UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

      

FORM 10-Q

      

(Mark One)

 

x

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

For the quarterly period ended September 30, 2013

or

 

¨

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

Commission file number 001-35560

      

ImmunoCellular Therapeutics, Ltd.

(Exact name of registrant as specified in its charter)

      

   

 

Delaware

   

93-1301885

(State or other jurisdiction of

incorporation or organization)

   

(IRS Employer

Identification No.)

   

   

23622 Calabasas Road, Suite 300

Calabasas, California

   

91302

(Address of principal executive offices)

   

(Zip code)

(818) 264-2300

(Registrant’s telephone number, including area code)

      

   

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  ¨

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  x  No  ¨

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.

   

 

Large accelerated filer

¨

      

Accelerated Filer

x

   

   

   

   

   

Non-accelerated filer (Do not check if a smaller reporting company)

¨

      

Smaller reporting company

¨

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

The Issuer had 57,095,788 shares of its common stock outstanding as of November 1, 2013.

      

   

   

   

   

       

 

   

   


ImmunoCellular Therapeutics, Ltd.

FORM 10-Q

Table of Contents

   

 

   

Page

PART 1

   

FINANCIAL INFORMATION  

 

  3

   

   

Item 1: Condensed Financial Statements  

 

  3

   

   

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations  

 

  20

   

   

Item 3: Quantitative and Qualitative Disclosures About Market Risk  

 

  25

   

   

Item 4: Controls and Procedures  

 

  25

   

   

PART II

   

OTHER INFORMATION  

 

  26

   

   

Item 1: Legal Proceedings  

 

  26

   

   

Item 1A: Risk Factors  

 

  26

   

   

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds  

 

  26

   

   

Item 3: Defaults Upon Senior Securities  

 

  26

   

   

Item 4: Mine Safety Disclosures  

 

  26

   

   

Item 5: Other Information  

 

  26

   

   

Item 6: Exhibits  

 

  27

   

   

SIGNATURES  

 

  28

   

   

EXHIBIT INDEX  

 

  29

   

   

   

   

 

 2 


PART 1

FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Condensed Balance Sheets

   

 

   

September 30,
2013

   

      

December 31,
2012

   

   

(unaudited)

   

      

   

   

Assets

   

   

   

      

   

   

   

Current assets:

   

   

   

      

   

   

   

Cash and cash equivalents

$

29,433,560

   

      

$

26,216,668

   

Other assets

   

401,962

   

      

   

714,508

   

Total current assets

   

29,835,522

   

      

   

26,931,176

   

Property and equipment, net

   

74,667

   

      

   

76,289

   

Deposits

   

28,844

   

      

   

11,736

   

Total assets

$

29,939,033

   

      

$

27,019,201

   

Liabilities and Shareholders’ Equity

   

   

   

      

   

   

   

Current liabilities:

   

   

   

      

   

   

   

Accounts payable

$

554,743

   

      

$

732,851

   

Accrued compensation and benefits

   

296,262

   

      

   

309,345

   

Accrued expenses

   

216,524

   

      

   

56,111

   

Total current liabilities

   

1,067,529

   

      

   

1,098,307

   

Warrant liability

   

3,690,609

   

      

   

2,852,880

   

Commitments and contingencies (Note 5)

   

   

   

      

   

   

   

Shareholders’ equity:

   

   

   

      

   

   

   

Common stock, $0.0001 par value; 149,000,000 shares and 99,000,000 shares authorized as of September 30, 2013 and 2012, respectively; 56,625,294 shares and 51,500,996 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively

   

5,663

   

      

   

5,150

   

Additional paid-in capital

   

77,261,623

   

      

   

66,231,694

   

Deficit accumulated during the development stage

   

(52,086,391

)

      

   

(43,168,830

)

Total shareholders’ equity

   

25,180,895

   

      

   

23,068,014

   

Total liabilities and shareholders’ equity

$

29,939,033

   

      

$

27,019,201

   

   

   

   

   

   

   

   

   

   

   

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

   

   

 

 3 


ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Condensed Statements of Operations

(unaudited)

   

 

   

For the Three Months Ended September 30,

2013

   

   

For the
Three Months Ended
September 30,
2012

   

   

For the Nine
Months Ended September 30,
2013

   

   

For the Nine
Months Ended September 30,
2012

   

   

February 25, 2004 (Inception) to September 30
2013

   

Revenues

$

0

   

   

$

0

   

   

$

0

   

   

$

0

   

   

$

300,000

   

Expenses:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Research and development

   

1,276,507

   

   

   

2,378,917

   

   

   

3,905,338

   

   

   

6,567,086

   

   

   

22,165,450

   

Stock based compensation

   

156,277

   

   

   

33,887

   

   

   

500,351

   

   

   

382,611

   

   

   

9,216,363

   

General and administrative

   

985,107

   

   

   

1,004,181

   

   

   

2,542,794

   

   

   

2,647,301

   

   

   

15,227,541

   

Total expenses

   

2,417,891

   

   

   

3,416,985

   

   

   

6,948,483

   

   

   

9,596,998

   

   

   

46,609,354

   

Loss before other income (expense) and income  taxes

   

(2,417,891

)

   

   

(3,416,985

)

   

   

(6,948,483

)

   

   

(9,596,998

)

   

   

(46,309,354

)

Interest income

   

3,667

   

   

   

1,858

   

   

   

14,310

   

   

   

4,867

   

   

   

362,053

   

Financing expense

   

0

   

   

   

0

   

   

   

0

   

   

   

(368,524

)

   

   

(397,294

)

Change in fair value of warrant liability

   

(1,379,217

)

   

   

2,777,500

   

   

   

(1,983,388

)

   

   

(5,018,224

)

   

   

(3,649,296

)

Loss before income taxes

   

(3,793,441

)

   

   

(637,627

)

   

   

(8,917,561

)

   

   

(14,978,879

)

   

   

(49,993,891

)

Income taxes

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

Net loss

   

(3,793,441

)

   

   

(637,627

)

   

   

(8,917,561

)

   

   

(14,978,879

)

   

   

(49,993,891

)

Deemed dividend on redemption of preferred  stock

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(2,092,500

)

Net loss attributable to common stock

$

(3,793,441

)

   

$

(637,627

)

   

$

(8,917,561

)

   

$

(14,978,879

)

   

$

(52,086,391

)

Net loss per share, basic and diluted

$

(0.07

)

   

$

(0.02

)

   

$

(0.17

)

   

$

(0.38

)

   

$

(2.68

)

Weighted average number of shares basic and  diluted

   

55,307,906

   

   

   

40,329,306

   

   

   

53,289,854

   

   

   

39,260,253

   

   

   

19,438,888

   

   

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

   

   

 

 4 


ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Condensed Statements of Shareholders’ Equity (Deficit)

(unaudited)

   

 

   

Preferred Stock

   

   

Common Stock

   

   

Additional
Paid-in
Capital

   

   

Promissory
Note

   

   

Deficit
Accumulated
During the
Development
Stage

   

   

Total

   

   

Shares

   

   

Amount

   

   

Shares

   

   

Amount

   

   

   

   

   

   

   

   

   

Initial capitalization at $0.00002 per share

   

0

   

   

$

0

   

   

   

6,256,500

   

   

$

10

   

   

$

87

   

   

$

0

   

   

$

0

   

   

$

97

   

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

   

0

   

   

   

0

   

   

   

193,500

   

   

   

15

   

   

   

135

   

   

   

0

   

   

   

0

   

   

   

150

   

Net loss

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(11,741

)

   

   

(11,741

)

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Balance at December 31, 2004

   

0

   

   

   

0

   

   

   

6,450,000

   

   

   

25

   

   

   

222

   

   

   

0

   

   

   

(11,741

)

   

   

(11,494

)

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

   

0

   

   

   

0

   

   

   

387,000

   

   

   

659

   

   

   

74,341

   

   

   

0

   

   

   

0

   

   

   

75,000

   

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

   

0

   

   

   

0

   

   

   

154,800

   

   

   

16

   

   

   

49,984

   

   

   

0

   

   

   

0

   

   

   

50,000

   

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

   

0

   

   

   

0

   

   

   

154,800

   

   

   

15

   

   

   

152,745

   

   

   

0

   

   

   

0

   

   

   

152,760

   

Net loss

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(246,004

)

   

   

(246,004

)

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Balance at December 31, 2005

   

0

   

   

   

0

   

   

   

7,146,600

   

   

   

715

   

   

   

277,292

   

   

   

0

   

   

   

(257,745

)

   

   

20,262

   

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

   

0

   

   

   

0

   

   

   

73,093

   

   

   

7

   

   

   

36,539

   

   

   

0

   

   

   

0

   

   

   

36,546

   

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

   

0

   

   

   

0

   

   

   

1,510,000

   

   

   

151

   

   

   

549,249

   

   

   

0

   

   

   

0

   

   

   

549,400

   

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

   

0

   

   

   

0

   

   

   

694,000

   

   

   

69

   

   

   

693,931

   

   

   

0

   

   

   

0

   

   

   

694,000

   

Shares issued in connection with reverse merger

   

0

   

   

   

0

   

   

   

825,124

   

   

   

83

   

   

   

(83

)

   

   

0

   

   

   

0

   

   

   

0

   

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

   

0

   

   

   

0

   

   

   

(2,059,100

)

   

   

(206

)

   

   

(64,794

)

   

   

0

   

   

   

0

   

   

   

(65,000

)

Exercise of stock options

   

0

   

   

   

0

   

   

   

10,062

   

   

   

1

   

   

   

3,521

   

   

   

0

   

   

   

0

   

   

   

3,522

   

Stock based compensation (options)

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

4,103,645

   

   

   

0

   

   

   

0

   

   

   

4,103,645

   

Net loss

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(5,152,713

)

   

   

(5,152,713

)

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Balance at December 31, 2006

   

0

   

   

   

0

   

   

   

8,199,779

   

   

   

820

   

   

   

5,599,300

   

   

   

0

   

   

   

(5,410,458

)

   

   

189,662

   

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

   

0

   

   

   

0

   

   

   

3,531,603

   

   

   

353

   

   

   

4,892,133

   

   

   

0

   

   

   

0

   

   

   

4,892,486

   

Exercise of stock options

   

0

   

   

   

0

   

   

   

51,111

   

   

   

5

   

   

   

(5

)

   

   

0

   

   

   

0

   

   

   

0

   

Reclassification of warrant derivative liability

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

2,233,600

   

   

   

0

   

   

   

0

   

   

   

2,233,600

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Stock based compensation (options)

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

1,296,714

   

   

   

0

   

   

   

0

   

   

   

1,296,714

   

Net loss

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(3,614,753

)

   

   

(3,614,753

)

 

 5 


   

 

   

Preferred Stock

   

   

Common Stock

   

   

Additional
Paid-in
Capital

   

   

Promissory
Note

   

   

Deficit
Accumulated
During the
Development
Stage

   

   

Total

   

   

Shares

   

   

Amount

   

   

Shares

   

   

Amount

   

   

   

   

   

   

   

   

   

Balance at December 31, 2007

   

0

   

   

  $

0

   

   

   

11,782,493

   

   

$

1,178

   

   

   

14,021,742

   

   

   

0

   

   

   

(9,025,211

)

   

   

4,997,709

   

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

   

0

   

   

   

0

   

   

   

800,000

   

   

   

80

   

   

   

423,920

   

   

   

0

   

   

   

0

   

   

   

424,000

   

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

   

0

   

   

   

0

   

   

   

100,000

   

   

   

10

   

   

   

64,990

   

   

   

0

   

   

   

0

   

   

   

65,000

   

Stock based compensation (options)

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

513,357

   

   

   

0

   

   

   

0

   

   

   

513,357

   

Net loss

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(3,059,730

)

   

   

(3,059,730

)

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Balance at December 31, 2008

   

0

   

   

   

0

   

   

   

12,682,493

   

   

   

1,268

   

   

   

15,024,009

   

   

   

0

   

   

   

(12,084,941

)

   

   

2,940,336

   

Exercise of warrants

   

0

   

   

   

0

   

   

   

1,970,992

   

   

   

197

   

   

   

462,551

   

   

   

0

   

   

   

0

   

   

   

462,748

   

Exercise of stock options

   

0

   

   

   

0

   

   

   

214,357

   

   

   

22

   

   

   

64,460

   

   

   

(52,668

)

   

   

0

   

   

   

11,814

   

Stock based compensation (options)

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

308,302

   

   

   

0

   

   

   

0

   

   

   

308,302

   

Net loss

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(2,626,205

)

   

   

(2,626,205

)

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Balance at December 31, 2009

   

0

   

   

   

0

   

   

   

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

   

0

   

   

   

0

   

   

   

4,230,910

   

   

   

423

   

   

   

3,248,315

   

   

   

0

   

   

   

0

   

   

   

3,248,738

   

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

   

400

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

Exercise of warrants in exchange for promissory note

   

0

   

   

   

0

   

   

   

2,700,000

   

   

   

270

   

   

   

5,399,730

   

   

   

(5,400,000

)

   

   

0

   

   

   

0

   

Redemption of preferred stock for repayment of promissory note

   

(400

)

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

5,400,000

   

   

   

(2,092,500

)

   

   

3,307,500

   

Exercise of stock options

   

0

   

   

   

0

   

   

   

50,000

   

   

   

5

   

   

   

26,495

   

   

   

0

   

   

   

0

   

   

   

26,500

   

Cashless exercise of stock options

   

0

   

   

   

0

   

   

   

297,156

   

   

   

30

   

   

   

(30

)

   

   

0

   

   

   

0

   

   

   

0

   

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

   

0

   

   

   

0

   

   

   

60,000

   

   

   

6

   

   

   

53,994

   

   

   

0

   

   

   

0

   

   

   

54,000

   

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

   

0

   

   

   

0

   

   

   

7,694

   

   

   

0

   

   

   

8,156

   

   

   

0

   

   

   

0

   

   

   

8,156

   

Stock based compensation

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

745,697

   

   

   

0

   

   

   

0

   

   

   

745,697

   

Interest on promissory note

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(1,614

)

   

   

0

   

   

   

(1,614

)

Net loss

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(6,150,142

)

   

   

(6,150,142

)

Balance at December 31, 2010

   

0

   

   

   

0

   

   

   

22,213,602

   

   

   

2,221

   

   

   

25,341,679

   

   

   

(54,282

)

   

   

(22,953,788

)

   

   

2,335,830

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Common stock and warrants issued for cash during 2011 at $1.55 per share, net of offering costs

   

0

   

   

   

0

   

   

   

5,219,768

   

   

   

522

   

   

   

4,982,817

   

   

   

0

   

   

   

0

   

   

   

4,983,339

   

Exercise of stock options

   

0

   

   

   

0

   

   

   

382,000

   

   

   

38

   

   

   

388,341

   

   

   

0

   

   

   

0

   

   

   

388,379

   

Cashless exercise of stock options

   

0

   

   

   

0

   

   

   

667,077

   

   

   

67

   

   

   

(67

)

   

   

0

   

   

   

0

   

   

   

0

   

Stock based compensation

   

0

   

   

   

0

   

   

   

131,537

   

   

   

13

   

   

   

1,190,120

   

   

   

0

   

   

   

0

   

   

   

1,190,133

   

Interest on promissory note

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(352

)

   

   

0

   

   

   

(352

)

Redemption of promissory note

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

54,634

   

   

   

0

   

   

   

54,634

   

Net loss

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(5,719,903

)

