UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED - OCTOBER 31, 2015
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER 000-28489
ADVAXIS, INC.
(Name of Registrant in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
305 College Road East
Princeton, New Jersey
(Address of Principal Executive Offices)
02-0563870
(I.R.S. Employer
Identification No.)
08540
(Zip Code)
(609) 452-9813
(Issuer’s Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Common Stock - $.001 par value
NASDAQ Capital Market
Securities registered under Section 12(g) of the Exchange Act:
[None]
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [ ] No [X]
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 (§ 232.405 of this chapter) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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 [ ]
Non-accelerated filer [ ]
Accelerated filer [X]
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]
As of April 30, 2015, the aggregate market value of the voting common equity held by non-affiliates was approximately
$445,644,000 based on the closing bid price of the registrant’s Common Stock on the NASDAQ Capital Market. (For purposes of
determining this amount, only directors, executive officers, and 10% or greater shareholders and their respective affiliates have been
deemed affiliates). [X]
The registrant had 33,769,136 shares of Common Stock, par value $0.001 per share, outstanding as of January 7, 2016.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the registrant’s 2016 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed
within 120 days of the end of the fiscal year ended October 31, 2015 are incorporated by reference in Part III hereof. Except with respect to
information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as a part hereof.
Table of Contents
Form 10-K Index
PART 1
Business
Item 1:
Item 1A: Risk Factors
Item 1B: Unresolved Staff Comments
Item 2:
Item 3:
Item 4: Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Selected Financial Data
Item 5: Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Item 6:
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
Item 8:
Item 9:
Item 9A: Controls and Procedures
Item 9B: Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
PART III
Item 10: Directors, Executive Officers, and Corporate Governance
Item 11: Executive Compensation
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Item 13: Certain Relationships and Related Transactions, and Director Independence
Item 14: Principal Accounting Fees and Services
Part IV
Item 15: Exhibits, Financial Statements Schedules
Signatures
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PART 1
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements. When used in this Annual Report, statements that
are not statements of current or historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words
“plan”, “intend”, “may,” “will,” “expect,” “believe”, “could,” “anticipate,” “estimate,” or “continue” or similar expressions or other
variations or comparable terminology are intended to identify such forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by law, the Company undertakes
no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 1. Business.
General
Advaxis, Inc. (“Advaxis” or the “Company”) is a clinical stage biotechnology company focused on the discovery, development
and commercialization of proprietary Lm-LLO cancer immunotherapies. These immunotherapies are based on a platform technology that
utilizes live attenuated Listeria monocytogenes (“Lm” or “Listeria”) bioengineered to secrete antigen/adjuvant fusion proteins. These Lm-
LLO strains are believed to be a significant advancement in immunotherapy as they integrate multiple functions into a single
immunotherapy as they access and direct antigen presenting cells to stimulate anti-tumor T-cell immunity, stimulate and activate the
immune system with the equivalent of multiple adjuvants, and simultaneously reduce tumor protection in the tumor microenvironment to
enable the T-cells to eliminate tumors.
Axalimogene filolisbac (ADXS-HPV) is our lead Lm-LLO immunotherapy product candidate for the treatment of Human
Papilloma Virus (“HPV”) associated cancers. We completed a randomized Phase 2 study in 110 patients with recurrent cervical cancer that
was shown to have a manageable safety profile, apparent improved survival and objective tumor responses. In addition, the Gynecologic
Oncology Group (“GOG”), now part of NRG Oncology, is conducting a cooperative group sponsored Phase 2 open-label clinical study of
axalimogene filolisbac in patients with persistent or recurrent cervical cancer with documented disease progression. The study, known as
GOG-0265, has successfully completed its first stage and has met the predetermined safety and efficacy criteria required to proceed into the
second stage of patient recruitment. We plan to advance axalimogene filolisbac into a registrational clinical trial for the treatment of women
with high-risk locally advanced cervical cancer.
Axalimogene filolisbac has received United States Food and Drug Administration (“FDA”) orphan drug designation for three
HPV-associated cancers: cervical, head and neck, and anal cancer, and has received European Medicines Agency (“EMA”) orphan drug
designation for anal cancer. It is being evaluated in Company-sponsored trials executed under an Investigational New Drug (“IND”) which
include the following: i) a Phase 1/2 clinical trial alone and in combination with MedImmune, LLC’s (“MedImmune”) investigational anti-
PD-L1 immune checkpoint inhibitor, durvalumab (MEDI4736), in patients with previously treated metastatic cervical cancer and HPV-
associated head and neck cancer; ii) a Phase 2 multi-center, open-label study alone and in combination with Incyte Corporation’s (“Incyte”)
investigational oral indoleamine 2,3-dioxygenase 1 (IDO1) inhibitor, epacadostat (INCB24360) in patients with Stage I-IIa cervical cancer;
iii) a Phase 1/2 study evaluating higher doses and repeat cycles of axalimogene filolisbac in patients with recurrent cervical cancer; iv) a
single arm Phase 2 monotherapy study in patients with metastatic anal cancer; and v) a Phase 2 study in collaboration with and funded by
Global BioPharma Inc. (“GBP”), under a development and commercialization license agreement applicable to Asia, HPV-associated non-
small cell lung cancer. In addition to Company-sponsored trials, axalimogene filolisbac is also being evaluated in three ongoing
investigator-initiated clinical trials as follows: locally advanced cervical cancer (GOG-0265), head and neck cancer (Mount Sinai), and anal
cancer (Brown University).
ADXS-PSA is our Lm-LLO immunotherapy product candidate designed to target the Prostate Specific Antigen (“PSA”)
associated with prostate cancer. This Phase 1/2 clinical trial in combination with KEYTRUDA® (pembrolizumab), Merck & Co.’s
(“Merck”) humanized monoclonal antibody against PD-1, is in patients with previously treated metastatic castration-resistant prostate
cancer.
ADXS-HER2 is our Lm-LLO immunotherapy product candidate designed for the treatment of Human Epidermal Growth Factor
Receptor 2 (“HER2”) expressing cancers, including human and canine osteosarcoma, breast, gastric and other cancers. This Phase 1b
clinical trial is in patients with metastatic HER2 expressing solid tumors. We received orphan drug designation from both the FDA and
EMA for ADXS-HER2 in osteosarcoma. Clinical research with ADXS-HER2 in canine osteosarcoma is being developed by our pet
therapeutic partner, Aratana Therapeutics Inc. (“Aratana”), who holds exclusive rights to develop and commercialize ADXS-HER2 and
three other Lm-LLO immunotherapies for pet health applications. Aratana has announced that a product license application for use of
ADXS-HER2 in the treatment of canine osteosarcoma has been filed with the United States Department of Agriculture (“USDA”). Aratana
received communication from the USDA in March 2015 stating that the previously submitted efficacy data for product licensure for AT-
014 (ADXS-HER2), the cancer immunotherapy for canine osteosarcoma, was accepted and that it provides a reasonable expectation of
efficacy that supports conditional licensure. While additional steps need to be completed, including in the areas of manufacturing and
safety, Aratana anticipates that AT-014 could receive conditional licensure from the USDA in 2016.
3
In October of 2015, we received notification from the FDA that the INDs for axalimogene filolisbac were put on clinical hold in
response to our submission of a safety report to the FDA. The clinical hold also included the INDs for ADXS-PSA and ADXS-HER2.
Following discussions with the FDA and in accordance with their recommendations, we agreed to implement certain risk mitigation
measures, including revised study protocol inclusion / exclusion criteria, post-administration antibiotic treatment and patient surveillance
and monitoring measures. In December 2015, the FDA notified us that the hold has been lifted with respect to our INDs.
We have focused our development efforts on understanding our platform technology and establishing a drug development pipeline
that incorporates this technology into therapeutic cancer immunotherapies, with clinical trials currently targeting HPV-associated cancer
(cervical cancer, head and neck cancer and anal cancer), prostate cancer, and HER2-expressing cancers. Although no immunotherapies have
been commercialized to date, we continue to invest in research and development to advance the technology and make it available to patients
with many different types of cancer. Pipeline development and the further exploration of the technology for advancement entails risk and
expense. We anticipate that our ongoing operational costs will increase significantly as we continue conducting and expanding our clinical
development program. In addition to our existing single antigen vectors that target one tumor associated antigen, we are actively engaged in
the development of new constructs that will address multiple targets that are common to tumor types, as well as mutation-associated neo-
epitopes that are specific to an individual patient’s tumor. Lastly, we are developing certain internal capabilities to produce supplies for our
neoepitope and our other programs.
Clinical Pipeline
We are a clinical-stage biotechnology company focused on the discovery, development and commercialization of proprietary Lm-
LLO cancer immunotherapies. These immunotherapies are based on a platform technology that utilizes live attenuated Listeria
monocytogenes bioengineered to secrete antigen/adjuvant fusion proteins. These Lm-LLO strains are believed to be a significant
advancement in immunotherapy as they integrate multiple functions into a single immunotherapy as they access and direct antigen
presenting cells to stimulate anti-tumor T-cell immunity, stimulate and activate the immune system with the equivalent of multiple
adjuvants, and simultaneously reduce tumor protection in the tumor microenvironment to enable the T-cells to eliminate tumors.
Axalimogene filolisbac Franchise
Axalimogene filolisbac is an Lm-LLO immunotherapy directed against HPV and designed to target cells expressing the HPV. It is
currently under investigation or planned investigation in four HPV-associated cancers: cervical cancer, head and neck cancer, anal cancer,
and lung cancer, either as a monotherapy or in combination.
Cervical Cancer
There are 527,624 new cases of cervical cancer caused by HPV worldwide every year, and 14,377 new cases in the U.S. alone,
according to the WHO Human Papillomavirus and Related Cancers in the World Summary Report 2014 (“WHO”). Current preventative
vaccines cannot protect the 20 million women who are already infected with HPV. Challenges with acceptance, accessibility, and
compliance have resulted in approximately a third of young women being vaccinated in the United States and even less in other countries
around the world.
We completed a randomized Phase 2 clinical study ( Lm-LLO-E7-15), conducted exclusively in India, in 110 women with
recurrent/refractory cervical cancer. The final results were presented at the 2014 American Society of Clinical Oncology (“ASCO”) Annual
Meeting, and showed that 32% (35/109) of patients were alive at 12 months, 22% (24/109) of patients were Long-term Survivors (“LTS”)
alive greater than 18 months, and 18% (16/91) evaluable with adequate follow-up) of patients were alive for more than 24 months. Of the
109 patients treated in the study, LTS included not only patients with tumor shrinkage but also patients who had experienced stable disease
or increased tumor burden. 17% (19/109) of the patients in the trial had recurrence of disease after at least two prior treatments for their
cervical cancer; these patients comprised 8% (2/24) of LTS. Among the LTS, 25% (3/12) of patients had a baseline ECOG performance
status of 2, a patient population that is often times excluded from clinical trials. Furthermore, a 10% objective response rate (including 5
complete responses and 6 partial responses) and a disease control rate of 38% (42/109) were observed. The addition of cisplatin
chemotherapy to axalimogene filolisbac in this study did not significantly improve overall survival or objective tumor response (p
=0.9981).
In this study, 109 patients received 254 doses of axalimogene filolisbac. Axalimogene filolisbac was found to be well tolerated
with 38% (41/109) of patients experiencing mild to moderate Grade 1 or 2 transient adverse events associated with infusion; 1 patient
experienced a Grade 3 Serious Adverse Events (“SAE”). All observed treatment related adverse events either self-resolved or responded
readily to symptomatic treatment.
4
The GOG (now a member of NRG Oncology), under the sponsorship of the Cancer Therapy Evaluation Program (“CTEP”) of the
National Cancer Institute (“NCI”), is independently conducting GOG-0265, an open-label, single arm Phase 2 study of axalimogene
filolisbac in persistent or recurrent cervical cancer (patients must have received at least 1 prior chemotherapy regimen for the treatment of
their recurrent/metastatic disease, not including that administered as a component of primary treatment) at 21 clinical sites in the U.S. The
first stage of enrollment in GOG-0265 has successfully been completed with 26 patients treated and has met the predetermined safety and
efficacy criteria required to proceed into the second stage of patient enrollment. Clinical data from the first stage of GOG-0265 was
presented at the American Gynecological & Obstetrical Society (“AGOS”) annual meeting on September 17, 2015. Overall survival at 12
months was 38.5% (10/26) (the predefined criteria for 12-month survival was ≥20%), and, among patients who had received the full
treatment regimen of 3 doses of axalimogene filolisbac, the 12-month survival rate was 55.6% (10/18). The adverse events observed in the
first stage of the study have been consistent with those reported in other clinical studies with axalimogene filolisbac. It was well-tolerated,
with Grade 1-2 fatigue, chills, and fever the most commonly reported Adverse Events (“AE”); six patients experienced a treatment-related
Grade 3 or Grade 4 AE, which was considered possibly-related to axalimogene filolisbac. The second stage of the study will include
approximately 37 additional patients; it has been amended to permit only one prior chemotherapy regimen for the treatment of
recurrent/metastatic disease and allows patients to continue to receive repeat cycles of therapy until disease progression.
We have completed an End-of-Phase 2 (“EOP2”) meeting with the FDA. The purpose of the EOP2 meeting was to discuss
axalimogene filolisbac preclinical data, Chemistry, Manufacturing and Controls (“CMC”), and clinical program, prior to moving
axalimogene filolisbac forward into a registrational trial in cervical cancer. At the meeting, the FDA provided guidance on our CMC
activities and clinical development plan. We have submitted our Phase 3 protocol for a Special Protocol Assessment (“SPA”) request to the
FDA. The SPA request included specific questions from Advaxis to facilitate a meaningful dialogue with the FDA on the proposed study
design. We have received back from FDA initial comments and considerations for incorporation into our study design. Additional rounds
of review and/or a formal meeting are anticipated, both of which can extend the review period and be beneficial in reaching agreement with
the FDA on design elements. Based on the FDA’s feedback, we may reach final agreement with FDA or may decide to incorporate the
advice into the design of the Phase 3 clinical study without undergoing additional rounds of review. FDA’s assessment of the SPA request,
and all related feedback, will be very valuable in the development of axalimogene filolisbac. Contingent upon the outcome of the forgoing,
we plan to initiate, in collaboration with the GOG/NRG Foundation, Inc., an independent international non-profit organization with the
purpose of promoting excellence in the quality and integrity of clinical and basic scientific research in the field of gynecologic
malignancies, a registrational clinical trial in cervical cancer in 2016 to support a Biologics License Application (“BLA”) submission in the
U.S. and in other territories around the world.
The planned registrational clinical trial will be a Phase 3 study of adjuvant axalimogene filolisbac, following primary treatment
with chemoradiation, in patients with high-risk locally advanced cervical cancer compared to placebo alone. This population has a high
recurrence rate and, once the disease has recurred, there are currently no available treatments. This study will evaluate both the time it takes
for the cancer to recur as well as the overall survival. Our goal is to develop a treatment to prevent or reduce the risk of recurrence of
cervical cancer after primary treatment interventions.
Biocon Limited (“Biocon”), our co-development and commercialization partner for axalimogene filolisbac in India and key
emerging markets, filed a Marketing Authorization Application (“MAA”) for licensure of this immunotherapy in India. The Drug
Controller General of India (“DCGI”) accepted this MAA for review. The filing of the MAA was driven by several factors: i) results from
the Lm -LLO-E7-15 Phase 2 trial indicated that axalimogene filolisbac was well tolerated and showed significant clinical activity in
recurrent/refractory cervical cancer; ii) cervical cancer is the second most common cancer among Indian women (according to WHO, there
are 122,844 new cases per year with 67,544 deaths reported); and iii) current treatment options for non-operable refractory/recurrent disease
are limited in India. As part of the MAA review process, Biocon met with the Scientific Expert Committee (the “Committee”). The
Committee indicated that proof of concept for this novel immunotherapy has been established. The Committee advised Biocon to obtain
data from a Phase 3 clinical trial in patients with recurrent cervical cancer who have failed prior chemo and radiation therapy. The face-to-
face interaction with the Committee provided Biocon and Advaxis with valuable insight for future development and the companies are
evaluating next steps.
We are conducting a Phase 1/2 trial evaluating higher doses and repeat cycles of axalimogene filolisbac in patients with recurrent
cervical cancer. This Phase 1/2 study is designed to evaluate the safety, efficacy and immunological effect of the highest-tolerated dose of
axalimogene filolisbac administered in repeat cycles to patients with cervical cancer whose disease has recurred after receiving one prior
systemic dose cytotoxic treatment regimen. At present, a total of 27 cycles of therapy have been delivered at the 5 x 109 CFU dose level
and 5 cycles at the high dose of 1 x 1010 CFU, which will now constitute the randomized Phase 2 dose. The AEs observed at the high dose
are consistent with previous clinical experience with axalimogene filolisbac.
We have entered into a clinical trial collaboration agreement with MedImmune, the global biologics research and development
arm of AstraZeneca, and are conducting a Phase 1/2, open-label, multicenter, two-part study to evaluate the safety and immunogenicity of
our investigational Lm-LLO cancer immunotherapy, axalimogene filolisbac, in combination with MedImmune’s investigational anti-PD-L1
immune checkpoint inhibitor, durvalumab, as a combination treatment for patients with metastatic squamous or non-squamous carcinoma
of the cervix and metastatic HPV-associated Squamous Cell Carcinoma of the Head and Neck (“SCCHN”). For the axalimogene filolisbac
and durvalumab dose escalation portion of the study, Cohort 1 has been completed allowing for advancement to the next dose level. Once
the dose escalation has been completed, the recommended combination doses will be advanced further into the study.
5
We have entered into a clinical trial collaboration agreement with Incyte where we plan to conduct a Phase 2, open-label,
multicenter study to evaluate the safety and immunogenicity of axalimogene filolisbac as a monotherapy and in combination with Incyte’s
investigational oral indoleamine 2,3-dioxygenase 1 (IDO1) inhibitor, epacadostat (INCB24360), in patients with Stage I-IIa cervical cancer.
Incyte plans to enroll patients in this Phase 2 trial in 2016.
Axalimogene filolisbac has received FDA orphan drug designation for invasive Stage II-IV cervical cancer. (Axalimogene
filolisbac was not granted orphan drug designation for cervical cancer in the EMA).
Head and Neck Cancer
SCCHN is the most frequently occurring malignant tumor of the head and neck and is a major cause of morbidity and mortality
worldwide. More than 90% of SCCHNs originate from the mucosal linings of the oral cavity, pharynx, or larynx and 60-80% of these
cancers are caused by HPV. According to the American Cancer Society, head and neck cancer accounts for about 3% to 5% of all cancers
in the United States with an increasing incidence of HPV-associated head and neck cancers. Approximately 12,000 new cases will be
diagnosed in the United Stated in 2016 according to the Surveillance, Epidemiology, and End Results (“SEER”) database.
The safety and immunogenicity of axalimogene filolisbac is being evaluated in a Phase 2 study under an investigator-sponsored
IND at Mount Sinai, in patients with HPV-positive head and neck cancer. This clinical trial is the first study to evaluate the effects of
axalimogene filolisbac in patients when they are initially diagnosed with HPV-associated head and neck cancer.
As stated above, we have entered into a clinical trial collaboration agreement with MedImmune to collaborate on a Phase 1/2,
open-label, multicenter, two part study to evaluate safety and immunogenicity of durvalumab (MEDI4736) in combination with
axalimogene filolisbac as a combination treatment for patients with metastatic squamous or non-squamous carcinoma of the cervix and
metastatic HPV-associated SCCHN.
Axalimogene filolisbac has received FDA orphan drug designation for HPV-associated head and neck cancer.
Anal Cancer
According to the American Cancer Society, nearly all squamous cell anal cancers are linked to infection by HPV, the same virus
that causes cervical cancer. According to the SEER database, approximately 7,500 new cases will be diagnosed in the United States in
2016.
The safety and efficacy of axalimogene filolisbac is being evaluated in a Phase 2 study under an investigator-sponsored IND by
Brown University in patients with high-risk locally advanced anal cancer. Preliminary data indicates all patients who have completed the
treatment regimen have experienced a six-month complete response, with no disease recurrence. In consideration of these preliminary data,
the investigator at Brown University is evaluating the opportunity to transition this study into a NCI-funded cooperative group trial to
evaluate the safety and efficacy of axalimogene filolisbac in a pivotal Phase 2/3 anal cancer trial, to be conducted by NRG Oncology. In
advance of the foregoing, we have entered into a clinical trial collaboration agreement with the Radiation Therapy Oncology Group
(“RTOG”) Foundation for the conduct of such study.
We plan to enroll patients in a Company sponsored Phase 2 study in patients with persistent/recurrent, loco-regional or metastatic
squamous cell carcinoma of the anorectal canal in 2016.
Axalimogene filolisbac has received FDA and EMA orphan drug designation for anal cancer.
Lung Cancer
Lung cancer is the leading cause of cancer death in Taiwan, China, and worldwide. Histologically, Non-Small Cell Lung Cancer
(“NSCLC”), including squamous cell carcinoma, adenocarcinoma, and large cell carcinoma, comprises more than 80% of lung cancers.
Cigarette smoking is the primary risk factor and accounts for approximately 85% of all lung cancer cases. For those who have never
smoked, HPV infection is considered to be an important cause of lung cancer in Asia. In a recent international pooled analysis of data on
HPV-associated lung cancers, the prevalence in Asia was found to be 5% of all lung cancers.
GBP, our development and commercialization partner in Asia, is planning to conduct a randomized Phase 2, open-label, controlled
study in HPV-associated NSCLC in patients following first-line induction chemotherapy. Pending Taiwanese FDA approval, the study is
planned to initiate in 2016 and will enroll up to 124 patients. This trial will be fully funded exclusively by GBP.
6
ADXS-PSA Franchise
Prostate Cancer
According to the American Cancer Society, prostate cancer is the second most common type of cancer found in American men.
Prostate cancer is the second leading cause of cancer death in men, behind only lung cancer. One man in seven will get prostate cancer
during his lifetime, and one man in 36 will die of this disease. About 210,000 new cases will be diagnosed in the United States in 2016
according to the SEER database.
ADXS-PSA is an Lm-LLO immunotherapy designed to target the PSA antigen commonly overexpressed in prostate cancer.
We have entered into a clinical trial collaboration and supply agreement with Merck to evaluate the safety and efficacy of ADXS-
PSA as monotherapy and in combination with KEYTRUDA® (pembrolizumab), Merck’s anti PD-1 antibody, in a Phase 1/2, open-label,
multicenter, two part study in patients with previously treated metastatic, castration-resistant prostate cancer. For ADXS-PSA monotherapy
dose escalation portion of the study, Cohort 1 and Cohort 2 have been completed allowing for advancement into Cohort 3, the third and
final dose level. Once the dose escalation has been completed, the recommended dose will be advanced into the combination portion of the
study.
ADXS-HER2 Franchise
HER2 Expressing Solid Tumors
HER2 is overexpressed in a percentage of solid tumors such as breast, gastric, bladder, brain, pancreatic, ovarian and
osteosarcoma. According to the SEER database and recent published literature, the percentage of HER2 expression varies by cancer type,
with approximately 70,000 new cases of invasive HER2 positive breast cancer diagnosed each year in the US; approximately 5,000 new
cases of HER2 positive gastric cancer; approximately 22,000 new cases of HER2 positive bladder cancer; approximately 20,000 new cases
of HER2 positive pancreatic cancer; approximately 2,500 new cases of HER2 positive ovarian cancer; and approximately 600 new cases of
HER2 positive osteosarcoma.
ADXS-HER2 is an Lm-LLO immunotherapy designed to target HER2 expressing solid tumors such as human and canine
osteosarcoma, breast, gastric and other cancers. The FDA has cleared our IND application and we have initiated a Phase 1b study in
patients with metastatic HER2-expressing cancers. Thereafter, we intend to initiate a clinical development program with ADXS-HER2 for
the treatment of pediatric osteosarcoma.
Osteosarcoma
Osteosarcoma affects about 400 children and teens in the U.S. every year, representing a small but significant unmet medical need
that has seen little therapeutic improvement in decades. Osteosarcoma is considered a rare disease and may qualify for regulatory incentives
including, but not limited to, orphan drug designation, patent term extension, market exclusivity, and development grants. Given the limited
availability of new treatment options for osteosarcoma, and that it is an unmet medical need affecting a very small number of patients in the
U.S. annually, we believe that, subject to regulatory approval, the potential to be on the market may be accelerated.
Based on encouraging data discussed below from a veterinarian clinical study in which pet dogs with naturally occurring
osteosarcoma were treated with ADXS-HER2, we intend to initiate a clinical development program with ADXS-HER2 for the treatment of
human osteosarcoma. Both veterinary and human osteosarcoma specialists consider canine osteosarcoma to be the best model for human
osteosarcoma.
ADXS-HER2 has received FDA and EMA orphan drug designation for osteosarcoma.
Canine Osteosarcoma
Osteosarcoma is the most common primary bone tumor in dogs, accounting for roughly 85% of tumors on the canine skeleton.
Approximately 10,000 dogs a year (predominately middle to older-aged dogs and larger breeds) are diagnosed with osteosarcoma in the
United States. This cancer initially presents as lameness and oftentimes visible swelling on the leg. Current standard of care treatment is
amputation immediately after diagnosis, followed by chemotherapy. Median survival time with standard of care is ten to twelve months.
For dogs that cannot undergo amputation, palliative radiation and analgesics are frequently employed and median survival times range from
three to five months.
