the order of the Corporation);

 

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whereupon the Holder shall be entitled to receive from the Corporation a stock certificate in proper form representing the number of shares of Common Stock so purchased.

(b) Limited Net Cash Settlement Right .

If as of the date of such Warrant exercise there is no effective registration statement under the Securities Act registering, or the prospectus contained therein is not available for, the issuance or resale of the shares of Common Stock upon the exercise of this Warrant, then this Warrant may instead be exercised, upon the Holder’s election in the Notice of Exercise, by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of shares of Common Stock equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A)

  =   the VWAP on the trading day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the Notice of Exercise; provided that, for purposes of this Section 2(b), the date of such Warrant exercise shall be deemed to be the date on which the Corporation actually receives from the Holder the executed Notice of Exercise, either by facsimile transmission or by mail;

(B)

  =   the Exercise Price of this Warrant, as adjusted hereunder; and

(X)

  =   the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed on a national securities exchange, the daily volume-weighted average price of the Common Stock for such date (or the nearest preceding date) on the national securities exchange on which the Common Stock is then listed as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time), (b) if the Common Stock is not then listed on a national securities exchange, the volume-weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on a national securities exchange or the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Corporation.

Except as specifically set forth in the preceding portions of this Section 2(b), under no circumstances will the Corporation be required to net cash settle this Warrant upon its exercise.

 

3. Issuance of Shares; No Fractional Shares or Scrip

Certificates for shares purchased hereunder shall be delivered to the Holder by the Corporation’s transfer agent at the Corporation’s expense within a reasonable time after the date on which this Warrant shall have been exercised in accordance with the terms hereof. Each certificate so delivered shall be in such denominations as may be requested by the Holder and shall be registered in the name of the Holder or, subject to applicable laws, such other name as shall be

 

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requested by the Holder. If, upon exercise of this Warrant, fewer than all of the shares of Common Stock evidenced by this Warrant are purchased prior to the Expiration Time, one or more new Warrants substantially in the form of, and on the terms in, this Warrant will be issued for the remaining number of shares of Common Stock not purchased upon exercise of this Warrant. The Corporation hereby represents and warrants that all shares of Common Stock which may be issued upon the exercise of this Warrant will, upon such exercise, be duly and validly authorized and issued, fully paid, and nonassessable and free from all taxes, liens, and charges in respect of the issuance thereof (other than liens or charges created by or imposed upon the Holder). The Corporation agrees that the shares so issued shall be and will be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered for exercise in accordance with the terms hereof. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon the exercise of this Warrant, an amount equal to such fraction multiplied by the then current price at which each share may be purchased hereunder shall be paid in cash to the Holder of this Warrant.

 

4. Charges, Taxes, and Expenses

Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by an Assignment Form to be provided by the Corporation duly executed by the Holder.

 

5. No Rights as a Stockholder

This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Corporation prior to the exercise of this Warrant.

 

6. Exchange and Registry of Warrant

This Warrant is exchangeable, upon the surrender hereof by the Holder at the above-mentioned office or agency of the Corporation, for a new Warrant of like tenor and dated as of such exchange. The Corporation shall maintain at the above-mentioned office or agency a registry showing the name and address of the registered Holder of this Warrant. This Warrant may be surrendered for exchange, transfer, or exercise, in accordance with its terms, at such office or agency of the Corporation, and the Corporation shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

 

7. Loss, Theft, Destruction, or Mutilation of Warrant

Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant and in case of loss, theft, or destruction of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Corporation of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the

 

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Corporation will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

 

8. Saturdays, Sundays and Holidays

If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, a Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

 

9. Merger, Sale of Assets and Similar Transactions

If at any time the Corporation proposes to merge or consolidate with or into any other corporation, effect any reorganization, or sell or convey all or substantially all of its assets to any other entity, then, as a condition of such reorganization, consolidation, merger, sale or conveyance, the Corporation or its successor, as the case may be, shall enter into a supplemental agreement to make lawful and adequate provision whereby the Holder shall have the right to receive, upon exercise of this Warrant, the kind and amount of equity securities which would have been received upon such reorganization, consolidation, merger, sale or conveyance by a Holder of a number of shares of Common Stock equal to the number of shares issuable upon exercise of this Warrant immediately prior to such reorganization, consolidation, merger, sale, or conveyance. The Corporation shall give the Holder of this Warrant ten business days’ prior written notice of the proposed effective date of any such merger, consolidation, reorganization, sale or conveyance, and the Corporation shall also give the Holder of this Warrant ten business days’ prior written notice of the commencement of the Corporation’s voluntary or involuntary dissolution, liquidation or winding up. If the property to be received upon such merger, consolidation, reorganization, sale or conveyance is not equity securities, and if this Warrant has not been exercised by or on the effective date of such transaction, it shall terminate.

 

10. Subdivision, Combination, Reclassification, Conversion and Similar Events

If the Corporation at any time shall by subdivision, combination, reclassification of securities or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Warrant shall thereafter entitle the Holder to acquire such number and kind of securities as would have been issuable in respect of the Common Stock (or other securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change) as the result of such change if this Warrant had been exercised in full for cash immediately prior to such change. The Exercise Price hereunder shall be adjusted if and to the extent necessary to reflect such change. If the Common Stock or other securities issuable upon exercise hereof are subdivided or combined into a greater or smaller number of shares of such security, the number of shares issuable hereunder shall be proportionately increased or decreased, as the case may be, and the Exercise Price shall be proportionately reduced or increased, as the case may be, in both cases according to the ratio which the total number of shares of such security to be outstanding immediately after such event bears to the total number of shares of such security outstanding immediately prior to such event. The Corporation shall give the Holder prompt written notice of any change in the type of securities issuable hereunder, any adjustment of the Exercise Price for the securities issuable hereunder, and any increase or decrease in the number of shares issuable hereunder.