   

   

(5,719,903

)

 

 6 


   

 

   

Preferred Stock

   

   

Common Stock

   

   

Additional
Paid-in
Capital

   

   

Promissory
Note

   

   

Deficit
Accumulated
During the
Development
Stage

   

   

Total

   

   

Shares

   

   

Amount

   

   

Shares

   

   

Amount

   

   

   

   

   

   

   

   

   

Balance at December 31, 2011

   

0

   

   

$

0

   

      

   

28,613,984

   

      

$

2,861

      

      

   

31,902,890

   

   

   

0

   

      

   

(28,673,691

)

   

   

3,232,060

   

Common stock and warrants issued for cash during 2012 at $1.10 per share, net of offering costs in January 2012

   

0

   

   

   

0

   

      

   

9,489,436

   

      

   

949

      

      

   

9,270,421

   

   

   

0

   

   

   

0

   

   

   

9,271,370

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Common stock and warrants issued for cash during 2012 at $2.10 per share, net of offering costs in October 2012

   

0

   

   

   

0

   

      

   

10,000,000

   

   

   

1,000

   

   

   

19,358,553

   

   

   

0

   

   

   

0

   

   

   

19,359,553

   

Exercise of warrants

   

0

   

   

   

0

   

      

   

2,295,334

   

   

   

230

   

   

   

3,201,690

   

   

   

0

   

   

   

0

   

   

   

3,201,920

   

Reclassification of warrant liability upon exercise

   

0

   

   

   

0

   

      

   

0

   

   

   

0

   

   

   

1,981,743

   

   

   

0

   

   

   

0

   

   

   

1,981,743

   

Cashless exercise of warrants

   

0

   

   

   

0

   

      

   

288,973

   

   

   

29

   

   

   

(29

)

   

   

0

   

   

   

0

   

   

   

0

   

Cashless exercise of stock options

   

0

   

   

   

0

   

      

   

792,018

   

   

   

79

   

   

   

(79

)

   

   

0

   

   

   

0

   

   

   

0

   

Restricted stock vested

   

0

   

   

   

0

   

      

   

1,251

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

Stock based compensation

   

0

   

   

   

0

   

      

   

0

   

   

   

0

   

   

   

496,007

   

   

   

0

   

   

   

0

   

   

   

496,007

   

Exercise of stock options

   

0

   

   

   

0

   

      

   

20,000

   

   

   

2

   

   

   

20,498

   

   

   

0

   

   

   

0

   

   

   

20,500

   

Net loss

   

0

   

   

   

0

   

      

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(14,495,139

)

   

   

(14,495,139

)

Balance at December 31, 2012

   

0

   

   

   

0

   

      

   

51,500,996

   

   

   

5,150

   

   

   

66,231,694

   

   

   

0

   

   

   

(43,168,830

)

   

   

23,068,014

   

Exercise of warrants

   

0

   

   

   

0

   

      

   

2,926,072

   

   

   

293

   

   

   

5,407,089

   

   

   

0

   

   

   

0

   

   

   

5,407,382

   

Cashless exercise of warrants

   

0

   

   

   

0

   

   

   

28,300

   

   

   

3

   

   

   

(3

)

   

   

0

   

   

   

0

   

   

   

0

   

Exercise of stock options

   

0

   

   

   

0

   

      

   

145,401

   

   

   

15

   

   

   

141,616

   

   

   

0

   

   

   

0

   

   

   

141,631

   

Cashless exercise of stock options

   

0

   

   

   

0

   

      

   

131,228

   

   

   

13

   

   

   

(13

)

   

   

0

   

   

   

0

   

   

   

0

   

Stock based compensation

   

0

   

   

   

0

   

      

   

0

   

   

   

0

   

   

   

500,351

   

   

   

0

   

   

   

0

   

   

   

500,351

   

Common stock issued for license rights in January 2013 at $2.41 per share

   

0

   

   

   

0

   

      

   

31,155

   

   

   

3

   

   

   

74,997

   

   

   

0

   

   

   

0

   

   

   

75,000

   

Common stock issued through controlled equity offering during May 2013 at an average of $2.57 per share, net of offering costs

   

0

   

   

   

0

   

   

   

172,988

   

   

   

17

   

   

   

404,191

   

   

   

0

   

   

   

0

   

   

   

404,208

   

Common stock issued through controlled equity offering during July 2013 at an average of $2.79 per share, net of offering costs

   

0

   

   

   

0

   

   

   

770,508

   

   

   

77

   

   

   

2,013,039

   

   

   

0

   

   

   

0

   

   

   

2,013,116

   

Common stock issued through controlled equity offering during August 2013 at an average of $2.90 per share, net of offering costs

   

0

   

   

   

0

   

   

   

642,604

   

   

   

64

   

   

   

1,752,267

   

   

   

0

   

   

   

0

   

   

   

1,752,331

   

Common stock issued through controlled equity offering during September 2013 at an average of $2.84 per share, net of offering costs

   

0

   

   

   

0

   

   

   

276,042

   

   

   

28

   

   

   

736,395

   

   

   

0

   

   

   

0

   

   

   

736,423

   

Net loss

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

0

   

   

   

(8,917,561

)

   

   

(8,917,561

)

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Balance at September 30, 2013

   

0

   

   

   

0

   

   

   

56,625,294

   

   

$

5,663

   

   

$

77,261,623

   

   

$

0

   

   

$

(52,086,391

)

   

$

25,180,895

   

   

   

   

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

   

   

 

 7 


ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Condensed Statements of Cash Flows

(unaudited)

   

 

   

For the
Nine Months Ended
September 30,
2013

   

   

For the
Nine Months Ended
September 30, 2012

   

   

February 25, 2004 (Inception) to
September 30,
2013

   

Cash flows from operating activities:

   

   

   

   

   

   

   

   

   

   

   

Net loss

$

(8,917,561

)

   

$

(14,978,879

)

   

$

(49,993,891

)

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

   

   

   

   

   

   

   

   

   

   

   

Depreciation and amortization

   

35,682

   

   

   

34,331

   

   

   

110,967

   

Loss on disposal of assets

   

3,817

   

   

   

0

   

   

   

3,817

   

Change in fair value of warrant liability

   

1,983,388

   

   

   

5,018,224

   

   

   

3,649,296

   

Financing expense

   

0

   

   

   

368,524

   

   

   

397,294

   

Stock-based compensation

   

500,351

   

   

   

382,611

   

   

   

9,154,207

   

Common stock issued for services

   

0

   

   

   

0

   

   

   

98,703

   

Common stock issued for research and development

   

0

   

   

   

0

   

   

   

1,335,760

   

Changes in assets and liabilities:

   

   

   

   

   

   

   

   

   

   

   

Other assets

   

370,438

   

   

   

(501,714

)

   

   

(421,969

)

Accounts payable

   

(178,108

)

   

   

91,421

   

   

   

554,393

   

Accrued liabilities

   

147,330

   

   

   

397,899

   

   

   

512,786

   

Net cash used in operating activities

   

(6,054,663

)

   

   

(9,187,583

)

   

   

(34,598,637

)

Cash flows from investing activities:

   

   

   

   

   

   

   

   

   

   

   

Purchase of property and equipment

   

(37,877

)

   

   

(5,668

)

   

   

(193,569

)

Cash paid for sale of Optical Molecular Imaging, Inc.

   

0

   

   

   

0

   

   

   

(25,000

)

Net cash used in investing activities

   

(37,877

)

   

   

(5,668

)

   

   

(218,569

)

Cash flows from financing activities:

   

   

   

   

   

   

   

   

   

   

   

Proceeds from exercise of stock options

   

141,631

   

   

   

20,500

   

   

   

592,344

   

Proceeds from exercise of warrants

   

4,261,723

   

   

   

3,153,852

   

   

   

7,926,389

   

Payments on promissory note receivable

   

0

   

   

   

0

   

   

   

53,018

   

Proceeds from issuance of common stock and warrants, net of offering costs

   

4,906,078

   

   

   

9,371,370

   

   

   

51,899,857

   

Proceeds from issuance of preferred stock and warrants, net of offering costs

   

0

   

   

   

0

   

   

   

3,779,158

   

Net cash provided by financing activities

   

9,309,432

   

   

   

12,545,722

   

   

   

64,250,766

   

Increase in cash and cash equivalents

   

3,216,892

   

   

   

3,352,471

   

   

   

29,433,560

   

Cash and cash equivalents, beginning of period

   

26,216,668

   

   

   

6,653,168

   

   

   

0

   

Cash and cash equivalents, end of period

$

29,433,560

   

   

$

10,005,639

   

   

$

29,433,560

   

Supplemental cash flows disclosures:

   

   

   

   

   

   

   

   

   

   

   

Interest expense paid

$

0

   

   

$

0

   

   

$

0

   

Income taxes paid

$

0

   

   

$

0

   

   

$

0

   

Supplemental non-cash financing disclosures:

   

   

   

   

   

   

   

   

   

   

   

Exercise of warrants in exchange for promissory note

$

0

   

   

$

0

   

   

$

3,350,000

   

Redemption of preferred stock for repayment of promissory note

$

0

   

   

$

0

   

   

$

3,350,000

   

Deemed dividend on redemption of preferred stock

$

0

   

   

$

0

   

   

$

2,092,500

   

Warrant liability converted to additional paid-in capital upon exercise

$

1,145,659

   

   

$

1,944,688

   

   

$

3,127,404

   

Deposits used to acquire property and equipment

$

0

   

   

$

35,882

   

   

$

35,882

   

Deferred offering costs

$

0

   

   

$

0

   

   

$

182,599

   

Common stock issued for license rights

$

75,000

   

   

$

0

   

   

$

75,000

   

   

   

   

   

   

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

   

   

   

 

 8 


ImmunoCellular Therapeutics, Ltd.

(A Development Stage Company)

Notes to Unaudited Condensed 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.

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. The Company’s lead product candidate, ICT-107, is in Phase II clinical development. The Company has two other candidates, ICT-140 and ICT-121, that each have investigational new drug (IND) applications for initiation of clinical development. The Company has sustained operating losses and, as of September 30, 2013, the Company had an accumulated deficit of $52,086,391. The Company expects to incur significant research, development and administrative expenses before any of its products can be launched and recurring revenues generated.

Interim Results

The accompanying condensed financial statements as of September 30, 2013 and for the three and nine months periods ended September 30, 2013 and 2012 and for the period from February 25, 2004 (inception) to September 30, 2013 are unaudited, but include all adjustments, consisting of normal recurring entries, which the Company’s management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. Balance sheet amounts as of December 31, 2012 have been derived from the Company’s audited financial statements included in its Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (SEC) on March 11, 2013.

The financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) have been condensed or omitted pursuant to such rules and regulations. The financial statements should be read in conjunction with the Company’s audited financial statements in its Form 10-K for the year ended December 31, 2012. The Company’s operating results will fluctuate for the foreseeable future. Therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods.

   

2. Summary of Significant Accounting Policies

Development Stage Enterprise – The Company is a development stage enterprise and is devoting substantially all of its present efforts to research and development. All losses accumulated since inception are considered part of the Company’s development stage activities.

Liquidity – As of September 30, 2013, the Company had working capital of $28,767,993, compared to working capital of $25,832,869 as of December 31, 2012. The estimated cost of completing the development of any of our current vaccine product candidates and of obtaining all required regulatory approvals to market any of those product candidates is substantially greater than the amount of funds we currently have available. However, we believe that our existing cash balances will be sufficient to fund our operations for at least the next twelve months, although there is no assurance that such proceeds will be sufficient.

Cash and cash equivalents – The Company considers all highly liquid instruments with an original maturity of 90 days or less at acquisition to be cash equivalents. As of September 30, 2013 and December 31, 2012, the Company had $25,910,858 and $23,646,922, respectively, of certificates of deposit. The Company places its cash and cash equivalents with various banks in order to maintain FDIC insurance on all of its investments.

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

 

 9 


Stock Based Compensation – The Company records the cost for all share-based payment transactions in the Company’s financial statements.

Stock option grants issued prior to March 31, 2011 to employees and officers and directors were valued using the Black-Scholes pricing model. Stock option grants made subsequent to March 31, 2011 were valued using the binomial lattice simulation model.

Fair value was estimated at the date of grant using the following weighted average assumptions:

   

 

   

Nine months
Ended
September 30,
2013

   

   

Nine months
Ended
September 30,
2012

   

Risk-free interest rate

   

1.61

%

   

   

0.66

%

Expected dividend yield

   

None

   

   

   

None

   

Expected life

   

5.12 Years

   

   

   

4.42 Years

   

Expected volatility

   

90.6

%

   

   

64.7

%

Expected forfeitures

   

0

%

   

   

0

%

The risk-free interest rate used 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. For the nine months ended September 30, 2013, the expected volatility is based upon the historical volatility of the Company’s common stock. For the nine months ended September 30, 2012, the expected volatility is based on market prices of traded options for comparable entities within our industry. Forfeitures have been estimated to be nil.

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 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 September 30, 2013, the Company had approximately 56,617,706 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 under the liability method, with a deferred tax asset or liability 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. As of September 30, 2013 and December 31, 2012, the Company fully reserved its deferred tax assets. The Company recognizes in its financial statements the impact of an uncertain 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’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. The Company is not currently under examination by any taxing authority nor has it been notified of an impending examination. The Company’s tax returns for the years ended December 31, 2012, 2011 and 2010 remain open for possible review.

Fair Value of Financial Instruments – The carrying amounts reported in the balance sheets for cash, cash equivalents, and accounts payable approximate their fair values due to their quick turnover. The fair value of warrant derivative liability is estimated using the Binomial Lattice option valuation model.

Fair value for financial reporting is defined 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)

 

 10 


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 if the effect would be antidilutive. Common share equivalents which could potentially dilute earnings per share, and which were excluded from the computation of diluted loss per share, totaled 14,610,187 shares and 19,290,100 shares at September 30, 2013 and 2012 respectively.

Recently Issued Accounting Standards – In June 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-5, which amends the Comprehensive Income Topic of the ASC. The ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity, and instead requires consecutive presentation of the statement of net income and other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements. ASU No. 2011-5 became effective for interim and annual periods beginning after December 15, 2011. In February 2013, the FASB issued ASU No. 2013-02, which further amends the Comprehensive Income Topic of the ASC. This amendment requires entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount is being reclassified in its entirety to net income. This standard became effective for periods beginning after December 15, 2012. The adoption of these ASU’s did not have a material impact on the Company’s results of operations, financial condition or liquidity.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the Securities Exchange Commission (the SEC) did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

   

3. Property and Equipment

Property and equipment consist of the following:

   

 

   

September 30,
2013

   

      

December 31,
2012

   

Computers

$

58,375

   

      

$

23,192

   

Research equipment

   

120,505

   

      

   

128,381

   

   

   

178,880

   

      

   

151,573

   

Accumulated depreciation

   

(104,213

)

      

   

(75,284

)

   

$

74,667

   

      

$

76,289

   

Depreciation expense was $13,998 and $11,443 for the three months ended September 30, 2013 and 2012, respectively. Depreciation expense was $35,682 and $34,331 for the nine months ended September 30, 2013 and 2012, respectively. Depreciation expense was $110,967 for the period from February 25, 2004 (date of inception) to September 30, 2013.