7
Under the direction of Dr. Nicola Mason, the University of Pennsylvania School of Veterinary Medicine is conducting studies in
companion dogs evaluating the safety and efficacy of ADXS-HER2 in the treatment of naturally occurring canine osteosarcoma. In the
initial study, the primary endpoint was to determine the maximum tolerated dose of ADXS-HER2. Secondary endpoints for the study were
progression-free survival and overall survival. The findings of the Phase 1 clinical trial in dogs with osteosarcoma suggest that ADXS-
HER2 is safe and well tolerated at doses up to 3 x 109 CFU with no evidence of significant cardiac, hematological, or other systemic
toxicities. The study determined that ADXS-HER2 is able to delay or prevent metastatic disease and significantly prolong overall survival
in dogs with osteosarcoma that had minimal residual disease following standard of care (amputation and follow-up chemotherapy). Dr.
Mason presented data at the 2014 American College of Veterinary Internal Medicine (“ACVIM”) Forum which showed that 80% of the
dogs treated (n=15) were still alive and median survival had not yet been reached. A second study is currently being conducted by Dr.
Mason and data was presented at the 2015 ACVIM Forum obtained from pet dogs (n=12) with primary osteosarcoma unsuitable for
amputation. Repeat doses of ADXS-HER2 administered after palliative radiation were well tolerated with no systemic or cardiac toxicity.
On March 19, 2014, we entered into a definitive Exclusive License Agreement with Aratana, where we granted Aratana an
exclusive, worldwide, royalty-bearing license, with the right to sublicense, certain of our proprietary technology that enables Aratana to
develop and commercialize animal health products that will be targeted for treatment of osteosarcoma and other cancer indications in
animals. A product license request has been filed by Aratana for ADXS-HER2 (also known as AT-014 by Aratana) for the treatment of
canine osteosarcoma with the USDA. Aratana received communication from the USDA in March 2015 stating that the previously
submitted efficacy data for product licensure for AT-014 (ADXS-HER2), the cancer immunotherapy for canine osteosarcoma, was
accepted and that it provides a reasonable expectation of efficacy that supports conditional licensure. While additional steps need to be
completed, including in the areas of manufacturing and safety, Aratana anticipates that AT-014 could receive conditional licensure from the
USDA in 2016. Aratana has been granted exclusive worldwide rights by us to develop and commercialize ADXS-HER2 in animals.
Aratana is further responsible for the conduct of clinical research with ADXS-Survivin in canine/feline lymphoma, as well as pending
investigations of two additional Advaxis constructs in animals.
ADXS-NEO Franchise (preclinical)
We intend to file an IND application for ADXS-NEO and to initiate Company-sponsored studies, as well as external
collaborations.
We have entered into a research collaboration with Memorial Sloan Kettering Cancer Center (“MSK”) to advance the study of
neoepitope-based, personalized cancer therapy. The goal of the collaboration, titled “MINE™” (My Immunotherapy Neo-Epitopes), is to
use our Lm-LLO cancer immunotherapy technology to develop neo-epitope immunotherapies based on an individual patient’s tumor
(“ADXS-NEO”). MINE™ will first focus on a preclinical study of our new construct approach to evaluate the immunologic effects and
anti-tumor activity of a personalized immunotherapy in a mouse tumor model. We will use learnings from the MINE™ collaboration to
identify and target neoepitopes using Lm-LLO technology and later develop patient specific immunotherapy constructs that incorporate the
neoepitope sequences identified in the patient’s tumor cells. Clinical studies using ADXS-NEO, to be conducted at MSK, are in
development.
ADXS-TNBC Franchise (preclinical)
We are developing a construct that targets antigens specific to Triple-Negative Breast Cancer (“TNBC”), which accounts for ~15-
20% of all diagnosed breast cancer cases and has not been amenable to targeted therapies directed toward estrogen, progesterone, or HER2
receptors. A majority of TNBC patients’ still exhibit poor outcomes, with only 30-45% of patients achieving a pathological complete
response from conventional chemotherapeutic and radiation therapy. The heterogeneous nature of this cancer type, the presence of
mutations in multiple pathways, and the development of resistance to single agents make combination therapy much more attractive and
suggest the need for agents that address more than one antigen/target.
Lm-LLO Combination Franchise
Axalimogene filolisbac and Durvalumab
As stated above, we have entered into a clinical trial collaboration agreement with MedImmune to conduct a Phase 1/2, open-label,
multicenter, two part study to evaluate safety and immunogenicity of our investigational Lm-LLO cancer immunotherapy, axalimogene
filolisbac, in combination with MedImmune’s investigational anti-PD-L1 immune checkpoint inhibitor, durvalumab (MEDI4736) for the
treatment of patients with metastatic squamous or non-squamous carcinoma of the cervix and metastatic HPV-associated SCCHN.
Preliminary patient responses have been observed in Cohort 1. For the axalimogene filolisbac and durvalumab (MEDI4736) dose
escalation portion of the study, Cohort 1 has been completed allowing for advancement to the next dose level. Once the dose escalation has
been completed, the recommended combination doses will be advanced further into the study.
Axalimogene filolisbac and Epacadostat
As stated above, we have entered into a clinical trial collaboration agreement with Incyte where we plan to collaborate on a Phase
2, open-label, multicenter, preoperative window-study to evaluate the safety and immunogenicity of axalimogene filolisbac as a
monotherapy and in combination with Incyte’s investigational oral indoleamine 2,3-dioxygenase 1 (IDO1) inhibitor, epacadostat
(INCB24360), in patients with Stage I-IIa cervical cancer. Incyte plans to enroll patients in this Phase 2 in 2016.
ADXS-PSA and KEYTRUDA® (pembrolizumab)
As stated above, we have entered into a clinical trial collaboration agreement with Merck to evaluate the safety and efficacy of
ADXS-PSA as monotherapy and in combination with KEYTRUDA® (pembrolizumab), Merck’s anti PD-1 antibody, in a Phase 1/2, open-
label, multicenter, two part study in patients with previously treated metastatic, castration-resistant prostate cancer. For the ADXS-PSA
monotherapy dose escalation portion of the study, Cohort 1 and Cohort 2 have been completed allowing for advancement to next dose
level. Once the dose escalation has been completed, the recommended dose will be advanced into the combination portion of the study.
Lm-LLO Immunotherapy and Sorrento
We have entered into a non-exclusive research and clinical trial collaboration agreement with Sorrento Therapeutics, Inc.
(“Sorrento”) to evaluate our Lm-LLO cancer immunotherapy technology in combination with Sorrento’s fully human antibodies, which
may include GITR, OX40, LAG-3 and/or TIM-3, in two clinical trials.
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Lm-LLO Immunotherapy (preclinical)
We have various preclinical collaborations with academic and other centers of excellence.
Corporate Information
We were originally incorporated in the State of Colorado on June 5, 1987 under the name Great Expectations, Inc. We were a
publicly-traded “shell” company without any business until November 12, 2004 when we acquired Advaxis, Inc., a Delaware corporation,
through a Share Exchange and Reorganization Agreement, dated as of August 25, 2004, which we refer to as the Share Exchange, by and
among Advaxis, the stockholders of Advaxis and us. As a result of the Share Exchange, Advaxis became our wholly-owned subsidiary and
our sole operating company. On December 23, 2004, we amended and restated our articles of incorporation and changed our name to
Advaxis, Inc. On June 6, 2006, our stockholders approved the reincorporation of our company from Colorado to Delaware by merging the
Colorado entity into our wholly-owned Delaware subsidiary. Our date of inception, for financial statement purposes, is March 1, 2002.
Our principal executive offices are located at 305 College Road East, Princeton, New Jersey 08540 and our telephone number is
(609) 452-9813. We maintain a website at www.advaxis.com which contains descriptions of our technology, our product candidates and
the trial status of each drug. We make available free of charge through our Internet website our annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after we
electronically file such material with, or furnish such material to, the SEC. We are not including the information on our website as a part of,
nor incorporating it by reference into, this report. You may read and copy any materials we file at the SEC’s Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549 on official business days during the hours of 10:00 a.m. to 3:00 p.m. Please call the SEC at 1-
800-SEC-0330 for information on the Public Reference Room. Additionally, the SEC maintains a website that contains annual, quarterly,
and current reports, proxy statements, and other information that issuers (including us) file electronically with the SEC. The SEC’s website
address is http://www.sec.gov.
Intellectual Property
Protection of our intellectual property is important to our business. We have a robust and extensive patent portfolio that protects
our product candidates and Lm -based immunotherapy technology. Currently, we own or have rights to 200 patents and applications, which
are owned, licensed from, or co-owned with Penn, Merck, NIH, and/or Georgia Regents University. We continuously grow this portfolio
by filing new applications to protect our ongoing research and development efforts. We aggressively prosecute and defend our patents and
proprietary technology. Our patents are directed to the compositions of matter, use, and methods thereof, of our Lm -LLO immunotherapies
for our product candidates, axalimogene filolisbac, ADXS-PSA, and ADXS-HER2.
Our approach to the intellectual property portfolio is to create, maintain, protect, enforce and defend our proprietary rights for the
products we develop from our immunotherapy technology platform. We endeavor to maintain a coherent and aggressive strategic approach
to building our patent portfolio with an emphasis in the field of cancer vaccines.
9
We successfully defended our intellectual property concerning our Lm -based technology by contesting a challenge made by Anza
Therapeutics, Inc. (now known as Aduro BioTech), to our patent position in Europe on a claim not available in the United States. The
European Patent Office (“EPO”) Board of Appeals in Munich, Germany ruled in favor of the Trustees of Penn and us, Penn’s exclusive
licensee, and reversed a patent ruling that revoked a technology patent that had resulted from an opposition filed by Anza. The ruling of the
EPO Board of Appeals is final and cannot be appealed. The granted claims, the subject matter of which was discovered by Dr. Yvonne
Paterson, are directed to the method of preparation and composition of matter of recombinant bacteria expressing tumor antigens for the
treatment of patients with cancer. The successful development of our immunotherapies will include our ability to create and maintain
intellectual property related to our product candidates.
Issued patents which are directed to our product candidates axalimogene filolisbac, ADXS-PSA, and ADVX-HER2 in the United
States, will expire between 2017 and 2032. Issued patents directed to our product candidates axalimogene filolisbac, ADXS-PSA, and
ADXS-HER2 outside of the United States, will expire in 2028. Issued patents directed to our Lm -based immunotherapy platform in the
United States, will expire between 2016 and 2030. Issued patents directed to our Lm -based immunotherapy platform outside of the United
States, will expire between 2021 and 2030.
We have issued patents directed to methods of using our product candidates axalimogene filolisbac, ADXS-PSA and ADXS-
HER2 in the United States, which will expire between 2017 and 2032. Issued patents directed to use of our product candidates:
axalimogene filolisbac, ADXS-PSA and ADXS-HER2 for indications outside of the United States, will expire between 2018 and 2028.
We have pending patent applications directed to our product candidates axalimogene filolisbac, ADXS-PSA, ADXS-HER2 that, if
issued would expire in the United States and in countries outside of the United States between 2020 and 2037. We have pending patent
applications directed to methods of using of our product candidates axalimogene filolisbac, ADXS-PSA, ADXS-HER2 directed to the
following indications: a her2/neu-expressing cancer, a prostate cancer, cervical dysplasia, and cervical cancer that, if issued would expire in
the United States and in countries outside of the United States between 2020 and 2037, depending on the specific indications.
We will be able to protect our technology from unauthorized use by third parties only to the extent it is covered by valid and
enforceable patents or is effectively maintained as trade secrets. Patents and other proprietary rights are an essential element of our
business.
Our success will depend in part on our ability to obtain and maintain proprietary protection for our product candidates,
technology, and know-how, to operate without infringing on the proprietary rights of others, and to prevent others from infringing our
proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent
applications related to our proprietary technology, inventions, and improvements that are important to the development of our business. We
also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities to develop and maintain our
proprietary position.
Any patent applications which we have filed or will file or to which we have or will have license rights may not issue, and patents
that do issue may not contain commercially valuable claims. In addition, any patents issued to us or our licensors may not afford
meaningful protection for our products or technology, or may be subsequently circumvented, invalidated, narrowed, or found
unenforceable. Our processes and potential products may also conflict with patents which have been or may be granted to competitors,
academic institutions or others. As the pharmaceutical industry expands and more patents are issued, the risk increases that our processes
and potential products may give rise to interferences filed by others in the U.S. Patent and Trademark Office, or to claims of patent
infringement by other companies, institutions or individuals. These entities or persons could bring legal actions against us claiming
damages and seeking to enjoin clinical testing, manufacturing and marketing of the related product or process. In recent years, several
companies have been extremely aggressive in challenging patents covering pharmaceutical products, and the challenges have often been
successful. If any of these actions are successful, in addition to any potential liability for damages, we could be required to cease the
infringing activity or obtain a license in order to continue to manufacture or market the relevant product or process. We may not prevail in
any such action and any license required under any such patent may not be made available on acceptable terms, if at all. Our failure to
successfully defend a patent challenge or to obtain a license to any technology that we may require to commercialize our technologies or
potential products could have a materially adverse effect on our business. In addition, changes in either patent laws or in interpretations of
patent laws in the United States and other countries may materially diminish the value of our intellectual property or narrow the scope of
our patent protection.
We also rely upon unpatented proprietary technology, and in the future may determine in some cases that our interests would be
better served by reliance on trade secrets or confidentiality agreements rather than patents or licenses. We may not be able to protect our
rights to such unpatented proprietary technology and others may independently develop substantially equivalent technologies. If we are
unable to obtain strong proprietary rights to our processes or products after obtaining regulatory clearance, competitors may be able to
market competing processes and products.
Others may obtain patents having claims which cover aspects of our products or processes which are necessary for, or useful to,
the development, use or manufacture of our services or products. Should any other group obtain patent protection with respect to our
discoveries, our commercialization of potential therapeutic products and methods could be limited or prohibited.
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The Drug Development Process
The product candidates in our pipeline are at various stages of preclinical and clinical development. The path to regulatory
approval includes multiple phases of clinical trials in which we collect data to support an application to regulatory authorities to allow us to
market a product for the diagnosis, cure, mitigation, treatment, or prevention of a specified disease. There are many difficulties and
uncertainties inherent in research and development of new products, resulting in a high rate of failure. To bring a drug from the discovery
phase to regulatory approval, and ultimately to market, takes many years and significant costs.
Clinical testing, known as clinical trials or clinical studies, is either conducted internally by a pharmaceutical or biotechnology
company or is conducted on behalf of these companies by Clinical Research Organizations (“CRO”). The process of conducting clinical
studies is highly regulated by the FDA, as well as by other governmental and professional bodies. In a clinical trial, participants receive
specific interventions according to the research plan or protocol created by the investigators. Clinical trials may compare a new medical
approach to a standard one that is already available or to a placebo that contains no active ingredients or to no intervention. Some clinical
trials compare interventions that are already available to each other. When a new product or approach is being studied, it is not usually
known whether it will be helpful, harmful, or no different than available alternatives. The investigators try to determine the safety and
efficacy of the intervention by measuring certain outcomes in the participants.
Phase 1. Phase 1 clinical trials begin when regulatory agencies allow initiation of clinical investigation of a new drug or product
candidate. They typically involve testing an investigational new drug on a limited number of patients. Phase 1 studies determine a
drug’s basic safety, maximum tolerated dose and how the drug is absorbed by, and eliminated from, the body. Typically, cancer
therapies are initially tested on late stage cancer patients.
Phase 2. Phase 2 clinical trials involve larger numbers of patients that have been diagnosed with the targeted disease or condition.
Phase 2 clinical trials gather preliminary data on effectiveness (where the drug works in people who have a certain disease or
condition) and to determine the common short-term side effects and risks associated with the drug. If Phase 2 clinical trials show
that an investigational new drug has an acceptable range of safety risks and probable effectiveness, a company will continue to
evaluate the investigational new drug in Phase 3 studies.
Phase 3. Phase 3 clinical trials are typically controlled multi-center trials that involve a larger number of patients to ensure the study
results are statistically significant. The purpose is to confirm effectiveness and safety on a large scale and to provide an adequate
basis for physician labeling. These trials are generally global in nature and are designed to generate clinical data necessary to
submit an application for marketing approval to regulatory agencies.
Biologic License Application (BLA). The results of the clinical trials using biologics are submitted to the FDA as part of a BLA.
Following the completion of Phase 3 studies, if the Sponsor of a potential product in the United States believes it has sufficient
information to support the safety and effectiveness of the investigational new drug, the Sponsor submits a BLA to the FDA
requesting that the investigational new drug be approved for sale. The application is a comprehensive, multi-volume filing that
includes the results of all preclinical and clinical studies, information about the drug’s composition, and the Sponsor’s plans for
manufacturing, packaging, labeling and testing the investigational new drug. The FDA’s review of an application is designated
either as a standard review with a target review time of 10 months or a priority review with a target of 6 months. Depending upon
the completeness of the application and the number and complexity of follow-up requests and responses between the FDA and the
Sponsor, the review time can take months to many years. Once approved through this process, a drug may be marketed in the
United States, subject to any conditions imposed by the FDA.
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The current state of development of our candidates in various areas are outlined in the following table:
Government Regulations
General
Government authorities in the United States and other countries extensively regulate, among other things, the preclinical and
clinical testing, manufacturing, labeling, storage, record-keeping, advertising, promotion, export, marketing and distribution of biologic
products. In the United States, the FDA subjects pharmaceutical and biologic products to rigorous review under the Federal Food, Drug and
Cosmetic Act, the Public Health Service Act and other federal statutes and regulations.
Orphan Drug Designation
Under the Orphan Drug Act (“ODA”), the FDA may grant Orphan Drug Designation (“ODD”) to a drug or biological product
intended to treat a rare disease or condition, which means a disease or condition that affects fewer than 200,000 individuals in the United
States, or more than 200,000 individuals in the United States, but for which there is no reasonable expectation that the cost of developing
and making a drug or biological product available in the United States will be recovered from domestic sales of the product.
The benefits of ODD can be substantial, including research and development tax credits and exemption from user fees, enhanced
access to advice from the FDA while the drug is being developed, and market exclusivity once the product reaches approval and begins
sales, provided that the new product is first to market and that this new product has not been previously approved for the same orphan
disease or condition, with or without orphan drug designation. In order to qualify for these incentives, a company must apply for
designation of its product as an “Orphan Drug” and obtain approval from the FDA. Orphan product designation does not convey any
advantage in or shorten the duration of the regulatory review and approval process. A drug that is approved for the ODD indication is
granted seven years of orphan drug exclusivity. During that period, the FDA generally may not approve any other application for the same
product for the same indication, although there are exceptions, most notably when the later product is shown to be clinically superior to the
product with exclusivity.
We currently have ODD with the FDA for axalimogene filolisbac for treatment of anal cancer (granted August 2013), HPV-
associated head and neck cancer (granted November 2013); and treatment of Stage II-IV invasive cervical cancer (granted May 2014). We
also have ODD with the FDA for ADXS-HER2 for the treatment of osteosarcoma (granted May 2014).
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In Europe, the Committee for Orphan Medicinal Products (“COMP”) issued a positive opinion on the application for ODD of
axalimogene filolisbac for the treatment of anal cancer (December 2015) and on the application for ODD of ADXS-HER2 for osteosarcoma
(November 2015).
Expedited Programs for Serious Conditions
Four FDA programs are intended to facilitate and expedite development and review of new drugs to address unmet medical need
in the treatment of serious or life-threatening conditions: fast track designation, breakthrough therapy designation, accelerated approval, and
priority review designation. We intend to avail ourselves of any and all of these programs as applicable to our products.
Non-U.S. Regulation
Before our products can be marketed outside the United States, they are subject to regulatory approval of the respective
authorities in the country in which the product should be marketed. The requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement vary widely from country to country. No action can be taken to market any product in a country until
an appropriate application has been approved by the regulatory authorities in that country. The time spent in gaining approval varies from
that required for FDA approval, and in certain countries, the sales price of a product must also be approved. The pricing review period
often begins after market approval is granted. Even if a product is approved by a regulatory authority, satisfactory prices might not be
approved for such product.
Collaborations, Partnerships and Agreements
Biocon Limited
On January 20, 2014, we entered into a Distribution and Supply Agreement (“Biocon Agreement”) with Biocon Limited, a
company incorporated under the laws of India.
Pursuant to the Biocon Agreement, we granted Biocon an exclusive license (with a right to sublicense) to (i) use our data from
clinical development activities, regulatory filings, technical, manufacturing and other information and know-how to enable Biocon to
submit regulatory filings for axalimogene filolisbac in the following territories: India, Malaysia, Bangladesh, Bhutan, Maldives, Myanmar,
Nepal, Pakistan, Sri Lanka, Bahrain, Jordan, Kuwait, Oman, Saudi Arabia, Qatar, United Arab Emirates, Algeria, Armenia, Egypt, Eritrea,
Iran, Iraq, Lebanon, Libya, Sudan, Syria, Tunisia and Yemen (collectively, the “Territory”) and (ii) import, promote, market, distribute and
sell pharmaceutical products containing axalimogene filolisbac . Axalimogene filolisbac is based on a novel platform technology using live,
attenuated bacteria that are bio-engineered to secrete an antigen/adjuvant fusion protein(s) that is designed to redirect the powerful immune
response all human beings have to the bacterium against their cancer.
Under the Biocon Agreement, Biocon has agreed to use its commercially reasonable efforts to obtain regulatory approvals for
axalimogene filolisbac in India. In the event Phase 2 or Phase 3 clinical trials are required, we shall conduct such trials at our cost, provided
that if we are unable to commence such clinical trials, Biocon may conduct such clinical trials, subject to reimbursement of costs by us.
Biocon has agreed to commence commercial distribution of axalimogene filolisbac no later than 9 months following receipt of regulatory
approvals in a country in the Territory. Biocon will be responsible for the costs of obtaining and maintaining regulatory approvals in the
Territory.
We will have the exclusive right to supply axalimogene filolisbac to Biocon and Biocon will be required to purchase its
requirements of axalimogene filolisbac exclusively from us at the specified contract price, as such price may be adjusted from time to time.
The supply price agreed upon between the parties will be correlated to the net sales of the product during the preceding contract year. In
addition, we will be entitled to a six-figure milestone payment if net sales of axalimogene filolisbac for the contract year following the
initiation of clinical trials in India exceed certain specified thresholds.
Biocon will also have a right of first refusal relating to the licensing of any new products in the Territory that we may develop
during the term of the Biocon Agreement.
The term of the Biocon Agreement will be the later of twenty years or the last to expire patent or patent application. In addition,
the Biocon Agreement may be terminated by either party upon thirty days’ written notice (i) in the event of a material breach by the other
party of its obligations under the Biocon Agreement, (ii) if the other party becomes bankrupt or insolvent or (iii) if the other party
undergoes a change in control.
Biocon filed a MAA for licensure of this immunotherapy in India. The DCGI accepted this MAA for review. The filing of the
MAA was driven by several factors: i) results from the Lm -LLO-E7-15 Phase 2 trial indicated that axalimogene filolisbac was well
tolerated and showed significant clinical activity in recurrent/refractory cervical cancer; ii) cervical cancer is the second most common
cancer among Indian women (132,000 new cases per year with 74,000 deaths reported); and iii) current treatment options for non-operable
refractory/recurrent disease are limited in India. As part of the MAA review process, Biocon met with the Scientific Expert Committee (the
“Committee”). The Committee indicated that proof of concept for this novel immunotherapy has been established. The Committee advised
Biocon to obtain data from a Phase 3 clinical trial in patients with recurrent cervical cancer who have failed prior chemo and radiation
therapy. The face-to-face interaction with the Committee provided Biocon and Advaxis with valuable insight for future development. We
continue to assist Biocon with the activities necessary to develop and ultimately commercialize axalimogene filolisbac in the Territory.
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Global BioPharma, Inc.
On December 9, 2013, we entered into an exclusive licensing agreement for the development and commercialization of
axalimogene filolisbac with Global BioPharma, Inc. (“GBP”), a Taiwanese based biotech company funded by a group of investors led by
Taiwan Biotech Co., Ltd (TBC).
GBP plans to conduct registration trials with axalimogene filolisbac for the treatment of advanced cervical cancer. GBP is also
planning to conduct a randomized Phase 2, open-label, controlled study in HPV-associated NSCLC in patients following first-line induction
chemotherapy. Pending Taiwanese FDA approval, the study is planned to initiate in 2016 and will enroll up to 124 patients. This trial will
be fully funded by GBP. GBP will continue to explore the use of our lead product candidate in several other indications including head and
neck, and anal cancer.
GBP will pay us event-based financial milestones, an annual development fee, and annual net sales royalty payments in the high
single to double digits. In addition, as an upfront payment, GBP made an investment in us by purchasing shares of our Common Stock
(“Common Stock”) at market price. GBP has an option to purchase additional shares of our stock at a 150% premium to the stock price on
the effective date of the agreement.
GBP will be responsible for all clinical development and commercialization costs in the GBP territory. GBP will also reimburse us
$2.25 million toward our U.S. registrational study, where such payment will help to offset our development costs. GBP is committed to
establishing manufacturing capabilities for its own territory and to serving as a secondary manufacturing source for us in the future. Under
the terms of the agreement, we will exclusively license the rights of axalimogene filolisbac to GBP for the Asia, Africa, and former USSR
territory, exclusive of India and certain other countries, for all HPV-associated indications. We will retain exclusive rights to axalimogene
filolisbac for the rest of the world.
University of Pennsylvania
On July 1, 2002 we entered into an exclusive worldwide license agreement with Penn with respect to the innovative work of
Yvonne Paterson, Ph.D., Associate Dean for Research at the School of Nursing at Penn, and former Professor of Microbiology at Penn, in
the area of innate immunity, or the immune response attributed to immune cells, including dendritic cells, macrophages and natural killer
cells, that respond to pathogens non-specifically (subject to certain U.S. government rights). This agreement was amended and restated as of
February 13, 2007, and, thereafter, has been amended from time to time.