 

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11. Transferability; Compliance with Securities Laws

(a) This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable United States, state, and foreign securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Corporation, if requested by the Corporation). Subject to such restrictions, prior to the Expiration Time, this Warrant and all rights hereunder are transferable by the Holder hereof, in whole or in part, at the office or agency of the Corporation referred to in Section 2 above. Any such transfer shall be made in person or by the Holder’s duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto properly endorsed.

(b) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Common Stock issuable upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell, or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act or any state or foreign securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Corporation, confirm in writing, in a form satisfactory to the Corporation, that the shares of Common Stock so purchased are being acquired solely for Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

(c) The Common Stock has not been registered under the Securities Act, and this Warrant may not be exercised except by (1) the original purchaser of this Warrant from the Corporation or (2) an “accredited investor” as defined in Rule 501(a) under the Securities Act. Each certificate representing shares of Common Stock issued on exercise of this Warrant or other securities issued in respect of such Common Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any other legend required under applicable securities laws):

THE SHARES OF COMMON STOCK EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR UNLESS THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SHARES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

 

12. Representations and Warranties

The Corporation hereby represents and warrants to the Holder that:

(a) During the period that this Warrant is outstanding, the Corporation will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant;

 

18


(b) The issuance of this Warrant shall constitute full authority to the Corporation’s officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Common Stock issuable upon exercise of this Warrant;

(c) The Corporation has all requisite legal and corporate power to execute and deliver this Warrant, to sell and issue the Common Stock hereunder, and to carry out and perform its obligations under the terms of this Warrant;

(d) All corporate action on the part of the Corporation, its directors and stockholders necessary for the authorization, execution, delivery, and performance of this Warrant by the Corporation, the authorization, sale, issuance, and delivery of the Common Stock, the grant of registration rights as provided herein, and the performance of the Corporation’s obligations hereunder has been taken;

(e) The shares of Common Stock, when issued in compliance with the provisions of this Warrant and the Corporation’s Certificate of Incorporation (as they may be amended from time to time), will be validly issued, fully paid, and nonassessable, and free of all taxes, liens, or encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable United States and state securities laws; and

(f) The issuance of the shares of Common Stock upon exercise of this Warrant will not be subject to any preemptive rights, rights of first refusal, or similar rights.

 

13. Governing Law

This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by its duly authorized officer.

 

Dated: October 1, 2010     IMMUNOCELLULAR THERAPEUTICS, LTD.
    By:    
      Manish Singh, Ph.D.
      President and Chief Executive Officer

 

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EXHIBIT 10.52

NOTICE OF EXERCISE

 

To: ImmunoCellular Therapeutics, Ltd.

 

(1) The undersigned hereby elects to purchase shares of common stock of ImmunoCellular Therapeutics, Ltd. pursuant to the terms of the attached Warrant (the “Warrant”) and (check the applicable box):

 

  ¨ Tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any, or

 

  ¨ Elects to exercise the Warrant on a “cashless” basis under the limited circumstances described in Section 2(b) of the Warrant.

 

(2) In exercising the Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state or foreign securities laws.

 

(3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name as is specified below:

 

       
   (Name)   
       
   (Address)   
       
       
   (Tax I.D. No.)   

 

(4) The undersigned represents that (a) he, she, or it is the original purchaser from the Corporation of the Warrant or is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act of 1933, as amended, and (b) the aforesaid shares of common stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares.

 

Date:                                                                      
   
(Signature)

 

20

EXHIBIT 10.53

Garden State Securities Inc.

October 1, 2010

ImmunoCellular Therapeutics, Ltd.

21900 Burbank Boulevard, 3rd Floor

Woodland Hills, California 91367

ATT: Manish Singh, Ph.D, Chief Executive Officer

 

  Re: Advisory Services

Dear Dr. Singh:

This letter confirms the engagement of Garden State Securities Inc., a FINRA member firm (“GSS”), as a non-exclusive financial advisor to ImmunoCellular Therapeutics, Ltd. and its subsidiaries and affiliates (together, referred to as the “Company”) for a period of 12 months commencing on October 1, 2010 (the “Effective Date”). In this regard, the parties agree to the following terms and conditions:

1. Engagement . The Company hereby engages and retains GSS as a non-exclusive financial advisor for and on behalf of the Company to perform the Services as defined in Section 2. GSS hereby accepts this engagement on the terms and conditions set forth in this Agreement.

2. Services . In connection with its engagement pursuant to this Agreement, GSS agrees to perform the following services for the Company:

A. Advisory Services . As requested from time to time by the Company, GSS shall provide financial advisory services to the Company pertaining to the Company’s business affairs. Without limiting the foregoing, GSS will assist the Company in developing, studying and evaluating a financing plan, strategic and financial alternatives, and merger and acquisition proposals and will assist in negotiations and discussions pertaining thereto. Additionally, GSS will assist the Company in preparing an offering document or presentation materials describing the Company, its operations, its historical performance and future prospects.