   

4. Related-Party Transactions

Cedars-Sinai Medical Center License Agreement

Dr. John Yu, our Chief Scientific Officer and former interim Chief Executive Officer, is a neurosurgeon at Cedars-Sinai Medical Center (Cedars-Sinai). In November 2006, the Company entered into a license agreement with 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 issued and pending U.S. and foreign patents and applications, and the term of the license will be until the last to expire of any patent claims 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.

 

 11 


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. 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 is covered by U.S. patent applications filed by both 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.

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 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 by September 30, 2011 the Company 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, 2011.

Effective September 1, 2012, the Company entered into a new agreement with Cedars-Sinai whereby Cedars-Sinai provided research support for CD133 experiments in support of ICT-121. The agreement expired on September 19, 2013 and the Company made payments to Cedars-Sinai of $329,832. The Company is currently in negotiations with Cedars-Sinai to extend this research agreement.

   

5. Commitments and Contingencies

Sponsored Research Agreements

In an effort to expand the Company’s intellectual property portfolio to use antigens to create personalized vaccines, the Company has entered into various intellectual property and research agreements. Those agreements are long-term in nature and are discussed below.

Aptiv Solutions

The Company has contracted with Aptiv Solutions to provide certain services related to the Company’s ICT-107 Phase II trial. The original agreement was entered into in August of 2010 and provided for estimated payments of approximately $3 million for services through September 2013. Subsequently, the Company and Aptiv entered into three contract amendments. Under the first amendment, effective January 20, 2011, Aptiv agreed to provide additional services in conjunction with the Phase II trial of ICT-107 for an additional fee of $469,807. The second amendment, effective February 4, 2012, extended the services to be provided by Aptiv and further increased the fees by $986,783. The second amendment also extended the term of the agreement to March 31, 2014. On January 11, 2013, the third amendment was finalized whereby the services were further extended and the fees were further increased by $608,201. The total aggregate fee pursuant to the original agreement and the three modifications is $5,078,169. As of September 30, 2013, the Company’s remaining obligation under the existing commitment is approximately $962,190.

 

 12 


University of Pennsylvania

On February 13, 2012, the Company entered into a Patent License Agreement with The Trustees of the University of Pennsylvania under which the Company acquired an exclusive, worldwide license relating to intellectual property for the production, use and cryopreservation of high-activity dendritic cell cancer vaccines, including ICT-107, its lead dendritic cell-based cancer vaccine candidate for the treatment of glioblastoma multiforme.

  Pursuant to the License Agreement, the Company paid an upfront licensing fee and will be obligated to pay annual license maintenance fees. In addition, the Company has agreed to make payments upon completion of specified milestones and to pay royalties of a specified percentage on net sales, subject to a specified minimum royalty, and sublicensing fees.

The Johns Hopkins University Licensing Agreement

On February 23, 2012, the Company entered into an Exclusive License Agreement, effective as of February 16, 2012, with The Johns Hopkins University (JHU) under which it received an exclusive, worldwide license to JHU’s rights in and to certain intellectual property related to mesothelin-specific cancer immunotherapies.

Pursuant to the License Agreement, the Company agreed to pay an upfront licensing fee, payable half in cash and half in shares of its common stock, within 30 days of the effective date of the License Agreement and upon issuance of the first U.S. patent covering the subject technology. In addition, the Company has agreed to pay milestone license fees upon completion of specified milestones, customary royalties based on a specified percentage of net sales, sublicensing payments and annual minimum royalties.  Effective September 24, 2013, the Company entered into an Amendment No. 1 to the Exclusive License Agreement that updated certain milestones.

The University of Pittsburgh Patent License Agreement

On March 20, 2012, the Company entered into an Exclusive License Agreement with the University of Pittsburgh under which the Company has licensed intellectual property surrounding EphA2, a tyrosine kinase receptor that is highly expressed by ovarian cancer and other advanced and metastatic malignancies. The License Agreement grants a worldwide exclusive license to the intellectual property for ovarian and pancreatic cancers; and a worldwide non-exclusive license to the intellectual property for brain cancer. The Company intends to employ the intellectual property in the development and commercialization of ICT-140, a multivalent, dendritic cell-based vaccine for the treatment of ovarian cancer.

Pursuant to the License Agreement, the Company agreed to pay an upfront nonrefundable and noncreditable licensing fee and nonrefundable and noncreditable maintenance fees due annually starting 12 months from the anniversary of the effective date of the License Agreement. In addition, the Company has agreed to make certain milestone payments upon completion of specified milestones and to pay customary royalties based on a specified percentage of net sales and sublicensing payments, as applicable.

Torrey Pines

On October 1, 2012, the Company entered into a Contract Services Agreement with Torrey Pines under which the Company has engaged Torrey Pines to determine the immunogenicity of certain peptides that are used in conjunction with the Company’s ICT-107 Phase IIb trial and in the development of ICT-140. The Company agreed to pay an upfront nonrefundable and noncreditable fee and is obligated to pay the remainder at the conclusion of the contract. On April 1, 2013, the Company and Torrey Pines expanded the scope of work to be completed by Torrey Pines under an additional Contract Services Agreement. This supplemental agreement provides for the Company to pay an upfront fee and additional fees at the conclusion of the contract.

Cedars-Sinai Medical Center

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

Employment Agreements

The Company has one-year employment agreements with its management that provide for a base salary, bonus and stock option grants.  The aggregate annual base salary payable to this group is approximately $1,179,000 and the potential bonus is approximately $362,000.  Additionally, during the nine months ended September 30, 2013, the Company issued an aggregate of 489,000 stock options to its management at a weighted average exercise price of $2.66 that vest over a period of four years.  

 

 13 


Operating Lease

The Company entered into a lease for new office space effective June 15, 2013 and continuing through August 31, 2016 at an initial monthly rental of $8,063. The monthly rental will increase by 3% on each anniversary date of the lease. Rent for the months of August and September 2013 was abated.  Rent expense was approximately $17,900 and $14,000 for the three months ended September 30, 2013 and 2012, respectively. Rent expense was approximately $55,000 and $40,000 for the nine months ended September 30, 2013 and 2012, respectively.

Future minimum rentals under the operating lease are as follows:

 

Years ending December 31,

   

Amount

   

2013

   

$

24,189

   

2014

   

   

97,724

   

2015

   

   

100,905

   

2016

   

   

68,432

   

Total

   

$

291,250

   

   

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

In February 2011, the Company raised $7,460,129 (after 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 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 $1.55. The January and October 2012 underwritten public offering (see below) provided for the issuance of shares at prices that were less than $1.55. Accordingly, the exercise price of these warrants was adjusted to $1.87 and the number of warrants was proportionally increased to 2,823,670 net of exercises. (See “Warrants and Warrant Liabilities” below)

In January 2012, the Company raised approximately $9,271,370 in an underwritten public offering, net of offering expenses of approximately $1.1 million, from the sale of 9,489,436 shares of common stock and warrants to purchase 4,744,718 shares of common stock at an exercise price of $1.41 per share, to various investors in an underwritten public offering. The warrants have a term of 60 months from the date of issuance. The warrants do not contain any features (such as net cash settlement or anti-dilution features) that would preclude the Company from accounting for these warrants as equity. Accordingly, the warrants are accounted for as equity.

In October 2012, the Company raised $19,359,553 in an underwritten public offering, net of offering expenses of approximately $1.6 million, from the sale of 10,000,000 shares of common stock and warrants to purchase 4,500,000 shares of common stock at an exercise price of $2.65 per share, to various investors in an underwritten public offering. The warrants have a term of 60 months from the date of issuance. The warrants do not contain any features (such as net cash settlement or anti-dilution features) that would preclude the Company from accounting for these warrants as equity. Accordingly, the warrants are accounted for as equity.

 

 14 


Controlled Equity Offering

On April 18, 2013, the Company entered into a Controlled Equity Offering SM Sales Agreement (the Sales Agreement) with Cantor Fitzgerald & Co., as agent (Cantor), pursuant to which the Company may offer from time to time through Cantor, shares of our common stock having an aggregate offering price of up to $25.0 million (of which only $17.0 million is currently registered for offer and sale). Under the Sales Agreement, Cantor may sell shares by any method permitted by law and deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act, as amended, including sales made directly on the NYSE MKT, on any other existing trading market for our common stock or to or through a market maker. The Company may instruct Cantor not to sell shares if the sales cannot be effected at or above the price designated by us from time to time. The Company is not obligated to make any sales of the shares under the Sales Agreement. The offering of shares pursuant to the Sales Agreement will terminate upon the earlier of (a) the sale of all of the shares subject to the Sales Agreement or (b) the termination of the Sales Agreement by Cantor or the Company, as permitted therein. Cantor will receive a commission rate of 3.0% of the aggregate gross proceeds from each sale of shares and the Company has agreed to provide Cantor with customary indemnification and contribution rights. The Company will also reimburse Cantor for certain specified expenses in connection with entering into the Sales Agreement.  On April 22, 2013, NYSE MKT approved the listing of 10,593,220 shares of our common stock in connection with the Sales Agreement. Through September 30, 2013, we sold 1,862,142 shares of our common stock under the Sales Agreement that resulted in proceeds to the Company of approximately $4,906,078, less offering expenses of approximately $338,000.  As of September 30, 2013, aggregate gross sales for additional common stock of approximately $11,754,071 remained available under the Sales Agreement .

Stock Options

In February 2005, the Company adopted an Equity Incentive Plan (the 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). Initially, the Company reserved 6,000,000 shares of common stock for issuance under the Plan. On October 24, 2011, the Company’s shareholders voted to increase the number of authorized shares reserved for the Plan to 8,000,000 shares. On September 20, 2013, the Company’s shareholders voted to increase the number of authorized shares reserved for the Plan to 12,000,000 shares. Options to purchase 3,852,655 common shares have been granted under the Plan and are outstanding as of September 30, 2013. As of September 30, 2013, there were 5,644,347 options available for issuance under the Plan.

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.

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 nine months ended September 30, 2013:

   

 

   

Options

   

      

Weighted
Average
Exercise
Price

   

      

Weighted
Average
Remaining
Contractual
Term

   

      

Aggregate
Intrinsic
Value

   

Outstanding December 31, 2012

10,581,194

   

      

$

1.16

      

      

   

0

      

      

   

0

      

Granted

847,287

   

      

   

2.67

      

      

   

0

      

      

   

0

      

Exercised

(422,401

)

      

   

1.33

      

      

   

0

      

      

   

0

      

Forfeited or expired

(120,000

)

      

   

1.77

      

      

   

0

      

      

   

0

      

Outstanding September 30, 2013

10,886,080

   

      

$

1.34

      

      

   

3.74

      

      

$

13,830,748

      

Vested or expected to vest at September 30, 2013

8,806,043

   

      

$

1.06

      

      

   

2.98

      

      

$

13,394,524

      

 

 15 


As of September 30, 2013, the total unrecognized compensation cost related to unvested stock options amounted to $2,641,357, which will be amortized over the weighted-average remaining requisite service period of approximately 22 months.

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 had a term of 26 months from the date of issuance. As of September 30, 2013, these warrants have been fully exercised.

In connection with the May 2010 common stock private placement, the Company issued to the investors warrants to purchase 1,287,733 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. As of September 30, 2013 these warrants have been fully exercised, except for warrants to purchase 4,000 shares of the Company’s common stock that expired. (See Warrant Liabilities below.)

In connection with the sale of Preferred Stock in May 2010, the Company issued warrants to purchase 1,350,000 shares of common stock at an exercise price of $2.50. The warrants have a term of five-years from the date of issuance. As of September 30, 2013, warrants to purchase 1,290,996 shares of the Company’s common stock at $2.50 remain outstanding related to this private placement. (See “Warrant Liability” below.)

In connection with the February 2011 common stock private placement, the Company issued to the investors warrants to purchase 2,818,675 shares of the Company’s common stock at $2.25 per share. The warrants have a five-year term from the date of issuance and contain a provision that provides for an adjustment to the exercise price in the event the Company completes an equity financing at a per share price of its common stock that is less than $1.55. As a result of the January and October 2012 financings, the exercise price of the warrants was adjusted to $1.87 and the number of warrants was proportionately increased to 2,823,670 net of exercises. As of September 30, 2013, warrants to purchase 2,823,670 shares of the Company’s common stock remain outstanding related to this private placement. (See “Warrant Liability” below.)

In connection with the January 2012 underwritten public offering, the Company issued to the investors warrants to purchase 4,744,718 shares of the Company’s common stock at $1.41 per share. The warrants have a five-year term from the date of issuance. These warrants qualify for equity treatment since they do not have any provisions that would require the Company to redeem them for cash or that would result in an adjustment to the number of warrants. As of September 30, 2013, warrants to purchase 1,900,079 shares of the Company’s common stock remain outstanding relating to this public offering.

In connection with the October 2012 underwritten public offering, the Company issued to the investors warrants to purchase 4,500,000 shares of the Company’s common stock at $2.65 per share. The warrants have a five-year term from the date of issuance. These warrants qualify for equity treatment since they do not have any provisions that would require the Company to redeem them for cash or that would result in an adjustment to the number of warrants. As of September 30, 2013, warrants to purchase 4,480,750 shares of the Company’s common stock remain outstanding relating to this public offering.

Warrant Liability

The Company’s warrant liability is adjusted to fair value each reporting period and is influenced by several factors including the price of the Company’s common stock as of the balance sheet date. On September 30, 2013, the price per share of Company’s common stock was $2.57 per share compared to $1.92 per share at December 31, 2012 and $2.81 per share on September 30, 2012.

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 future common stock issuances are made at a price less than $1.00. Due to the potential variability of their exercise price, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. The warrant liability was adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations. Prior to 2011, the Company had concluded that Black-Scholes method of valuing the price adjustment feature does not materially differ from the valuation of such warrants using the lattice simulation model, and therefore, the use of the Black-Scholes valuation model was 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 1.00%, and (iv) contractual life of 26 months.  During the year ended December 31, 2011, the Company determined that it was more appropriate to value the warrants using a binomial lattice simulation model. During the six months ended June 30, 2012, the remaining warrants were fully exercised; however, the Company recognized an expense of $45,570 as the Company revalued the warrants at the date of exercise.  For the three and nine months ended September 30, 2012, the Company recorded a charge to other expense of nil and $745,500, respectively.     

 

 16 


In connection with the May 2010 common stock private placement, the Company issued to the investors warrants to purchase 1,287,773 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 future common stock issuances are made at a price less than $1.00. Due to the potential variability of their exercise price, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. The warrant liability is adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations. Prior to 2011, the Company had concluded that the Black-Scholes method of valuing the price adjustment feature does not materially differ from the valuation of such warrants using the binomial lattice simulation model, and therefore, the use of the Black-Scholes valuation model was 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. Effective January 1, 2011, the Company determined that it was more appropriate to value the warrants using a binomial lattice simulation model. For the three months ended September 30, 2012, the Company recorded a credit to other income of $745,778 and for the nine months ended September 30, 2012, the Company recorded a charge to other expense of $1,181,075. During the six months ended June 30, 2013, the remaining warrants were fully exercised; however, the Company recognized a credit to other income of $403,665 as the Company revalued the warrants at the date of exercise.  For the three and nine months ended September 30, 2013, the Company recorded a charge to other expense of nil and $583,134, respectively.