This license, unless sooner terminated in accordance with its terms, terminates upon the latter of (a) the expiration of the last to
expire of the Penn patent rights; or (b) twenty years after the effective date of the license. Penn may terminate the license agreement early
upon the occurrence of certain defaults by us, including, but not limited to, a material breach by us of the Penn license agreement that is not
cured within 60 days after notice of the breach is provided to us.
The license provides us with the exclusive commercial rights to the patent portfolio developed by Penn as of the effective date of
the license, in connection with Dr. Paterson and requires us to pay various milestone, legal, filing and licensing payments to commercialize
the technology. In exchange for the license, Penn received shares of our Common Stock. However, as of October 31, 2015, Penn does not
own shares of our Common Stock. In addition, Penn is entitled to receive a non-refundable initial license fee, royalty payments and
milestone payments based on net sales and percentages of sublicense fees and certain commercial milestones. Under the amended licensing
agreement, Penn is entitled to receive 2.5% of net sales in the territory. Should annual net sales exceed $250 million, the royalty rate will
increase to 2.75%, but only with respect to those annual net sales in excess of $250 million. Additionally, Penn will receive tiered sales
milestone payments upon the achievement of cumulative global sales ranging between $250 million and $2 billion, with the maximum
aggregate amounts payable to Penn in the event that maximum sales milestones are achieved is $40 million. Notwithstanding these royalty
rates, upon first in-human commercial sale (U.S. & E.U.), we have agreed to pay Penn a total of $775,000 over a four-year period as an
advance minimum royalty, which shall serve as an advance royalty in conjunction with the above terms. In addition, under the license, we
are obligated to pay an annual maintenance fee of $100,000 commencing on December 31, 2010, and each December 31st thereafter for the
remainder of the term of the agreement until the first commercial sale of a Penn licensed product. We are responsible for filing new patents
and maintaining and defending the existing patents licensed to us and we are obligated to reimburse Penn for all attorney’s fees, expenses,
official fees and other charges incurred in the preparation, prosecution and maintenance of the patents licensed from Penn.
Upon first regulatory approval in humans (US or EU), Penn will be entitled to a milestone payment of $600,000. Furthermore,
upon the achievement of the first sale of a product in certain fields, Penn will be entitled to certain milestone payments, as follows: $2.5
million will be due upon the first in-human commercial sale (US or EU) of the first product in the cancer field and $1.0 million will be due
upon the date of first in-human commercial sale (US or EU) of a product in each of the secondary strategic fields sold.
As of October 31, 2015, we had no outstanding balance with Penn under all licensing agreements.
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Merck & Co., Inc.
On August 22, 2014, we entered into a Clinical Trial Collaboration and Supply Agreement (the “Merck Agreement”) with Merck,
pursuant to which the parties will collaborate on a Phase 1/2 dose-escalation and safety study. The Phase 1 portion of the study will
evaluate the safety of our Lm -LLO based immunotherapy for prostate cancer, ADXS31-142 (the “Advaxis Compound”) as monotherapy
and in combination with KEYTRUDA ® (pembrolizumab), Merck’s humanized monoclonal antibody against PD-1 (the “Merck
Compound”), to determine a recommended Phase 2 combination dose. The Phase 2 portion will evaluate the safety and efficacy of the
Advaxis Compound in combination with the Merck Compound. Both phases of the study will be in patients with previously treated
metastatic castration-resistant prostate cancer. A joint development committee, comprised of equal representatives from both parties, is
responsible for coordinating all regulatory and other activities under, and pursuant to, the Merck Agreement.
Each party is responsible for their own internal costs and expenses to support the study, while we will be responsible for all third
party costs of conducting the study. Merck will be responsible for manufacturing and supplying the Merck Compound. We will be
responsible for manufacturing and supplying the Advaxis Compound. We will be the sponsor of the study and hold the IND related to the
study.
All data and results generated under the study (“Collaboration Data”) will be jointly owned by the parties, except that ownership of
data and information generated from sample analysis to be performed by each party on its respective compound will be owned by the party
conducting such testing. All rights to all inventions and discoveries, which claim or cover the combined use of the Advaxis Compound and
the Merck Compound shall belong jointly to the parties. Inventions and discoveries relating solely to the Advaxis Compound, or a live
attenuated bacterial vaccine, shall be the exclusive property of us. Inventions and discoveries relating solely to the Merck Compound, or a
PD-1 antagonist, shall be the exclusive property of Merck.
The Merck Agreement shall continue in full force and effect until completion of all of the obligations of the parties or a permitted
termination.
MedImmune/AstraZeneca
On July 21, 2014, we entered into a Clinical Trial Collaboration Agreement (the “MedImmune Agreement”) with MedImmune,
the global biologics research and development arm of AstraZeneca, pursuant to which the parties intend to initiate a Phase 1/2 clinical study
in the United States to evaluate the safety and efficacy of MedImmune’s investigational anti-PD-L1 immune checkpoint inhibitor,
MEDI4736, in combination with our investigational Lm -LLO cancer immunotherapy, axalimogene filolisbac , as a combination treatment
for patients with advanced, recurrent or refractory cervical cancer and HPV-associated head and neck cancer. A joint steering committee,
composed of equal representatives from both parties, is responsible for various matters associated with the collaboration, including protocol
approval, as well as reviewing and monitoring the progress of the study.
MedImmune will be responsible for providing MEDI4736 at no cost, as well as costs related to the proprietary assays performed
by MedImmune or a third party on behalf of MedImmune. We will be the sponsor of the study and be responsible for the submission of all
regulatory filings to support the study, the negotiation and execution of the clinical trial agreements associated with each study site, and the
packaging and labelling of the Advaxis and MedImmune product candidates to be used in the study and the costs associated therewith.
For a period beginning upon the completion of the study and the receipt by MedImmune of the last final report for the study and
ending one hundred twenty (120) days thereafter (unless extended), MedImmune will be granted first right to negotiate in good faith in an
attempt to enter into an agreement with us with respect to the development, regulatory approval and commercialization of axalimogene
filolisbac and MEDI4736 to be used in combination with each other for the treatment or prevention of cancer. Neither party is obligated to
enter into such an agreement. In the event the parties do not enter an agreement and we obtain regulatory approval for axalimogene
filolisbac in combination with any PD-1 antibody or PD-L1 antibody, we shall pay MedImmune a royalty obligation and one-time payment.
All intellectual property rights made, conceived or generated through the clinical trials that relate solely to a MedImmune
development product shall be owned solely by MedImmune. All intellectual property rights made, conceived or generated through the
clinical trials that relate solely to an Advaxis development product shall be owned solely by us. All intellectual property rights made,
conceived or generated through the clinical trials that relate to the combination of one or more MedImmune development product and one
or more Advaxis development product shall be jointly owned by both parties; provided, however that in the event the parties do not enter
into a clinical development and commercialization agreement, we will not exploit, commercialize or license the joint inventions, except for
the performance of its obligations under the MedImmune Agreement. MedImmune has the sole right to prosecute and enforce all patents
and other intellectual property rights covering all joint inventions and all associated costs will be shared by the parties.
The MedImmune Agreement shall remain in effect until the earlier of (i) permitted termination, (ii) the parties entering into a
clinical development and commercialization agreement or expiration of the negotiation period (unless extended), except with respect to
rights that survive termination. Either party may terminate the MedImmune Agreement upon thirty (30) days written notice upon material
breach of the other party, unless the breach is cured in such period or reasonable actions to cure the breach are initiated and pursued (if the
breach is not capable of being cured during the 30-day notice period). In addition, either party may terminate the MedImmune Agreement
immediately if the party determines in good faith that the trials may unreasonably affect the safety of trial subjects.
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Inctye
On February 10, 2015, we entered into a Clinical Trial Collaboration Agreement (the “Incyte Agreement”) with Incyte for the
development and analysis of a combination therapy for the treatment of cervical cancer. Under the terms of the Incyte Agreement, the
parties will contribute their respective compounds to be dosed in combination during the course of the study, with Incyte acting as the
sponsor of the study and taking the lead role in its conduct. The Incyte Agreement is to continue in full force and effect until completion of
the final study report or until earlier termination by either party. Costs for the study are to be split between the parties, and Incyte will
provide us with an invoice and supporting documents of our share of the costs incurred through the end of each calendar quarter.
Aratana
On March 19, 2014, we entered into a definitive Exclusive License Agreement (the “Aratana Agreement”) with Aratana. Pursuant
to the Aratana Agreement, we granted Aratana an exclusive, worldwide, royalty-bearing license, with the right to sublicense, under certain
Advaxis proprietary technology that enables the design of an immunotherapy utilizing live attenuated Lm bioengineered to secrete fusion
proteins consisting of antigen and adjuvant molecules, including certain “Constructs” and related “Compounds” (both as defined in the
Aratana Agreement) in order for Aratana to develop and commercialize animal health products containing or incorporating Compounds
(“Products”) for use in non-human animal health applications (the “Aratana Field”) that will be targeted for treatment of osteosarcoma and
other cancer indications in animals. Our technology licensed to Aratana includes certain patents and patent applications, as well as related
know-how, data, technical information, results and other information controlled by us during the term of the Aratana Agreement that are
reasonably necessary for the development, manufacture or commercialization of any Construct, Compound or Product.
In addition to the Constructs licensed by Aratana upon signing of the Aratana Agreement, Aratana also has a right of first refusal to
license additional constructs from us in the future if we develop (on its own or upon request of Aratana) new constructs which are
reasonably believed to be suitable for treating osteosarcoma and certain other cancer indications (“Additional Constructs”). If the parties
agree upon the terms pursuant to which such Additional Constructs shall be added as Constructs under the Aratana Agreement, such
Additional Constructs will be added by virtue of an amendment to the Aratana Agreement.
Aratana has granted us an exclusive, worldwide, royalty-free, fully-paid, irrevocable and perpetual license, with the right to
sublicense, under Aratana’s existing technology, and any related sole Aratana development or Aratana’s rights in any joint inventions which
may be developed by the parties during the course of the Aratana Agreement, solely for us to develop and commercialize our products for
any and all uses outside of the Aratana Field, including, without limitation, all human health applications. The Aratana technology to be
licensed to us will include any patents or patent applications controlled by Aratana during the term of the Aratana Agreement that claim or
cover the manufacture, use, sale, offer for sale or import of any Products as well as related know-how, data, technical information, results
and other information controlled by Aratana during the term of the Aratana Agreement that is necessary or useful in the development,
manufacture or commercialization of any Compound, Construct or Product.
Under the terms of the Aratana Agreement, Aratana paid an upfront payment to us in the amount of $1,000,000 upon signing of
the Aratana Agreement. Aratana will also pay us (a) up to $36.5 million based on the achievement of milestone relating to the advancement
of Products through the approval process with the USDA in the United States and the relevant regulatory authorities in the European Union
(“E.U.”) in all four therapeutic areas and up to an additional $15 million in cumulative sales milestones based on achievement of gross sales
revenue targets for sales of any and all Products in the Aratana Field (regardless of therapeutic area), and (b) tiered royalties starting at 5%
and going up to 10%, which will be paid based on net sales of any and all Products (regardless of therapeutic area) in the Aratana Field in
the United States. Royalties for sales of Products outside of the United States will be paid at a rate equal to half of the royalty rate payable
by Aratana on net sales of Products in the United States (starting at 2.5% and going up to 5%). Royalties will be payable on a Product-by-
Product and country-by-country basis from first commercial sale of a Product in a country until the later of (a) the 10th anniversary of first
commercial sale of such Product by Aratana, its affiliates or sub licensees in such country or (b) the expiration of the last-to-expire valid
claim of our patents or joint patents claiming or covering the composition of matter, formulation or method of use of such Product in such
country. Aratana will also pay us 50% of all sublicense royalties received by Aratana and its affiliates.
Furthermore, pursuant to the Aratana Agreement, we (i) issued and sold 306,122 shares of Common Stock to Aratana at a price of
$4.90 per share, which was equal to the closing price of the Common Stock on the NASDAQ Capital Market on March 19, 2014, and (ii)
issued a ten-year warrant to Aratana giving Aratana the right to purchase up to 153,061 additional shares of Common Stock at an exercise
price of $4.90 per share. The warrant also contains a provision for cashless exercise if the fair market value of Advaxis’ Common Stock for
the five trading days ending three trading days prior to the exercise date is higher than the exercise price. In connection with the sale of the
Common Stock and warrants, we received aggregate net proceeds of $1,500,000. We issued the shares and warrant in reliance on the
exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933.
Aratana has filed a product license request for ADXS-HER2 (also known as AT-014 by Aratana) for the treatment of canine
osteosarcoma with the USDA. Aratana received communication from the USDA in March 2015 stating that the previously submitted
efficacy data for product licensure for AT-014, the cancer immunotherapy for canine osteosarcoma, was accepted and that it provides a
reasonable expectation of efficacy that supports conditional licensure. While additional steps need to be completed, including in the areas of
manufacturing and safety, Aratana anticipates that AT-014 could receive conditional licensure from the USDA in 2016.
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Master Services Agreement with inVentiv Health Clinical
On May 29, 2014, we announced that we entered into a master services agreement with inVentiv Health Clinical (“inVentiv”), a
leading global Clinical Research Organization (“CRO”), for the clinical development of certain immunotherapy product candidates in our
proprietary pipeline.
Under the terms of the agreement, inVentiv can provide us with full CRO services to execute clinical studies for our current
cancer immunotherapy product candidates including axalimogene filolisbac for cervical cancer, and other HPV-associated cancer; ADXS-
HER2 for pediatric osteosarcoma and other HER2 over-expressing cancer and ADXS-PSA for prostate cancer. In addition, pending
regulatory approval, we can leverage inVentiv’s significant commercialization capabilities in select countries, should we seek to do so.
Agreement with Knight Therapeutics Inc.
On August 26, 2015, we announced that we had entered into an agreement with Knight Therapeutics Inc. (“Knight”), a Canadian-
based specialty pharmaceutical company, to commercialize in Canada Advaxis’ product candidates.
In connection with the agreement, Knight purchased 359,454 shares of our common stock at $13.91 per share, which represents a
seven percent premium to the price of our common stock at market close on August 25, 2015. In addition, Sectoral Asset Management, a
leading Canadian-based global healthcare investment advisor, purchased 1,437,815 shares at $13.91 per share directly from us on behalf of
its clients. The combined gross proceeds to us from these direct investments was $25 million.
Under the terms of the agreement, Knight will be responsible to conduct and fund all regulatory and commercial activities in
Canada. We are eligible to receive double digit royalty as well as approximately $33 million in cumulative sales milestones.
Manufacturing
Current Good Manufacturing Practices (“cGMP”) are the standards identified in order to conform to requirements by
governmental agencies that control authorization and licensure for manufacture and distribution of drug products for either clinical
investigations or commercial sale. GMPs identify the requirements for procurement, manufacturing, testing, storage, distribution and the
supporting quality systems in order to ensure that a drug product is safe for its intended application. GMPs are enforced in the United States
by the FDA, under the authorities of the Federal Food, Drug and Cosmetic Act and its implementing regulations and use the phrase “current
good manufacturing practices” (“cGMP”) to describe these standards.
We have entered into agreements with multiple third-party organizations to handle the manufacturing, testing, and distribution of
our product candidates. These organizations have extensive experience within the biologics space and with the production of clinical and
commercial GMP supplies. In parallel, we have also continued to invest in our internal process/analytical development, quality systems,
manufacturing, and quality control infrastructure with the goal of accelerating and advancing our pipeline. Construction of a new pilot plant
capable of producing early phase clinical trial GMP supplies and capable of supporting process optimization/scale-up is underway at our
New Jersey headquarter. In addition, we have initiated the conceptual engineering design for a potential facility expansion to allow us to
produce supplies for our neoepitope and our other programs. Our strategy is to continue to leverage both our partner’s capabilities and our
internal capabilities in order to build a supply chain that is reliable, flexible, and cost competitive.
Competition
The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of
competition. As a result, our actual or proposed immunotherapies could become obsolete before we recoup any portion of our related
research and development expenses. The biotechnology and biopharmaceutical industries are highly competitive, and this competition
comes from both biotechnology firms and from major pharmaceutical companies, including: Aduro Biotech, Agenus Inc., Celldex
Therapeutics, Inovio Pharmaceutical Inc., ISA Pharmaceuticals, MedImmune LLC, Neon Therapeutics, Oncolytics Biotech Inc.,
Oncothyreon Inc., et al., each of which is pursuing cancer vaccines and/or immunotherapies.
Many of these companies have substantially greater financial, marketing, and human resources than we do (including, in some
cases, substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). We also experience
competition in the development of our immunotherapies from universities and other research institutions and compete with others in
acquiring technology from such universities and institutions. In addition, certain of our immunotherapies may be subject to competition
from investigational new drugs and/or products developed using other technologies, some of which have completed numerous clinical
trials.
Our competition will be determined in part by the potential indications for which drugs are developed and ultimately approved by
regulatory authorities. Additionally, the timing of market introduction of some of our potential immunotherapies or of competitors’
products may be an important competitive factor. Accordingly, the speed with which we can develop immunotherapies, complete
preclinical testing, clinical trials and approval processes and supply commercial quantities to market are expected to be important
competitive factors. We expect that competition among products approved for sale will be based on various factors, including product
efficacy, safety, reliability, acceptance, availability, price and patent position.
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Experience and Expertise
Our management team has extensive experience in oncology development, including contract research, development and
manufacturing across a board range of science, technologies, and process operations. We have built internal capabilities supporting
research, clinical, medical, manufacturing and compliance operations and have extended our expertise with collaborations.
Employees
As of January 6, 2016, we had 48 employees, all of which were full time employees. None of our employees are represented by a
labor union, and we consider our relationship with our employees to be good.
Description of Property
Our corporate offices are currently located at 305 College Road East, Princeton, New Jersey 08540. On April 1, 2011, we entered
into a sublease agreement for such office, which is an approximately 10,000 square foot leased facility in Princeton, NJ. The agreement had
a termination date of November 29, 2015. In May 2015, we signed a direct lease for an expansion area, as well as a direct lease for the
existing office, lab and vivarium space upon the expiration of the sublease agreement, which is approximately 20,000 square foot of space
in total. The lease term is seven years and expires on November 30, 2022. The lease requires base annual rent of approximately $442,000
with annual increases in increments between 2% and 4% throughout the remainder of the lease. The lease contains two options to renew for
five years each.
We plan to further increase our capacity to include in-house clinical and commercial manufacturing capabilities, where we first
intend to manufacture clinical supplies for our ADXS-NEO program. We will continue to rent necessary offices and laboratories to support
our growing business.
Item 1A: Risk Factors.
You should carefully consider the risks described below as well as other information provided to you in this annual report,
including information in the section of this document entitled “Forward-Looking Statements.” The risks and uncertainties described below
are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial
may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of
operations could be materially adversely affected, the value of our Common Stock could decline, and you may lose all or part of your
investment.
Risks Related to our Business and Industry
We are a clinical stage company.
We are a clinical stage biotechnology company with a history of losses and can provide no assurance as to future operating results.
As a result of losses that will continue throughout our clinical stage, we may exhaust our financial resources and be unable to complete the
development of our products. We anticipate that our ongoing operational costs will increase significantly as we continue conducting our
clinical development program. Our deficit will continue to grow during our drug development period.
We have sustained losses from operations in each fiscal year since our inception, and we expect losses to continue for the
indefinite future due to the substantial investment in research and development. As of October 31, 2015, we had an accumulated deficit of
$134,054,259 and shareholders’ equity of $115,598,875. We expect to spend substantial additional sums on the continued administration
and research and development of proprietary products and technologies with no certainty that our immunotherapies will become
commercially viable or profitable as a result of these expenditures. If we fail to raise a significant amount of capital, we may need to
significantly curtail operations or cease operations in the near future. If any of our product candidates fail in clinical trials or does not gain
regulatory approval, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain
profitability in subsequent periods.
Drug discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of
failure.
Product candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy in
humans. Conducting pre-clinical testing and clinical trials is a lengthy, time-consuming and expensive process that takes many years. We
cannot be sure that pre-clinical testing or clinical trials of any of our product candidates will demonstrate the safety, efficacy and benefit-to-
risk profile necessary to obtain marketing approvals. In addition, product candidates that experience success in pre-clinical testing and
early-stage clinical trials will not necessarily experience the same success in late-stage clinical trials, which are required for marketing
approval.
Even if we are successful in advancing a product candidate into the clinical development stage, before obtaining regulatory and
marketing approvals, we must demonstrate through extensive human clinical trials that the product candidate is safe and effective for its
intended use. Human clinical trials must be carried out under protocols that are acceptable to regulatory authorities and to the independent
committees responsible for the ethical review of clinical studies. There may be delays in preparing protocols or receiving approval for them
that may delay the start or completion of the clinical trials. In addition, clinical practices vary globally, and there is a lack of harmonization
among the guidance provided by various regulatory bodies of different regions and countries with respect to the data that is required to
receive marketing approval, which makes designing global trials increasingly complex. There are a number of additional factors that may
cause our clinical trials to be delayed, prematurely terminated or deemed inadequate to support regulatory approval, such as:
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● unforeseen safety issues (including those arising with respect to trials by third parties for compounds in a similar class as our
product or product candidate), inadequate efficacy, or an unacceptable risk-benefit profile observed at any point during or after
completion of the trials;
● slower than expected rates of patient enrollment, which could be due to any number of factors, including failure of our third-party
vendors, including our CROs, to effectively perform their obligations to us, a lack of patients who meet the enrollment criteria or
competition from clinical trials in similar product classes or patient populations;
● the risk of failure of our clinical investigational sites and related facilities, including our suppliers, to maintain compliance with the
FDA’s cGMP regulations or similar regulations in countries outside of the U.S., including the risk that these sites fail to pass
inspections by the appropriate governmental authority, which could invalidate the data collected at that site or place the entire
clinical trial at risk;
● a n y inability to reach agreement or lengthy discussions with the FDA, equivalent regulatory authorities, or ethical review
committees on trial design that we are able to execute;
● changes in laws, regulations, regulatory policy or clinical practices, especially if they occur during ongoing clinical trials or shortly
after completion of such trials.
● clinical trial record keeping or data quality and accuracy issues.
Any deficiency in the design, implementation or oversight of our development programs could cause us to incur significant
additional costs, experience significant delays, prevent us from obtaining marketing approval for any product candidate or abandon
development of certain product candidates, any of which could harm our business and cause our stock price to decline.
Our operating history does not afford investors a sufficient history on which to base an investment decision.
We commenced our Lm-LLO based immunotherapy development business in February 2002 and today exist as a clinical stage
company. We have no approved products and therefore have not derived any significant revenue from the sales of products and have not
yet demonstrated ability to obtain regulatory approval, formulate and manufacture commercial scale products, or conduct sales and
marketing activities necessary for successful product commercialization. Consequently, there is limited information for investors to use as
basis for assessing our future viability. Investors must consider the risks and difficulties we have encountered in the rapidly evolving
vaccine and immunotherapy industry. Such risks include the following:
● difficulties, complications, delays and other unanticipated factors in connection with the development of new drugs;
● competition from companies that have substantially greater assets and financial resources than we have;
● need for acceptance of our immunotherapies;
● ability to anticipate and adapt to a competitive market and rapid technological developments;
● need to rely on outside funding due to the length of drug development cycles and governmental approved protocols associated with
the pharmaceutical industry; and
● dependence upon key personnel including key independent consultants and advisors.
We cannot be certain that our strategy will be successful or that we will successfully address these risks. In the event that we do
not successfully address these risks, our business, prospects, financial condition and results of operations could be materially and adversely
affected. We may be required to reduce our staff, discontinue certain research or development programs of our future products and cease to
operate.
We may face legal claims; Litigation is expensive and we may not be able to afford the costs.
We may face legal claims involving stockholders, consumers, competitors, and other issues. As described in “Legal Proceedings”
in Part I Item 3 of this Form 10-K, we are engaged in a number of legal proceedings. Litigation and other legal proceedings are inherently
uncertain, and adverse rulings could occur, including monetary damages, or an injunction stopping us from engaging in business practices,
or requiring other remedies, such as compulsory licensing of patents.
The costs of litigation or any proceeding relating to our intellectual property or contractual rights could be substantial, even if
resolved in our favor. Some of our competitors or financial funding sources have far greater resources than we do and may be better able to
afford the costs of complex litigation. Also, in a lawsuit for infringement or contractual breaches, even if frivolous, will require
considerable time commitments on the part of management, our attorneys and consultants. Defending these types of proceedings or legal
actions involve considerable expense and could negatively affect our financial results.
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We can provide no assurance of the successful and timely development of new products.
Our immunotherapies are at various stages of research and development. Further development and extensive testing will be
required to determine their technical feasibility and commercial viability. We will need to complete significant additional clinical trials
demonstrating that our product candidates are safe and effective to the satisfaction of the FDA and other non-U.S. regulatory authorities.
The drug approval process is time-consuming, involves substantial expenditures of resources, and depends upon a number of factors,
including the severity of the illness in question, the availability of alternative treatments, and the risks and benefits demonstrated in the
clinical trials. Our success will depend on our ability to achieve scientific and technological advances and to translate such advances into
licensable, FDA-approvable, commercially competitive products on a timely basis. Failure can occur at any stage of the process. If such
programs are not successful, we may invest substantial amounts of time and money without developing revenue-producing products. As we
enter a more extensive clinical program for our product candidates, the data generated in these studies may not be as compelling as the
earlier results.
The proposed development schedules for our immunotherapies may be affected by a variety of factors, including technological
difficulties, clinical trial failures, regulatory hurdles, clinical holds, competitive products, intellectual property challenges and/or changes in
governmental regulation, many of which will not be within our control. Any delay in the development, introduction or marketing of our
products could result either in such products being marketed at a time when their cost and performance characteristics would not be
competitive in the marketplace or in the shortening of their commercial lives. In light of the long-term nature of our projects, the unproven
technology involved and the other factors described elsewhere in this section, there can be no assurance that we will be able to successfully
complete the development or marketing of any new products which could materially harm our business, results of operations and prospects.