B. Business Combinations . GSS will use its best efforts only upon the written request of the Company to coordinate the introduction of the Company to one or more individuals, firms or other entities (the “Candidates”) that may have an interest in pursuing some form of Business Combination with the Company and in analyzing, structuring, negotiating and effecting such a Business Combination. As used in this letter, the term “Business Combination” means (i) any merger, consolidation, reorganization or other business combination pursuant to which any portion of the business of the Company is combined with that of another entity, including without limitation any joint venture, licensing agreement, or product sale or marketing distribution agreement or (ii) the acquisition, directly or indirectly, of beneficial ownership of more than 50% of any class of capital stock of the Company or substantially all of the assets of the Company. Nothing contained herein shall be deemed or construed as an agreement by GSS to issue any “fairness opinion” with respect to a Business Combination. In the event that the Company desires GSS to issue a fairness opinion, the parties shall negotiate the terms of a


separate agreement with respect thereto. The Company shall have no obligation to enter into or pay any compensation to GSS with respect to any Business Combination, financing or other transaction structured or presented to the Company by GSS.

C. GSS agrees to use its best efforts to make itself available to the Company’s officers, at such mutually agreed upon place and time during normal business hours for reasonable periods of time for the purpose of advising and assisting the Company in preparing reports, summaries, corporate and/or transaction profiles, due diligence packages and/or other material and documentation as shall be necessary, in the opinion of GSS. Such availability will be subject to reasonable advance notice and mutually convenient scheduling. In addition, GSS shall make its Investment Banking personnel available for telephone conferences with the Company’s principal financial sales and/or operating officers during normal business hours upon reasonable advance notice and mutually agreed upon dates and times to assist with, and evaluate proposals.

3. Compensation . As compensation for the services rendered by GSS to the Company pursuant to this Agreement and in addition to the expense allowance set forth in Section 4 (“Expenses”) below, the Company shall pay to GSS as set forth below:

Advisory Services. The Company shall issue GSS shares of restricted common stock (“Advisory Stock”) and warrants (“Warrants”). Upon execution of this Agreement, the Company will deliver to GSS, 24,000 shares of the Advisory Stock and Warrants exercisable into 80,000 shares of the Company’s common stock at an exercise price of $1.00 per share and Warrants exercisable into 80,000 shares of the Company’s common stock at an exercise price of $2.00 per share, pursuant to GSS’s instructions to designate the Advisory Stock and Warrants to certain GSS employees and affiliates of GSS. The Advisory Stock shall immediately vest upon delivery and the Warrants shall vest for each Warrant class as to 20,000 shares upon issuance and at a rate of 6,667 for each Warrant class on the 1st day of each of the 4th month through the 11th month from the Effective Date and 6,664 on the 1st day of the 12th month from the Effective Date. On the 1st day of each of the 4th month through the 12th month from the Effective Date, the Company will deliver to GSS 8,000 shares of vested Advisory Stock. The Warrants shall provide for cashless exercise and have a 3-year life. The Company shall deliver to GSS and the Company’s transfer agent, legal opinion letters for GSS and for each designee, at the time that the Advisory Stock and the shares underlying the Warrants are eligible to be sold pursuant to SEC Rule 144, upon GSS’s request and subject to the holder of these shares satisfying all of the requirements of Rule 144 for sale of these shares at that time.

Business Combinations . The form and amount of any compensation payable by the Company to GSS for completed Business Combinations shall be negotiated by GSS and the Company.

4. Expenses . In addition to the compensation in Section 3, “Compensation” above, the Company agrees to reimburse GSS, upon request made from time to time, for its reasonable out-of-pocket expenses incurred by GSS in connection with its activities under this Agreement; provided, however, GSS shall not incur any expense in excess of $500 without the prior written consent of the Company. These expenses include but are not limited to long distance phone

 

2


charges, airfare, hotel lodging and meals, transportation, outside consultants, printing, and overnight express mail incurred by GSS in fulfilling its duties under this Agreement.

5. Confidentiality and Non- Disclosure . The Company is prepared to make available to GSS certain information concerning the business, financial condition, operations, assets and liabilities of the Company in connection with the performance of its duties hereunder. As a condition to such information being furnished to GSS and its employees or agents, GSS agrees to treat any information concerning the Company (whether prepared by the Company, its advisors, investors or otherwise and irrespective of the form of communication) which is furnished to GSS or to its employees or agents now or in the future by or on behalf of the Company (herein collectively referred to as the “ Evaluation Material ”) in accordance with the provisions of this Agreement, and to take or abstain from taking certain other actions hereinafter set forth. The term “ Evaluation Material ” also shall be deemed to include all notes, analyses, compilations, studies, interpretations or other documents prepared by GSS, its employees or agents which contain, reflect or are based upon, in whole or in part, the information furnished to GSS, its employees or agents pursuant hereto. The term “ Evaluation Material ” does not include information which (i) is or becomes generally available to the public other than as a result of a disclosure by GSS, its employees or agents, or (ii) becomes available to GSS on a non-confidential basis from a source other than the Company (including without limitation any of the Company’s directors, officers, employees or agents), or any of its attorneys, accountants, investors, consultants, bankers and financial advisors (collectively, the “ Representatives ”), provided that such source is not bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any other party with respect to such information.

GSS hereby agrees that GSS, its employees and agents shall use the Evaluation Material solely for the purposes contemplated by this Agreement, that the Evaluation Material will be kept confidential and that GSS, its employees and agents will not disclose any of the Evaluation Material in any manner whatsoever; provided, however, that GSS may make any disclosure of such information to which the Company give its prior written consent.

However, the Company will not provide GSS or any GSS affiliate with any material non-public information without prior written notice in which case GSS will only accept receipt of such material non-public information after the signing of a separate non-disclosure agreement between the Company and GSS.