In connection with the sale of Preferred Stock in 2010, the Company vested warrants to purchase 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 warrants contain a provision whereby the warrant may be settled for cash in connection with a change of control with a private company. Due to the potential variability of their exercise price, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. The warrant liability is adjusted to fair value each reporting period and any change in value is recognized in the statement of operations. Prior to 2011, the Company concluded that the Black-Scholes method of valuing the price adjustment feature does not materially differ from the valuation of such warrants using the Monte Carlo or binomial lattice simulation models, and therefore, the use of the Black-Scholes valuation model was 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 2.50%, and (iv) contractual life of 60 months. Effective January 1, 2011, the Company determined that it was more appropriate to value the warrants using a binomial lattice simulation model. For the three months ended September 30, 2012, the Company recorded a credit to other income of $718,720 and for the nine months ended September 30, 2012, the Company recorded a charge to other expense of $732,750. As of September 30, 2013, the Company revalued the warrants using the binomial lattice simulation model assuming (i) dividend yield of 0%; (ii) expected volatility of 70%; (iii) risk free rate of 0.24% and (iv) expected term of 1.59 years. For the three and nine months ended September 30, 2013, the Company recorded a charge to other expense of $348,569 and $345,987, respectively. As of September 30, 2013, the carrying value of the warrant liability is $934,681.

In connection with the February 2011 common stock private placement, the Company issued to the investors warrants to purchase 2,818,675 shares of the Company’s common stock at $2.25 per share. Of the total proceeds from the February 2011 common stock private placement, $2,476,790 was allocated to the freestanding warrants associated with the units based upon the fair value of the warrants determined under the Binomial lattice 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 $1.55. Due to the potential variability of their exercise price, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. As a result of the January and October 2012 financings, the exercise price of the warrants was adjusted to $1.87 and the number of warrants was proportionately increased to 2,823,670 net of exercises. The Company recorded a charge to financing expense of $397,294 to reflect the issuance of the additional warrants. The warrant liability is adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations. The Company initially valued these warrants using a binomial lattice simulation model assuming (i) dividend yield of 0%; (ii) expected volatility of 146%; (iii) risk free rate of 1.96% and (iv) expected term of 5 years. Based upon those calculations, the Company calculated the initial valuation of the warrants to be $2,476,790. For the three months ended September 30, 2012, the Company recorded a credit to other income of $1,313,003 and for the nine months ended September 30, 2012, the Company recorded a charge to other expense of $2,727,643, As of September 30, 2013, the Company revalued the warrants using the binomial lattice simulation model assuming (i) dividend yield of 0%; (ii) expected volatility of 73%; (iii) risk free rate of 0.45% and (iv) expected term of 2.39 years. For the three and nine months ended September 30, 2013, the Company recorded a charge to other expense of $1,030,649 and $1,054,268, respectively. As of September 30, 2013, the carrying value of the warrant liability is $2,755,928.

For the three and nine months ended September 30, 2013, the expected volatility is based upon the historical volatility of the Company’s stock. For the three and nine months ended September 30, 2012, the expected volatility is based on market prices of traded options for comparable entities within our industry.

 

 17 


The following reconciliation of the beginning and ending balances for all warrant liabilities measured at fair market value on a recurring basis using significant unobservable inputs (level 3) during the period ended September 30, 2013 and 2012:

   

 

   

September 30,
2013

   

   

September 30,
2012

   

Balance – January 1

$

2,852,880

   

   

$

2,157,408

   

Issuance of warrants and effect of repricing

   

0

   

   

   

368,524

   

Exercise of warrants

   

(1,145,659

)

   

   

(1,944,688

)

(Gain) or loss included in earnings

   

1,983,388

   

   

   

5,018,224

   

Transfers in and out/or out of Level 3

   

—  

   

   

   

—  

   

Balance – September 30

$

3,690,609

   

   

$

5,599,468

   

   

   

7. 401(k) Profit Sharing Plan

During 2011, the Company adopted a Profit Sharing Plan that qualifies under Section 401(k) of the Internal Revenue Code. Contributions to the plan are at the Company’s discretion. The Company did not make any matching contributions during the three and nine months ended September 30, 2013 or September 30, 2012.

   

8. 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 stock-based compensation.

As of September 30, 2013, the Company has an insufficient history to support the likelihood of ultimate realization of the benefit associated with its deferred tax assets. 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:

   

 

   

September 30, 

2013

   

   

September 30, 

2012

   

Income tax benefit at the federal statutory rate

   

-34

%

   

   

-34

%

State income tax benefit, net of federal tax benefit

   

-6

%

   

   

-6

%

Change in fair value of warrant liability

   

9

%

   

   

14

%

Change in valuation allowance for deferred tax assets

   

31

%

   

   

26

%

Total

   

0

%

   

   

0

%

   

   

 

   

September 30,
2013

   

      

December 31,
2012

   

Net operating loss carryforwards

$

15,759,274

   

   

$

12,821,749

   

Stock-based compensation

   

1,931,443

   

   

   

1,796,954

   

Less valuation allowance

   

(17,690,717

)

   

   

(14,618,703

)

Net deferred tax asset

$

0

   

   

$

—  

   

As of September 30, 2013 and December 31, 2012, the Company had federal and California income tax net operating loss carryforwards of approximately $38 million. These net operating losses will begin to expire in 2022 and 2016, respectively, unless previously utilized.

Section 382 of the Internal Revenue Code can limit the amount of net operating losses which may be utilized if certain changes to a company’s ownership occur. While the Company underwent an ownership change in 2012 as defined by Section 382 of the Internal Revenue Code, management estimated that the Company had not incurred any limitations on its ability to utilize its net operating losses under Section 382 of the Internal Revenue Code during 2012. The Company may incur limitations in the future if there is a change in ownership.

   

 

 18 


   

9. Subsequent Events

Warrant Exercises

Subsequent to September 30, 2013, certain warrant holders exercised 198,550 warrants for cash and the Company received $279,956.

Stock Option Exercises

Subsequent to September 30, 2013, the Company issued 18,157 shares of common stock upon the cashless exercise of stock options to purchase 24,000 shares of common stock.  Additionally, the Company issued 267,387 shares of common stock as a result of the exercise of stock options and the Company received cash proceeds of $66,847.

   

   

   

 

 19 


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Throughout this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” and “our company” refer to ImmunoCellular Therapeutics, Ltd., a Delaware corporation.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements, which reflect the views of our management with respect to future events and financial performance. These forward-looking statements are subject to a number of uncertainties and other factors that could cause actual results to differ materially from such statements. Forward-looking statements are identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “plans,” “projects,” “targets” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which are based on the information available to management at this time and which speak only as of this date. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under the heading “Risk Factors” in our Form 10-K for the year ended December 31, 2012. The identification in this Quarterly Report of factors that may affect future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Overview and Plan of Operation

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.

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. The Company’s lead product candidate, ICT-107 is in Phase II clinical development. The Company has two other candidates, ICT-140 and ICT-121, that each have investigational new drug (IND) applications for initiation of clinical development. The Company has sustained operating losses and, as of September 30, 2013, the Company had an accumulated deficit of $52,086,391. The Company expects to incur significant research, development and administrative expenses before any of its products can be launched and recurring revenues generated.

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

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. We have completed a Phase I clinical trial of a vaccine product candidate for the treatment of glioblastoma multiforme based on this technology and in January 2011, we initiated a Phase II clinical trial. During 2012, we completed our patient enrollment for this trial.

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 differential immunization for antigen and antibody discovery 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. 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 do not plan to develop these technologies for our own use, but we may choose to license or discontinue them in the future.

In February 2012, we acquired an exclusive worldwide license from the University of Pennsylvania related to intellectual property for the production, use and cryopreservation of high-activity dendritic cell cancer vaccines, including ICT-107, our lead dendritic cell-based cancer vaccine candidate for the treatment of glioblastoma multiforme.

 

 20 


Also in February 2012, we acquired an exclusive, worldwide license from The John Hopkins University to certain intellectual property related to mesothelin-specific cancer immunotherapies.

In January 2013, the U.S. Food and Drug Administration allowed our IND for a clinical trial for ICT-140 Phase II open-label safety study to initially enroll 30 ovarian cancer patients with an option to enroll another 30 patients at our discretion.  The study is designed with a 2-to-1 randomization, whereby for every 2 patients who will receive the treatment 1 patient will receive the current standard of care. All of the patients participating in the study will have been previously treated with standard chemotherapeutic agents. This trial is expected to include five clinical sites in the United States and we expect to initiate the trial in the first quarter of 2014.

On July 30, 2013, we announced the initiation of a Phase I clinical trial of cancer vaccine ICT-121 as a potential treatment for patients with recurrent glioblastoma multiforme.

Since our inception on February 25, 2004, we have been primarily engaged in the acquisition of certain intellectual property, together with the recent clinical testing activities for our vaccine product candidates, and have not generated any recurring revenues. As a result, we have incurred operating losses and, as of September 30, 2013 we had an accumulated deficit of $52,086,391. 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.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations are based on our 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, fair value of warrant derivatives 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 September 30, 2013. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:

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 nine months ended September 30, 2013 and 2012 we recorded an expense of $3,905,338 and $6,567,086, respectively related to research and development activities. We expect our research and development expenses during the remainder of 2013 to remain relatively constant with the first half of the year.

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.

 

 21 


Income Taxes

The Company accounts for federal and state income taxes under the liability method, with a deferred tax asset or liability 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. The Company recognizes in its financial statements the impact of an uncertain 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’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. The Company is not currently under examination by any taxing authority nor has it been notified of an impending examination. The Company’s tax returns for the years ended December 31, 2012, 2011 and 2010, remain open for possible review.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheets for cash, cash equivalents, and accounts payable approximate their fair values due to their quick turnover. The fair value of warrant liability is estimated using the Binomial Lattice option valuation model.

Results of Operations

Three months ended September 30, 2013 and 2012

Net Loss

We incurred a net loss of $3,793,441 and $637,627 for the three months ended September 30, 2013 and 2012, respectively. The increase in the net loss is primarily due to a charge during the three months ended September 30, 2013 of $1,379,217 related to the increase in the fair value of the warrant liability, compared to a credit of $2,777,500 to revalue the warrant liability during the same period last year.  This increase was partially offset by reductions in our research and development expenses during the current period.

Revenues

We did not have any revenue during the three months ended September 30, 2013 and 2012 and we do not expect to have any revenue in 2013.

Expenses

General and administrative expenses for the three months ended September 30, 2013 and 2012 were $985,107 and $1,004,181, respectively. During the three months ended September 30, 2013, we optimized our spending in the areas of investor relations, travel and professional fees, which resulted in a decrease in expense.  These decreases were partially offset by increases in personnel related expenses as we hired additional employees and we concluded a litigation matter.  The Company and certain officers and directors were the defendants in a lawsuit.  The plaintiff alleged that the Company and our directors breached their fiduciary duty for making inadequate disclosures in our proxy statement related to the proposed amendment to our 2006 Equity Incentive Plan.  The litigation was settled during the quarter ended September 30, 2013 and the Company does not expect to incur any additional expenses related to this matter.

Research and development expenses for the three months ended September 30, 2013 and 2012 were $1,276,507 and $2,378,917, respectively. During the three months ended September 30, 2012, we completed our enrollment by enrolling 39 new patients in our Phase II clinical trial of ICT-107 bringing the total number of enrolled patients to 278. Since a significant amount of the expenses that we incur to treat patients are incurred shortly after enrollment, our patient treatment costs for ICT-107 were substantially higher during the three months ended September 30, 2012. The decrease in the amounts expended for ICT-107 was partially offset by certain pre-clinical expenses we incurred related to ICT-121 and ICT-140. Our future research and development expenses are heavily dependent on the outcome of our Phase II trial of ICT-107.  Depending on the outcome of that trial, we may need to conduct a Phase III trial with a patient enrollment that will likely be significantly larger than the Phase II trial.  The number of patients to be enrolled and the ultimate cost will be dependent on factors that are not presently known by us.  We will incur additional costs as we enroll patients in our ICT-121 and ICT-140 clinical trials .

We had $1,549,492 of non-cash expenses during the three months ended September 30, 2013, consisting of $1,379,217 related to the increase in our warrant liabilities, $156,277 of stock based compensation and $13,998 of depreciation expense. We had $45,330 of non-cash expenses for the three months ended September 30, 2012, consisting of $33,887 of stock based compensation and $11,443 of depreciation expense. During the three months ended September 30, 2012, we recorded $2,777,500 of other income related to the decrease in the fair value of our warrant liabilities.

 

 22 


Nine months ended September 30, 2013 and 2012

Net Loss

We incurred a net loss of $8,917,561 and $14,978,879 for the nine months ended September 30, 2013 and 2012, respectively. The decrease in the net loss is primarily due to reductions in research and development expenses and a reduced charge to other expense related to the increase in the fair value of the warrant liability.

Revenues

We did not have any revenue during the nine months ended September 30, 2013 and 2012 and we do not expect to have any revenue in 2013.

Expenses

General and administrative expenses for the nine months ended September 30, 2013 and 2012 were $2,542,794 and $2,647,301, respectively. During the three months ended September 30, 2013, we optimized our spending in the areas of investor relations, travel and professional fees, which resulted in a decrease in expense.  These decreases were partially offset by increases in personnel related expenses as we hired additional employees and we concluded a litigation matter .

Research and development expenses for the nine months ended September 30, 2013 and 2012 were $3,905,338 and $6,567,086, respectively. During the nine months ended September 30, 2012, we completed our enrollment by enrolling 39 new patients in our Phase II clinical trial of ICT-107 bringing the total number of enrolled patients to 278.  Additionally, we had two manufacturing facilities and 25 Phase II trial clinical sites that were operational.  Since we completed our ICT-107 patient enrollment during the third quarter of 2012, we did not incur certain expenses related to product manufacturing or quality control during the nine months ended September 30, 2013.  However, we continued to incur other trial related expenses related to ICT-107.  The decrease in the amounts expended for ICT-107 was partially offset by certain pre-clinical expenses we incurred related to ICT-121 and ICT-140.  We expect our research and development expenses to increase during the remainder of 2013 as we incur on-going expenses related to our Phase II  trial of ICT-107 and as we begin enrolling patients in our clinical trials for ICT-121 and ICT-140.  

We had $2,523,238 of non-cash expenses during the nine months ended September 30, 2013, consisting of $1,983,388 related to the increase in our warrant liabilities, $500,351 of stock based compensation, $3,817 loss on disposal of assets and $35,682 of depreciation expense. We had $5,435,166 of non-cash expenses for the nine months ended September 30, 2012, consisting of $5,018,224 related to the increase in our warrant liability, $382,611 of stock based compensation and $34,331 of depreciation expense.

Liquidity and Capital Resources

As of September 30, 2013, we had working capital of $28,767,993, compared to working capital of $25,832,869 as of December 31, 2012. 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 will be sufficient to fund our operations for at least the next twelve months, although there is no assurance that such proceeds will be sufficient.