Our research and development expenses are subject to uncertainty.
Factors affecting our research and development expenses include, but are not limited to:
● competition from companies that have substantially greater assets and financial resources than we have;
● need for acceptance of our immunotherapies;
● ability to anticipate and adapt to a competitive market and rapid technological developments;
● amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure;
● need to rely on multiple levels of outside funding due to the length of drug development cycles and governmental approved
protocols associated with the pharmaceutical industry; and
● dependence upon key personnel including key independent consultants and advisors.
There can be no guarantee that our research and development expenses will be consistent from period to period. We may be
required to accelerate or delay incurring certain expenses depending on the results of our studies and the availability of adequate funding.
We are subject to numerous risks inherent in conducting clinical trials.
We outsource the management of our clinical trials to third parties. Agreements with clinical research organizations, clinical
investigators and medical institutions for clinical testing and data management services, place substantial responsibilities on these parties
that, if unmet, could result in delays in, or termination of, our clinical trials. For example, if any of our clinical trial sites fail to comply with
FDA-approved good clinical practices, we may be unable to use the data gathered at those sites. If these clinical investigators, medical
institutions or other third parties do not carry out their contractual duties or obligations or fail to meet expected deadlines, or if the quality
or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols or for other reasons, our
clinical trials may be extended, delayed or terminated, and we may be unable to obtain regulatory approval for, or successfully
commercialize, our agents. We are not certain that we will successfully recruit enough patients to complete our clinical trials nor that we
will reach our primary endpoints. Delays in recruitment, lack of clinical benefit or unacceptable side effects would delay or prevent the
initiation of future development of our agents.
We or our regulators may suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or
terminate our clinical trials if at any time we believe they present an unacceptable risk to the patients enrolled in our clinical trials or do not
demonstrate clinical benefit. In addition, regulatory agencies may order the temporary or permanent discontinuation of our clinical trials, or
place our products on temporary or permanent hold, at any time if they believe that the clinical trials are not being conducted in accordance
with applicable regulatory requirements or that they present an unacceptable safety risk to the patients enrolled in our clinical trials.
Our clinical trial operations are subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our
clinical trial sites are not in compliance with applicable regulatory requirements for conducting clinical trials, we may receive reports of
observations or warning letters detailing deficiencies, and we will be required to implement corrective actions. If regulatory agencies deem
our responses to be inadequate, or are dissatisfied with the corrective actions we or our clinical trial sites have implemented, our clinical
trials may be temporarily or permanently discontinued, we may be fined, we or our investigators may be precluded from conducting any
ongoing or any future clinical trials, the government may refuse to approve our marketing applications or allow us to manufacture or
market our products, and we may be criminally prosecuted.
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The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain
regulatory approval for our product candidates, which would materially harm our business, results of operations and prospects.
The successful development of immunotherapies is highly uncertain.
Successful development of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are
beyond our control. Immunotherapies that appear promising in the early phases of development may fail to reach the market for several
reasons including:
● preclinical study results that may show the immunotherapy to be less effective than desired (e.g., the study failed to meet its primary
objectives) or to have harmful or problematic side effects;
● clinical study results that may show the immunotherapy to be less effective than expected (e.g., the study failed to meet its primary
endpoint) or to have unacceptable side effects;
● failure to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may
be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, additional time requirements for data
analysis, or Biologics License Application preparation, discussions with the FDA, an FDA request for additional preclinical or
clinical data, or unexpected safety or manufacturing issues;
● manufacturing costs, formulation issues, pricing or reimbursement issues, or other factors that make the immunotherapy
uneconomical; and
● the proprietary rights of others and their competing products and technologies that may prevent the immunotherapy from being
commercialized.
Success in preclinical and early clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results
are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to
complete clinical studies and to submit an application for marketing approval for a final decision by a regulatory authority varies
significantly from one immunotherapy to the next, and may be difficult to predict.
Even if we are successful in getting market approval, commercial success of any of our product candidates will also depend in
large part on the availability of coverage and adequate reimbursement from third-party payers, including government payers such as the
Medicare and Medicaid programs and managed care organizations, which may be affected by existing and future health care reform
measures designed to reduce the cost of health care. Third-party payers could require us to conduct additional studies, including post-
marketing studies related to the cost effectiveness of a product, to qualify for reimbursement, which could be costly and divert our
resources. If government and other health care payers were not to provide adequate coverage and reimbursement levels for one any of our
products once approved, market acceptance and commercial success would be reduced.
In addition, if one of our products is approved for marketing, we will be subject to significant regulatory obligations regarding
product promotion, the submission of safety and other post-marketing information and reports and registration, and will need to continue to
comply (or ensure that our third party providers) comply with cGMPs, and Good Clinical Practices (“GCP”), for any clinical trials that we
conduct post-approval. In addition, there is always the risk that we or a regulatory authority might identify previously unknown problems
with a product post-approval, such as adverse events of unanticipated severity or frequency. Compliance with these requirements is costly,
and any failure to comply or other issues with our product candidates’ post-market approval could have a material adverse effect on our
business, financial condition and results of operations.
We must comply with significant government regulations.
The research and development, manufacturing and marketing of human therapeutic and diagnostic products are subject to
regulation, primarily by the FDA in the United States and by comparable authorities in other countries. These national agencies and other
federal, state, local and foreign entities regulate, among other things, research and development activities (including testing in animals and
in humans) and the testing, manufacturing, handling, labeling, storage, record keeping, approval, advertising and promotion of the products
that we are developing. If we obtain approval for any of our product candidates, our operations will be directly or indirectly through our
customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statue and the
federal False Claims Act, and privacy laws. Noncompliance with applicable laws and requirements can result in various adverse
consequences, including delay in approving or refusal to approve product licenses or other applications, suspension or termination of
clinical investigations, revocation of approvals previously granted, fines, criminal prosecution, civil and criminal penalties, recall or seizure
of products, exclusion from having our products reimbursed by federal health care programs, the curtailment or restructuring of our
operations, injunctions against shipping products and total or partial suspension of production and/or refusal to allow a company to enter
into governmental supply contracts.
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The process of obtaining requisite FDA approval has historically been costly and time-consuming. Current FDA requirements for
a new human biological product to be marketed in the United States include: (1) the successful conclusion of preclinical laboratory and
animal tests, if appropriate, to gain preliminary information on the product’s safety; (2) filing with the FDA of an IND to conduct human
clinical trials for drugs or biologics; (3) the successful completion of adequate and well-controlled human clinical trials to establish the
safety and efficacy of the investigational new drug for its recommended use; and (4) filing by a company and acceptance and approval by
the FDA of a BLA for a biological investigational new drug, to allow commercial distribution of a biologic product. The FDA also requires
that any drug or formulation to be tested in humans be manufactured in accordance with its GMP regulations. This has been extended to
include any drug that will be tested for safety in animals in support of human testing. The GMPs set certain minimum requirements for
procedures, record-keeping and the physical characteristics of the laboratories used in the production of these drugs. A delay in one or
more of the procedural steps outlined above could be harmful to us in terms of getting our immunotherapies through clinical testing and to
market.
We can provide no assurance that our clinical product candidates will obtain regulatory approval or that the results of clinical studies
will be favorable.
We are currently evaluating the safety and efficacy of several of our candidates in a number of ongoing pre-clinical and clinical
trials. However, even though the initiation and conduct of the clinical trials is in accordance with the governing regulatory authorities in
each country, as with any investigational new drug (under an IND in the United States, or the equivalent in countries outside of the United
States), we are at risk of a clinical hold at any time based on the evaluation of the data and information submitted to the governing
regulatory authorities.
There can be delays in obtaining FDA (U.S.) and/or other necessary regulatory approvals in the United States and in countries
outside the United States for any investigational new drug and failure to receive such approvals would have an adverse effect on the
investigational new drug’s potential commercial success and on our business, prospects, financial condition and results of operations. The
time required to obtain approval by the FDA and non-U.S. regulatory authorities is unpredictable but typically takes many years following
the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities.
For example, the FDA or non-U.S. regulatory authorities may disagree with the design or implementation of our clinical trials or study
endpoints; or we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks. In addition,
the FDA or non-U.S. regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials or the data
collected from clinical trials of our product candidates may not be sufficient to support the submission of a New Drug Application
(“NDA”) or other submission or to obtain regulatory approval in the United States or elsewhere. The FDA or non-U.S. regulatory
authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical
and commercial supplies; and the approval policies or regulations of the FDA or non-U.S. regulatory authorities may significantly change
in a manner rendering our clinical data insufficient for approval.
In addition to the foregoing, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may
change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not submitted for nor
obtained regulatory approval for any product candidate in-humans (US & EU) and it is possible that none of our existing product candidates
or any product candidates we may seek to develop in the future will ever obtain regulatory approval.
We may not obtain or maintain the benefits associated with orphan drug designation, including market exclusivity.
Although we have been granted FDA orphan drug designation for axalimogene filolisbac for use in the treatment of anal cancer,
HPV-associated head and neck cancer, Stage II-IV invasive cervical cancer and for ADXS-HER2 for the treatment of osteosarcoma in the
United States, as well as EMA orphan drug designation for axalimogene filolisbac for the treatment of anal cancer and for ADXS-HER2
for the treatment of osteosarcoma in the EU, and intend to continue to expand our designation for these uses where applicable , we may not
receive the benefits associated with orphan drug designation. This may result from a failure to maintain orphan drug status, or result from a
competing product reaching the market that has an orphan designation for the same disease indication. Under U.S. rules for orphan drugs, if
such a competing product reaches the market before ours does, the competing product could potentially obtain a scope of market
exclusivity that limits or precludes our product from being sold in the United States for seven years. Even if we obtain exclusivity, the FDA
could subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is
shown to be safer, more effective or makes a major contribution to patient care. A competitor also may receive approval of different
products for the same indication for which our orphan product has exclusivity, or obtain approval for the same product but for a different
indication for which the orphan product has exclusivity.
In addition, if and when we request orphan drug designation in Europe, the European exclusivity period is ten years but can be
reduced to six years if the drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that
market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMEA determines that the request for
designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients
with the rare disease or condition.
We rely upon patents to protect our technology. We may be unable to protect our intellectual property rights and we may be liable for
infringing the intellectual property rights of others.
Our ability to compete effectively will depend on our ability to maintain the proprietary nature of our technologies, including the
Lm-LLO based immunotherapy platform technology, and the proprietary technology of others with whom we have entered into
collaboration and licensing agreements.
Currently, we own or have rights to 193 patents and applications, which are owned, licensed from, or co-owned with Penn, Merck,
NIH, and/or Georgia Regents University. We have obtained the rights to all future patent applications in this field originating in the
laboratories of Dr. Yvonne Paterson and Dr. Fred Frankel, at the University of Pennsylvania.
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We own or hold licenses to a number of issued patents and U.S. pending patent applications, as well as foreign patents and foreign
counterparts. Our success depends in part on our ability to obtain patent protection both in the United States and in other countries for our
product candidates, as well as the methods for treating patients in the product indications using these product candidates. Such patent
protection is costly to obtain and maintain, and we cannot guarantee that sufficient funds will be available. Our ability to protect our
product candidates from unauthorized or infringing use by third parties depends in substantial part on our ability to obtain and maintain
valid and enforceable patents. Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering
pharmaceutical inventions and the scope of claims made under these patents, our ability to obtain, maintain and enforce patents is uncertain
and involves complex legal and factual questions. Even if our product candidates, as well as methods for treating patients for prescribed
indications using these product candidates are covered by valid and enforceable patents and have claims with sufficient scope, disclosure
and support in the specification, the patents will provide protection only for a limited amount of time. Accordingly, rights under any issued
patents may not provide us with sufficient protection for our product candidates or provide sufficient protection to afford us a commercial
advantage against competitive products or processes.
In addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to
us. Even if patents have issued or will issue, we cannot guarantee that the claims of these patents are or will be valid or enforceable or will
provide us with any significant protection against competitive products or otherwise be commercially valuable to us. The laws of some
foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States and many companies have
encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. Furthermore, different countries have
different procedures for obtaining patents, and patents issued in different countries offer different degrees of protection against use of the
patented invention by others. If we encounter such difficulties in protecting or are otherwise precluded from effectively protecting our
intellectual property rights in foreign jurisdictions, our business prospects could be substantially harmed.
The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and
factual questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed
unenforceable, invalidated, or circumvented as a result of laws, rules and guidelines that are changed due to legislative, judicial or
administrative actions, or review, which render our patents unenforceable or invalid. Our patents can be challenged by our competitors who
can argue that our patents are invalid, unenforceable, lack utility, sufficient written description or enablement, or that the claims of the
issued patents should be limited or narrowly construed. Patents also will not protect our product candidates if competitors devise ways of
making or using these product candidates without infringing our patents.
We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our technologies,
methods of treatment, product candidates, and any future products are covered by valid and enforceable patents or are effectively
maintained as trade secrets and we have the funds to enforce our rights, if necessary.
The expiration of our owned or licensed patents before completing the research and development of our product candidates and
receiving all required approvals in order to sell and distribute the products on a commercial scale can adversely affect our business and
results of operations.
Litigation regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are involved
in such litigation, it could cause delays in bringing product candidates to market and harm our ability to operate.
Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. The
pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may
obtain patents in the future and allege that the products or use of our technologies infringe these patent claims or that we are employing
their proprietary technology without authorization.
In addition, third parties may challenge or infringe upon our existing or future patents. Proceedings involving our patents or patent
applications or those of others could result in adverse decisions regarding:
● the patentability of our inventions relating to our product candidates; and/or
● the enforceability, validity or scope of protection offered by our patents relating to our product candidates.
Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in
pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of
others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation
is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do
not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed
patents declared valid, we may:
● incur substantial monetary damages;
● encounter significant delays in bringing our product candidates to market; and/or
● be precluded from participating in the manufacture, use or sale of our product candidates or methods of treatment requiring licenses.
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We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We also rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is
appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees,
consultants, outside scientific collaborators, sponsored researchers, and other advisors to protect our trade secrets and other proprietary
information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy
in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and
proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary
rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
We are dependent upon our license agreement with Penn; if we breach the license agreement and/or fail to make payments due and
owing to Penn under our license agreement, our business will be materially and adversely affected.
Pursuant to the terms of our license agreement with Penn, which has been amended from time to time, we have acquired exclusive
worldwide licenses for patents and patent applications related to our proprietary Listeria vaccine technology. The license provides us with
the exclusive commercial rights to the patent portfolio developed at Penn as of the effective date of the license, in connection with Dr.
Paterson and requires us to pay various milestone, legal, filing and licensing payments to commercialize the technology. As of October 31,
2015, we had no outstanding payments to Penn. We can provide no assurance that we will be able to make all future payments due and
owing thereunder, that such licenses will not be terminated or expire during critical periods, that we will be able to obtain licenses from
Penn for other rights that may be important to us, or, if obtained, that such licenses will be obtained on commercially reasonable terms. The
loss of any current or future licenses from Penn or the exclusivity rights provided therein could materially harm our business, financial
condition and operating results.
If we are unable to obtain licenses needed for the development of our product candidates, or if we breach any of the agreements under
which we license rights to patents or other intellectual property from third parties, we could lose license rights that are important to our
business.
If we are unable to maintain and/or obtain licenses needed for the development of our product candidates in the future, we may
have to develop alternatives to avoid infringing on the patents of others, potentially causing increased costs and delays in drug development
and introduction or precluding the development, manufacture, or sale of planned products. Some of our licenses provide for limited periods
of exclusivity that require minimum license fees and payments and/or may be extended only with the consent of the licensor. We can
provide no assurance that we will be able to meet these minimum license fees in the future or that these third parties will grant extensions
on any or all such licenses. This same restriction may be contained in licenses obtained in the future.
Additionally, we can provide no assurance that the patents underlying any licenses will be valid and enforceable. To the extent any
products developed by us are based on licensed technology, royalty payments on the licenses will reduce our gross profit from such product
sales and may render the sales of such products uneconomical. In addition, the loss of any current or future licenses or the exclusivity rights
provided therein could materially harm our business financial condition and our operations.
We have no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such.
We do not intend to create facilities to manufacture our products and therefore are dependent upon third parties to do so. We
currently have agreements with various third party manufacturing facilities for production of our immunotherapies for research and
development and testing purposes. We depend on our manufacturers to meet our deadlines, quality standards and specifications. Our
reliance on third parties for the manufacture of our drug substance, investigational new drugs and, in the future, any approved products,
creates a dependency that could severely disrupt our research and development, our clinical testing, and ultimately our sales and marketing
efforts if the source of such supply proves to be unreliable or unavailable. If the contracted manufacturing source is unreliable or
unavailable, we may not be able to manufacture clinical drug supplies of our immunotherapies, and our preclinical and clinical testing
programs may not be able to move forward and our entire business plan could fail. If we are able to commercialize our products in the
future, there is no assurance that our manufacturers will be able to meet commercialized scale production requirements in a timely manner
or in accordance with applicable standards or current GMP.
If we are unable to establish or manage strategic collaborations in the future, our revenue and drug development may be limited.
Our strategy includes eventual substantial reliance upon strategic collaborations for marketing and commercialization of our
clinical product candidates, and we may rely even more on strategic collaborations for research, development, marketing and
commercialization for some of our immunotherapies. To date, we have been heavily reliant upon third party outsourcing for our clinical
trials execution and production of drug supplies for use in clinical trials. Establishing strategic collaborations is difficult and time-
consuming. Our discussions with potential collaborators may not lead to the establishment of collaborations on favorable terms, if at all.
For example, potential collaborators may reject collaborations based upon their assessment of our financial, clinical, regulatory or
intellectual property position. Our current collaborations, as well as any future new collaborations, may never result in the successful
development or commercialization of our immunotherapies or the generation of sales revenue. To the extent that we have entered or will
enter into co-promotion or other collaborative arrangements, our product revenues are likely to be lower than if we directly marketed and
sold any products that we may develop.
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Management of our relationships with our collaborators will require:
● significant time and effort from our management team;
● financial funding to support said collaboration;
● coordination of our research and development programs with the research and development priorities of our collaborators; and
● effective allocation of our resources to multiple projects.
If we continue to enter into research and development collaborations at the early phases of drug development, our success will in
part depend on the performance of our corporate collaborators. We will not directly control the amount or timing of resources devoted by
our corporate collaborators to activities related to our immunotherapies. Our corporate collaborators may not commit sufficient resources to
our research and development programs or the commercialization, marketing or distribution of our immunotherapies. If any corporate
collaborator fails to commit sufficient resources, our preclinical or clinical development programs related to this collaboration could be
delayed or terminated. Also, our collaborators may pursue existing or other development-stage products or alternative technologies in
preference to those being developed in collaboration with us. Finally, if we fail to make required milestone or royalty payments to our
collaborators or to observe other obligations in our agreements with them, our collaborators may have the right to terminate those
agreements.
We may incur substantial liabilities from any product liability claims if our insurance coverage for those claims is inadequate.
We face an inherent risk of product liability exposure related to the testing of our immunotherapies in human clinical trials, and
will face an even greater risk if the approved products are sold commercially. An individual may bring a liability claim against us if one of
the immunotherapies causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves against the product
liability claim, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
● decreased demand for our immunotherapies;
● damage to our reputation;
● withdrawal of clinical trial participants;
● costs of related litigation;
● substantial monetary awards to patients or other claimants;
● loss of revenues;
● the inability to commercialize immunotherapies; and
● increased difficulty in raising required additional funds in the private and public capital markets.
We have Product Liability and Clinical Trial Liability insurance coverage for each clinical trial. We do not have product liability
insurance for sold commercial products because we do not have products on the market. We currently are in the process of obtaining
insurance coverage and plan to expand such coverage to include the sale of commercial products if marketing approval is obtained for any
of our immunotherapies. However, insurance coverage is increasingly expensive and we may not be able to maintain insurance coverage at
a reasonable cost and we may not be able to obtain insurance coverage that will be adequate to satisfy any liability that may arise.
We may incur significant costs complying with environmental laws and regulations.
We and our contracted third parties use hazardous materials, including chemicals and biological agents and compounds that could
be dangerous to human health and safety or the environment. As appropriate, we store these materials and wastes resulting from their use at
our or our outsourced laboratory facility pending their ultimate use or disposal. We contract with a third party to properly dispose of these
materials and wastes. We are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture,
storage, handling and disposal of these materials and wastes. Compliance with such laws and regulations may be costly.
If we use biological materials in a manner that causes injury, we may be liable for damages.
Our research and development activities involve the use of biological and hazardous materials. Although we believe our safety
procedures for handling and disposing of these materials complies with federal, state and local laws and regulations, we cannot entirely
eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of these materials. We do not carry
specific biological waste or pollution liability or remediation insurance coverage, nor do our workers’ compensation, general liability, and
property and casualty insurance policies provide coverage for damages and fines/penalties arising from biological exposure or
contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with fines in an
amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended or terminated.
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We need to attract and retain highly skilled personnel; we may be unable to effectively manage growth with our limited resources.
As of January 6, 2016, we had 48 employees, all of which were full time employees. Our ability to attract and retain highly skilled
personnel is critical to our operations and expansion. We face competition for these types of personnel from other technology companies
and more established organizations, many of which have significantly larger operations and greater financial, technical, human and other
resources than we have. We may not be successful in attracting and retaining qualified personnel on a timely basis, on competitive terms,
or at all. If we are not successful in attracting and retaining these personnel, or integrating them into our operations, our business, prospects,
financial condition and results of operations will be materially adversely affected. In such circumstances we may be unable to conduct
certain research and development programs, unable to adequately manage our clinical trials and other products, and unable to adequately
address our management needs.
We depend upon our senior management and key consultants and their loss or unavailability could put us at a competitive
disadvantage.
We depend upon the efforts and abilities of our senior executives, as well as the services of several key consultants. The loss or
unavailability of the services of any of these individuals for any significant period of time could have a material adverse effect on our
business, prospects, financial condition and results of operations. We have not obtained, do not own, nor are we the beneficiary of, key-
person life insurance.
The biotechnology and immunotherapy industries are characterized by rapid technological developments and a high degree of
competition. We may be unable to compete with more substantial enterprises.
The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of
competition. As a result, our actual or proposed immunotherapies could become obsolete before we recoup any portion of our related
research and development and commercialization expenses. Competition in the biopharmaceutical industry is based significantly on
scientific and technological factors. These factors include the availability of patent and other protection for technology and products, the
ability to commercialize technological developments and the ability to obtain governmental approval for testing, manufacturing and
marketing. We compete with specialized biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing number
of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies have focused
their development efforts in the human therapeutics area, including cancer. Many major pharmaceutical companies have developed or
acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies. These companies,
as well as academic institutions and governmental agencies and private research organizations, also compete with us in recruiting and
retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with other companies in the
pharmaceutical field will also depend to a considerable degree on the continuing availability of capital to us.
We are aware of certain investigational new drugs under development or approved products by competitors that are used for the
prevention, diagnosis, or treatment of certain diseases we have targeted for drug development. Various companies are developing
biopharmaceutical products that have the potential to directly compete with our immunotherapies even though their approach to may be
different. The biotechnology and biopharmaceutical industries are highly competitive, and this competition comes from both biotechnology
firms and from major pharmaceutical companies, including companies like: Aduro Biotech, Agenus Inc., Bionovo Inc., Celldex
Therapeutics, Inovio Pharmaceutical Inc., ISA Pharmaceuticals, MedImmune LLC, Neon Therapeutics, Oncolytics Biotech Inc.,
Oncothyreon Inc., each of which is pursuing cancer vaccines and/or immunotherapies. Many of these companies have substantially greater
financial, marketing, and human resources than we do (including, in some cases, substantially greater experience in clinical testing,
manufacturing, and marketing of pharmaceutical products). We also experience competition in the development of our immunotherapies
from universities and other research institutions and compete with others in acquiring technology from such universities and institutions.
In addition, certain of our immunotherapies may be subject to competition from investigational new drugs and/or products
developed using other technologies, some of which have completed numerous clinical trials.
We may not obtain or maintain the benefits associated with breakthrough therapy designation.
If we apply for Breakthrough Therapy Designation (“BTD”), we may not be granted BTD, or even if granted, we may not receive
the benefits associated with BTD. This may result from a failure to maintain breakthrough therapy status if it is no longer considered to be a
breakthrough therapy. For example, a drug’s development program may be granted BTD using early clinical testing that shows a much
higher response rate than available therapies. However, subsequent interim data derived from a larger study may show a response that is
substantially smaller than the response seen in early clinical testing. Another example is where BTD is granted to two drugs that are being
developed for the same use. If one of the two drugs gains traditional approval, the other would not retain its designation unless its sponsor
provided evidence that the drug may demonstrate substantial improvement over the recently approved drug. When BTD is no longer
supported by emerging data or the designated drug development program is no longer being pursued, the FDA may choose to send a letter
notifying the sponsor that the program is no longer designated as a breakthrough therapy development program.
We believe that our immunotherapies under development and in clinical trials will address unmet medical needs in the treatment of
cancer. Our competition will be determined in part by the potential indications for which drugs are developed and ultimately approved by
regulatory authorities. Additionally, the timing of market introduction of some of our potential products or of competitors’ products may be
an important competitive factor. Accordingly, the relative speed with which we can develop immunotherapies, complete preclinical testing,
clinical trials and approval processes and supply commercial quantities to market is expected to be important competitive factors. We
expect that competition among products approved for sale will be based on various factors, including product efficacy, safety, reliability,
availability, price and patent position.
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Risks Related to our Securities
The price of our Common Stock and warrants may be volatile.