6. Indemnification . The Company agrees to indemnify GSS and its affiliates and their respective directors, officers, employees, agents and controlling persons (each such person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities, joint or several, related to or arising out of any Business Combination, or the engagement of GSS pursuant to, and the performance by GSS of the services contemplated by, this Agreement and will reimburse any Indemnified party for all expenses (including reasonable fees and costs of counsel) as they are incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not such claim, action or proceeding is initiated or brought by or on behalf of the Company, except in the case of the breach of any provision of this Agreement or negligence or willful misconduct by the

 

3


Indemnified Party. If the indemnification of an Indemnified Party provided for in this Agreement is for any reason held unenforceable, the Company agrees to contribute to the losses, claims, damages and liabilities for which such indemnification is held unenforceable is such proportion as is appropriate to reflect the relative benefits to the Company, on the one hand, and GSS, on the other hand; provided, however, that in no event shall the Indemnified Parties be required to contribute an aggregate amount in excess of the aggregate fees actually paid to GSS under this Agreement. The Company agrees that it will not settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification could be sought under the indemnification provision of this Agreement (whether or not GSS or any other Indemnified Party is an actual or potential party to such claim, action or proceeding), unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action or proceeding.

7. Independent Contractor . The Company acknowledges that GSS has been retained to act solely as a financial advisor to the Company. In such capacity, GSS shall act as an independent contractor, and any duties of GSS arising out of its engagement pursuant to this Agreement shall be owed solely to the Company. GSS shall be responsible for the payment of all federal, state and local taxes which may be payable in connection with the receipt of compensation hereunder.

8. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Each of GSS and the Company (a) agrees that any legal suit, action or proceeding arising out of or relating to this Agreement shall be instituted exclusively in New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (b) waives any objection which the Company may have now or hereafter to the venue of any such suit, action or proceeding, and (c) irrevocably consents to the jurisdiction of the foregoing named courts in any such suit, action or procedure. In the event of litigation between the parties arising hereunder, the prevailing party shall be entitled to costs and reasonable attorney’s fees.

9. Term and Termination . This Agreement shall be effective upon its execution and shall remain in effect for 12 months from the date of acceptance by the Company. Either the Company or GSS may terminate GSS’s engagement and responsibilities hereunder with a 10-day advance written notice, which notice (except in the case of termination for cause) shall not be effective as of any date prior to 90 days from the Effective Date. However, no termination of this Agreement shall in any way effect the right of GSS to receive the vested Advisory Stock or vested Warrants for the services rendered hereunder, especially the fees detailed in Section 3 of this Agreement. In addition, Section 6, “Indemnification,” Section 7, “Independent Contractor,” and Section 8, “Governing Law” shall survive any termination of this Agreement.

10. Entire Agreement . This Agreement contains the entire Agreement and understanding between the parties with respect to its subject matter and supersedes all prior discussion, agreements and understandings between them with respect thereto. This Agreement may not be modified except in a writing signed by the parties.

 

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11. Assignment . Neither this Agreement nor the rights of either party hereunder shall be assigned by either party without the prior written consent of the other party.

12. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

13. No Fiduciary Relationship . The Company acknowledges and agrees that: (i) this Agreement is an arm’s-length commercial transaction between the Company and GSS; (ii) in connection therewith and with the process leading to any subsequent transaction as referred to hereunder, including any offering of securities of the Company, GSS is not acting as a fiduciary of the Company; (iii) GSS has not assumed any fiduciary responsibility in favor of the Company or any subscriber or investor with respect to any securities offering contemplated hereby or the process leading thereto, including any negotiation related to the pricing of any securities; and (iv) the Company has consulted its own legal and financial advisors to the extent it has deemed appropriate in connection with this Agreement.

14. Press Releases/Public Announcements . Neither party shall issue any press release or public announcement of this Agreement or the terms hereof without the prior consent of the other party; provided, however, the Company may make filings under applicable federal and state securities laws as required under applicable law but shall provide GSS with a reasonable opportunity to review and comments upon any proposed filing.

 

Sincerely,
Garden State Securities Inc.
By:   /s Ernest Pellegrino
  Name:   Ernest Pellegrino
  Title:   Director of Corporate Finance

 

Agreed and Accepted:
Date: October 1, 2010
By:   /s/ Manish Singh
  Name:   Dr. Manish Singh
  Title:   CEO, ImmunoCellular Therapeutics, Ltd.

 

5

EXHIBIT 10.54

LOGO

January 31, 2011

STRICTLY PRIVATE AND CONFIDENTIAL

Manish Singh, Ph.D.

President and Chief Executive Officer

ImmunoCellular Therapeutics, Ltd.

21900 Burbank Boulevard, 3rd Floor

Woodland Hills, California 91367

Dear Manish:

1. ImmunoCellular Therapeutics, Ltd. (together with any present and future subsidiaries and affiliates of ImmunoCellular Therapeutics, Ltd., the “Company”) hereby retains Summer Street Research Partners (“Summer Street”) and Dawson James Securities, Inc. (“Dawson”) and, together with Summer Street, (the “Agents”) to serve as exclusive co-placement agents for the Company on the terms and conditions set forth in this letter agreement (this “Agreement”) for the purpose of raising up to $25 million.