On April 18, 2013, we entered into a Controlled Equity Offering SM Sales Agreement (the Sales Agreement) with Cantor Fitzgerald & Co., as agent (Cantor), pursuant to which we may offer and sell, from time to time through Cantor, shares of our common stock having an aggregate offering price of up to $25.0 million (of which only $17.0 million was initially registered for offer and sale). Under the Sales Agreement, Cantor may sell shares by any method permitted by law and deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act, as amended, including sales made directly on the NYSE MKT, on any other existing trading market for our common stock or to or through a market maker. We may instruct Cantor not to sell shares if the sales cannot be effected at or above the price designated by us from time to time. We are not obligated to make any sales of the shares under the Sales Agreement. The offering of shares pursuant to the Sales Agreement will terminate upon the earlier of (a) the sale of all of the shares subject to the Sales Agreement or (b) the termination of the Sales Agreement by Cantor or the Company, as permitted therein. We will pay Cantor a commission rate of 3.0% of the aggregate gross proceeds from each sale of shares and have agreed to provide Cantor with customary indemnification and contribution rights. We will also reimburse Cantor for certain specified expenses in connection with entering into the Sales Agreement. On April 22, 2013, NYSE MKT approved the listing of 10,593,220 shares of our common stock in connection with the Sales Agreement. During the nine months ended September 30, 2013, we issued 1,862,142 shares and received net proceeds of $4,906,078.  As of September 30, 2013, we had $11,754,071 remaining under the registration statement.  See additional discussion in Note 6 to the unaudited condensed financial statements which are included in Part 1 of this Form 10-Q.

 

 23 


In October 2012, we raised $19,359,553 in an underwritten public offering, net of offering expenses of approximately $1.6 million, of 10 million units priced at $2.10 per unit. Each unit consisted of one share of common stock and a warrant to purchase .45 of a share of our common stock at an exercise price of $2.65 per share. In January 2012, we raised approximately $9,271,370 in an underwritten public offering, net of offering expenses of approximately $1.1 million, of 9,489,436 units at a price of $1.10 per unit. Each unit consists of one share of stock and a warrant to purchase 0.5 of a share of our common stock at an exercise price of $1.41 per share. In February 2011, we raised $7,460,129 (after commissions and offering expenses) from the sale 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. In May 2010, we 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 exercise price of $1.50 per share. In March 2010, we 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.

We may also seek to obtain funding through strategic alliances with larger pharmaceutical or biomedical companies. 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 September 30, 2013, we did not have any bank credit lines, long-term debt obligations, capital lease obligations, or other similar long-term liabilities. We have various purchase commitments for sponsored research and license fees. 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.

Contractual Obligations

The following is a summary of our contractual obligations including those entered into subsequent to September 30, 2013.

   

 

   

Total

   

   

Less than
1 year

   

   

1-3
years

   

   

3-5
years

   

   

More than
5 years

   

Unconditional purchase obligations

$

1,099,016

   

   

$

1,099,016

   

   

$

0

   

   

$

0

   

   

$

0

   

Operating lease obligation

   

291,250

   

   

   

96,998

   

   

   

194,252

   

   

   

0

   

   

   

0

   

   

$

1,390,266

   

   

$

1,196,014

   

   

$

194,252

   

   

$

0

   

   

$

0

   

Cash Flows

We used $6,054,663 of cash in our operations for the nine months ended September 30, 2013, compared to $9,187,583 for the nine months ended September 30, 2012. During the nine months ended September 30, 2012, we greatly expanded our research and development activities, expanded our investor relations program and obtained a listing on NYSE MKT. Since we completed our ICT-107 patient enrollment during the third quarter of 2012, we did not incur certain expenses related to product manufacturing or quality control during the nine months ended September 30, 2013. During the nine months ended September 30, 2013, we incurred non-cash expenses consisting primarily of a valuation adjustment to our warrant liabilities of $1,983,388 and stock based compensation of $500,351. During the nine months ended September 30, 2012, we incurred non-cash expenses consisting primarily of a valuation adjustment to our warrant liabilities of $5,018,224. Additionally, during the nine months ended September 30, 2012, we recorded a non-cash financing expense of $368,524 related to the issuance of additional warrants triggered by the January 2012 stock issuance.

We used $37,877 cash from our investing activities during the nine months ended September 30, 2013 primarily to purchase computer equipment and a telephone system. During the nine months ended September 30, 2012, we used $5,668 of cash from our investing activities to acquire office equipment.

During the nine months ended September 30, 2013, we received net proceeds of $141,631 from the exercise of stock options and $4,261,723 from the exercise of warrants. We also received $4,906,078 in net proceeds from our controlled equity offering.  During the nine months ended September 30, 2012, we received net proceeds of $9,271,370, excluding $100,000 of deferred offering costs that were previously advanced by the Company, from the issuance of common stock and warrants and we received $3,153,852 of proceeds from the exercise of warrants.

Inflation and changing prices have had no effect on our income or losses from operations over our two most recent fiscal years.

Off-Balance Sheet Arrangements

We are not party to any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

 24 


   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

During the three months ended September 30, 2013, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 11, 2013 with the SEC.

   

  Item 4. Controls a nd Procedures

As of the end of the fiscal quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, regarding the effectiveness of the design and operation of our disclosure controls and procedures pursuant to SEC Rule 15d-15(b) of the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2013, (i) our disclosure controls and procedures were effective to ensure that information that is required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported or submitted within the time period specified in the rules and forms of the SEC and (ii) our disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Exchange Act was accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We do not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. The design of any system of controls also is based in part upon assurance that any design will succeed in achieving its stated goals under all potential future conditions. However, controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

   

   

 

 25 


PART II

OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

You should read and consider the risk factors included under Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 11, 2013 with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about the Company’s repurchases of its common stock during the quarter ended September 30, 2013.

   

 

Month

   

Total Number of
Shares (or Units)
Purchased (1)

   

      

Average Price
Paid per Share

(or Unit)

   

      

Total Number of Shares
(or Units) Purchased as
Part of
Publicly Announced
Plans or
Programs

   

      

Maximum
Number (or
Approximate Dollar
Value) of Shares

(or Units)

that May Yet be
Purchased Under
the Plans or
Programs

   

July

   

   

0

   

   

$

0

   

   

   

0

   

   

   

0

   

August

   

   

99,331

   

   

$

0

   

   

   

0

   

   

   

0

   

September

   

   

5,491

   

   

$

0

   

   

   

0

   

   

   

0

   

   

   

   

104,822

   

   

$

0

   

   

   

0

   

   

   

0

   

 

(1)

These shares are deemed to be repurchased through the cashless exercise of warrants and stock options during the quarter ended September 30, 2013.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

 

 26 


  Item 6. Exh ibits

   

 

Exhibit No.

      

Description

   

   

3.1

   

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (1)

   

   

10.1

      

Employment Agreement dated August 19, 2013 between Anthony Gringeri and ImmunoCellular Therapeutics, Ltd.

   

   

10.2

      

Amendment No. 1 to the Exclusive License Agreement between the Johns Hopkins University and ImmunoCellular Therapeutics, Ltd.†

   

   

10.3

   

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

   

   

10.4

   

Amendment No. 1 to Amended and Restated 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd.

   

   

10.5

   

Form of Stock Option Grant Notice for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd.

   

   

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.

   

   

101.INS

      

XBRL Instance Document

   

   

101.SCH

      

XBRL Taxonomy Extension Schema Document

   

   

101.CAL

      

XBRL Taxonomy Extension Calculation Linkbase Document

   

   

101.LAB

      

XBRL Taxonomy Extension Labels Linkbase Document

   

   

101.PRE

      

XBRL Taxonomy Extension Presentation Linkbase Document

   

   

101.DEF

      

XBRL Taxonomy Extension Definition Linkbase Document

 

(1)

Previously filed by us on September 24, 2013 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.

 

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.

   

   

 

 27 


SIGNA TURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

   

 

Dated: November 7, 2013

   

IMMUNOCELLULAR THERAPEUTICS, LTD.

   

   

   

By:

   

/s/ Andrew Gengos

   

Name:

   

Andrew Gengos

   

Title:

   

President and Chief Executive Officer

(Principal Executive Officer)

   

   

   

   

By:

   

/s/ David Fractor

   

Name:

   

David Fractor

   

Title:

   

Principal Accounting Officer

(Principal Financial and Accounting Officer)

   

   

 

 28 


EXHIBIT INDEX

IMMUNOCELLULAR THERAPEUTICS, LTD.

FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2013

   

 

Exhibit No.

      

Description

   

   

3.1

      

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of ImmunoCellular Therapeutics, Ltd. (1)

   

   

10.1

      

Employment Agreement dated August 19 ,2013 between Anthony Gringeri and ImmunoCellular Therapeutics, Ltd.

   

   

10.2

      

Amendment No. 1 to the Exclusive License Agreement between the Johns Hopkins University and ImmunoCellular Therapeutics, Ltd. †

   

   

10.3

   

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

   

   

10.4

   

Amendment No. 1 to Amended and Restated 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd.

   

   

10.5

   

Form of Stock Option Grant Notice for the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd.

   

   

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.

   

   

101.INS

      

XBRL Instance Document

   

   

101.SCH

      

XBRL Taxonomy Extension Schema Document

   

   

101.CAL

      

XBRL Taxonomy Extension Calculation Linkbase Document

   

   

101.LAB

      

XBRL Taxonomy Extension Labels Linkbase Document

   

   

101.PRE

      

XBRL Taxonomy Extension Presentation Linkbase Document

   

   

101.DEF

      

XBRL Taxonomy Extension Definition Linkbase Document

 

(1)

Previously filed by us on September 24, 2013 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.

 

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.

   

 

 29 


Exhibit 10.1

ImmunoCellular Therapeutics, Ltd.

EXECUTIVE EMPLOYMENT AGREEMENT

for

Anthony Gringeri

This Executive Employment Agreement (the “ Agreement ”), made between ImmunoCellular Therapeutics, Ltd. (the “ Company ”) and Anthony Gringeri (the “ Executive ”) ( collectively, the “ Parties ”), is effective as of August 19, 2013.  

Whereas , the Company desires for Executive to provide services to the Company, and wishes to provide Executive with certain compensation and benefits in return for such employment services; and

Whereas , Executive wishes to be employed by the Company and to provide personal services to the Company in return for certain compensation and benefits;

Now, Therefore , in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

 

1.     Employment by the Company.

   

   

   

1.1     Position.  Executive shall serve as the Company’s Senior Vice President of Strategic Resources.  During the term of Executive’s employment with the Company, Executive will devote Executive’s best efforts and substantially all of Executive’s business time and attention to the business of the Company, except for approved time off permitted by the Company’s general employment policies.  

   

1.2    Duties and Location.  Executive shall perform such duties as are required by the Chief Executive Officer, to whom Executive will report.  Executive’s primary office location will be the Company’s headquarters.  The Company reserves the right to reasonably require Executive to perform Executive’s duties at places other than Executive’s primary office location from time to time, and to require reasonable business travel.  The Company may modify Executive’s job title and duties as it deems necessary and appropriate in light of the Company’s needs and interests from time to time.

   

1.3    Policies and Procedures.  The employment relationship between the Parties shall be governed by the general employment policies and practices of the Company, except that when the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.

   

2.    Compensation.

   

   

   

2.1     Salary.  For services to be rendered hereunder, Executive shall receive a base salary at the rate of Three Hundred Ten Thousand Dollars ($310,000) per year (the “ Base Salary ”), subject to standard payroll deductions and withholdings and payable in accordance with the Company’s regular payroll schedule.

   

2.2    Stock Option Grant.  Subject to approval by the Board of Directors (the “Board” ), Executive shall be granted an option to purchase 300,000 shares of Common Stock in the Company at the fair market value on the date of grant (the “Option”).  The Option shall be governed in all respects by the terms of the governing equity plan documents and option agreement between Executive and the Company, and shall be subject to a vesting schedule whereby one-quarter (1/4) of the shares subject to the Option shall vest one year after grant, with the remaining shares vesting in equal monthly installments over the following three years thereafter, subject to Executive’s continuous service.

   

 

 1 


   

 

2.3    Annual Cash Bonus.   Executive will be eligible for an annual discretionary cash bonus of up to thirty percent (30%) of Executive’s Base Salary (the “ Annual Bonus ”), to be prorated for 2013.  Whether Executive receives an Annual Bonus for any given year, and the amount of any such Annual Bonus, will be determined by the Board (or the Compensation Committee of the Board) in its sole discretion based upon the Company’s and Executive’s achievement of agreed upon written objectives and milestones to be determined on an annual basis.  Any Annual Bonus that is awarded will be paid within the first 90 days of the calendar year following the applicable bonus year.  Executive will not be eligible for, and will not earn, any Annual Bonus (including a prorated bonus) if Executive’s employment terminates for any reason before the payment date.

   

3.        Standard Company Benefits. Executive shall be entitled to participate in all employee benefit programs for which Executive is eligible under the terms and conditions of the benefit plans that may be in effect from time to time and provided by the Company to its employees.  The Company reserves the right to cancel or change the benefit plans or programs it offers to its employees at any time.   

   

4.         Expenses.  The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in furtherance or in connection with the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.

   

5.      Termination of Employment; Severance.

   

5.1     At-Will Employment.  Executive’s employment relationship is at-will.  Either Executive or the Company may terminate the employment relationship at any time, with or without Cause or advance notice.

   

5.2    Termination Without Cause; Resignation for Good Reason.  

   

(i)     The Company may terminate Executive’s employment with the Company at any time without Cause (as defined below).  Further, Executive may resign at any time for Good Reason (as defined below).

   

(ii)     In the event Executive’s employment with the Company is terminated by the Company without Cause, or Executive resigns for Good Reason, then provided such termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “ Separation from Service ”), and provided that Executive remains in compliance with the terms of this Agreement, the Company shall provide Executive with the following severance benefits:

   

(a)     The Company shall pay Executive, as severance, six (6) months of Executive’s base salary in effect as of the date of Executive’s employment termination, subject to standard payroll deductions and withholdings (the “ Severance ”).  The Severance will be paid in equal installments on the Company’s regular payroll schedule over the six (6) month period following Executive’s Separation from Service; provided, however, that no payments will be made prior to the 60th day following Executive’s Separation from Service.  On the 60th day following Executive’s Separation from Service, the Company will pay Executive in a lump sum the Severance that Executive would have received on or prior to such date under the standard payroll schedule but for the delay while waiting for the 60 th day in compliance with Code Section 409A, with the balance of the Severance being paid as originally scheduled.

   

 

 2 


   

 

(b)     Provided Executive timely elects continued coverage under COBRA, the Company shall pay Executive’s COBRA premiums to continue Executive’s coverage (including coverage for eligible dependents, if applicable) (“ COBRA Premiums ”) through the period (the “ COBRA Premium Period ”) starting on Executive’s Separation from Service and ending on the earliest to occur of: (i) six (6) months following Executive’s Separation from Service; (ii) the date Executive becomes eligible for group health insurance coverage through a new employer; or (iii) the date Executive ceases to be eligible for COBRA continuation coverage for any reason, including plan termination. In the event Executive becomes covered under another employer's group health plan or otherwise cease to be eligible for COBRA during the COBRA Premium Period, Executive must immediately notify the Company of such event.  Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot pay the COBRA Premiums without a substantial risk of violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company instead shall pay to Executive, on the first day of each calendar month, a fully taxable cash payment equal to the applicable COBRA premiums for that month (including premiums for Executive and Executive’s eligible dependents who have elected and remain enrolled in such COBRA coverage), subject to applicable tax withholdings (such amount, the “ Special Cash Payment ”), for the remainder of the COBRA Premium Period.  Executive may, but is not obligated to, use such Special Cash Payments toward the cost of COBRA premiums.  

   

(c)     The Company will accelerate the vesting of the Option, as well as any other equity interests granted to Executive, such that the shares that would have vested in the six (6) months following Executive’s Separation from Service shall be deemed vested and exercisable as of Executive’s last day of employment (the “Accelerated Vesting” ).   