The trading price of our Common Stock and warrants may fluctuate substantially. The price of our Common Stock and warrants
that will prevail in the market may be higher or lower than the price you have paid, depending on many factors, some of which are beyond
our control and may not be related to our operating performance. These fluctuations could cause you to lose part or all of your investment
in our Common Stock and warrants. Those factors that could cause fluctuations include, but are not limited to, the following:
● price and volume fluctuations in the overall stock market from time to time;
● fluctuations in stock market prices and trading volumes of similar companies;
● actual or anticipated changes in our net loss or fluctuations in our operating results or in the expectations of securities analysts;
● the issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
● general economic conditions and trends;
● positive and negative events relating to healthcare and the overall pharmaceutical and biotech sector;
● major catastrophic events;
● sales of large blocks of our stock;
● significant dilution caused by the anti-dilutive clauses in our financial agreements;
● departures of key personnel;
● changes in the regulatory status of our immunotherapies, including results of our clinical trials;
● events affecting Penn or any current or future collaborators;
● announcements of new products or technologies, commercial relationships or other events by us or our competitors;
● regulatory developments in the United States and other countries;
● failure of our Common Stock or warrants to be listed or quoted on The NASDAQ Stock Market, NYSE Amex Equities or other
national market system;
● changes in accounting principles; and
● discussion of us or our stock price by the financial and scientific press and in online investor communities.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often
been brought against that company. Due to the potential volatility of our stock price, we may therefore be the target of securities litigation
in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.
A limited public trading market may cause volatility in the price of our Common Stock.
The quotation of our Common Stock on the NASDAQ does not assure that a meaningful, consistent and liquid trading market
currently exists, and in recent years such market has experienced extreme price and volume fluctuations that have particularly affected the
market prices of many smaller companies like us. Our Common Stock is thus subject to this volatility. Sales of substantial amounts of
Common Stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our Common Stock and
our stock price may decline substantially in a short time and our shareholders could suffer losses or be unable to liquidate their holdings.
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The market prices for our Common Stock may be adversely impacted by future events.
Our Common Stock began trading on the over-the-counter-markets on July 28, 2005 and is currently quoted on the NASDAQ
Stock Market under the symbol ADXS. Market prices for our Common Stock and warrants will be influenced by a number of factors,
including:
● the issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
● changes in interest rates;
● significant dilution caused by the anti-dilutive clauses in our financial agreements;
● competitive developments, including announcements by competitors of new products or services or significant contracts,
acquisitions, strategic partnerships, joint ventures or capital commitments;
● variations in quarterly operating results;
● change in financial estimates by securities analysts;
● the depth and liquidity of the market for our Common Stock and warrants;
● investor perceptions of our company and the pharmaceutical and biotech industries generally; and
● general economic and other national conditions.
If we fail to remain current with our listing requirements, we could be removed from the NASDAQ Capital Market, which would limit
the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.
Companies trading on the NASDAQ Marketplace, such as our Company, must be reporting issuers under Section 12 of the
Exchange Act, as amended, and must meet the listing requirements in order to maintain the listing of our Common Stock on the NASDAQ
Capital Market. If we do not meet these requirements, the market liquidity for our securities could be severely adversely affected by
limiting the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.
Sales of additional equity securities may adversely affect the market price of our Common Stock and your rights may be reduced.
We expect to continue to incur drug development and selling, general and administrative costs, and to satisfy our funding
requirements, we will need to sell additional equity securities, which may be subject to registration rights and warrants with anti-dilutive
protective provisions. The sale or the proposed sale of substantial amounts of our Common Stock or other equity securities in the public
markets may adversely affect the market price of our Common Stock and our stock price may decline substantially. Our shareholders may
experience substantial dilution and a reduction in the price that they are able to obtain upon sale of their shares. Also, new equity securities
issued may have greater rights, preferences or privileges than our existing Common Stock.
Additional authorized shares of Common Stock available for issuance may adversely affect the market price of our securities.
We are currently authorized to issue 45,000,000 shares of our Common Stock. As of January 7, 2016, we had 33,769,136 shares of
our Common Stock issued and outstanding, excluding shares issuable upon exercise of our outstanding warrants, options, convertible
promissory notes and shares of Common Stock earned but not yet issued under our director compensation program. Under our 2011
Employee Stock Purchase Plan, or ESPP, our employees can buy our Common Stock at a discounted price. To the extent the shares of
Common Stock are issued, options and warrants are exercised or convertible promissory notes are converted, holders of our Common Stock
will experience dilution. In the event of any future financing of equity securities or securities convertible into or exchangeable for,
Common Stock, holders of our Common Stock may experience dilution. In addition, as of January 4, 2016, we had outstanding options to
purchase 3,357,554 shares of our Common Stock at a weighted average exercise price of approximately $13.34 per share and outstanding
warrants to purchase 3,241,138 shares of our Common Stock (including the above warrants subject to weighted-average anti-dilution
protection); and approximately 22,827 shares of our Common Stock are available for grant under the ESPP.
We do not intend to pay cash dividends.
We have not declared or paid any cash dividends on our Common Stock, and we do not anticipate declaring or paying cash
dividends for the foreseeable future. Any future determination as to the payment of cash dividends on our Common Stock will be at our
Board of Directors’ discretion and will depend on our financial condition, operating results, capital requirements and other factors that our
Board of Directors considers to be relevant. In addition, the terms of our Series B Preferred Stock prohibit the payment of dividends on our
Common Stock for so long as any shares of our Series B Preferred Stock are outstanding.
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Our certificate of incorporation, bylaws and Delaware law have anti-takeover provisions that could discourage, delay or prevent a
change in control, which may cause our stock price to decline.
Our certificate of incorporation, Bylaws and Delaware law contain provisions which could make it more difficult for a third party
to acquire us, even if closing such a transaction would be beneficial to our shareholders. To date, we have not issued shares of preferred
stock, however, we are authorized to issue up to 5,000,000 shares of preferred stock. This preferred stock may be issued in one or more
series, the terms of which may be determined at the time of issuance by our Board of Directors without further action by shareholders. The
terms of any series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as
to dividend, liquidation, conversion and redemption rights and sinking fund provisions. The issuance of any preferred stock could
materially adversely affect the rights of the holders of our Common Stock, and therefore, reduce the value of our Common Stock. In
particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to,
a third party and thereby preserve control by the present management.
Provisions of our certificate of incorporation, Bylaws and Delaware law also could have the effect of discouraging potential
acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a shareholder might
consider favorable. Such provisions may also prevent or frustrate attempts by our shareholders to replace or remove our management. In
particular, the certificate of incorporation, Bylaws and Delaware law, as applicable, among other things; provide the Board of Directors
with the ability to alter the Bylaws without shareholder approval, and provide that vacancies on the Board of Directors may be filled by a
majority of directors in office, although less than a quorum.
We are also subject to Section 203 of the Delaware General Corporation Law, which, subject to certain exceptions, prohibits
“business combinations” between a publicly-held Delaware corporation and an “interested shareholder,” which is generally defined as a
shareholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year period following
the date that such shareholder became an interested shareholder.
These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of our company to first negotiate with its board. These provisions may delay or prevent
someone from acquiring or merging with us, which may cause the market price of our Common Stock to decline.
Item 1B: Unresolved Staff Comments.
None.
Item 2. Properties.
Our corporate offices are currently located at 305 College Road East, Princeton, New Jersey 08540. On April 1, 2011, we entered
into a sublease agreement for such office, which is an approximately 10,000 square foot leased facility in Princeton, NJ. The agreement had
a termination date of November 29, 2015. In May 2015, we signed a direct lease for an expansion area, as well as a direct lease for the
existing office, lab and vivarium space upon the expiration of the sublease agreement, which is approximately 20,000 square feet of space
in total. The lease term is seven years and expires on November 30, 2022. The lease requires base annual rent of approximately $442,000
with annual increases in increments between 2% and 4% throughout the remainder of the lease. The lease contains two options to renew for
five years each.
We plan to further increase our capacity to include in-house clinical and commercial manufacturing capabilities, where we first
intend to manufacture clinical supplies for our ADXS-NEO program. We will continue to rent necessary offices and laboratories to support
our growing business.
Item 3. Legal Proceedings.
The information required under this item will be set forth in Footnote 11. Commitments and Contingencies – Legal Proceedings
with this Form 10-K and is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
None.
29
Item 5. Market for Our Common Stock and Related Shareholder Matters.
PART II
Set forth below for the periods indicated are the high and low sales prices for trading in our Common Stock. Through October
2013, our Common Stock was quoted on the OTC Bulletin Board under the symbol ADXS.OB. Fiscal year 2013 bid prices represent prices
quoted by broker-dealers on the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions, and, particularly because our Common Stock is traded infrequently, may not necessarily represent actual transactions or a
liquid trading market. Fiscal year 2014 bid prices represent prices as reported by the Nasdaq Capital Market.
Fiscal 2015
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fiscal 2014
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fiscal 2013
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Low
19.71 $
28.77 $
23.61 $
13.51 $
High
Low
4.60 $
3.57 $
5.99 $
5.70 $
High
Low
7.96 $
7.50 $
17.50 $
8.75 $
9.76
15.82
7.02
2.75
2.50
2.52
2.46
2.88
2.70
3.18
8.75
3.75
$
$
$
$
$
$
$
$
$
$
$
$
As of October 31, 2015, there were approximately 108 shareholders of record. Because shares of our Common Stock are held by
depositaries, brokers and other nominees, the number of beneficial holders of our shares is substantially larger than the number of
shareholders of record. On January 6, 2016, the last reported sale price per share for our Common Stock as reported by NASDAQ was
$7.97.
We have not paid or declared any cash dividends during the past two fiscal years or subsequent period prior to the filing of this
annual report, nor do we anticipate paying cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
On August 1, 2015, the registrant issued 988 shares of Common Stock to its Executive Officers, pursuant to their Employment
Agreements.
On August 10, 2015, the registrant issued 64,104 shares of Common Stock to an accredited investor as payment for consulting
services.
On September 1, 2015, the registrant issued 1,020 shares of Common Stock to its Executive Officers, pursuant to their
Employment Agreements.
On September 18, 2015, the registrant issued 1,134 shares of Common Stock to an accredited investor as payment for consulting
services.
On October 1, 2015, the registrant issued 1,478 shares of Common Stock to its Executive Officers, pursuant to their Employment
Agreements.
On October 20, 2015, the registrant issued 30,413 shares of Common Stock to a current Executive Officer which represents the
second of three vesting periods of an inducement grant pursuant to his Employment Agreement.
On October 27, 2015, the registrant issued 18,269 shares of Common Stock to a current Executive Officer which represents the
third of four vesting periods of an inducement grant pursuant to his Employment Agreement.
On October 30, 2015, the registrant issued 2,263 shares of Common Stock to a current employee pursuant to a warrant exercise.
On October 30, 2015, the registrant issued 1,064 shares of Common Stock to its Executive Officers, pursuant to their Employment
Agreements.
On November 17, 2015, the registrant issued 17,201 shares of Common Stock to an accredited investor as payment for consulting
services.
On November 30, 2015, the registrant issued 1,195 shares of Common Stock to its Executive Officers, pursuant to their
Employment Agreements.
On December 1, 2015, the registrant issued 1,657 shares of Common Stock to an accredited investor as payment for consulting
On December 29, 2015, the Company issued 122,662 shares of Common Stock to an accredited investor, pursuant to a warrant
services.
exercise.
On December 31, 2015, the Company issued 2,044 shares of Common Stock to its Executive Officers, pursuant to their
Employment Agreements.
On January 7, 2016, the Company issued 5,000 shares of Common Stock to an accredited investor as payment for consulting
services.
30
Equity Compensation Plan Information
The following table provides information regarding the status of our existing equity compensation plans at October 31, 2015:
Number of shares of
Common Stock to be
issued on exercise of
outstanding options,
warrants and rights
Weighted- average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in the
previous columns)
1,981,939 $
13.78
2,134,468
Plan category
Equity compensation plans approved
by security holders
Treasury Share Repurchases
The following table represents treasury share repurchases during the three months ended October 31, 2015:
(a)
Total Number
of Shares
Purchased (1)
(b)
Average Price
Paid Per
Share
576 $
10,112 $
82,770 $
93,458 $
16.89
15.16
10.55
11.09
(c)
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
(d)
Maximum
Dollar Value of
Shares that
May Yet Be
Purchased
Under the
Program
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Period
August 1, 2015 – August 31, 2015
September 1, 2015 – September 30, 2015
October 1, 2015 – October 31, 2015
Total
(1) Consists of shares repurchased by the Company for certain employees’ restricted stock units that vested to satisfy minimum tax
withholding obligations that arose on the vesting of the restricted stock units.
ITEM 6. Selected Financial Data.
Not required.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Management’s Discussion and Analysis of Financial Conditions and Results of Operations and other portions of this report
contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated
by the forward-looking information. Factors that may cause such differences include, but are not limited to, availability and cost of
financial resources, product demand, market acceptance and other factors discussed in this report under the heading “Risk Factors”. This
Management’s Discussion and Analysis of Financial Conditions and Results of Operations should be read in conjunction with our
financial statements and the related notes included elsewhere in this report.
Overview
We are a clinical-stage biotechnology company focused on the discovery, development and commercialization of proprietary Lm-
LLO cancer immunotherapies. These immunotherapies are based on a platform technology that utilizes live attenuated Listeria
monocytogenes bioengineered to secrete antigen/adjuvant fusion proteins. These Lm-LLO strains are believed to be a significant
advancement in immunotherapy as they integrate multiple functions into a single immunotherapy as they access and direct antigen
presenting cells to stimulate anti-tumor T-cell immunity, stimulate and activate the immune system with the equivalent of multiple
adjuvants, and simultaneously reduce tumor protection in the tumor microenvironment to enable the T-cells to eliminate tumors.
Results of Operations
Fiscal Year 2015 Compared to Fiscal Year 2014
Revenue
We did not record any revenue for the year end October 31, 2015.
During the year end October 31, 2014, we transitioned from a development stage company to an operating company. On March
19, 2014, we and Aratana entered into the Agreement pursuant to which we granted Aratana an exclusive, worldwide, royalty-bearing,
license, with the right to sublicense, certain Advaxis proprietary technology that enables Aratana to develop and commercialize animal
health products that will be targeted for treatment of osteosarcoma and other cancer indications in animals. Under the terms of the
agreement. Aratana paid us an upfront payment of $1 million. As this license has stand-alone value to Aratana (who has the ability to
sublicense) and was delivered to Aratana upon execution of the Agreement, we properly recorded the $1 million payment as licensing
revenue in the year ended October 31, 2014.
31
Research and Development Expenses
We make significant investments in research and development in support of our development programs both clinically and pre-
clinically. Research and development costs are expensed as incurred and primarily include salary and benefit costs, third-party grants, fees
paid to clinical research organizations and supply costs. Research and development expense was $24.2 million for the year ended October
31, 2015, compared with $8.7 million for the year ended October 31, 2014, an increase of $15.5 million. The increase was primarily a
result of higher third-party costs, specifically related to axalimogene filolisbac support in manufacturing and clinical trial expenses, for the
Anal, Head & Neck, High Dose, and Cervical Cancer programs, as well as ADXS-PSA Phase 1/2 trial support. In addition, stock based
compensation costs rose by approximately $5.0 million due to a rise in our share price and an increase in the number of shares awarded as a
result of an increased headcount.
We anticipate a significant increase in research and development expenses on a continuous basis as a result of our intended
expanded development and commercialization efforts primarily related to clinical trials and product development. In addition, we expect to
incur expenses in the development of strategic and other relationships required to license, manufacture and distribute our product
candidates when they are approved.
General and Administrative Expenses
General and administrative expenses primarily include salary and benefit costs for employees included in our finance, legal and
administrative organizations, outside legal and professional services, and facilities costs. General and administrative expense was $24.5
million for the year ended October 31, 2015, compared with $11.9 million for the year ended October 31, 2014, an increase of $12.6
million. The increase was due to greater stock based compensation costs of approximately $11.0 million attributable to a rise in our share
price and an increase in the number of shares awarded as a result of an increased headcount. Furthermore, greater legal costs of
approximately $0.6 million for consultation on a variety of corporate matters and $1.4 million in cash payments for investor relations. The
aforementioned was partially offset by $0.5 million in severance costs related to a former employee in the prior period.
We anticipate general and administrative expenses in the near term to remain comparable to current levels, exclusive of the impact
of future stock awards.
Interest Income
Interest income was $114,219 for the year ended October 31, 2015, compared with $36,305 for the year ended October 31, 2014.
Interest income earned for the year ended October 31, 2015 reflected interest income earned on the Company’s held-to-maturity
investments and savings account balance. Interest income earned for the year ended October 31, 2014 reflected interest income earned on
the Company’s savings account balance.
Changes in Fair Values
For the year ended October 31, 2015, the Company recorded non-cash expense from changes in the fair value of the warrant
liability of $48,950 due to an increase in the fair value of liability warrants primarily resulting from a larger range of share prices used in the
calculation of the Black-Scholes Model (“BSM”) volatility input, as well as a significant increase in our share price from $3.18 at October
31, 2014 to $11.09 at October 31, 2015. This was partially offset by the expiration of some warrants.
For the year ended October 31, 2014, the Company recorded non-cash income from changes in the fair value of the warrant
liability of $619,089 due to a decrease value of liability warrants due to a decrease in our share price from $3.74 at October 31, 2013 to
$3.18 at October 31, 2014, a smaller range of share prices used in the calculation of the BSM volatility input and the expiration of some
warrants.
Income Tax Benefit
We may be eligible, from time to time, to receive cash from the sale of our Net Operating Losses (“NOLs”) under the State of
New Jersey NOL Transfer Program. In December 2015, the Company received a net cash amount of $1,609,349 from the sale of its state
NOLs and research and development tax credits for the period ended October 31, 2014.
In the year ended October 31, 2014, we received a net cash amount of $625,563 from the sale of its state NOLs and research and
development tax credits for the periods ended October 31, 2010 and 2011. In December 2014, we received a net cash amount of $1,731,317
from the sale of our state NOLs and research and development tax credits for the years ended October 31, 2012 and 2013.
Net Loss
We reported a net loss of $47.0 million, or $1.68 per share basic and diluted for the year ended October 31, 2015 as compared to a
net loss of $16.5 million, or $0.97 per share basic and diluted, for the year ended October 31, 2014.
32
Liquidity and Capital Resources
Our major sources of cash have been proceeds from various public and private offerings of our common stock and option and
warrant exercises. From October 2013 through October 2015, we raised approximately $166.5 million in gross proceeds from various
public and private offerings of our common stock. We have not yet commercialized any drug, and we may not become profitable. Our
ability to achieve profitability depends on a number of factors, including our ability to complete our development efforts, obtain regulatory
approvals for our drug, successfully complete any post-approval regulatory obligations, successfully compete with other available treatment
options in the marketplace, overcome any clinical holds that the FDA may impose and successfully manufacture and commercialize our
drug alone or in partnership. We may continue to incur substantial operating losses even after we begin to generate revenues from our drug
candidates. We believe our current cash position is sufficient to fund our business plan approximately through calendar year end 2017. The
actual amount of cash that we will need to operate is subject to many factors.
Since our inception through October 31, 2015, we reported accumulated net losses of approximately $134.1 million and recurring
negative cash flows from operations. We anticipate that we will continue to generate significant losses from operations for the foreseeable
future.
Cash used in operating activities for the year ended October 31, 2015 was approximately $24.1 million (including proceeds from
the sale of our state NOLs and R&D tax credits of approximately $1.7 million) primarily from spending associated with our clinical trial
programs and general and administrative spending.
Cash used in operating activities for the year ended October 31, 2014 was approximately $16.0 million (including proceeds from
the sale of our state NOLs and R&D tax credits of approximately $0.6 million) primarily from spending associated with our clinical trial
programs and general and administrative spending. Total spending approximated $13.9 million, including one-time non-recurring costs
associated with our October 2013 financing, March 2014 financing, certain compensation costs and the settlement of legal claims.
Cash used in investing activities for the year ended October 31, 2015 was approximately $47.4 million resulting from investments
in held-to-maturity investments, purchases of property and equipment to support expansion, legal cost spending in support of our intangible
assets (patents) and costs paid to Penn for patents.
Cash used in investing activities, for the year ended October 31, 2014, was approximately $440,000 resulting from legal cost
spending in support of our intangible assets (patents) and costs paid to Penn for patents.
Cash provided by financing activities for the year ended October 31, 2015 was approximately $120.5 million, resulting primarily
from registered direct offerings of 8,806,165 shares of our Common Stock resulting in net proceeds of approximately $63.1 million and a
public offering of 2,800,000 shares of Common Stock resulting in net proceeds of approximately $56.7 million. In addition, the Company
received approximately $2.4 million from the proceeds received on option and warrant exercises. This was partially offset by
approximately $1.6 million of taxes paid related to the net share settlement of equity awards.
Cash provided by financing activities, for the year ended October 31, 2014, was approximately $13.6 million, primarily resulting
from the public offering of 4,692,000 shares of Common Stock at $3.00 per share, resulting in net proceeds of $12.6 million. In addition,
we sold 306,122 shares of Common Stock to Aratana at a price of $4.90 per share, resulting in net proceeds of approximately $1.5 million.
We also issued GBP 108,724 shares of Common Stock pursuant to a Stock Purchase Agreement with GBP, resulting in net proceeds of
approximately $0.4 million. This was partially offset by approximately $0.9 million of taxes paid related to the net share settlement of
equity awards.
Our capital resources and operations to date have been funded primarily with the proceeds from public, private equity and debt
financings, NOL tax sales and income earned on investments and grants. We have sustained losses from operations in each fiscal year since
our inception, and we expect losses to continue for the indefinite future, due to the substantial investment in research and development. As
of October 31, 2015 and October 31, 2014, we had an accumulated deficit of $134,054,259 and $86,991,137, respectively and
shareholders’ equity of $115,598,875 and $20,629,986, respectively.
The Company believes its current cash position is sufficient to fund its business plan approximately through calendar year end
2017. We have based this estimate on assumptions that may prove to be wrong, and we could use available capital resources sooner than
currently expected. Because of the numerous risks and uncertainties associated with the development and commercialization of our product
candidates, we are unable to estimate the amount of increased capital outlays and operating expenses associated with completing the
development of our current product candidates.
The Company recognizes it may need to raise additional capital in order to continue to execute its business plan. There is no
assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable
to the Company or whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to
raise sufficient additional funds, it will have to scale back its business plan, extend payables and reduce overhead until sufficient additional
capital is raised to support further operations. There can be no assurance that such a plan will be successful.
Off-Balance Sheet Arrangements
As of October 31, 2015, we had no off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP accepted in the U.S. requires management to make estimates
and assumptions that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting
estimate to be critical if:
● it requires assumptions to be made that were uncertain at the time the estimate was made, and
● changes in the estimate of difference estimates that could have been selected could have material impact in our results of
operations or financial condition.
33
While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under
the circumstances, actual results could differ from those estimates and the differences could be material. The most significant estimates
impact the following transactions or account balances: stock compensation, warrant liability valuation and impairment of intangibles.
Revenue Recognition
The Company derived all of its revenue in 2014 from patent licensing. In general, these revenue arrangements provide for the
payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies
owned or controlled by the Company. The intellectual property rights granted may be perpetual in nature, or upon the final milestones
being met, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at
the end of each contractual term for an additional minimum upfront payment. The Company recognizes licensing fees when there is
persuasive evidence of a licensing arrangement, fees are fixed or determinable, delivery has occurred and collectability is reasonably
assured.
An allowance for doubtful accounts is established based on the Company’s best estimate of the amount of probable credit losses in
the Company’s existing license fee receivables, using historical experience. The Company reviews its allowance for doubtful accounts
periodically. Past due accounts are reviewed individually for collectability.
Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for
recovery is considered remote. To date, this is yet to occur.
If product development is successful, the Company will recognize revenue from royalties based on licensees’ sales of its products
or products using its technologies. Royalties are recognized as earned in accordance with the contract terms when royalties from licensees
can be reasonably estimated and collectability is reasonably assured. If royalties cannot be reasonably estimated or collectability of a
royalty amount is not reasonably assured, royalties are recognized as revenue when the cash is received.
The Company recognizes revenue from milestone payments received under collaboration agreements when earned, provided that
the milestone event is substantive, its achievability was not reasonably assured at the inception of the agreement, the Company has no
further performance obligations relating to the event and collection is reasonably assured. If these criteria are not met, the Company
recognizes milestone payments ratably over the remaining period of the Company’s performance obligations under the collaboration
agreement. All such recognized revenues are included in collaborative licensing and development revenue in the Company’s consolidated
statements of operations.
Stock Based Compensation
We account for stock-based compensation using fair value recognition and record stock-based compensation as a charge to
earnings net of the estimated impact of forfeited awards. As such, we recognize stock-based compensation cost only for those stock-based
awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the individual grants.
The process of estimating the fair value of stock-based compensation awards and recognizing stock-based compensation cost over
their requisite service period involves significant assumptions and judgments. We estimate the fair value of stock option awards on the date
of grant using the Black-Scholes option-valuation model for the remaining awards, which requires that we make certain assumptions
regarding: (i) the expected volatility in the market price of our Common Stock; (ii) dividend yield; (iii) risk-free interest rates; and (iv) the
period of time employees are expected to hold the award prior to exercise (referred to as the expected holding period). As a result, if we
revise our assumptions and estimates, our stock-based compensation expense could change materially for future grants.
Stock-based compensation for employees, executives and directors is measured based on the fair value of the shares issued on the
date of grant and is to be recognized over the requisite service period in both research and development expenses and general and
administrative expenses on the statement of operations. For non-employees, the fair value of the award is generally measured based on
contractual terms.