2. In such capacity, the Agents shall be available for advice, and shall advise the Company with respect to such financial matters as the Company shall from time to time request, including without limitation, matters relating to (a) the Company’s business, operations, properties, financial condition and prospects, and (b) the preparation of materials (collectively, the “Documents”) that include select business and financial information about the Company and other relevant information for purposes of investor presentations and meetings with current or potential investors and as investors or other interested parties may request. The Agents shall serve as exclusive co-placement agents to the Company for a capital raising transaction, whether from institutional, retail or other investors or lenders or from the private placement or public offering of debt instruments or equity securities, including, without limitation, a rights offering (a “Financing”). The Agents are being retained to serve as Agents solely to the Company, and it is agreed that the engagement of the Agents is not, and shall not be deemed to be, on behalf of, and is not intended to confer rights or benefits upon any shareholder or creditor of the Company or upon any other person or entity. No one other than the Company is authorized to rely upon this engagement of the Agents or any statements, conduct or advice of the Agents, and no one other than the Company is intended to be a beneficiary of this engagement. All opinions, advice or other assistance (whether written or oral) given by the Agents in connection with this engagement are intended solely for the benefit


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and use of the Company and will be treated by the Company as confidential, and no opinion, advice or other assistance of the Agents shall be used for any other purpose or reproduced, disseminated, quoted or referred to at any time, in any manner or for any purpose, nor shall any public or other references to the Agents (or to such opinions, advice or other assistance) be made without the express prior written consent of the Agents, unless required by an applicable law or regulation.

3. The Company will furnish the Agents with all information and material concerning the Company which the Agents reasonably request in connection with the performance of their obligations hereunder. The Company represents and warrants that all information made available to the Agents by the Company will, at all times during the period of the engagement of the Agents hereunder, be complete and correct in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in light of the circumstances under which such statements are made and it will continue to ensure that all such information is current and accurate in all material respects. The Company further represents and warrants that any projections provided to the Agents will have been prepared in good faith and will be based upon assumptions which, in light of the circumstances under which they are made, are reasonable. The Company acknowledges and agrees that in rendering its services hereunder the Agents will be using and relying upon, without any independent investigation or verification thereof, all information that is or will be furnished to the Agents by or on behalf of the Company and on publicly available information, and the Agents will not in any respect be responsible for the accuracy or completeness of any of the foregoing kinds of information. The Company understands that in rendering services hereunder the Agents do not provide accounting, legal or tax advice and will rely upon the advice of counsel to the Company and other advisors to the Company as to accounting, legal, tax and other matters relating to any services or transactions (including any potential Financing) contemplated by this Agreement.

In connection with the Agents’ activities on behalf of the Company, the Company will furnish the Agents with all financial and other information regarding the Company that the Agents reasonably believe appropriate to their assignment (all such information so furnished by the Company, whether furnished before or after the date of this Agreement, being referred to herein as the “Information”). The Company will provide the Agents with reasonable access to the officers, directors, employees, independent accountants, legal counsel and other advisors and consultants for the Company. The Agents will maintain the confidentiality of the Information and, unless and until such information shall have been made publicly available by the Company or by

 


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others without breach of a confidentiality agreement, shall disclose the Information only as authorized in writing by the Company or as required by law, rule or regulation, including NASD Rule 2711, or by order of a governmental authority or court of competent jurisdiction. In the event that any Financial Advisor is legally required to make disclosure of any of the Information, such Financial Advisor will give written notice to the Company prior to such disclosure, to the extent that such Financial Advisor can practically do so.

4. The Company agrees as compensation for their services under this Agreement to pay the Agents as follows:

(a) (i) if a Financing is consummated during the term of this Agreement with or without the Agents, or (ii) the Company enters into a definitive agreement with respect to a Financing, during the term of this Agreement or during the Residual Period, then the Company shall pay to the Agents, upon each closing or consummation of the Financing, a cash placement fee (the “Financing Fee”) equal to seven percent (7.0%) on any gross proceeds received by the Company at such closing or consummation in connection with the sale of securities sold in the Financing to any investor who were introduced to the Company during the term of this Agreement as evidenced by a list of persons and entities prepared by the Agents and approved in writing by the Company (the “Financial Advisor Investors”). In addition, the Company shall issue to the Agents or their designees at the closing, warrants (the “Placement Agent Warrants”) to purchase that number of shares of common stock of the Company (“Shares”) equal to an aggregate of four percent (4.0%) of the aggregate number of Shares issued or issuable to Financial Advisor Investors in connection with the Financing (the “Financing Shares”), including, without limitation, upon exercise or conversion of securities placed in the Financing. The Placement Agent Warrants (i) shall have a 5-year term, (ii) shall have a per share exercise price equal to the exercise or conversion price per share paid (or to be paid) upon exercise or conversion of any warrants or convertible securities placed in the Financing (or 125% of the price paid for the Shares if no warrants or convertible securities are placed in the Financing), (iii) may be exercised via cashless exercise (at any time that the Financing Shares are not registered); (iv) shall have the same registration rights with respect to the underlying Shares as the Shares issued or issuable in the Financing. The Financing Fee and the Placement Agent Warrants shall be allocated between the Agents as follows: 70% to Summer Street and 30% to Dawson and shall be paid directly by the Company to Summer Street and Dawson, respectively, as per the aforementioned allocation. Any Financing Fee shall be due and payable immediately upon closing or consummation of a Financing. The Financing Fee shall be deemed earned when paid and shall be non-refundable. The Financing Fee is not negotiable or subject to any reduction, set-off,

 


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counterclaim or refund for any reason or matter whatsoever. If the Company fails to pay the Agents any fee due and payable pursuant to this Agreement in full on the date payable, the Company will pay interest thereon at a rate of 1.5% per month (or such lesser maximum amount that is permitted to be paid by applicable law) to the Agents, accruing daily from the date such fees are due until such amounts, plus all such interest thereon, are paid in full.