   

(iii)     If the Company terminates Executive’s employment with the Company without Cause, or Executive resigns for Good Reason, in either case within twelve (12) months following the closing of a Change in Control (as defined below), then in addition to the Severance and COBRA Premiums (or Special Cash Payments set forth above), the Company will accelerate the vesting of the Option, as well as any other equity interests granted to Executive, such that fifty percent (50%) of the then-unvested shares subject to the Option (or other equity interests) will be deemed vested and exercisable as of Executive’s last day of employment.

   

5.3     Termination for Cause; Resignation Without Good Reason; Death or Disability.

   

(i)     The Company may terminate Executive’s employment with the Company at any time for Cause.  Further, Executive may resign at any time without Good Reason.  Executive’s employment with the Company may also be terminated due to Executive’s death or disability.  

   

(ii)     If Executive resigns without Good Reason, or the Company terminates Executive’s employment for Cause, or upon Executive’s death or disability, then (i) Executive will no longer vest in the Option, (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately (except as to amounts already earned), and (c) Executive will not be entitled to any severance benefits, including (without limitation) the Severance, COBRA Premiums, Special Cash Payments or Accelerated Vesting.  

   

6.          Conditions to Receipt of Severance, COBRA Premiums, Special Cash Payments and Accelerated Vesting.  The receipt of the Severance, COBRA Premiums, Special Cash Payments and Accelerated Vesting will be subject to Executive signing and not revoking a separation agreement and release of claims in a form satisfactory to the Company (the “ Separation Agreement ”) within a time period specified by the Company.  No Severance, COBRA Premiums, Special Cash Payments or Accelerated Vesting will be paid or provided until the Separation Agreement becomes effective.  Executive shall also resign from all positions and terminate any relationships as an employee, advisor, officer or director with the Company and any of its affiliates, each effective on the date of termination.

   

 

 3 


   

 

7.          Section 409A.  It is intended that all of the severance benefits and other payments payable under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this Agreement will be construed to the greatest extent possible as consistent with those provisions, and to the extent no so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A.  For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.  Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), and if any of the payments upon Separation from Service set forth herein and/or under any other agreement with the Company are deemed to be “deferred compensation”, then to the extent delayed commencement of any portion of such payments is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments shall not be provided to Executive prior to the earliest of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company, (ii) the date of Executive’s death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation.  Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this Paragraph shall be paid in a lump sum to Executive, and any remaining payments due shall be paid as otherwise provided herein or in the applicable agreement. No interest shall be due on any amounts so deferred.

   

8.    Definitions.  

   

   

   

(i)     Cause.  For purposes of this Agreement, “Cause” for termination will mean:  (a)  commission of any felony or crime involving dishonesty; (b) participation in any fraud against the Company; (c) material breach of Executive’s duties to the Company; (d) persistent unsatisfactory performance of job duties after written notice from the Board and a reasonable opportunity to cure (if deemed curable); (e) intentional damage to any property of the Company; (f) misconduct, or other violation of Company policy that causes harm; (g) breach of any written agreement with the Company; and (h) conduct by Executive which in the good faith and reasonable determination of the Board demonstrates gross unfitness to serve.

   

(ii)    Good Reason.  For purposes of this Agreement, Executive shall have “ Good Reason ” for resignation from employment with the Company if any of the following actions are taken by the Company without Executive’s prior written consent:  (a) a material reduction in Executive’s base salary, which the parties agree is a reduction of at least 10% of Executive’s base salary (unless pursuant to a salary reduction program applicable generally to the Company’s similarly situated employees); or (b) a material reduction in Executive’s duties (including responsibilities and/or authorities), provided, however, that a change in job position shall not be deemed a “material reduction” in and of itself unless Executive’s new duties are materially reduced from the prior duties; or (c) relocation of Executive’s principal place of employment to a place that increases Executive’s one-way commute by more than sixty (60) miles as compared to Executive’s then-current principal place of employment immediately prior to such relocation.  In order to resign for Good Reason, Executive must provide written notice to the Company’s CEO within 30 days after the first occurrence of the event giving rise to Good Reason setting forth the basis for Executive’s resignation, allow the Company at least 30 days from receipt of such written notice to cure such event, and if such event is not reasonably cured within such period, Executive must resign from all positions Executive then holds with the Company not later than 90 days after the expiration of the cure period.

   

 

 4 


   

 

(iii)    Change of Control.  For purposes of this Agreement, “Change of Control” shall mean:  (a) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction or series of transactions; (b) a sale, lease or other conveyance of all or substantially all of the assets of the Company; or (c) any liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily.

   

9.    Proprietary Information Obligations.

   

   

   

9.1     Confidential Information Agreement.  As a condition of employment, Executive shall execute and abide by the Company’s standard form of At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement (the “ Confidentiality Agreement ”).

   

9.2    Third-Party Agreements and Information.  Executive represents and warrants that Executive’s employment by the Company does not conflict with any prior employment or consulting agreement or other agreement with any third party, and that Executive will perform Executive’s duties to the Company without violating any such agreement.  Executive represents and warrants that Executive does not possess confidential information arising out of prior employment, consulting, or other third party relationships, that would be used in connection with Executive’s employment by the Company, except as expressly authorized by that third party.  During Executive’s employment by the Company, Executive will use in the performance of Executive’s duties only information which is generally known and used by persons with training and experience comparable to Executive’s own, common knowledge in the industry, otherwise legally in the public domain, or obtained or developed by the Company or by Executive in the course of Executive’s work for the Company.  

   

10.    Outside Activities During Employment.

   

   

   

10.1     Non-Company Business.  Except with the prior written consent of the Board, Executive will not during the term of Executive’s employment with the Company undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor.  Prior approval by the Board, which will not be unreasonably withheld, is required for advisory or other company board of director commitments proposed by Executive.  In any event, Executive may engage in civic and not-for-profit activities so long as such activities do not materially interfere with the performance of Executive’s duties hereunder.  

   

10.2    No Adverse Interests.  Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.

   

11.          Non-Solicitation.  Executive agree that during the period of employment with the Company and for twelve (12) months after the date Executive’s employment is terminated for any reason, Executive will not, either directly or through others, solicit or encourage or attempt to solicit or encourage any employee, independent contractor, or consultant of the Company to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or entity.

   

 

 5 


   

 

12.          Dispute Resolution.  To ensure the timely and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, including but not limited to statutory claims, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in Los Angeles, California, conducted by JAMS, Inc. (“ JAMS ”) under the then applicable JAMS rules (which can be found at the following web address: ) .  By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.  The Company acknowledges that Executive will have the right to be represented by legal counsel at any arbitration proceeding.  The arbitrator shall:  (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award.  The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law.  The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required of the Executive if the dispute were decided in a court of law.  Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.  Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.

   

13.    General Provisions.

   

   

   

13.1     Notices.  Any notices provided must be in writing and will be deemed effective upon the earlier of personal delivery (including personal delivery by fax) or the next day after sending by overnight carrier, to the Company at its primary office location and to Executive at the address as listed on the Company payroll.

   

13.2    Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the extent possible in keeping with the intent of the parties.

   

13.3     Waiver.  Any waiver of any breach of any provisions of this Agreement must be in writing to be effective, and it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

   

13.4     Complete Agreement.  This Agreement, together with the Confidentiality Agreement, constitutes the entire agreement between Executive and the Company with regard to this subject matter and is the complete , final, and exclusive embodiment of the Parties’ agreement with regard to this subject matter.  This Agreement is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations.  It is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified or amended except in a writing signed by a duly authorized officer of the Company.

   

13.5     Counterparts.  This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

13.6     Headings.  The headings of the paragraphs hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

   

 

 6 


   

 

13.7     Successors and Assigns.  This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which shall not be withheld unreasonably.

   

13.8    Tax Withholding and Indemnification.  All payments and awards contemplated or made pursuant to this Agreement will be subject to withholdings of applicable taxes in compliance with all relevant laws and regulations of all appropriate government authorities.  Executive acknowledges and agrees that the Company has neither made any assurances nor any guarantees concerning the tax treatment of any payments or awards contemplated by or made pursuant to this Agreement.  Executive has had the opportunity to retain a tax and financial advisor and fully understands the tax and economic consequences of all payments and awards made pursuant to the Agreement.

   

13.9     Choice of Law.  All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California.  

   

In Witness Whereof , the Parties have executed this Agreement on the day and year first written above.

 

ImmunoCellular Therapeutics, Ltd.

   

By:

   

   

Andrew Gengos

   

Chief Executive Officer

   

   

   

   

Executive

   

   

   

Anthony Gringeri

   

   

   

   

 

 7 


[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 10.2

AMENDMENT NO. 1 to the

EXCLUSIVE LICENSE AGREEMENT

Between

THE JOHNS HOPKINS UNIVERSITY

&

IMMUNOCELLULAR THERAPEUTICS, LTD.

This Amendment No. 1 ( Amendment No. 1 ) is made effective as of the date the last party hereto has executed this Amendment No. 1 (the Amendment No. 1 Effective Date ) by and between Immunocellular Therapeutics, LTD, a Delaware corporation, having an address at 23622 Calabasas Road, Suite 300, Calabasas, CA 91302 ( Company ) and The Johns Hopkins University, a corporation of the state of Maryland, having a principal place of business for the purposes of this Amendment No. 1 at 100 N. Charles Street, Baltimore, Maryland 21201 ( JHU ).

RECITALS

Whereas , JHU and Company (the “ Parties ”) are parties to that certain Exclusive License Agreement JHU Ref. No. A20530 effective February 16, 2012 (the Agreement ); and

Whereas , the Parties now desire to amend the Agreement as set forth below.

Now, Therefore , in consideration of the premises and mutual covenants and agreements contained herein, and for good and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound hereby, do hereby agree as follows:

 

1.

Amendment to Paragraph 5.4 Developmental Obligations .

   

   

Paragraph 5.4 shall be deleted in its entirety from the Agreement and replaced with the following:

   

   

   

5.4

Developmental Obligations.   Best efforts shall be demonstrated, among other ways, by the achievement of the following diligence milestones:

   

 

   

Event

Date

   

   

(i)

the first screened patient in any trial

   

   

   

   

subsequent to the current trial

July 1, 2017

   

For clarity, “first screened patient” shall mean the first patient screened for histocompatibility status prior to dosing.  

With regard to the diligence milestone specified in Paragraph 5.4(i), Company may extend such milestone by one (1) year with written notice to JHU prior to the due date thereof specified in Paragraph 5.4(i) and upon paying JHU a non-creditable, nonrefundable fee of [ * ] within thirty (30) days after such notice. The Company may extend the milestone for an additional one (1) year period by written notice to JHU prior to expiration of the initial one (1) year extension period and payment to JHU of a non-creditable, non-refundable fee of [ * ] within thirty (30) days after such written notice.

 

   


   

Company shall provide JHU with notice, as provided hereunder in Paragraph 10.6, within thirty (30) days of achieving the diligence milestone.

Unless otherwise specifically defined in this Amendment No. 1, all capitalized terms used herein shall have the meaning given to such terms in the Agreement.  Except as explicitly amended by this Amendment No. 1, all other terms and conditions of the Agreement shall remain in full force and effect and apply fully to the terms of this Amendment No. 1 as if part of the Agreement.

In Witness Whereof, the Parties, intending to be legally bound, have caused this Amendment No. 1 to be executed by their respective duly authorized representatives.

   

 

THE JOHNS HOPKINS UNIVERSITY

   

IMMUNOCELLULAR THERAPEUTICS, LTD.

   

   

   

   

   

By:

/s/ Wesley D. Blakeslee J.D. CLP

   

By:

/s/ Andrew Gengos

   

Wesley D. Blakeslee J.D. CLP

   

   

Andrew Gengos

   

Executive Director

   

   

President and CEO

   

   

   

   

   

Date:

9/24/2013

   

Date:

9/17/2013

   

   

                       

 

 2 

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.


Exhibit 10.3

2006 EQUITY INCENTIVE PLAN
OF
IMMUNOCELLULAR THERAPEUTICS, LTD.

(As Amended and Restated as of June 14, 2013)

(Approved by Stockholders on September 20, 2013)

 

1.

PURPOSES OF THE PLAN

   

The purposes of the 2006 Equity Incentive Plan (“Plan”) of IMMUNOCELLULAR THERAPEUTICS, LTD., a Delaware corporation formerly known as Patco Industries, Ltd. and Optical Molecular Imaging, Inc. (the “Company”), are to:

   

1.1 Encourage selected employees, directors, consultants and advisers to improve operations and increase the profitability of the Company; and

   

1.2 Encourage selected employees, directors, consultants and advisers to accept or continue employment or association with the Company or its Affiliates.

   

2.

TYPES OF AWARDS; ELIGIBLE PERSONS

   

2.1 The Administrator (as defined below) may, from time to time, take the following action, separately or in combination, under the Plan: (i)  grant “incentive stock options” (“ISOs”) intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”); (ii) grant “non-qualified options” (“NQOs,” and together with ISOs, “Options”); (iii) grant or sell Common Stock subject to restrictions (“restricted stock”) and (iv) grant stock appreciation rights (in general, the right to receive the excess of the fair market value of Common Stock on the exercise date over its fair market value on the grant date (“SARs”)), either in tandem with Options or as separate and independent grants.  Any such awards may be made to employees, including employees who are officers or directors, and to individuals described in Section 1 of this Plan who the Administrator believes have made or will make a contribution to the Company or any Affiliate (as defined below); provided, however, that only a person who is an employee of the Company or any Affiliate at the date of the grant of an Option is eligible to receive ISOs under the plan.  The term “Affiliate” as used in this Plan means a parent or subsidiary corporation as defined in the applicable provisions (currently Sections 424(e) and (f), respectively) of the Code.  The term “employee” includes an officer or director who is an employee of the Company.  The term “consultant” includes persons employed by, or otherwise affiliated with, a consultant.  The term “adviser” includes persons employed by, or otherwise affiliated with, an adviser.

   

2.2 Except as otherwise expressly set forth in this Plan, no right or benefit under this Plan shall be subject in any manner to anticipation, alienation, hypothecation, or charge, and any such attempted action shall be void.  No right or benefit under this Plan shall in any manner be liable for or subject to debts, contracts, liabilities, or torts of any option holder or any other person except as otherwise may be expressly required by applicable law.

   

3.

STOCK SUBJECT TO THIS PLAN; MAXIMUM NUMBER OF GRANTS

   

Subject to the provisions of Sections 6.1.1 and 8.2 of this Plan, the total number of shares of Common Stock which may be offered, or issued as restricted stock or on the exercise of Options or SARs under the Plan shall not exceed twelve million (12,000,000) shares of Common Stock.  The shares subject to an Option or SAR granted under the Plan which expire, terminate or are cancelled unexercised shall become available again for grants under this Plan.  If shares of restricted stock awarded under the Plan are forfeited to the Company or repurchased by the Company, the number of shares forfeited or repurchased shall again be available under the Plan.  Where the exercise price of an Option is paid by means of the optionee’s surrender of previously owned shares of Common Stock or the Company’s withholding of shares otherwise issuable upon exercise of the Option as may be permitted herein, only the net number of shares issued and which remain outstanding in connection with such exercise shall be deemed “issued” and no longer available for issuance under this Plan.  No eligible person shall be granted Options or other awards during any twelve-month period covering more than seven hundred twenty-five thousand (725,000) shares.

   


   

 

4.