Derivative Financial instruments
We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our
financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For
derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is
then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The determination of fair
value requires the use of judgment and estimates by management. For stock-based derivative financial instruments, we used the BSM
which approximated the binomial lattice options pricing model to value the derivative instruments at inception and on subsequent valuation
dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on
whether or not net-cash settlement of the instrument could be required within 12 months of the balance sheet date. The variables used in the
model are projected based on our historical data, experience, and other factors. Changes in any of these variables could result in material
adjustments to the expense recognized for changes in the valuation of the warrant derivative liability.
34
Intangible Assets
Intangible assets primarily consist of legal and filing costs associated with obtaining patents and licenses and are amortized on a
straight-line basis over their remaining useful lives which are estimated to be twenty years from the effective dates of the University of
Pennsylvania (Penn) License Agreements, beginning in July 1, 2002. These legal and filing costs are invoiced to the Company through
Penn and its patent attorneys.
Management has reviewed its long-lived assets for impairment whenever events and circumstances indicate that the carrying value
of an asset might not be recoverable and its carrying amount exceeds its fair value, which is based upon estimated undiscounted future cash
flows. Net assets are recorded on the balance sheet for patents and licenses related to axalimogene filolisbac, ADXS-PSA and ADXS-
HER2 and other products that are in development. However, if a competitor were to gain FDA approval for a treatment before us or if
future clinical trials fail to meet the targeted endpoints, the Company would likely record an impairment related to these assets. In addition,
if an application is rejected or fails to be issued, the Company would record an impairment of its estimated book value.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income
Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii)
deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or
tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce
the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some
portion or all of the deferred tax assets will not be realized.
ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements
and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. The Company will classify as income tax expense any interest and
penalties. The Company has no material uncertain tax positions for any of the reporting periods presented. The Company files tax returns
in U.S. federal and state jurisdictions, including New Jersey, and is subject to audit by tax authorities beginning with the year ended
October 31, 2012.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,
Revenue from Contracts with Customers. Amendments in this ASU create Topic 606, Revenue from Contracts with Customers, and
supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition
guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605-35,
Revenue Recognition—Construction-Type and Production-Type Contracts, and create new Subtopic 340-40, Other Assets and Deferred
Costs—Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. This ASU is the final version of Proposed ASU 2011-230—Revenue Recognition (Topic 605) and Proposed
ASU 2011–250—Revenue Recognition (Topic 605): Codification Amendments, both of which have been deleted. The amendments in this
ASU are effective for the Company for annual reporting periods beginning after December 15, 2017, including interim periods within that
reporting period. The Company is currently evaluating the effects of ASU 2014-09 on the consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, Disclosures of Uncertainties About an Entity’s Ability to Continue as a Going
Concern. The new standard provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an
entity’s ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect
that this guidance will have a material impact on its financial position, results of operations or cash flows.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not Required.
Item 8: Financial Statements and Supplementary Data.
The index to Financial Statements appears on the page immediately prior to page F-1, the Report of the Independent Registered
Public Accounting Firms appears on page F-1, and the Financial Statements and Notes to Financial Statements appear on pages F-2 to F-
26.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
35
Item 9A: Controls and Procedures.
Assessment of the Effectiveness of Internal Controls over Financial Reporting
Under the supervision and with the participation of our management, including our chief executive officer and chief financial
officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework published in
2013. Based on its evaluation, our management concluded that our internal control over financial reporting was effective as of the end of
the period covered by this Annual Report on Form 10-K.
(a) Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including our chief executive
officer and our chief financial officer as to the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Exchange Act) as of the end of the period covered by this report. Any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, the chief executive
officer and the chief financial officer of the Company have concluded that, as of the end of the period covered by this report, our disclosure
controls and procedures are effective.
(b) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide
reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes
those policies and procedures that:
(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
our assets;
(ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with
the authorization of management and/or our Board of Directors; and
(iii) provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use or disposition
of our assets that could have a material effect on our financial statements.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Marcum LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in
this Annual Report on Form l0-K and, as part of the audit, has issued an attestation report, included herein, on the effectiveness of our
internal control over financial reporting. See “Reports of Independent Registered Public Accounting Firm” included in this filling.
(c) Changes in Internal Control over Financial Reporting
During the quarter ended October 31, 2015, there were no changes in our internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls. Our management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors 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. Further, the design of a control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. 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.
36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
To the Audit Committee of the
Board of Directors and Shareholders of
Advaxis, Inc.
We have audited Advaxis, Inc.’s (the “Company”) internal control over financial reporting as of October 31, 2015, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
in 2013. The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual Report on
Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that degree of compliance with the policies or procedures may deteriorate.
In our opinion, Advaxis, Inc. maintained, in all material aspects, effective internal control over financial reporting as of October 31, 2015,
based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance
sheet as of October 31, 2015 and the related statements of operations, shareholders’ equity, and cash flows for the year then ended of the
Company and our report dated January 8, 2016 expressed an unqualified opinion on those financial statements.
/s/ Marcum LLP
Marcum llp
New York, NY
January 8, 2016
37
Item 9B: Other Information.
None.
38
Item 10: Directors, Executive Officers and Corporate Governance.
PART III
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2016 Annual Meeting
of Stockholders.
Item 11: Executive Compensation.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2016 Annual Meeting
of Stockholders.
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2016 Annual Meeting
of Stockholders.
Item 13: Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2016 Annual Meeting
of Stockholders.
Item 14: Principal Accountant Fees and Services.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2016 Annual Meeting
of Stockholders.
39
PART IV
Item 15: Exhibits and Financial Statements Schedules.
See Index of Exhibits below. The Exhibits are filed with or incorporated by reference in this report.
(a) Exhibits. The following exhibits are included herein or incorporated herein by reference.
Exhibit
Number
Description of Exhibits
3.1
Amended and Restated Certificate of Incorporation. Incorporated by reference to Annex C to DEF 14A Proxy Statement filed
with the SEC on May 15, 2006.
3.2
Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock of the registrant, dated September
24, 2009. Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed with the SEC on September 25, 2009.
3.3
Certificate of Designations of Preferences, Rights and Limitations of Series B Preferred Stock of the registrant, dated July 19,
2010. Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed with the SEC on July 20, 2010.
3.4
3.5
3.6
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on
August 16, 2012. Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the SEC on August 17,
2012.
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on
July 11, 2013 (reverse stock split). Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the SEC
on July 15, 2013.
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on
July 12, 2013 (reverse stock split). Incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed with the SEC
on July 15, 2013.
3.7
Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on
July 9, 2014. Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the SEC on July 10, 2014.
3.8
Amended and Restated Bylaws. Incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-QSB filed with the
SEC on September 13, 2006.
4.1
Form of Common Stock certificate. Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed with the SEC
on October 23, 2007.
4.2
Form of Amended and Restated Common Stock Purchase Warrant. Incorporated by reference to Exhibit 4.2 to Current Report
on Form 8-K/A filed with the SEC on February 11, 2010.
4.3
Form of Common Stock Purchase Warrant, issued in the junior bridge financing. Incorporated by reference to Exhibit 4.12 to
Registration Statement on Form S-1 (File No. 333-162632) filed with the SEC on October 22, 2009.
4.4
Form of Common Stock Purchase Warrant. Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed with
the SEC on June 19, 2009.
4.5
Form of Common Stock Purchase Warrant. Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K/A filed with
the SEC on February 11, 2010.
4.6
Form of Common Stock Purchase Warrant. Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed with
the SEC on November 12, 2010.
4.7
Form of Common Stock Purchase Warrant. Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed with
the SEC on May 9, 2011.
4.8
Form of Common Stock Purchase Warrant. Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed with
the SEC on August 31, 2011.
4.9
Form of Common Stock Purchase Warrant. Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed with
the SEC on November 2, 2011.
40
Exhibit
Number
Description of Exhibits
4.10
Form of Common Stock Purchase Warrant. Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed with
the SEC on January 5, 2012.
4.11
4.12
Form of Common Stock Purchase Warrant issued pursuant to the Exchange Agreements, dated as of May 14, 2012, by and
between Advaxis, Inc. and each investor identified on the signature pages thereto. Incorporated by reference to Exhibit 4.1 to
Current Report on Form 8-K filed with the SEC on May 18, 2012.
Form of Common Stock Purchase Warrant issued pursuant to the note purchase agreement, dated as of May 14, 2012, by and
between Advaxis, Inc. and each investor identified on the signature pages thereto. Incorporated by reference to Exhibit 4.3 to
Current Report on Form 8-K filed with the SEC on May 18, 2012.
4.13
Form of Common Stock Purchase Warrant issued to Dr. James Patton. Incorporated by reference to Exhibit 4.23 to Amendment
No. 1 to Registration Statement on Form S-1 (File No. 333-183682) filed with the SEC on September 11, 2012.
4.14
4.15
4.16
Form of Secured Promissory Note issued pursuant to the Securities Purchase Agreement, dated as of December 13, 2012, by and
between Advaxis, Inc. and Tonaquint, Inc. Incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q filed with
the SEC on March 25, 2013.
Form of Warrant to Purchase Shares of Common Stock issued pursuant to the Securities Purchase Agreement, dated as of
December 13, 2012, by and between Advaxis, Inc. and Tonaquint, Inc. Incorporated by reference to Exhibit 4.2 to Quarterly
Report on Form 10-Q filed with the SEC on March 25, 2013.
Form of Warrant Agency Agreement by and between Advaxis, Inc. and Securities Transfer Corporation and Form of Warrant
Certificate. Incorporated by reference to Exhibit 4.18 to Registration Statement on Form S-1/A (File No. 333-188637) filed with
the SEC on September 27, 2013.
4.17
Form of Representative’s Warrant. Incorporated by reference to Exhibit 4.19 to Registration Statement on Form S-1/A (File No.
333-188637) filed with the SEC on September 27, 2013.
4.18
4.19
Form of Warrant to Purchase 30,154 Shares of Common Stock issued September 17, 2013 pursuant to an engagement letter
termination agreement. Incorporated by reference to Exhibit 4.20 to Registration Statement on Form S-1/A (File No. 333-
188637) filed with the SEC on September 27, 2013.
Form of Warrant Agency Agreement between Advaxis, Inc. and Securities Transfer Corporation dated October 22, 2013 and
Form of Warrant Certificate. Incorporated by reference to Exhibits 10.1 and 10.2 to Current Report on Form 8-K filed with the
SEC on October 22, 2013.
4.20
Common Stock purchase warrant, dated as of March 19, 2014, by and between Advaxis, Inc. and Aratana Therapeutics, Inc.
Incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q filed with the SEC on June 10, 2014.
4.21
Form of Representative’s Warrant related to the Underwriting Agreement, dated as of March 31, 2014, by and between Advaxis,
Inc. and Aegis Capital Group. Incorporated by reference to Exhibit 4.2 to Quarterly Report on Form 10-Q filed with the SEC on
June 10, 2014.
10.1
2004 Stock Option Plan of the registrant. Incorporated by reference to Exhibit 4.1 to Report on Form S-8 filed with the SEC on
December 1, 2005.
10.2
2005 Stock Option Plan of the registrant. Incorporated by reference to Annex A to DEF 14A Proxy Statement filed with the SEC
on May 15, 2006.
10.3
10.4
10.5
License Agreement, between the Trustees of the University of Pennsylvania and the registrant dated as of June 17, 2002, as
Amended and Restated on February 13, 2007. Incorporated by reference to Exhibit 10.11 to Annual Report on Form 10-KSB
filed with the SEC on February 13, 2007.
Sponsored Research Agreement dated November 1, 2006 by and between the Trustees of the University of Pennsylvania (Dr.
Paterson Principal Investigator) and the registrant. Incorporated by reference to Exhibit 10.44 to Annual Report on 10-KSB filed
with the SEC on February 13, 2007.
Agreement, dated July 7, 2003, by and between Cobra Biomanufacturing PLC and Advaxis, Inc. Incorporated by reference to
Exhibit 10.16 to Pre-Effective Amendment No. 4 filed on June 9, 2005 to Registration Statement on Form SB-2 (File No. 333-
122504).
41
Exhibit
Number
10.6
Description of Exhibits
Royalty Agreement, dated as of May 11, 2003, by and between Cobra Bio-Manufacturing PLC and the registrant. Incorporated
by reference to Exhibit 10.28 to Pre-Effective Amendment No. 4 filed on June 9, 2005 to Registration Statement on Form SB-2
(File No. 333-122504).
10.7
Technical/Quality Agreement dated May 6, 2008 by and between Vibalogics GmbH and the registrant. Incorporated by
reference to Exhibit 10.57 to Annual Report on Form 10-KSB filed with the SEC on January 29, 2009.
10.8
Master Service Agreement dated April 7, 2008 by and between Vibalogics GmbH and the registrant. Incorporated by reference
to Exhibit 10.58 to Annual Report on Form 10-KSB filed with the SEC on January 29, 2009.
10.9
Amended and Restated 2009 Stock Option Plan of the registrant. Incorporated by reference to Annex A to DEF 14A Proxy
Statement filed with the SEC on April 30, 2010.
10.10
10.11
Second Amendment to the Amended and Restated Patent License Agreement between the registrant and the Trustees of the
University of Pennsylvania dated as of May 10, 2010. Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-
Q filed with the SEC on June 3, 2010.
Note purchase agreement, dated as of May 9, 2011, by and between Advaxis, Inc. and each investor identified on the signature
pages thereto. Incorporated by reference to Exhibit 10.1 to Amendment to Current Report on Form 8-K/A filed with the SEC on
May 12, 2011.
10.12
2011 Omnibus Incentive Plan of registrant. Incorporated by reference to Annex A to DEF 14A Proxy Statement filed with the
SEC on August 29, 2011.
10.13
2011 Employee Stock Purchase Plan. Incorporated by reference to Annex B to DEF 14A Proxy Statement filed with the SEC on
August 29, 2011.
10.14
Amendment No. 1 to the Advaxis, Inc. 2011 Employee Stock Purchase Plan. Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed with the SEC on December 20, 2011.
10.15
10.16
10.17
10.18
10.19
10.20
Exchange Agreement, dated as of May 14, 2012, by and between Advaxis, Inc. and each investor identified on the signature
pages thereto. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC on May 18, 2012.
Amendment, Consent and Waiver Agreement, dated as of May 14, 2012, by and between Advaxis, Inc. and each investor
identified on the signature pages thereto. Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the
SEC on May 18, 2012.
Form of Convertible Promissory Note issued pursuant to the note purchase agreement, dated as of May 14, 2012, by and
between Advaxis, Inc. and each investor identified on the signature pages thereto. Incorporated by reference to Exhibit 4.2 to
Current Report on Form 8-K filed with the SEC on May 18, 2012.
Note purchase agreement, dated as of May 14, 2012, by and between Advaxis, Inc. and each investor identified on the signature
pages thereto. Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed with the SEC on May 18, 2012.
Registration Rights Agreement, dated as of May 14, 2012, by and between Advaxis, Inc. and each investor identified on the
signature pages thereto. Incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed with the SEC on May 18,
2012.
Amendment No. 1, dated as of March 26, 2007, to the License Agreement, between the Trustees of the University of
Pennsylvania and Advaxis, Inc. dated as of June 17, 2002, as amended and restated on February 13, 2007. Incorporated by
reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed with the SEC on June 14, 2012.
10.21
Clinical Trial Services Agreement, dated December 13, 2009, by and between the Gynecologic Oncology Group and Advaxis,
Inc. Incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q filed with the SEC on June 14, 2012.
10.22
Amendment No. 3, dated as of December 12, 2011, to the License Agreement, between the Trustees of the University of
Pennsylvania and Advaxis, Inc. dated as of June 17, 2002, as amended and restated on February 13, 2007. Incorporated by
reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed with the SEC on June 14, 2012.
10.23
Amendment No. 1 to 2011 Omnibus Incentive Plan of registrant. Incorporated by reference to Annex B to DEF 14A Proxy
Statement filed with the SEC on July 19, 2012.
42
Exhibit
Number
Description of Exhibits
10.24
Employment Agreement by and between Advaxis, Inc. and Daniel J. O’Connor, dated August 19, 2013. Incorporated by
reference to Exhibit 10.2 to Current Report on Form 8-K filed with the SEC on August 20, 2013.
10.25
Indemnification Agreement. Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed with the SEC on
August 20, 2013.
10.26‡
Employment Agreement between Advaxis, Inc. and Robert Petit, dated September 26, 2013. Incorporated by reference to Exhibit
10.70 to Registration Statement on Form S-1/A (File No. 333-188637) filed with the SEC on September 27, 2013.
10.27‡
Employment Agreement by and between Advaxis, Inc. and Gregory T. Mayes, III, dated October 25, 2013. Incorporated by
reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC on October 29, 2013.
10.28‡
Restricted Stock Agreement between Advaxis, Inc. and Gregory T. Mayes, III, dated October 25, 2013. Incorporated by
reference to Exhibit 10.2 to Current Report on Form 8-K filed with the SEC on October 29, 2013.
10.29
10.30‡
10.31‡
10.32‡
Exclusive License and Technology Transfer Agreement by and between Advaxis, Inc. and Global BioPharma, Inc., dated
December 9, 2013. Incorporated by reference to Exhibit 10.79 to Annual Report on Form 10-K/A filed with the SEC on
February 6, 2014.
Amendment No. 1, dated as of December 19, 2013, to the Employment Agreement by and between Advaxis, Inc. and Daniel J.
O’Connor. Incorporated by reference to Exhibit 10.82 to Annual Report on Form 10-K/A filed with the SEC on February 6,
2014.
Amendment No. 1, dated as of December 19, 2013, to the Employment Agreement by and between Advaxis, Inc. and Gregory T.
Mayes, III. Incorporated by reference to Exhibit 10.82 to Annual Report on Form 10-K/A filed with the SEC on February 6,
2014.
Amendment No. 1, dated as of December 19, 2013, to the Employment Agreement by and between Advaxis, Inc. and Mark J.
Rosenblum. Incorporated by reference to Exhibit 10.82 to Annual Report on Form 10-K/A filed with the SEC on February 6,
2014.
10.33‡
Amendment No. 1, dated as of December 19, 2013, to the Employment Agreement by and between Advaxis, Inc. and Robert G.
Petit. Incorporated by reference to Exhibit 10.82 to Annual Report on Form 10-K/A filed with the SEC on February 6, 2014.
10.34
Distribution and Supply Agreement, dated as of January 20, 2014, by and between Advaxis, Inc. and Biocon, Limited.
Incorporated by reference to Exhibit 10.7 to Quarterly Report on Form 10-Q filed with the SEC on March 17, 2014.
10.35
Exclusive License Agreement, dated March 19, 2014, by and between Advaxis, Inc. and Aratana Therapeutics, Inc. Incorporated
by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed with the SEC on June 10, 2014.
10.36‡
Employment Agreement, dated March 24, 2014, by and between Advaxis, Inc. and Sara M. Bonstein. Incorporated by reference
to Exhibit 10.2 to Quarterly Report on Form 10-Q filed with the SEC on June 10, 2014.
10.37‡
Separation Agreement and General Release, dated March 24, 2014, between Advaxis, Inc. and Mark J. Rosenblum. Incorporated
by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q filed with the SEC on June 10, 2014.
10.38‡
Amendment No. 2, dated as of June 5, 2014, to the Employment Agreement by and between Advaxis, Inc. and Daniel J.
O’Connor. Incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q filed with the SEC on June 10, 2014.
10.39‡
Amendment No. 2, dated as of June 5, 2014, to the Employment Agreement by and between Advaxis, Inc. and Gregory T.
Mayes. Incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed with the SEC on June 10, 2014.
43
Exhibit
Number
Description of Exhibits
10.40‡
Amendment No. 2, dated as of June 5, 2014, to the Employment Agreement by and between Advaxis, Inc. and Robert G. Petit.
Incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q filed with the SEC on June 10, 2014.
10.41‡
Amendment No. 1, dated as of June 5, 2014, to the Employment Agreement by and between Advaxis, Inc. and Sara M. Bonstein.
Incorporated by reference to Exhibit 10.8 to Quarterly Report on Form 10-Q filed with the SEC on June 10, 2014.
10.42‡
Employment Agreement, dated October 20, 2014, by and between Advaxis, Inc. and David J. Mauro. Incorporated by reference
to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC on October 21, 2014
10.43‡
Form of Restricted Stock Agreement between Advaxis, Inc. and David J. Mauro, dated October 20, 2014. Incorporated by
reference to Exhibit 10.2 to Current Report on Form 8-K filed with the SEC on October 21, 2014.
10.44
Clinical Trial Collaboration Agreement, dated July 21, 2014, by and between Advaxis, Inc. and MedImmune, LLC. Incorporated
by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed with the SEC on September 9, 2014.
10.45
5t h Amendment to the Amended & Restated License Agreement, dated July 25, 2014, by and between Advaxis, Inc. and
University of Pennsylvania. Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed with the SEC on
September 9, 2014.
10.46
Amendment No. 2 to the Advaxis, Inc. 2011 Omnibus Incentive Plan, effective July 9, 2014. Incorporated by reference to Annex
A to Current Report on Schedule 14A filed with the SEC on May 20, 2014.
10.47
Amended and Restated 2011 Omnibus Incentive Plan, dated September 8, 2014. Incorporated by reference to Exhibit 10.4 to
Quarterly Report on Form 10-Q filed with the SEC on September 9, 2014.
10.48
Master Services Agreement for Technical Transfer and Clinical Supply, dated February 5, 2014, by and between Advaxis, Inc.
and SynCo Bio Partners B.V. Incorporated by reference to Exhibit 10.1 to Current Report to Form 8-K filed with the SEC on
February 11, 2014.
10.49
Clinical Trial Collaboration and Supply Agreement by and between Advaxis, Inc. and Merck & Co. dated August 22, 2014.
Incorporated by reference to Exhibit 10.101 to Annual Report on Form 10-K filed with the SEC on January 6, 2015
10.50
Manufacturing Services Agreement by and between Advaxis, Inc. and IDT Biologika dated September 8, 2014. Incorporated by
reference to Exhibit 10.102 to Annual Report on Form 10-K filed with the SEC on January 6, 2015
10.51
Clinical Study Collaboration Agreement between Advaxis, Inc and Incyte Corporation. Dated February 10, 2015. Incorporated
by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC on February 12, 2015.
10.52‡
Amendment No. 1, dated as of April 17, 2015, to the Employment Agreement by and between Advaxis, Inc and David J. Mauro.
Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed with the SEC on June 15, 2015.
10.53‡
Amendment No. 2, dated as of April 17, 2015, to the Employment Agreement by and between Advaxis, Inc and Sara M.
Bonstein. Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q filed with the SEC on June 15, 2015.
10.54‡
Amendment No. 3, dated as of April 17, 2015, to the Employment Agreement by and between Advaxis, Inc and Daniel J.
O’Connor. Incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q filed with the SEC on June 15, 2015.
10.55‡
Amendment No. 3, dated as of April 17, 2015, to the Employment Agreement by and between Advaxis, Inc and Gregory T.
Mayes. Incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed with the SEC on June 15, 2015.
10.56‡
Amendment No. 3, dated as of April 17, 2015, to the Employment Agreement by and between Advaxis, Inc and Robert G. Petit.
Incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q filed with the SEC on June 15, 2015.
10.57*** Exclusive License Agreement, dated August 25, 2015, by and between Advaxis, Inc. and Knight Therapeutics, Inc.
10.58
Securities Purchase Agreement, dated as of August 25, 2015, between Advaxis, Inc., Knight Therapeutics Inc., and Sectoral
Asset Management. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC on August
28, 2015.
10.59‡*
Amendment No. 4, dated as of December 31, 2015, to the Employment Agreement by and between Advaxis, Inc and Robert G.
Petit.
10.60‡*
Amendment No. 3, dated as of December 31, 2015, to the Employment Agreement by and between Advaxis, Inc and Sara M.
Bonstein.
10.61‡*
Amendment No. 4, dated as of December 31, 2015, to the Employment Agreement by and between Advaxis, Inc and Daniel J.
O’Connor.
10.62‡*
Amendment No. 4, dated as of December 31, 2015, to the Employment Agreement by and between Advaxis, Inc and Gregory T.
Mayes.
44
Exhibit
Number
Description of Exhibits
14.1
Code of Business Conduct and Ethics dated July 9, 2014. Incorporated by reference to Exhibit 14.1 to Current Report on Form
8-K filed with the SEC on July 10, 2014.
31.1*
Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2*
Certification of Chief Financial Officer 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.DEF** XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB** XBRL Taxonomy Extension Label Linkbase Document
101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document
*
**
***
Filed herewith.
Furnished herewith.
Filed herewith. Confidential treatment requested under 17 C.F.R. §§200.80(b)(4) and Rule 24b-2. The confidential portions of
this exhibit have been omitted and are marked accordingly. The confidential portions have been provided separately to the SEC
pursuant to the confidential treatment request.
‡
Denotes management contract or compensatory plan or arrangement.
45
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in Princeton, Mercer County, State of New Jersey, on this 8th day of January 2016.
SIGNATURE
ADVAXIS, INC.
By: /s/ Daniel J. O’Connor
Daniel J. O’Connor, Chief Executive Officer and Director
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Daniel J.
O’Connor and Sara M. Bonstein (with full power to act alone), as his true and lawful attorneys-in-fact and agents, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this
Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE
Title
DATE
/s/ Daniel J. O’Connor
Daniel J. O’Connor
/s/ Sara Bonstein
Sara Bonstein
/s/ David Sidransky
David Sidransky
/s/ James Patton
James Patton
/s/ Richard Berman
Richard Berman
/s/ Thomas McKearn
Thomas McKearn
/s/ Samir Khleif
Samir Khleif
/s/ Roni Appel
Roni Appel
/s/ Thomas Ridge
Thomas Ridge
President, Chief Executive Officer and Director
January 8, 2016
(Principal Executive Officer)
Chief Financial Officer, Senior Vice President
(Principal Financial and Accounting Officer)
January 8, 2016
Chairman of the Board
January 8, 2016
Vice Chairman of the Board
January 8, 2016
Director
Director
Director
Director
Director
46
January 8, 2016
January 8, 2016
January 8, 2016
January 8, 2016
January 8, 2016
ADVAXIS, INC.