(b) In addition to the fees described in this Section 4 and the obligation of the Company to pay certain expenses set forth in Sections 5 and 7 and whether or not any Financing is consummated, the Company will pay all of the Agents’ reasonable out-of-pocket expenses directly to each Financial Advisor (including, without limitation, expenses relating to document and presentation materials, travel, external database and communications services, courier and delivery services, and the fees and expenses of each Financial Advisor’s outside legal counsel), incurred by the Agents in connection with this engagement. Such out-of-pocket expenses shall be payable as they are incurred upon request by the Agents. Any such individual expense in excess of $2,000 shall be subject to prior approval by the Company. Total expenses not to exceed $25,000 without prior approval by the Company. If any compensation or expenses payable to the Agents pursuant to this Agreement are not fully paid when due, the Company agrees to pay all costs of collection or other enforcement of the Agents’ rights hereunder, including but not limited to attorneys’ fees and expenses, whether collected or enforced by suit or otherwise.

5. In connection with engagements of the nature covered by this Agreement, it is the Agents’ practice to provide for indemnification, contribution, and limitation of liability. By signing this Agreement, the Company agrees to the provisions attached to this Agreement (Attachment A), which provisions are expressly incorporated by reference herein.

6. The Company represents and warrants to the Agents that this Agreement has been duly authorized and represents the legal, valid, binding and enforceable obligation of the Company and that neither this Agreement nor the consummation of any Financing contemplated hereby requires the approval or consent of any governmental or regulatory agency or violates any law, regulation, contract or order binding on the Company.

7. In the event of a Financing, the Company shall make or cause to be made state “blue sky” applications in such states and jurisdictions as shall be required by law in connection with a Financing. It shall be the Company’s obligation to bear all blue sky counsel fees and expenses.

8. The Company agrees to comply with all applicable federal and state securities laws in connection with any Financing contemplated by this

 


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Agreement. The Financial The Agents’ engagement shall automatically expire ninety (90) days from the date of this Agreement, unless extended in writing by the Agents and the Company. Either Summer Street (on behalf of the Agents) or the Company may terminate this Agreement, with or without cause, upon thirty (30) days’ written notice to the other party. The provisions of Sections 2, 3, 4, 5 (including, without limitation, Attachment A), 6, 7, 9, 10, 11, and 12 hereof shall survive any termination of this Agreement. Notwithstanding the foregoing, Summer Street (on behalf of the Agents) may immediately terminate this Agreement at any time if (each a “Summer Street Unilateral Termination”) (i) it reasonably determines that results from its due diligence review of the Company’s business, management and future prospects are unsatisfactory or (ii) its internal approval committee does not approve proceeding with the Financing. A “Residual Period” shall extend for twelve (12) months from the date of termination or automatic expiration of this Agreement with respect to participants in any Financing that were introduced by the Agents or their assignees to the Company during the term of this Agreement , as evidenced by a list of such persons and entities prepared by the Agents and approved in writing by the Company (the “Financial Advisor Investors”); provided, however, a Residual Period shall not be triggered as a result of a Summer Street Unilateral Termination.

9. The Company agrees that, following any future closing or consummation of any Financing, if any,, the Agents have the right to place advertisements in financial and other newspapers and journals at their own expense, describing their services to the Company and a general description of the Financing provided that the Agents will submit a copy of any such advertisements to the Company for its prior approval, which approval shall not be unreasonably withheld or delayed. In addition, the Company agrees to include in any press release or public announcement announcing a Financing, if any, a reference to the Agents’ role as financial advisor and placement agents to the Company with respect to such Financing, provided that the Company will submit a copy of any such press release or public announcement to the Agents for their prior approval, which approval shall not be unreasonably withheld or delayed.

10. The Company represents and warrants that there are no brokers, representatives or other persons which have an interest in any compensation due to the Agents from any advice or proposed Financing contemplated herein. The Company acknowledges and agrees that each Financial Advisor is a full-service securities firm and as such from time-to-time may effect transactions for its own account or the accounts of its customers and hold long or short positions in debt or equity securities of the companies which may be the subject of a potential Financing. It is understood that the Agents’ obligation under any definitive agreement as placement agents is to

 


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use their commercially reasonable efforts throughout the period for which they act as the Company’s exclusive agents as described herein, including to use their best efforts to complete any proposed Financing contemplated by this Agreement. The Agents’ engagement is not intended to provide the Company or any other person or entity with any assurances that any Financing or other transaction will be consummated, and in no event will a Financial Advisor or any of its affiliates be obligated to purchase securities of the Company for its own account or the accounts of its customers.

11. The terms and provisions of this Agreement are solely for the benefit of the Company and the Agents and the other Indemnified Persons and their respective successors, assigns, heirs and personal representatives, and no other person or entity shall acquire or have any right by virtue of this Agreement. The Company and the Agents acknowledge and agree that each Financial Advisor is acting as an independent contractor, and is not a fiduciary of, nor will its engagement hereunder give rise to fiduciary duties to, the Company or its board of directors. This Agreement represents the entire understanding between the Company and the Agents with respect to the Agents’ engagement hereunder, and all prior discussions are merged herein. This Agreement may be executed in two or more counterparts (including fax or electronic counterparts), all of which together will be considered a single instrument. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAWS, AND MAY BE AMENDED, MODIFIED OR SUPPLEMENTED ONLY BY WRITTEN INSTRUMENT EXECUTED BY EACH OF THE PARTIES HERETO.