ADMINISTRATION

   

4.1 This Plan shall be administered by the Board of Directors of the Company (the “Board”) or by a committee (the “Committee”) to which administration of this Plan, or of part of this Plan, is delegated by the Board (in either case, the “Administrator”).  The Board shall appoint and remove members of the Committee in its discretion in accordance with applicable laws.  At the Board’s discretion, the Committee may be comprised solely of “non-employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or  “outside directors” within the meaning of  Section 162(m) of the Code.  The Administrator may delegate non-discretionary administrative duties to such employees of the Company as the Administrator deems proper and the Board, in its absolute discretion, may at any time and from time to time exercise any and all rights and duties of the Administrator under this Plan.

   

4.2 Subject to the other provisions of this Plan, the Administrator shall have the authority, in its discretion: (i)  to grant Options and SARs and grant or sell restricted stock; (ii) to determine the fair market value of the Common Stock subject to Options or other awards; (iii) to determine the exercise price of Options granted, the economic terms of SARs granted, or the offering price of restricted stock; (iv) to determine the persons to whom, and the time or times at which, Options or SARs shall be granted or restricted stock granted or sold, and the number of shares subject to each Option or SAR or the number of shares of restricted stock granted or sold; (v) to construe and interpret the terms and provisions of this Plan, of any applicable agreement and all Options and SARs granted under this Plan, and of any restricted stock award under this Plan; (vi) to prescribe, amend, and rescind rules and regulations relating to this Plan; (vii) to determine the terms and provisions of each Option and SAR granted and award of restricted stock (which need not be identical), including but not limited to, the time or times at which Options and SARs shall be exercisable or the time at which the restrictions on restricted stock shall lapse; (viii) with the consent of the grantee, to rescind any award or exercise of an Option or SAR and to modify or amend the terms of any Option, SAR or restricted stock; (ix) to reduce the exercise price of any Option, the base value from which appreciation is to be determined with respect to an SAR or the purchase price of restricted stock, provided that any such reduction shall not be less than provided with Sections 6.2.1 and 6.3.1; (x) to accelerate or defer (with the consent of the grantee) the exercise date of any Option or SAR or the date on which the restrictions on restricted stock lapse; (xi) to issue shares of restricted stock to an optionee in connection with the accelerated exercise of an Option by such optionee; (xii) to authorize any person to execute on behalf of the Company any instrument evidencing the grant of an Option. SAR or award of restricted stock; (xiii) to determine the duration and purposes of leaves of absence which may be granted to participants without constituting a termination of their employment for the purposes of the Plan; and (xiv) to make all other determinations deemed necessary or advisable for the administration of this Plan, any applicable agreement, Option, SAR or award of restricted stock.

   

4.3 All questions of interpretation, implementation, and application of this Plan or any agreement or Option, SAR or award of restricted stock shall be determined by the Administrator, which determination shall be final and binding on all persons.

   

5.

GRANTING OF OPTIONS AND SARS; AGREEMENTS

   

5.1 No Options or SARs shall be granted under this Plan after ten (10)  years from the date of adoption of this Plan by the Board.  No SARs shall be granted under the Plan unless and until the common stock of the Company is publicly traded.

   

5.2 Each Option and SAR shall be evidenced by a written agreement, in form satisfactory to the Administrator, executed by the Company and the person to whom such grant is made.  In the event of a conflict between the terms or conditions of an agreement and the terms and conditions of this Plan, the terms and conditions of this Plan shall govern.

   

5.3 Each agreement shall specify whether the Option it evidences is an NQO or an ISO, provided, however, all Options granted under this Plan to non -employee directors, consultants and advisers of the Company are intended to be NQOs.

   

5.4 Subject to Section  6.3.3 with respect to ISOs, the Administrator may approve the grant of Options or SARs under this Plan to persons who are expected to become employees, directors, consultants or advisers of the Company, but are not employees, directors, consultants or advisers at the date of approval.

   

 

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6.

TERMS AND CONDITIONS OF OPTIONS AND SARS

   

Each Option and SAR granted under this Plan shall be subject to the terms and conditions set forth in Section 6.1.  NQOs and SARs shall also be subject to the terms and conditions set forth in Section 6.2, but not those set forth in Section 6.3.  ISOs shall also be subject to the terms and conditions set forth in Section 6.3, but not those set forth in Section 6.2.  SARs shall be subject to the terms and conditions of Section 6.4.

   

6.1 Terms and Conditions to Which All Options and SARs Are Subject.  All Options and SARs granted under this Plan shall be subject to the following terms and conditions:

   

6.1.1 Changes in Capital Structure.  Subject to Section  6.1.2, if the stock of the Company is changed by reason of a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification, or if the Company effects a spin-off of the Company’s subsidiary, appropriate adjustments shall be made by the Administrator, in its sole discretion, in (a) the number and class of shares of stock subject to this Plan and each Option and SAR outstanding under this Plan, and (b) the exercise price of each outstanding Option; provided, that the Company shall not be required to issue fractional shares as a result of any such adjustments.  Any adjustment, however, in an outstanding Option shall be made without change in the total price applicable to the unexercised portion of the Option but with a corresponding adjustment in the price for each share covered by the unexercised portion of the Option.  Adjustments under this Section 6.1.1 shall be made by the Administrator, whose determination as to the nature of the adjustments that shall be made, and the extent thereof, shall be final, binding, and conclusive.  If an adjustment under this Section 6.1.1 would result in a fractional share interest under an option or any installment, the Administrator’s decision as to inclusion or exclusion of that fractional share interest shall be final, but no fractional shares of stock shall be issued under the Plan on account of any such adjustment.

   

6.1.2 Corporate Transactions.  Except as otherwise provided in the applicable agreement, in the event of a Corporate Transaction (as defined below), the Administrator shall notify each holder of an Option or SAR at least thirty (30)  days prior thereto or as soon as may be practicable.  To the extent not then exercised all Options and SARs shall terminate immediately prior to the consummation of such Corporate Transaction unless the Administrator determines otherwise in its sole discretion; provided. however, that the Administrator, in its sole discretion, may (i) permit exercise of any Options or SARs prior to their termination, even if such Options or SARs would not otherwise have been exercisable, and/or (ii) provide that all or certain of the outstanding Options and SARs shall be assumed or an equivalent Option or SAR substituted by an applicable successor corporation or entity or any Affiliate of the successor corporation or entity.  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.

   

6.1.3 Time of Option or SAR Exercise.  Subject to Section  5 and Section 6.3.4, an Option or SAR granted under the Plan shall be exercisable (a) immediately as of the effective date of the of the applicable agreement or (b) in accordance with a schedule or performance criteria as may be set by the Administrator and specified in the applicable agreement.  However, in no case may an Option or SAR be exercisable until a written agreement in form and substance satisfactory to the Company is executed by the Company and the grantee.

   

6.1.4 Grant Date.  The date of grant of an Option or SAR under the Plan shall be the effective date of the applicable agreement.

   

6.1.5 Non-Transferability of Rights.  Except with the express written approval of the Administrator, which approval the Administrator is authorized to give only with respect to NQOs and SARs, no Option or SAR granted under this Plan shall be assignable or otherwise transferable by the grantee except by will or by the laws of descent and distribution.  During the life of the grantee, an Option or SAR shall be exercisable only by the grantee.

   

 

 3 

   


   

 

6.1.6 Payment.  Except as provided below, payment in full, in cash, shall be made for all stock purchased at the time written notice of exercise of an Option is given to the Company and the proceeds of any payment shall be considered general funds of the Company.  The Administrator, in the exercise of its absolute discretion after considering any tax, accounting and financial consequences, may authorize any one or more of the following additional methods of payment:

   

(a) Subject to the Sarbanes-Oxley Act of 2002, acceptance of the optionee ’s full recourse promissory note for all or part of the Option price, payable on such terms and bearing such interest rate as determined by the Administrator (but in no event less than the minimum interest rate specified under the Code at which no additional interest or original issue discount would be imputed), which promissory note may be either secured or unsecured in such manner as the Administrator shall approve (including, without limitation, by a security interest in the shares of the Company);

   

(b) Subject to the discretion of the Administrator and the terms of the stock option agreement granting the Option, delivery by the optionee of shares of Common Stock already owned by the optionee for all or part of the Option price, provided the fair market value (determined as set forth in Section  6.1.9) of such shares of Common Stock is equal on the date of exercise to the Option price, or such portion thereof as the optionee is authorized to pay by delivery of such stock;

   

(c) Subject to the discretion of the Administrator, through the surrender of shares of Common Stock then issuable upon exercise of the Option, provided the fair market value (determined as set forth in Section  6.1.9) of such shares of Common Stock is equal on the date of exercise to the Option price, or such portion thereof as the optionee is authorized to pay by surrender of such stock; and

   

(d) By means of so -called cashless exercises as permitted under applicable rules and regulations of the Securities and Exchange Commission and the Federal Reserve Board.

   

6.1.7 Withholding and Employment Taxes.  At the time of exercise and as a condition thereto, or at such other time as the amount of such obligation becomes determinable, the grantee of an Option or SAR shall remit to the Company in cash all applicable federal and state withholding and employment taxes.  Such obligation to remit may be satisfied, if authorized by the Administrator in its sole discretion, after considering any tax, accounting and financial consequences, by the holder ’s (i) delivery of a promissory note in the required amount on such terms as the Administrator deems appropriate, (ii) tendering to the Company previously owned shares of Common Stock or other securities of the Company with a fair market value equal to the required amount, or (iii) agreeing to have shares of Common Stock (with a fair market value equal to the required amount), which are acquired upon exercise of the Option or SAR, withheld by the Company.

   

6.1.8 Other Provisions.  Each Option and SAR granted under this Plan may contain such other terms, provisions, and conditions not inconsistent with this Plan as may be determined by the Administrator, and each ISO granted under this Plan shall include such provisions and conditions as are necessary to qualify the Option as an “incentive stock option” within the meaning of Section 422 of the Code.

   

6.1.9 Determination of Value.  For purposes of this Plan, the fair market value of Common Stock or other securities of the Company shall be determined as follows:

   

(a) If the stock of the Company is listed on a securities exchange or is regularly quoted by a recognized securities dealer, and selling prices are reported, its fair market value shall be the closing price of such stock on the date the value is to be determined, but if selling prices are not reported, its fair market value shall be the mean between the high bid and low asked prices for such stock on the date the value is to be determined (or if there are no quoted prices for the date of grant, then for the last preceding business day on which there were quoted prices).

   

(b) In the absence of an established market for the stock, the fair market value thereof shall be determined in good faith by the Administrator, with reference to the Company ’s net worth, prospective earning power, dividend-paying capacity, and other relevant factors, including the goodwill of the Company, the economic outlook in the Company’s industry, the Company’s position in the industry, the Company’s management, and the values of stock of other corporations in the same or a similar line of business.

   

 

 4 

   


   

 

6.1.10 Option and SAR Term.  No Option or SAR shall be exercisable more than 10 years after the date of grant, or such lesser period of time as is set forth in the applicable agreement (the end of the maximum exercise period stated in the agreement is referred to in this Plan as the “Expiration Date”).

   

6.2 Terms and Conditions to Which NQOs and SARs Are Subject.  Options granted under this Plan which are designated as NQOs and SARs shall be subject to the following terms and conditions:

   

6.2.1 Exercise Price.  The exercise price of an NQO and the base value of a SAR shall be no less than the fair market value of the Common Stock on the date of grant.

   

6.2.2 Termination of Employment.  Except as otherwise provided in the applicable agreement, if for any reason a grantee ceases to be employed by the Company or any of its Affiliates, Options that are NQOs and SARs held at the date of termination (to the extent then exercisable) may be exercised in whole or in part at any time within ninety (90)  days of the date of such termination (but in no event after the Expiration Date).  For purposes of this Section 6.2.2, “employment” includes service as a director, consultant or adviser.  For purposes of this Section 6.2.2, a grantee’s employment shall not be deemed to terminate by reason of the grantee’s transfer from the Company to an Affiliate, or vice versa, or sick leave, military leave or other leave of absence approved by the Administrator, if the period of any such leave does not exceed ninety (90) days or, if longer, if the grantee’s right to reemployment by the Company or any Affiliate is guaranteed either contractually or by statute.

   

6.3 Terms and Conditions to Which Only ISOs Are Subject.  Options granted under this Plan which are designated as ISOs shall be subject to the following terms and conditions:

   

6.3.1 Exercise Price.  The exercise price of an ISO shall not be less than the fair market value (determined in accordance with Section  6.1.9) of the stock covered by the Option at the time the Option is granted.  The exercise price of an ISO granted to any person who owns, directly or by attribution under the Code (currently Section 424(d)), stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Affiliate (a “Ten Percent Stockholder”) shall in no event be less than one hundred ten percent (110%) of the fair market value (determined in accordance with Section 6.1.9) of the stock covered by the Option at the time the Option is granted.

   

6.3.2 Disqualifying Dispositions.  If stock acquired by exercise of an ISO granted pursuant to this Plan is disposed of in a “disqualifying disposition” within the meaning of Section 422 of the Code (a disposition within two (2) years from the date of grant of the Option or within one year after the issuance of such stock on exercise of the Option), the holder of the stock immediately before the disposition shall promptly notify the Company in writing of the date and terms of the disposition and shall provide such other information regarding the Option as the Company may reasonably require.

   

6.3.3 Grant Date.  If an ISO is granted in anticipation of employment as provided in Section  5.4, the Option shall be deemed granted, without further approval, on the date the grantee assumes the employment relationship forming the basis for such grant, and, in addition, satisfies all requirements of this Plan for Options granted on that date.

   

6.3.4 Term.  Notwithstanding Section  6.1.10, no ISO granted to any Ten Percent Stockholder shall be exercisable more than five (5) years after the date of grant.

   

6.3.5 Termination of Employment.  Except as otherwise provided in the stock option agreement, if for any reason an optionee ceases to be employed by the Company or any of its Affiliates, Options that are ISOs held at the date of termination (to the extent then exercisable) may be exercised in whole or in part at any time within ninety (90)  days of the date of such termination (but in no event after the Expiration Date).  For purposes of this Section 6.3.5, an optionee’s employment shall not be deemed to terminate by reason of the optionee’s transfer from the Company to an Affiliate, or vice versa, or sick leave, military leave or other leave of absence approved by the Administrator, if the period of any such leave does not exceed ninety (90) days or, if longer, if the optionee’s right to reemployment by the Company or any Affiliate is guaranteed either contractually or by statute.

   

6.4 Terms and Conditions Applicable Solely to SARs.  In addition to the other terms and conditions applicable to SARs in this Section  6, the holder shall be entitled to receive on exercise of an SAR only Common Stock at a fair market value equal to the benefit to be received by the exercise.

   

 

 5 

   


   

 

7.

MANNER OF EXERCISE

   

7.1 An optionee wishing to exercise an Option or SAR shall give written notice to the Company at its principal executive office, to the attention of the officer of the Company designated by the Administrator, accompanied by payment of the exercise price and/or withholding taxes as provided in Sections 6.1.6 and 6.1.7.  The date the Company receives written notice of an exercise hereunder accompanied by the applicable payment will be considered as the date such Option or SAR was exercised.

   

7.2 Promptly after receipt of written notice of exercise and the applicable payments called for by Section  7.1, the Company shall, without stock issue or transfer taxes to the holder or other person entitled to exercise the Option or SAR, deliver to the holder or such other person a certificate or certificates for the requisite number of shares of Common Stock.  A holder or permitted transferee of an Option or SAR shall not have any privileges as a stockholder with respect to any shares of Common Stock to be issued until the date of issuance (as evidenced by the appropriate entry on the books of the Company or a duly authorized transfer agent) of such shares.