FINANCIAL STATEMENTS
INDEX
Reports of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Operations
Statements of Shareholders’ Equity
Statements of Cash Flows
Notes to the Financial Statements
47
Page
F-1
F-2
F-3
F-4
F-5
F-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of the
Board of Directors and Shareholders of
Advaxis, Inc.
We have audited the accompanying balance sheets of Advaxis, Inc. (the “Company”) as of October 31, 2015 and 2014, and the
related statements of operations, shareholders’ equity and cash flows for the years then ended. These financial are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advaxis,
Inc as of October 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Advaxis, Inc.’s internal control over financial reporting as of October 31, 2015, based on the criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 and our report dated
January 8, 2016 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ Marcum llp
Marcum llp
New York, NY
January 8, 2016
F-1
ADVAXIS, INC.
BALANCE SHEETS
ASSETS
Current Assets:
Cash and Cash Equivalents
Investments – Held-to-Maturity
Interest Receivable
Prepaid Expenses
Income Tax Receivable
Deferred Expenses - Current
Other Current Assets
Total Current Assets
Property and Equipment (net of accumulated depreciation)
Intangible Assets (net of accumulated amortization)
Other Assets
$
October 31,
2015
2014
66,561,683 $
45,594,495
145,299
338,841
1,609,349
749,790
15,116
115,014,573
1,087,244
3,355,033
148,843
17,606,860
-
-
182,978
1,731,317
964,724
8,182
20,494,061
77,369
2,767,945
38,438
TOTAL ASSETS
$
119,605,693 $
23,377,813
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable
Accrued Expenses
Short-term Convertible Notes and Fair Value of Embedded Derivative
Total Current Liabilities
Common Stock Warrant Liability
Total Liabilities
Commitments and Contingencies – Note 11
Shareholders’ Equity:
Preferred Stock, $0.001 par value; 5,000,000 shares authorized; Series B Preferred Stock; 0
shares issued and outstanding at October 31, 2015 and 2014. Liquidation preference of $0 at
October 31, 2015 and 2014.
Common Stock - $0.001 par value; 45,000,000 shares authorized, 33,591,882 shares issued and
33,574,963 shares outstanding at October 31, 2015 and 19,630,139 shares issued and
outstanding at October 31, 2014.
Additional Paid-In Capital
Treasury Stock, at cost, 16,919 shares at October 31, 2015 and 0 shares October 31, 2014
Accumulated Deficit
Total Shareholders’ Equity
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY
The accompanying notes should be read in conjunction with the financial statements.
F-2
$
696,117 $
3,191,941
29,549
3,917,607
89,211
4,006,818
1,411,058
1,241,796
62,882
2,715,736
32,091
2,747,827
-
-
33,592
249,807,303
(187,761)
(134,054,259)
115,598,875
119,605,693 $
19,630
107,601,493
-
(86,991,137)
20,629,986
23,377,813
$
Revenue
Research and Development Expenses
General and Administrative Expenses
Total Operating Expenses
Loss from Operations
Other Income (Expense):
Interest Income
Net Changes in Fair Value of Derivative Liabilities
Other Income (Expense), Net
Net Loss Before Income Tax Benefit
Income Tax Benefit
Net Loss
ADVAXIS, INC.
Statements of Operations
Year Ended October 31,
2015
2014
$
- $
24,220,610
24,450,047
48,670,657
1,000,000
8,687,168
11,851,410
20,538,578
(48,670,657)
(19,538,578)
114,219
(48,950)
(35,079)
(48,640,467)
36,305
619,089
990
(18,882,194)
1,609,349
2,356,880
$
(47,031,118) $
(16,525,314)
Net Loss per Common Share, Basic and Diluted
$
(1.68) $
(0.97)
Weighted Average Number of Common Shares Outstanding, Basic and Diluted
28,026,197
17,106,577
The accompanying notes should be read in conjunction with the financial statements.
F-3
ADVAXIS, INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY
Preferred Stock
Shares Amount
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Treasury Stock
Accumulated Shareholders’
Shares Amount
Deficit
Equity
Balance at
October 31, 2013
Stock
compensation to
employees,
directors and
consultants
Tax withholdings
paid related to net
share settlement
of equity awards
Common Stock
issued upon
exercise of
warrants
Common Stock
issued to
consultants
Issuance of shares
to employees
under ESPP Plan
Issuance of shares
to investors under
stock purchase
agreements
Advaxis Public
Offering
Net Loss
Balance at
October 31, 2014
Stock
compensation to
employees,
directors and
consultants
Tax withholdings
paid related to net
share settlement
of equity awards
Treasury stock
purchased to pay
employee
withholdings on
equity awards
Treasury shares
sold to pay for
employee tax
withhholdings on
equity awards
Common Stock
issued upon
exercise of
options
Common Stock
issued upon
exercise of
warrants
Common Stock
issued to
consultants
Conversion of
notes payable into
common stock
Issuance of shares
- $
- 13,719,861 $13,720 $
88,454,245
- $
- $ (70,465,823) $
18,002,142
501,651
502
3,839,202
(959,425)
50
-
250
247,218
247
1,551,186
2,110
2
6,249
3,839,704
(959,425)
250
1,551,433
6,251
467,249
467
2,033,670
4,692,000 4,692
12,676,116
2,034,137
12,680,808
(16,525,314)
(16,525,314)
- $
- 19,630,139 $19,630 $ 107,601,493
- $
- $ (86,991,137) $
20,629,986
789,438
790
16,667,800
(1,375,979)
16,668,590
(1,375,979)
(114,445) (1,388,086)
(1,388,086)
16,273
97,526 1,200,325
(32,004)
1,184,594
65,167
65
58,335
691,268
691
2,341,758
378,538
379
4,707,061
4,104
4
39,928
58,400
2,342,449
4,707,440
39,932
to employees
under ESPP Plan
Advaxis
registered direct
offerings
Advaxis Public
Offering
Net Loss
Balance at
October 31, 2015
7,063
7
28,784
8,806,165 8,806
63,046,722
3,220,000 3,220
56,675,128
28,791
63,055,528
56,678,348
(47,031,118)
(47,031,118)
- $
- 33,591,882 $33,592 $ 249,807,303
(16,919) $ (187,761) $(134,054,259) $ 115,598,875
The accompanying notes should be read in conjunction with the financial statements.
F-4
ADVAXIS, INC.
Statement of Cash Flows
OPERATING ACTIVITIES
Net Loss
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash charges to consultants and employees for options and stock
Non-cash interest expense
Loss (Gain) on change in value of warrants and embedded derivative
Warrant expense
(Gain) on disposal of property and equipment
Loss on write-off of intangible assets
Settlement expense
Employee Stock Purchase Plan
Depreciation expense
Amortization expense of intangibles
Amortization of premium on held-to-maturity investments
Debt conversion expense
(Gain) on note retirement
Change in operating assets and liabilities:
Interest receivable
Prepaid expenses
Taxes receivable
Other current assets
Deferred expenses
Security deposit
Accounts payable and accrued expenses
Interest payable
Net cash used in operating activities
INVESTING ACTIVITIES
Investments in held to maturity investments
Purchase of property and equipment
Cost of intangible assets
Net cash used in Investing Activities
FINANCING ACTIVITIES
Repayment of Officer Loan
Proceeds from exercise of options
Proceeds from the exercise of warrants
Net proceeds of issuance of Common Stock
Tax withholdings paid related to net share settlement of equity awards
Treasury stock purchased to pay employee withholdings on equity awards
Treasury shares sold to pay for employee tax withholdings on equity awards
Net cash provided by Financing Activities
Net increase (decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at beginning of year
Cash and Cash Equivalents at end of year
The accompanying notes should be read in conjunction with the financial statements.
F-5
-
58,400
2,342,449
119,733,876
(1,375,979)
(1,388,086)
1,169,594
120,540,254
48,954,823
17,606,860
66,561,683 $
$
Year ended October 31,
2015
2014
$
(47,031,118) $
(16,525,314)
21,431,030
-
48,950
8,170
(10,000)
28,480
-
28,791
59,033
206,357
60,608
6,599
-
(145,299)
(155,863)
121,968
8,066
214,934
(110,405)
1,094,155
-
(24,135,544)
(45,655,103)
(972,859)
(821,925)
(47,449,887)
5,365,610
51
(619,089)
4,446
-
-
34,125
6,251
27,611
175,686
-
-
(6,243)
-
(151,723)
(1,731,317
-
(617,676
(1,948,987)
(98,192)
(16,084,761)
-
(24,595)
(415,080)
(439,675)
(64,926)
-
250
14,580,808
(936,898)
-
-
13,579,234
(2,945,202)
20,552,062
17,606,860
Supplemental Disclosures of Cash Flow Information
Cash paid for Interest
Cash paid for Taxes
Year Ended October 31,
2015
2014
$
$
$
- $
103,445
-
Supplemental Schedule of Noncash Investing and Financing Activities
Accounts Payable and Accrued Expenses settled with Common Stock
Conversion of notes payable into Common Stock
Sale of treasury shares pending settlement
The accompanying notes should be read in conjunction with the financial statements.
F-6
Year Ended October 31,
2015
2014
$
$
$
- $
39,932 $
15,000 $
103,012
-
-
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
ADVAXIS, INC.
NOTES TO FINANCIAL STATEMENTS
Advaxis, Inc. (“Advaxis” or the “Company”) is a clinical stage biotechnology company focused on the discovery, development
and commercialization of proprietary Lm-LLO cancer immunotherapies. These immunotherapies are based on a platform technology that
utilizes live attenuated Listeria monocytogenes (“Lm” or “Listeria”) bioengineered to secrete antigen/adjuvant fusion proteins. These Lm-
LLO strains are believed to be a significant advancement in immunotherapy as they integrate multiple functions into a single
immunotherapy as they access and direct antigen presenting cells to stimulate anti-tumor T-cell immunity, stimulate and activate the
immune system with the equivalent of multiple adjuvants, and simultaneously reduce tumor protection in the tumor microenvironment to
enable the T-cells to eliminate tumors.
Axalimogene filolisbac (ADXS-HPV) is our lead Lm-LLO immunotherapy product candidate for the treatment of Human
Papilloma Virus (“HPV”) associated cancers. The Company completed a randomized Phase 2 study in 110 patients with recurrent cervical
cancer that was shown to have a manageable safety profile, apparent improved survival and objective tumor responses. In addition, the
Gynecologic Oncology Group (“GOG”), now part of NRG Oncology, is conducting a cooperative group sponsored Phase 2 open-label
clinical study of axalimogene filolisbac in patients with persistent or recurrent cervical cancer with documented disease progression. The
study, known as GOG-0265, has successfully completed its first stage and has met the predetermined safety and efficacy criteria required to
proceed into the second stage of patient recruitment. The Company plans to advance this immunotherapy into a registrational clinical trial
for the treatment of women with high-risk locally advanced cervical cancer.
Axalimogene filolisbac has received United States Food and Drug Administration (“FDA”) orphan drug designation for three
HPV-associated cancers: cervical, head and neck, and anal cancer, and has received European Medicines Agency (“EMA”) orphan drug
designation for anal cancer. It is being evaluated in Company-sponsored trials executed under an Investigational New Drug (“IND”) which
include the following: i) a Phase 1/2 clinical trial alone and in combination with MedImmune, LLC’s (“MedImmune”) investigational anti-
PD-L1 immune checkpoint inhibitor, durvalumab (MEDI4736), in patients with previously treated metastatic cervical cancer and HPV-
associated head and neck cancer; ii) a Phase 2 multi-center, open-label study alone and in combination with Incyte Corporation’s (“Incyte”)
investigational oral indoleamine 2,3-dioxygenase 1 (IDO1) inhibitor, epacadostat (INCB24360) in patients with Stage I-IIa cervical cancer;
iii) a Phase 1/2 study evaluating higher doses and repeat cycles of axalimogene filolisbac in patients with recurrent cervical cancer; iv) a
single arm Phase 2 monotherapy study in patients with metastatic anal cancer; and v) a Phase 2 study in collaboration with and funded by
Global BioPharma Inc. (“GBP”), under a development and commercialization license agreement applicable to Asia, of axalimogene
filolisbac in HPV-associated non-small cell lung cancer. In addition to the Company-sponsored trials, axalimogene filolisbac is also being
evaluated in three ongoing investigator-initiated clinical trials as follows: locally advanced cervical cancer (GOG-0265), head and neck
cancer (Mount Sinai), and anal cancer (Brown University).
ADXS-PSA is the Company’s Lm-LLO immunotherapy product candidate designed to target the Prostate Specific Antigen
(“PSA”) associated with prostate cancer. This Phase 1/2 clinical trial is alone and in combination with KEYTRUDA® (pembrolizumab),
Merck & Co.’s (“Merck”) humanized monoclonal antibody against PD-1, in patients with previously treated metastatic castration-resistant
prostate cancer.
ADXS-HER2 is the Company’s Lm-LLO immunotherapy product candidate designed for the treatment of Human Epidermal
Growth Factor Receptor 2 (“HER2”) expressing cancers, including human and canine osteosarcoma, breast, gastric and other cancers. This
Phase 1b clinical trial is in patients with metastatic HER2 expressing solid tumors. We received orphan drug designation from both the FDA
and EMA for ADXS-HER2 in osteosarcoma. Clinical research with ADXS-HER2 in canine osteosarcoma is being developed by our pet
therapeutic partner, Aratana Therapeutics Inc. (“Aratana”), who holds exclusive rights to develop and commercialize ADXS-HER2 and
three other Lm-LLO immunotherapies for pet health applications. Aratana has announced that a product license application for use of
ADXS-HER2 in the treatment of canine osteosarcoma has been filed with the United States Department of Agriculture (“USDA”). Aratana
received communication from the USDA in March 2015 stating that the previously submitted efficacy data for product licensure for AT-
014 (ADXS-HER2), the cancer immunotherapy for canine osteosarcoma, was accepted and that it provides a reasonable expectation of
efficacy that supports conditional licensure. While additional steps need to be completed, including in the areas of manufacturing and
safety, Aratana anticipates that AT-014 could receive conditional licensure from the USDA in 2016.
In October of 2015, the Company received notification from the FDA that the INDs for axalimogene filolisbac were put on
clinical hold in response to its submission of a safety report to the FDA. The clinical hold also included the INDs for ADXS-PSA and
ADXS-HER2. Following discussions with the FDA and in accordance with their recommendations, the Company agreed to implement
certain risk mitigation measures, including revised study protocol inclusion / exclusion criteria, post-administration antibiotic treatment and
patient surveillance and monitoring measures. In December 2015, the FDA notified the Company that the hold has been lifted with respect
to its INDs.
F-7
The Company has focused its development efforts on understanding its platform technology and establishing a drug development
pipeline that incorporates this technology into therapeutic cancer immunotherapies, with clinical trials currently targeting HPV-associated
cancer (cervical cancer, head and neck cancer and anal cancer), prostate cancer, and HER2-expressing cancers. Although no
immunotherapies have been commercialized to date, the Company continues to invest in research and development to advance the
technology and make it available to patients with many different types of cancer. Pipeline development and the further exploration of the
technology for advancement entails risk and expense. The Company anticipates that its ongoing operational costs will increase significantly
as it continues conducting and expanding its clinical development program. In addition to its existing single antigen vectors that target one
tumor associated antigen, the Company is actively engaged in the development of new constructs that will address multiple targets that are
common to tumor types, as well as mutation-associated neo-epitopes that are specific to an individual patient’s tumor. Lastly, the Company
is developing certain internal capabilities to produce supplies for its neoepitope and its other programs.
Liquidity and Financial Condition
The Company’s products are being developed and have not generated significant revenues. As a result, the Company has suffered
recurring losses. These losses are expected to continue for an extended period of time. On December 19, 2014, the Company priced a
registered direct offering of 3,940,801 shares of its Common Stock (“Common Stock”). The transaction closed on December 22, 2014, and
the Company received net proceeds of approximately $15.8 million from the offering. In addition, on February 18, 2015, the Company
priced an additional registered direct offering of 3,068,095 shares of its Common Stock. The transaction closed on February 19, 2015, and
the Company received net proceeds of approximately $22.3 million from the offering. The shares in each offering were sold under a
Registration Statement (No. 333-194009) on Form S-3, filed by the Company with the United States Securities and Exchange Commission
(“SEC”). On May 5, 2015, the Company closed on an underwritten public offering of 2,800,000 shares of Common Stock at a public
offering price of $19.00 per share. On May 20, 2015, the Company closed the Underwriters’ overallotment option to purchase 420,000
shares of its Common Stock at a public offering price of $19.00 per share. The net proceeds from the May 2015 public offerings were
approximately $56.7 million. On August 25, 2015, the Company priced a registered direct offering of 1,797,269 of its Common Stock at a
price of $13.91 per share. The transaction closed on August 28, 2015 and the Company received net proceeds of approximately $25
million. The sale of the shares in these offerings were registered pursuant to a Registration Statement (No. 333- 203497) on Form S-3, filed
by the Company with the SEC.
The Company believes its current cash position is sufficient to fund its business plan approximately through calendar year end
2017. The estimate is based on assumptions that may prove to be wrong, and the Company could use available capital resources sooner
than currently expected. Because of the numerous risks and uncertainties associated with the development and commercialization of its
product candidates, the Company is unable to estimate the amount of increased capital outlays and operating expenses associated with
completing the development of its current product candidates.
The Company recognizes it may need to raise additional capital in order to continue to execute its business plan. There is no
assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable
to the Company or whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to
raise sufficient additional funds, it will have to scale back its business plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) involves
the use of estimates and assumptions that affect the recorded amounts of assets and liabilities as of the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual results may differ substantially from these estimates.
Significant estimates include the fair value and recoverability of the carrying value of intangible assets (patents and licenses), the fair value
of investments, the fair value of options, the fair value of embedded conversion features, warrants and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates its estimates, based on historical experience and on various other
assumptions that it believes to be reasonable under the circumstances. Actual results may differ from estimates.
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period
financial statements. These reclassifications had no effect on the previously reported net loss.
Revenue Recognition
The Company derived all of its revenue in 2014 from patent licensing. In general, these revenue arrangements provide for the
payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies
owned or controlled by the Company. The intellectual property rights granted may be perpetual in nature, or upon the final milestones
being met, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at
the end of each contractual term for an additional minimum upfront payment. The Company recognizes licensing fees when there is
persuasive evidence of a licensing arrangement, fees are fixed or determinable, delivery has occurred and collectability is reasonably
assured.
An allowance for doubtful accounts is established based on the Company’s best estimate of the amount of probable credit losses in
the Company’s existing license fee receivables, using historical experience. The Company reviews its allowance for doubtful accounts
periodically. Past due accounts are reviewed individually for collectability.
F-8
Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for
recovery is considered remote. To date, this is yet to occur.
If product development is successful, the Company will recognize revenue from royalties based on licensees’ sales of its products
or products using its technologies. Royalties are recognized as earned in accordance with the contract terms when royalties from licensees
can be reasonably estimated and collectability is reasonably assured. If royalties cannot be reasonably estimated or collectability of a
royalty amount is not reasonably assured, royalties are recognized as revenue when the cash is received.
The Company recognizes revenue from milestone payments received under collaboration agreements when earned, provided that
the milestone event is substantive, its achievability was not reasonably assured at the inception of the agreement, the Company has no
further performance obligations relating to the event and collection is reasonably assured. If these criteria are not met, the Company
recognizes milestone payments ratably over the remaining period of the Company’s performance obligations under the collaboration
agreement. All such recognized revenues are included in collaborative licensing and development revenue in the Company’s consolidated
statements of operations.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash
equivalents. As of October 31, 2015 and October 31, 2014, the Company had approximately $62.8 million and $17.5 million in cash
equivalents.
Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts (checking) that at times exceed federally insured limits. Approximately
$63.9 million is subject to credit risk at October 31, 2015. However, these cash balances are maintained at creditworthy financial
institutions. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.
Investments
Investment securities at October 31, 2015 consist of certificates of deposit, domestic governmental agency loans, and U.S. treasury
notes. The Company classifies these securities as held-to-maturity. Held-to-maturity securities are those securities in which the Company
has the ability and intent to hold the security until maturity. Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Premiums and discounts are amortized or accreted over the life of the related held-to-
maturity security as an adjustment to yield using the effective interest method.
A decline in the market value of any investment security below cost, that is deemed to be other than temporary, results in a
reduction in the carrying amount to fair value. The impairment is charged to operations and a new cost basis for the security is established.
Other-than-temporary impairment charges are included in Other Income (Expense), net. The Company did not recognize any impairment
charges during the year ended October 31, 2015. Interest income is recognized when earned.
Deferred Expenses
Deferred Expenses consist of advanced payments made on research and development projects. Amortization is provided for on a
straight-line basis over the periods of the underlying research and development contracts ranging from six months to five years and is
charged to Research and Development Expense in the Statement of Operations.
Property and Equipment
Property and equipment consists of computer equipment, laboratory equipment, furniture and fixtures and leasehold improvements
and is stated at cost. Depreciation and amortization is provided for on the straight-line basis over the estimated useful lives of the respective
asset ranging from three to 10 years. Leasehold Improvements are amortized over the lesser of the asset’s economic life or the lease term.
Expenditures for maintenance and repairs that do not materially extend the useful lives of the respective assets are charged to expense as
incurred. The cost and accumulated depreciation of assets retired or sold are removed from the respective accounts and any gain or loss is
recognized in operations.
Intangible Assets
Intangible assets primarily consist of legal and filing costs associated with obtaining patents and licenses and are amortized on a
straight-line basis over their remaining useful lives which are estimated to be 20 years from the effective dates of the University of
Pennsylvania (Penn) License Agreements, beginning in July 1, 2002. These legal and filing costs are invoiced to the Company through
Penn and its patent attorneys.
Management has reviewed its long-lived assets for impairment whenever events and circumstances indicate that the carrying value
of an asset might not be recoverable and its carrying amount exceeds its fair value, which is based upon estimated undiscounted future cash
flows. Net assets are recorded on the balance sheet for patents and licenses related to axalimogene filolisbac, ADXS-PSA and ADXS-
HER2 and other products that are in development. However, if a competitor were to gain FDA approval for a treatment before Advaxis or if
future clinical trials fail to meet the targeted endpoints, the Company would likely record an impairment related to these assets. In addition,
if an application is rejected or fails to be issued, the Company would record an impairment of its estimated book value.
F-9
Net Loss per Share
Basic net income or loss per common share is computed by dividing net income or loss available to common shareholders by the
weighted average number of common shares outstanding during the period. Diluted earnings per share give effect to dilutive options,
warrants, convertible debt and other potential Common Stock outstanding during the period. In the case of a net loss the impact of the
potential Common Stock resulting from warrants, outstanding stock options and convertible debt are not included in the computation of
diluted loss per share, as the effect would be anti-dilutive. In the case of net income the impact of the potential Common Stock resulting
from these instruments that have intrinsic value are included in the diluted earnings per share. The table sets forth the number of potential
shares of Common Stock that have been excluded from diluted net loss per share.
Warrants
Stock Options
Convertible Debt (using the if-converted method)
Total
Research and Development Expenses
As of October 31,
2015
3,241,466
1,981,939
1,576
5,224,981
2014
4,158,092
467,968
3,354
4,629,414
Research and development costs are expensed as incurred and include but are not limited to clinical trial and related manufacturing
costs, payroll and personnel expenses, lab expenses, and related overhead costs.
Stock Based Compensation
The Company has an equity plan which allows for the granting of stock options to its employees, directors and consultants for a
fixed number of shares with an exercise price equal to the fair value of the shares at date of grant. The Company measures the cost of
services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair
value of the award is measured on the grant date and for non-employees, the fair value of the award is generally measured based on
contractual terms. The fair value amount is then recognized over the requisite service period, usually the vesting period, in both research
and development expenses and general and administrative expenses on the statement of operations, depending on the nature of the services
provided by the employees or consultants.
The process of estimating the fair value of stock-based compensation awards and recognizing stock-based compensation cost over
their requisite service period involves significant assumptions and judgments. The Company estimates the fair value of stock option awards
on the date of grant using the Black Scholes Model (“BSM”) for the remaining awards, which requires that the Company makes certain
assumptions regarding: (i) the expected volatility in the market price of its Common Stock; (ii) dividend yield; (iii) risk-free interest rates;
and (iv) the period of time employees are expected to hold the award prior to exercise (referred to as the expected holding period). As a
result, if the Company revises its assumptions and estimates, stock-based compensation expense could change materially for future grants.
The Company accounts for stock-based compensation using fair value recognition and records stock-based compensation as a
charge to earnings net of the estimated impact of forfeited awards. As such, the Company recognizes stock-based compensation cost only
for those stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the
individual grants.
Treasury Stock
The Company accounts for repurchases of common stock and shares withheld in lieu of taxes when restricted stock vests using the
cost method with common stock in treasury classified in the balance sheet as a reduction in stockholders’ equity.
Fair Value of Financial Instruments
The carrying amounts of financial instruments, including cash, accounts payable and accrued expenses approximated fair value as
of the balance sheet date presented, because of the relatively short maturity dates on these instruments. The carrying amounts of the
financing arrangements issued approximate fair value as of the balance sheet date presented, because interest rates on these instruments
approximate market interest rates after consideration of stated interest rates, anti-dilution protection and associated warrants.
F-10
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The
Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as
embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially
recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.