12. Dispute Resolution .

(a) All disputes, claims, or controversies arising out of or relating to this Agreement or the transactions contemplated hereby that are not resolved by mutual agreement shall be resolved solely and exclusively by binding arbitration to be conducted before JAMS, The Resolution Experts, or its successor (“JAMS”). The arbitration shall be held in New York City, New York before three arbitrators, one chosen by the Company, one chosen by Summer Street (on behalf of the Agents) and one reasonably agreed upon between the Company and Summer Street (on behalf of the Agents). The arbitration shall be conducted in accordance with the rules and regulations promulgated by JAMS unless specifically modified herein.

The parties covenant and agree that they will participate in the arbitration in good faith and that they will share equally its costs, except as otherwise provided herein. The arbitrators may in their discretion assess costs and expenses (including the reasonable legal fees and expenses of the prevailing party) against any party to a proceeding. Any party refusing to comply with an order of the arbitrators shall be liable for costs and

 


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expenses, including attorneys’ fees, incurred by the other party in enforcing the award. This Section 12 applies equally to requests for temporary, preliminary or permanent injunctive relief, except that in the case of temporary or preliminary injunctive relief any party may proceed in court without prior arbitration for the limited purpose of avoiding immediate and irreparable harm. The provisions of this Section 12 shall be enforceable in any court of competent jurisdiction.

The parties shall bear their own attorneys’ fees, costs and expenses in connection with the arbitration; provided, however, the parties agree that the prevailing party shall be entitled to, and the arbitrator shall award to the prevailing party, its attorneys fees, costs and expenses in the event such party completely prevails or prevails in all material respects in the arbitration decision as determined by the arbitrator. The parties will share equally in the fees and expenses charged by JAMS.

(b) Each of the parties hereto irrevocably and unconditionally consents to the exclusive jurisdiction of JAMS to resolve all disputes, claims or controversies arising out of or relating to this Agreement or the transactions contemplated hereby and further consents to the jurisdiction of the courts of New York for the purposes of enforcing the arbitration provisions of Section 12(a) of this Agreement. Each party further irrevocably waives any objection to proceeding before JAMS based upon lack of personal jurisdiction or to the laying of venue and further irrevocably and unconditionally waives and agrees not to make a claim in any court that arbitration before JAMS has been brought in an inconvenient forum. Each of the parties hereto hereby consents to service of process by registered mail at the address to which notices are to be given. Each of the parties hereto agrees that its or his submission to jurisdiction and its or his consent to service of process by mail is made for the express benefit of the other parties hereto.

13. The Agents may assign, with the prior written consent of the Company, all or a portion of their duties hereunder to one or more investment banks or Agents. Notwithstanding any other entity’s participation in any Financing hereunder as a result of such assignment, compensation detailed in Section 4 of this Agreement will be solely due and payable by the Company to the Agents on the proportional basis detailed in Section 4 of this Agreement , unless otherwise agreed. The Agents will compensate any such investment bank or financial advisor directly pursuant to arrangements between the Agents and such investment bank or financial advisor.

If the foregoing correctly sets forth the entire understanding and agreement between the Agents and the Company, please so indicate in the space provided for that purpose below and return an executed copy to us, whereupon this

 


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letter shall constitute a binding agreement as of the date first above written.

 

Very truly yours,
SUMMER STREET RESEARCH PARTNERS
By:   /s/ Al Sollami
  Name:   Al Sollami
  Title:   CEO
DAWSON JAMES SECURITIES, INC.
By:   /s/ Albert J. Poliak
  Name:   Albert J. Poliak
  Title:   President

 

AGREED:
IMMUNOCELLULAR THERAPEUTICS, LTD.
By:   /s/ Manish Singh
  Manish Singh, Ph.D.
  President and Chief Executive Officer

 


ATTACHMENT A

INDEMNIFICATION, CONTRIBUTION AND

LIMITATION OF LIABILITY PROVISIONS

 

(a) The Company agrees to indemnify and hold harmless each Financial Advisor and its affiliates and their respective officers, directors, employees and agents, and any persons controlling any Financial Advisor or any of its affiliates within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934 (each Financial Advisor and each such other person or entity being referred to herein as an “Indemnified Person”), from and against all claims, liabilities, losses or damages (or actions in respect thereof) or other expenses which are related to or arise out of (i) actions taken or omitted to be taken (including any untrue statements made or any statements omitted to be made) by the Company or its affiliates, (ii) actions taken or omitted to be taken by an Indemnified Person with the consent or in conformity with the actions or omissions of the Company or its affiliates, or (iii) either Financial Advisor’s activities on behalf of the Company as contemplated by this Agreement. The Company will not be responsible, however, for any losses, claims, damages, liabilities or expenses to the extent they are finally determined by a court or arbitral tribunal of competent jurisdiction to have resulted from such Indemnified Person’s bad faith, gross negligence or willful misconduct. In addition, the Company agrees to reimburse each Indemnified Person for all out-of-pocket expenses (including reasonable fees and expenses of counsel) as they are incurred by such Indemnified Person and which are necessary for the defense of any such action or claim. In the event an Indemnified Person is forced to litigate against the Company to enforce rights under this Agreement and such Indemnified Person is finally determined by a court or arbitral tribunal of competent jurisdiction to be entitled to such enforcement, then the Company shall be obligated to pay such Indemnified Person’s reasonable counsel fees and expenses.