   

8.

RESTRICTED STOCK

   

8.1 Grant or Sale of Restricted Stock.  

   

8.1.1 No awards of restricted stock shall be granted under this Plan after ten (10)  years from the date of adoption of this Plan by the Board.

   

8.1.2 The Administrator may issue shares under the Plan as a grant or for such consideration (including services, and, subject to the Sarbanes-Oxley Act of 2002, promissory notes) as determined by the Administrator.  Shares issued under the Plan shall be subject to the terms, conditions and restrictions determined by the Administrator.  The restrictions may include restrictions concerning transferability, repurchase by the Company and forfeiture of the shares issued, together with such other restrictions as may be determined by the Administrator.  If shares are subject to forfeiture or repurchase by the Company, all dividends or other distributions paid by the Company with respect to the shares may be retained by the Company until the shares are no longer subject to forfeiture or repurchase, at which time all accumulated amounts shall be paid to the recipient.  All Common Stock issued pursuant to this Section  8 shall be subject to a purchase or grant agreement, which shall be executed by the Company and the prospective recipient of the shares prior to the delivery of certificates representing such shares to the recipient.  The purchase or grant agreement may contain any terms, conditions, restrictions, representations and warranties required by the Administrator.  The certificates representing the shares shall bear any legends required by the Administrator.  The Administrator may require any purchaser of restricted stock to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements.  If the purchaser fails to pay the amount demanded, the Administrator may withhold that amount from other amounts payable by the Company to the purchaser, including salary, subject to applicable law.  With the consent of the Administrator in its sole discretion, a purchaser may deliver Common Stock to the Company to satisfy this withholding obligation.  Upon the issuance of restricted stock, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued.  

   

8.2 Changes in Capital Structure.  In the event of a change in the Company ’s capital structure, as described in Section 6.1.1, appropriate adjustments shall be made by the Administrator, in its sole discretion, in the number and class of restricted stock subject to this Plan and the restricted stock outstanding under this Plan; provided, however, that the Company shall not be required to issue fractional shares as a result of any such adjustments.

   

8.3 Corporate Transactions.  In the event of a Corporate Transaction, as defined in Section  6.1.2 hereof, to the extent not previously forfeited, all restricted stock shall be forfeited immediately prior to the consummation of such Corporate Transaction unless the Administrator determines otherwise in its sole discretion; provided, however, that the Administrator, in its sole discretion, may remove any restrictions as to any restricted stock.  The Administrator may, in its sole discretion, provide that all outstanding restricted stock participate in the Corporate Transaction with an equivalent stock substituted by an applicable successor corporation subject to the restriction.

   

 

 6 

   


   

 

9.

EMPLOYMENT OR CONSULTING RELATIONSHIP

   

Nothing in this Plan or any Option granted hereunder shall interfere with or limit in any way the right of the Company or of any of its Affiliates to terminate the employment, consulting or advising of any optionee or restricted stock holder at any time, nor confer upon any optionee or restricted stock holder any right to continue in the employ of, or consult or advise with, the Company or any of its Affiliates.

   

10.

CONDITIONS UPON ISSUANCE OF SHARES

   

10.1 Securities Act.  Shares of Common Stock shall not be issued pursuant to the exercise of an Option or the receipt of restricted stock unless the exercise of such Option or such receipt of restricted stock and the issuance and delivery of such shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended (the “Securities Act”).

   

10.2 Non-Compete Agreement.  As a further condition to the receipt of Common Stock pursuant to the exercise of an Option or the receipt of restricted stock, the optionee or recipient of restricted stock may be required not to render services for any organization, or engage directly or indirectly in any business, competitive with the Company at any time during which (i) an Option is outstanding to such Optionee and for six (6) months after any exercise of an Option or the receipt of Common Stock pursuant to the exercise of an Option and (ii) restricted stock is owned by such recipient and for six (6) months after the restrictions on such restricted stock lapse.  Failure to comply with this condition shall cause such Option and the exercise or issuance of shares thereunder and/or the award of restricted stock to be rescinded and the benefit of such exercise, issuance or award to be repaid to the Company.

   

11.

NON-EXCLUSIVITY OF THIS PLAN

   

The adoption of this Plan shall not be construed as creating any limitations on the power of the Company to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options other than under this Plan.

   

12.

MARKET STAND-OFF

   

Each optionee, holder of an SAR or recipient of restricted stock, if so requested by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Securities Act, shall not sell or otherwise transfer any shares of Common Stock acquired upon exercise of Options, SARs or receipt of restricted stock during the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act; provided, however, that such restriction shall apply only to a registration statement of the Company which includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act and the restriction period shall not exceed 90 days after the registration statement becomes effective.

   

13.

AMENDMENTS TO PLAN

   

The Board may at any time amend, alter, suspend or discontinue this Plan.  Without the consent of an optionee, holder of an SAR or holder of restricted stock, no amendment, alteration, suspension or discontinuance may adversely affect such person’s outstanding Option(s), SAR(s) or the terms applicable to restricted stock except to conform this Plan and ISOs granted under this Plan to the requirements of federal or other tax laws relating to incentive stock options.  No amendment, alteration, suspension or discontinuance shall require stockholder approval unless (a) stockholder approval is required to preserve incentive stock option treatment for federal income tax purposes or (b) the Board otherwise concludes that stockholder approval is advisable.

   

 

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14.

EFFECTIVE DATE OF PLAN; TERMINATION

   

This Plan shall become effective upon adoption by the Board; provided, however, that no Option or SAR shall be exercisable unless and until written consent of the stockholders of the Company, or approval of stockholders of the Company voting at a validly called stockholders’ meeting, is obtained within twelve (12) months after adoption by the Board.  If any Options or SARs are so granted and stockholder approval shall not have been obtained within twelve (12) months of the date of adoption of this Plan by the Board, such Options and SARs shall terminate retroactively as of the date they were granted.  Awards may be made under this Plan and exercise of Options and SARs shall occur only after there has been compliance with all applicable federal and state securities laws.  This Plan (but not Options and SARs previously granted under this Plan) shall terminate within ten (10) years from the date of its adoption by the Board.  Termination shall not affect any outstanding Options or SARs or the terms applicable to previously awarded restricted stock.

   

   

 

 8 

   


   

Exhibit 10.4

Amendment No. 1
to
2006 Equity Incentive Plan
of
ImmunoCellular Therapeutics, Ltd.

(As Amended and Restated as of June 14, 2013)

   

   

This Amendment No. 1 (this “ Amendment ”) to the 2006 Equity Incentive Plan of ImmunoCellular Therapeutics, Ltd., as amended and restated as of June 14, 2013, dated as of September 20, 2013 (the “ Effective Date ”), is made by ImmunoCellular Therapeutics, Ltd., a Delaware corporation (the “ Company ”).

   

WHEREAS, the Company maintains the 2006 Equity Incentive Plan, as amended and restated as of June 14, 2013 (the “ Plan ”); and

   

WHEREAS , all capitalized terms not defined herein will have the meanings ascribed to such terms in the Plan; and

   

WHEREAS , the Company desires to amend the Plan to provide that, effective as of the Effective Date, the Expiration Date of any Options or SARs granted on or after the Effective Date will be extended to a later date (not to exceed ten years from the date the Option or SAR is granted) if the Expiration Date occurs during a one of the Company’s Blackout Periods (as defined below); and

   

WHEREAS , Section 13 of the Plan authorizes the Board of Directors of the Company (the “ Board ”) to so amend the Plan .

   

NOW, THEREFORE, the Board hereby amends the Plan as follows:

   

1. Amendment to Section 6.1.10 .  Section 6.1.10 is hereby deleted in its entirety and replaced with the following sentences.  

Option and SAR Term .  No Option or SAR shall be exercisable more than 10 years after the date of grant, or such lesser period of time as is set forth in the applicable agreement (the end of the maximum exercise period stated in the agreement is referred to in this Plan as the “ Expiration Date ”).  Notwithstanding the preceding sentence, with respect to any Option or SAR granted on or after September 20, 2013, if the Expiration Date of any such Option or SAR occurs during a period in which the sale of any Common Stock received upon exercise of an Option or SAR would violate the Company’s insider trading policy (each, a “ Blackout Period ”) and the holder of such Option or SAR has not terminated employment or service with the Company or any Affiliate on or prior to the Expiration Date set forth in the preceding sentence (the “ Original Expiration Date ”), the Original Expiration Date will automatically be extended to the earlier of (i) the date that occurs thirty (30) days after the expiration of the applicable Blackout Period, and (ii) the day before the tenth anniversary (or if the Option is an ISO granted to any Ten Percent Stockholder, the fifth anniversary) of the date on which the Option or SAR was granted (in either case, the “ Extended Expiration Date ”).  For the sake of clarity, the preceding sentence will not apply to any holder of an Option or SAR who terminates employment or service with the Company or any Affiliate on or prior to the Original Expiration Date, notwithstanding the fact that such date may occur during a Blackout Period.

 

   


   

2. Ratification . All other provisions of the Plan remain unchanged and are hereby ratified by the Company and the Board.

3. Effective Date .  This Amendment shall be effective as of the date set forth in the first sentence of this Amendment.

 

   

   

   

   

   

   

   

   

*   *   *

 

   

   

                       

 

   


Exhibit 10.5

I mmuno C ellular T herapeutics , L td .

S tock O ption G rant N otice

(2006 E quity I ncentive P lan )

ImmunoCellular Therapeutics, Ltd. (the “ Company ”), pursuant to its 2006 Equity Incentive Plan (the “ Plan ”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below.  This option is subject to all of the terms and conditions as set forth in this notice, in the Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.  Capitalized terms not explicitly defined herein but defined in the Plan or the Option Agreement will have the same definitions as in the Plan or the Option Agreement. If there is any conflict between the terms in this notice and the Plan, the terms of the Plan will control.

   

 

Optionholder:

   

   

Date of Grant:

   

   

Vesting Commencement Date:

   

   

Number of Shares Subject to Option:

   

   

Exercise Price (Per Share):

   

   

Total Exercise Price:

   

   

Expiration Date:

   

   

   

 

Type of Grant:

¨

Incentive Stock Option1

¨

Nonstatutory Stock Option

Exercise Schedule :

¨

Same as Vesting Schedule  

¨

Early Exercise Permitted

Vesting Schedule :

   

   

   

   

   

   

   

Payment:

By one or a combination of the following items (described in the Option Agreement):

   

   

   

¨

By cash, check, bank draft, money order or wire transfer payable to the Company

   

¨

A “cashless exercise” pursuant to a Regulation T Program

   

¨

By delivery of already-owned shares

   

¨

If and only to the extent this option is a Nonstatutory Stock Option, and subject to the Company’s consent at the time of exercise, by a “net exercise” arrangement

Term:

Optionholder may not exercise this option before the Date of Grant or after the expiration of this option’s term.  The term of this option expires, subject to the provisions of Sections 6.1.10, 6.2.2 and 6.3.5 of the Plan, upon the earliest of the following:

 

   

(a) immediately upon the termination of Optionholder ’s employment for Cause (as defined below);

   

   

1 If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year.  Any excess over $100,000 is a Nonstatutory Stock Option.


   

 

(b) ______ after Optionholder ’s employment with the Company or any of its Affiliates terminates for any reason except for Cause; provided, however, that if during any part of such ______  period this option is not exercisable solely because of the condition set forth in Section 6 of the Option Agreement relating to “Securities Law Compliance,” this option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of ______  after Optionholder’s employment terminates; provided further, if during any part of such ______  period, the sale of any Common Stock received upon exercise of this option would violate the Company’s insider trading policy, then this option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of ______  after Optionholder’s employment terminates during which the sale of the Common Stock received upon exercise of this option would not be in violation of the Company’s insider trading policy;

   

   

   

(c) the Expiration Date indicated in this Grant Notice; or

   

   

   

(d) the day before the tenth (10th) anniversary of the Date of Grant.

“Cause” will have the meaning ascribed to such term in any written agreement between Optionholder and the Company defining such term and, in the absence of such agreement, such term shall mean termination of Optionholder’s employment with the Company or any of its Affiliates due to Optionholder’s willful breach or habitual neglect or continued incapacity to perform Optionholder’s required duties, or commission of acts of dishonesty, fraud, misrepresentation or other acts of moral turpitude as would prevent the effective performance of Optionholder’s duties.

If this option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the Date of Grant and ending on the day three (3) months before the date of Optionholder’s option exercise, Optionholder must be an employee of the Company or an Affiliate, except in the event of Optionholder’s death or permanent and total disability, as defined in Section 22(e)(3) of the Code.  The Company has provided for extended exercisability of this option under certain circumstances for Optionholder’s benefit but cannot guarantee that this option will necessarily be treated as an Incentive Stock Option if Optionholder continues to provide services to the Company or an Affiliate as a consultant or director after Optionholder’s employment terminates or if Optionholder otherwise exercises this option more than three (3) months after the date Optionholder’s employment with the Company or an Affiliate terminates.

Additional Terms/Acknowledgements:  

Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Option Agreement and the Plan.  Optionholder acknowledges and agrees that this Stock Option Grant Notice and the Option Agreement may not be modified, amended or revised except as provided in the Plan.  Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding this option award and supersede all prior oral and written agreements, promises and/or representations on that subject with the exception of (i) options previously granted and delivered to Optionholder, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law and (iii) any written employment or severance arrangement that would provide for vesting acceleration of this option upon the terms and conditions set forth therein.  By accepting this option, Optionholder consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

   

 

ImmunoCellular Therapeutics, Ltd

   

Optionholder:

By:

   

   

   

   

Signature

   

Signature

Title:

   

   

Date:

   

Date:

   

   

   

   

Attachments :  Option Agreement, 2006 Equity Incentive Plan and Notice of Exercise

   


A ttachment I

   

O ption A greement

   


A ttachment II

   

2006 E quity I ncentive P lan

   


A ttachment III

   

N otice of E xercise

   

   


Exhibit 31.1

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

I, Andrew Gengos, certify that:

 

1.

I have r eviewed this Form 10-Q 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(s) 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 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(s) 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 the 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: November 7, 2013

By:

/s/ Andrew Gengos

      

   

   

Name:

Andrew Gengos

   

   

Title:

President and Chief Executive Officer

   


Exhibit 31.2

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

I, David Fractor, certify that:

 

1.

I have r eviewed this Form 10-Q 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(s) 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 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(s) 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 the 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: November 7, 2013

By:

/s/ David Fractor

      

   

   

Name:

David Fractor

   

   

Title:

Principal Financial and Accounting Officer

   


Exhibit 32.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

Pursuant to the requirement set forth in Rule 13a -14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), the undersigned officer of ImmunoCellular Therapeutics, Ltd. (the “Company”) hereby certifies that, to the best of his knowledge:

 

1.

The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013 (“Periodic Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

 

2.

The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

   

   

 

Date:  November 7, 2013

By:

   

/s/ Andrew Gengos 

   

   

   

   

Name:

Andrew Gengos

   

   

   

Title:

President and Chief Executive Officer

   


Exhibit 32.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), the undersigned officer of ImmunoCellular Therapeutics, Ltd. (the “Company”) hereby certifies that, to the best of his knowledge:

 

1.

The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013 (“Periodic Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

 

2.

The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

   

   

 

Date: November 7, 2013

By:

/s/ David Fractor

   

   

Name:

David Fractor

   

Title:

Principal Financial and Accounting Officer