 

(b)

If for any reason the foregoing indemnity is unavailable to an Indemnified Person or insufficient to hold an Indemnified Person harmless, then the Company shall contribute to the amount paid or payable by such Indemnified Person as a result of such claim, liability, loss, damage or expense in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and the Agents on the other, but also the relative fault of the Company and the Agents, as well as any relevant equitable considerations, subject to the limitation that in any event the aggregate contribution of all Indemnified Persons to all losses, claims, liabilities, damages and expenses shall not exceed the amount of fees actually received by the Agents pursuant to this Agreement. It is hereby further agreed that


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the relative benefits to the Company on the one hand and the Agents on the other with respect to any Financing or proposed Financing contemplated by this Agreement shall be deemed to be in the same proportion as (i) the total value the Financing bears to (ii) the fees paid to the Agents with respect to such Financing.

 

(c) No Indemnified Person shall have any liability to the Company or any other person in connection with the services rendered pursuant to this Agreement, except to the extent any liability for losses, claims, damages or liabilities has been finally determined by a court or arbitral tribunal of competent jurisdiction to have resulted from such Indemnified Person’s bad faith, gross negligence or willful misconduct.

 

(d) If indemnification is to be sought hereunder by any Indemnified Person, then such Indemnified Person shall notify the Company of the commencement of any action or proceeding in respect thereof; provided, however, that the failure so to notify the Company shall not relieve the Company from any liability that it may otherwise have to such Indemnified Person except and only to the extent that the Company is materially adversely affected by such Indemnified Person’s failure to provide notice. Following such notification, the Company may elect in writing to assume the defense of such action or proceeding, and, upon such election, it shall not be liable for any legal costs subsequently incurred by such Indemnified Person (other than reasonable costs of investigation) in connection therewith, unless (i) the Company has failed to provide counsel of recognized standing and reasonably satisfactory to such Indemnified Person in a timely manner or (ii) representation of such Indemnified Person by counsel provided by the Company could present such counsel with a conflict of interest.

 

(e) The Company agrees that it will not settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought from the Company by any Indemnified Person (whether any Indemnified Person is an actual or potential party to such claim, action, suit or proceeding) unless such settlement, compromise or consent includes an unconditional release of Indemnified Persons hereunder from all liability arising out of such claim, action, suit or proceeding.

 

(f)

To the extent officers or employees of any Financial Advisor appear as witnesses, are deposed, or otherwise are involved in or assist with any action, hearing or proceeding related to or arising from any Financing or proposed Financing contemplated by this Agreement or the Agents’ engagement hereunder, or in a situation where such appearance, involvement or assistance results from the Agents’ engagement hereunder,

 


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the Company will pay such Financial Advisor, in addition to the fees set forth above, such Financial Advisor’s reasonable and customary per diem charges. In addition, if any Indemnified Person appears as a witness, is deposed or otherwise is required to be involved in any action relating to or arising from any Financing or proposed Financing contemplated by this Agreement or the Agents’ engagement hereunder, or in a situation where such appearance, involvement or assistance results from the Agents’ engagement hereunder, the Company will reimburse such Indemnified Person for all expenses (including reasonable fees and expenses of counsel) incurred by it by reason of it or any of its personnel being involved in any such action.

 

(g) Both parties waive any right to a trial by jury with respect to any claim or action arising out of this Agreement or the actions of the Agents, and consents to personal jurisdiction, service of process and venue in any court in which any claim covered by the provisions of this Attachment A may be brought against an Indemnified Person.

 

(h) The provisions of this Attachment A shall be in addition to any liability the Company may have to any Indemnified Person at common law or otherwise, and shall survive the termination of this Agreement and the closing or consummation of any Financing or proposed Financing contemplated by this Agreement.

 

Exhibit 23.1

Independent Registered Public Accounting Firm’s Consent

We consent to the incorporation by reference in the Registration Statements of ImmunoCellular Therapeutics, Ltd. on Form S-8 (File Nos. 333-171652, 333-155199, 333-151968 and 333-147278) of our report dated March 31, 2011 with respect to our audit of the financial statements of ImmunoCellular Therapeutics, Ltd. as of December 31, 2010 and for the year ended December 31, 2010 and the period from February 25, 2004 (inception) to December 31, 2010, which report makes reference to other auditors and is included in this Annual Report on Form 10-K of ImmunoCellular Therapeutics, Ltd. for the year ended December 31, 2010.

/s/ Marcum LLP

Los Angeles, California

March 31, 2011

Exhibit 23.2

Consent Of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements of ImmunoCellular Therapeutics, Ltd. on Form S-8 (File Nos. 333-171652, 333-155199, 333-151968 and 333-147278) of our report dated March 31, 2010 with respect to our audit of the financial statements of ImmunoCellular Therapeutics, Ltd. as of December 31, 2009 and for the years ended December 31, 2009 and 2008 and the period from February 25, 2004 (inception) to December 31, 2009, which report is included in this Annual Report on Form 10-K of ImmunoCellular Therapeutics, Ltd. for the year ended December 31, 2010.

/s/ Stonefield Josephson, Inc.

Los Angeles, California

March 31, 2011

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-K 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 registrant as of, and for, the periods presented in this report;

 

4. The registrant’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 registrant 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 registrant, 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 registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’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 registrant’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 registrant’s internal control over financial reporting.

 

  Date: March 31, 2011     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-K 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 registrant as of, and for, the periods presented in this report;

 

4. The registrant’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 registrant 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 registrant, 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 registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’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 registrant’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 registrant’s internal control over financial reporting.

 

  Date: March 31, 2011     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 adopted pursuant to 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-K of the Company for the fiscal year ended December 31, 2010 (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 31, 2011     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 adopted pursuant to 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-K of the Company for the fiscal year ended December 31, 2010 (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 31, 2011     By:       /s/ C. Kirk Peacock
        Name:   C. Kirk Peacock
        Title:   Chief Financial Officer