For stock-based derivative financial instruments, the Company used the Black Scholes valuation model which approximated the binomial
lattice options pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of
derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each
reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash
settlement of the instrument could be required within 12 months of the balance sheet date.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,
Revenue from Contracts with Customers. Amendments in this ASU create Topic 606, Revenue from Contracts with Customers, and
supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition
guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605-35,
Revenue Recognition—Construction-Type and Production-Type Contracts, and create new Subtopic 340-40, Other Assets and Deferred
Costs—Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. This ASU is the final version of Proposed ASU 2011-230—Revenue Recognition (Topic 605) and Proposed
ASU 2011–250—Revenue Recognition (Topic 605): Codification Amendments, both of which have been deleted. The amendments in this
ASU are effective for the Company for annual reporting periods beginning after December 15, 2017, including interim periods within that
reporting period. The Company is currently evaluating the effects of ASU 2014-09 on the consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, Disclosures of Uncertainties About an Entity’s Ability to Continue as a Going
Concern. The new standard provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an
entity’s ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect
that this guidance will have a material impact on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would
have a material impact on the accompanying consolidated financial statements.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income
Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii)
deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or
tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce
the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some
portion or all of the deferred tax assets will not be realized.
3. INVESTMENTS
The following table summarizes the Company’s investment securities at amortized cost as of October 31, 2015:
Amortized cost,
as adjusted
October 31, 2015
Gross
unrealized
holding gains
Gross
unrealized
holding losses
Estimated fair
value
Short-term investments:
Certificates of Deposit
Domestic Governmental
Agency Loans
U.S Treasury Notes
Total short-term investment
securities
$
12,628,880 $
- $
- $
12,628,880
27,951,633
5,013,982
5,827
700
5,979
262
27,951,481
5,014,420
$
45,594,495 $
6,527 $
6,241 $
45,594,781
All of the Company’s investments mature within the next 12 months.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
October 31,
2015
2014
Leasehold Improvements
Laboratory Equipment
Furniture and Fixtures
Computer Equipment
Construction in Progress
Total Property and Equipment
Accumulated Depreciation and Amortization
Net Property and Equipment
$
$
237,209 $
532,249
331,500
48,745
80,538
1,230,241
(142,997)
1,087,244 $
-
250,456
72,554
10,717
-
333,727
(256,358)
77,369
Depreciation expense for the years ended October 31, 2015 and 2014 was $59,033 and $27,611, respectively.
F-11
5. INTANGIBLE ASSETS
Under the University of Pennsylvania (“Penn”) license agreements, the Company is billed actual patent expenses as they are
passed through from Penn and are billed directly from the Company’s patent attorney. The following is a summary of intangible assets as of
the end of the following fiscal periods:
License
Patents
Total intangibles
Accumulated Amortization
Net Intangible Assets
October 31,
2015
651,992 $
3,898,493
4,550,485
(1,195,452)
3,355,033 $
2014
651,992
3,111,624
3,763,616
(995,671)
2,767,945
$
$
The expirations of the existing patents range from 2015 to 2030 but the expirations can be extended based on market approval if
granted and/or based on existing laws and regulations. Capitalized costs associated with patent applications that are abandoned without
future value are charged to expense when the determination is made not to pursue the application. Patent applications having a net book
value of $28,480 and $- were abandoned and were charged to Other Income (Expense), Net in the statement of operations for the years
ended October 31, 2015 and 2014, respectively. Amortization expense for licensed technology and capitalized patent cost is included in
general and administrative expenses and aggregated $206,357 and $175,686 for the years ended October 31, 2015 and 2014.
Estimated amortization expense for the next five years is as follows:
Year ending October 31,
2016
2017
2018
2019
2020
6. ACCRUED EXPENSES:
The following table represents the major components of accrued expenses:
Salaries and other compensation
Vendors
Professional Fees
Withholding taxes payable
Total Accrued Expenses
$
$
$
$
$
221,000
221,000
221,000
221,000
221,000
October 31,
2015
2014
1,698,371 $
1,000,579
272,058
220,933
3,191,941 $
890,069
121,200
208,000
22,527
1,241,796
$
$
7. CONVERTIBLE NOTES AND FAIR VALUE OF EMBEDDED DERIVATIVE
Junior Subordinated Convertible Promissory Notes
The Company refers to all Junior Subordinated Convertible Promissory Notes as “Bridge Notes.”
The Bridge Notes are convertible into shares of the Company’s Common Stock at a fixed exercise price. As of October 31, 2015
and 2014, the Company had approximately $30,000 and $63,000 in principal outstanding on its junior subordinated convertible promissory
notes that are currently overdue and are recorded as current liabilities on the Company’s balance sheet at October 31, 2015 and 2014,
respectively.
During February 2015, the Company induced certain noteholders to convert their convertible promissory notes into common
shares by offering conversion prices at a $1.61 discount from the market price of the common stock. In total, $33,333 of promissory notes
were converted into 4,104 shares of common stock. In connection with the note conversions, the Company recorded a debt conversion
expense of $6,599 in the accompanying statement of operations
F-12
Embedded Derivative Liability
The Company has convertible features (known as “Embedded Derivatives”) in its outstanding convertible promissory note. The
Embedded Derivatives are recorded as liabilities at issuance. These Embedded Derivatives are valued using the BSM and are subject to
revaluation at each reporting date. Any change in fair value between reporting periods will be reported on the statement of operations.
The fair value of the Warrants and Embedded Derivatives are estimated using an adjusted BSM model. The Company computes
multiple valuations, each quarter, using the BSM model for each derivative instrument to account for the various possibilities that could
occur due to changes in the inputs to the BSM model as a result of contractually-obligated changes (for example, changes in strike price to
account for down-round provisions). The Company effectively weights each calculation based on the likelihood of occurrence to determine
the value of the derivative at the reporting date.
At October 31, 2015 and October 31, 2014, the fair value of the Embedded Derivative Liability was $0 as the related notes were
paid off, converted or reached maturity.
8. COMMON STOCK PURCHASE WARRANTS AND WARRANT LIABILITY
Warrants
As of October 31, 2015, there were outstanding warrants to purchase 3,241,466 shares of the Company’s Common Stock with
exercise prices ranging from $2.76 to $18.75 per share. Information on the outstanding warrants is as follows:
Type
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Exercise Price
Amount
Expiration Date
Type of Financing
$
$
$
18.75
7,902 January 2016
December 2011 Convertible Debt
Financing
10.63
13,333 May 2017
May 2012 Convertible Debt Financing
18.75
376 N/A
Vendor & Other
$
10.63-18.75
3,172 November 2015 – May 2017
Placement Agent – Convertible Debt
Financing
$
$
$
$
$
5.00
20,392 October 2018
Former Officer
2.76-5.52
122,661 December 2015 – March 2024 Stock Purchase Agreement
18.75
1,778 August 2017
August – September 2012 Convertible
Promissory Notes
5.00
3,043,477 October 2018
Advaxis Public Offering
3.75-5.00
Grand Total
28,375 October 2018 – March 2019
3,241,466
Representative – Advaxis Public
Offering
F-13
As of October 31, 2014, there were outstanding warrants to purchase 4,158,092 shares of the Company’s Common Stock with
exercise prices ranging from $2.76 to $21.25 per share. Information on the outstanding warrants is as follows:
Type
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Common Stock Purchase
Warrant
Exercise Price
Amount
Expiration Date
Type of Financing
$
$
$
$
18.75
28,632 May 2015
May 2011 Convertible Debt Financing
18.75
10,059 October 2015
18.75
17,706 May 2015 – January 2016
Oct 2011 Convertible Debt Financing
December 2011 Convertible Debt
Financing
18.75
13,333 May 2017
May 2012 Convertible Debt Financing
$
7.77-21.25
112,460 December 2014 – April 2015 Bridge Notes
$
18.75
376 N/A
Vendor & Other
$
10.625-18.75
7,855 January 2015 – May 2017
Placement Agent – Convertible Debt
Financing
$
$
$
5.00
20,392 October 2018
Former Officer
4.90
30,154 September 2015
Consultant
2.76-5.52
277,055 December 2015 – March 2024 Stock Purchase Agreement
$
5.625-18.75
13,095 October 2015 – August 2017
August – September 2012 Convertible
Promissory Notes
$
$
5.00
3,306,200 October 2018
Advaxis Public Offering
3.75-5.00
Grand Total
320,775 October 2018 – March 2019
4,158,092
Representative – Advaxis Public
Offering
A summary of changes in warrants for the years ended October 31, 2015 and 2014 is as follows:
Outstanding and Exercisable Warrants at October
31, 2013
Issued
Exercised
Expired
Outstanding and Exercisable Warrants at October
31, 2014
Issued
Exercised *
Expired
Outstanding and Exercisable Warrants at October
31, 2015
Shares
Weighted
Average
Exercise Price
4,265,262 $
412,693
(50)
(519,813)
4,158,092 $
2,361
(769,349)
(149,638)
3,241,466 $
6.71
4.97
5.00
15.01
5.43
7.20
5.12
14.61
5.07
Weighted
Average
Remaining
Contractual Life
In Years
Aggregate
Intrinsic Value
4.22 $
22,208
3.94 $
9,518
2.90 $
19,588,099
* Includes the cashless exercise of 300,376 warrants that resulted in the issuance of 222,295 shares of common stock.
At October 31, 2015, the Company had approximately 3.22 million of its total 3.24 million outstanding warrants classified as
equity (equity warrants). At October 31, 2014, the Company had approximately 4.04 million of its total 4.16 million outstanding warrants
classified as equity (equity warrants). At issuance, equity warrants are recorded at their relative fair values, using the Relative Fair Value
Method, in the shareholders equity section of the balance sheet. The Company’s equity warrants can only be settled through the issuance of
shares and are not subject to anti-dilution provisions.
F-14
Warrant Liability
At October 31, 2015, the Company had approximately 18,000 of its total 3.24 million outstanding warrants classified as liability
warrants (Common Stock warrant liability). At October 31, 2014, the Company had approximately 123,000 of its total 4.16 million
outstanding warrants classified as liability warrants (Common Stock warrant liability). All of these liability warrants at October 31, 2015
and October 31, 2014 were outstanding. The Company utilizes the BSM to calculate the fair value of these warrants at issuance and at each
subsequent reporting date. For those warrants with exercise price reset features (anti-dilution provisions), the Company computes multiple
valuations, each quarter, using an adjusted BSM, to account for the various possibilities that could occur due to changes in the inputs to the
BSM as a result of contractually-obligated changes (for example, changes in strike price to account for down-round provisions). The
Company effectively weights each calculation based on the likelihood of occurrence to determine the value of the warrants at the reporting
date. At October 31, 2015, none of the 18,000 liability warrants are subject to weighted-average anti-dilution provisions. At October 31,
2014, approximately 60,000 of the 123,000 liability warrants are subject to weighted-average anti-dilution provisions. A certain number of
liability warrants contain a cash settlement provision in the event of a fundamental transaction (as defined in the Common Stock purchase
warrant). Any changes in the fair value of the warrant liability (i.e. - the total fair value of all outstanding liability warrants at the balance
sheet date) between reporting periods will be reported on the statement of operations.
At October 31, 2015 and October 31, 2014, the fair value of the warrant liability was $89,211 and $32,091, respectively. For the
twelve months ended October 31, 2015 and 2014, the Company reported a loss of $48,950 and income of $619,089, respectively, due to
changes in the fair value of the warrant liability.
In fair valuing the warrant liability, at October 31, 2015 and October 31, 2014, the Company used the following inputs in its
BSM:
Exercise Price
Stock Price
Expected Term
Volatility %
Risk Free Rate
Exercise of Warrants
10/31/2015
10/31/2014
$
$
$
$
10.63-18.75
11.09
1.52-1.76 years
93.87%-95.00%
.075%
2.76-21.25
3.18
0.01-2.76 years
55.41% -129.38%
.01%-1.62%
During the twelve months ended October 31, 2015, accredited investors exercised 769,349 warrants at a weighted average exercise
price of $5.12, resulting in net proceeds to the Company of $2,342,449.
During the twelve months ended October 31, 2014, an accredited investor exercised 50 warrants at an exercise price of $5.00,
resulting in net proceeds to the Company of $250.
Expiration of Warrants
During the twelve months ended October 31, 2015, the Company had 62,430 warrants with anti-dilution provisions, and 87,208
warrants, with no such anti-dilution provisions, expired unexercised.
During the twelve months ended October 31, 2014, the Company had 179,666 warrants with anti-dilution provisions, and 340,147
warrants, with no such anti-dilution provisions, expired unexercised.
Warrants with anti-dilution provisions
Some of the Company’s warrants contained anti-dilution provisions originally set at an exercise price of $25.00 with a term of five
years. As of October 31, 2015, all of these warrants had expired. As of October 31, 2014, these warrants had an exercise price of
approximately $7.71. If the Company had issued any Common Stock, except for exempt issuances as defined in the warrant agreement, for
consideration less than the exercise price, then the exercise price and the amount of warrant shares available would have been adjusted to a
new price and amount of shares per the “weighted average” formula included in the warrant agreement. For the twelve months ended
October 31, 2015, this anti-dilution provision required the Company to issue approximately 2,400 additional warrant shares, and the
exercise price to be lowered to $7.20.
For those warrants with exercise price reset features (anti-dilution provisions), the Company computed multiple valuations, each
quarter, using an adjusted BSM, to account for the various possibilities that could occur due to changes in the inputs to the BSM as a result
of contractually-obligated changes (for example, changes in strike price to account for down-round provisions). The Company utilized
different exercise prices of $7.20 and $6.00, weighting the possibility of warrants being exercised at $7.20 between 40% and 50% and
warrants being exercised at $6.00 between 50% and 60%.
F-15
9. SHARE BASED COMPENSATION
Amendments
On March 30, 2015, the Board of Directors adopted, subject to stockholder approval at the Annual Meeting, the Advaxis, Inc.
2015 Incentive Plan (the “2015 Plan”). The 2015 Plan became effective on May 27, 2015 when it was approved by the Company’s
stockholders at the 2015 Annual Meeting. The 2015 Plan serves as the successor to the Advaxis, Inc. 2011 Omnibus Incentive Plan (the
“Prior Plan”). Effective May 27, 2015, all future equity awards were made from the 2015 Plan, and no additional awards will be granted
under the Prior Plan. Subject to proportionate adjustment in the event of stock splits and similar events, the aggregate number of shares of
Common Stock that may be issued under the 2015 Plan is 3,600,000 shares, plus a number of additional shares (not to exceed 650,000)
underlying awards outstanding as of the effective date of the 2015 Plan under the Prior Plan that thereafter terminate or expire unexercised,
or are cancelled, forfeited or lapse for any reason. As of October 31, 2015, there were 2,134,468 shares available for issuance under the
2015 Plan.
At the Annual Meeting of Stockholders of the Company held on July 9, 2014, the stockholders ratified and approved an
amendment to the Company’s 2011 Omnibus Incentive Plan to increase the aggregate number of shares of common stock authorized for
issuance under such plan from 520,000 shares to 2,120,000 shares. Furthermore, the stockholders approved an amendment to the
Company’s Certificate of Incorporation to increase the total number of authorized shares of common stock from 25,000,000 shares of
common stock to 45,000,000 shares of common stock.
Employment Agreements
Management voluntarily purchases restricted stock directly from the Company at market price. The respective stock purchases
occur on the last trading day of each month. This voluntary election is outlined in each of Daniel J. O’Connor, Chief Executive Officer and
President, David J. Mauro, Executive Vice President, Chief Medical Officer, Gregory T. Mayes, Executive Vice President, Chief
Operating Officer and Secretary, Robert G. Petit, Executive Vice President, Chief Scientific Officer and Sara M. Bonstein, Senior Vice
President, Chief Financial Officer, (each an “Executive”), employment agreements. The table below reflects the purchases of each
Executive:
Executive
Daniel J. O’Connor
David J. Mauro
Gregory T. Mayes
Robert G. Petit
Sara M. Bonstein
ANNUALIZED
Annual Amount
to be Purchased
$
$
$
$
$
$
89,064 $
16,531 $
23,477 $
25,225 $
19,734 $
For the Year Ended October 31, 2015
Gross Purchase
Net Purchase
$
88,840
16,491
23,312
25,220
19,597
# of shares
8,482 $
1,591 $
2,180 $
2,443 $
1,837 $
$
76,451
12,729
18,740
19,000
15,662
# of shares
7,556
1,252
1,781
1,886
1,473
For the twelve months ended October 31, 2015, the Company recorded stock compensation expense of $206,192 for the portion
of management salaries paid in stock, representing 19,145 shares of its Common Stock (16,090 shares on a net basis after employee payroll
taxes).
For the twelve months ended October 31, 2014, the Company recorded stock compensation expense of $128,271 for the portion
of management salaries paid in stock, representing 40,320 shares of its Common Stock (31,026 shares on a net basis after employee payroll
taxes).
From 2013 to present, in addition to the purchases of Common Stock set forth in the above table, Mr. O’Connor has also
purchased an additional 146,616 shares of Common Stock out of his personal funds at the then market price for an aggregate consideration
of $588,294. These purchases consisted of the conversion of amounts due to Mr. O’Connor under a promissory note given by Mr.
O’Connor to the Company in 2012 of $66,500 for 21,091 shares, 2013 base salary which he elected to receive in Common Stock of a
$186,555 for 34,752 shares (21,489 on a net basis after employee payroll taxes), 2013 and 2014 cash bonuses voluntarily requested to
receive in equity of $214,359 for 62,064 shares (57,990 on a net basis after employee payroll taxes), fiscal 2014 voluntary request to
purchase stock directly from the Company at market price purchases of $68,750 for 15,950 shares, and purchases of the Company’s
Common Stock in the October 2013 and March 2014 public offerings of 13,500 shares for $54,000 and 3,333 shares for $10,000.
For the twelve months ended October 31, 2015, executive officers received a portion of their year-end performance bonus (with a
total fair value of approximately $418,000) in the aggregate amount of 125,411 shares of the Company’s Common Stock (98,603 on a net
basis after employee payroll taxes).
For the twelve months ended October 31, 2014, executive officers received a portion of their year-end performance bonus (with a
total fair value of approximately $129,000) in the aggregate amount of 31,845 shares of the Company’s Common Stock (21,389 on a net
basis after employee payroll taxes).
F-16
Restricted Stock Units (RSUs)
A summary of the Company’s RSU activity and related information for the twelve months ended October 31, 2015 and 2014 is as
follows:
Balance at October 31, 2013:
Granted
Vested
Cancelled
Balance at October 31, 2014:
Granted
Vested
Cancelled
Balance at October 31, 2015
Number of
RSUs
Weighted-Average
Grant Date Fair Value
112,500 $
1,268,580
(547,030)
(42,171)
791,879 $
864,192
(583,403)
(3,333)
1,069,335 $
3.57
3.88
3.91
4.14
3.81
15.14
7.58
11.76
10.89
The fair value as of the respective vesting dates of RSUs was approximately $7,771,000 and $1,944,000 for the twelve months
ended October 31, 2015 and 2014, respectively.
As of October 31, 2015, there was approximately $10,053,000 of unrecognized compensation cost related to non-vested RSUs,
which is expected to be recognized over a remaining weighted average vesting period of approximately 1.26 years.
As of October 31, 2015, the aggregate intrinsic value of non-vested RSUs was approximately $217,908.
Employee Stock Awards
During the twelve months ended October 31, 2015, 487,591 shares of Common Stock (406,691 shares on a net basis after
employee taxes) were issued to executives and employees related to incentive retention awards, employment inducements and employee
excellence awards. Total stock compensation expense associated with these awards was $5,226,302.
Furthermore, non-executive employees were entitled to receive a performance-based year-end cash bonus. Several non-executive
employees requested to be paid all or a portion of their cash bonus in the Company’s Common Stock instead of cash. During the twelve
months ended October 31, 2015, the total fair value of these equity purchases were $67,671, or 20,322 shares of the Company’s Common
Stock (14,300 on a net basis after employee payroll taxes).
During the twelve months ended October 31, 2014, 489,287 shares of Common Stock (280,848 shares on a net basis after
employee taxes) were issued to executives and employees related to incentive retention awards, employment inducements and employee
excellence awards. Total stock compensation expense associated with these awards was $1,836,143.
Director Stock Awards
During the twelve months ended October 31, 2015, 267,186 shares of Common Stock (253,754 shares on a net basis after taxes)
were issued to the Directors for compensation related to board and committee membership. Total stock compensation expense to the
Directors was $1,223,118.
During the twelve months ended October 31, 2014, 146,899 shares of Common Stock were issued to the Directors for
compensation related to board and committee membership. Total stock compensation expense to the Directors was $614,750.
F-17
Stock Options
A summary of changes in the stock option plan for the twelve months ended October 31, 2015 and 2014 is as follows:
Shares
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual Life
In Years
Aggregate
Intrinsic Value
Outstanding as of October 31, 2013
Granted
Cancelled or Expired
Outstanding as of October 31, 2014
Granted
Exercised *
Cancelled or Expired
Outstanding as of October 31, 2015
Vested and Exercisable at October 31, 2015
467,923 $
36,000
(35,955)
467,968 $
1,668,995
(137,667)
(17,357)
1,981,939 $
711,742 $
15.86
4.02
8.57
15.51
13.41
12.29
36.24
13.78
14.15
7.28 $
9.16
-
6.34 $
9.42
-
-
8.72 $
7.46 $
285,330
270,556
* Includes the cashless exercise of 117,667 options that resulted in the issuance of 45,167 shares of common stock.
The following table summarizes information about the outstanding and exercisable options at October 31, 2015.
Exercise
Price Range
$3.00 - $9.99
$10.00 - $14.99
$15.01 - $19.99
$20.00 - $36.00
Options Outstanding
Options Exercisable
Number
Outstanding
Weighted
Average
Remaining
Contractual
Weighted
Average
Exercise
Price
Intrinsic
Value
Number
Exercisable
Weighted
Average
Exercise
Price
Intrinsic
Value
119,720
1,621,605
224,669
15,945
7.40 $
9.24 $
6.33 $
0.45 $
8.71 $285,330
-
13.41 $
-
18.06 $
-
29.27 $
117,719 $
403,409 $
174,669 $
15,945 $
8.79 $ 270,556
-
13.31 $
-
18.30 $
-
29.27 $
The fair value of each option granted from the Company’s stock option plans during the years ended October 31, 2015 and 2014
was estimated on the date of grant using the Black-Scholes option-pricing model. Using this model, fair value is calculated based on
assumptions with respect to (i) expected volatility of the Company’s Common Stock price, (ii) the periods of time over which employees
and Board Directors are expected to hold their options prior to exercise (expected lives), (iii) expected dividend yield on the Company’s
Common Stock, and (iv) risk-free interest rates, which are based on quoted U.S. Treasury rates for securities with maturities approximating
the options’ expected lives. The Company used their own historical volatility in determining the volatility to be used. The expected term of
the stock option grants was calculated using the “simplified” method in accordance with the SEC Staff Accounting Bulletin 107. The
“simplified” method was used since the Company believes its historical data does not provide a reasonable basis upon which to estimate
expected term and the Company does not have enough option exercise data from its grants issued to support its own estimate as a result of
vesting terms and changes in the stock price. The expected dividend yield is zero as the Company has never paid dividends to common
shareholders and does not currently anticipate paying any in the foreseeable future.
In determining the fair value of the stock options granted during the twelve months ended October 31, 2015 and 2014, the
Company used the following inputs in its BSM:
Expected Term
Expected Volatility
Expected Dividends
Risk Free Interest Rate
Year Ended
October 31, 2015
October 31, 2014
5-10 years
109.26%-154.54%
0%
1.41%-2.27%
5 years
151.38%-171.12%
0%
1.39%-1.72%
Total compensation cost related to the Company’s outstanding stock options, recognized in the statement of operations for twelve
months ended October 31, 2015 and 2014 was approximately $9,521,000 and $920,000, respectively.
F-18
During the twelve months ended October 31, 2015, 1,668,995 options were granted with a total grant date fair value of
approximately $29,014,000. During the twelve months ended October 31, 2014, 36,000 options were granted with a total grant date fair
value of approximately $145,000.
During the twelve months ended October 31, 2015, options to purchase 137,667 shares of common stock were exercised, which
resulted in cash proceeds of $58,400.
As of October 31, 2015, there was approximately $19,718,000 of unrecognized compensation cost related to non-vested stock
option awards, which is expected to be recognized over a remaining weighted average vesting period of approximately 1.35 years.
As of October 31, 2015, the aggregate intrinsic value of vested and exercisable options was approximately $271,000.
Shares Issued to Consultants
During the twelve months ended October 31, 2015, 378,538 shares of Common Stock valued at $4,707,440 were issued to
consultants for services. The Company recorded a liability on its balance sheet for $55,000 for shares earned pursuant to consulting
agreements but not delivered.
During the twelve months ended October 31, 2014, 405,603 shares of Common Stock valued at $1,551,591 were issued to
consultants for services. The common stock share values were based on the dates the shares vested.
The following table summarizes share-based compensation expense included in the Statement of Operations by expense category
for years ended October 31, 2015 and 2014, respectively:
Research and development
General and administrative
Total
2011 Employee Stock Purchase Plan
Year Ended October 31,
2014
2015
1,250,747
6,293,791 $
4,114,863
15,137,239
5,365,610
21,431,030 $
$
$
The Company’s Board of Directors adopted the Advaxis, Inc. 2011 Employee Stock Purchase Plan, which the Company’s refers to
as the ESPP, on August 22, 2011, and the Company’s shareholders approved the ESPP on September 27, 2011. The ESPP allows
employees to purchase Common Stock of the Company at a 15% discount to the market price on designated exercise dates. Employees
were eligible to participate in the ESPP beginning December 30, 2011. 40,000 shares of the Company’s Common Stock are reserved for
issuance under the ESPP.
During the twelve months ended October 31, 2015, $28,791 was withheld from employees, on an after-tax basis, in order to
purchase an aggregate of 7,063 shares of Company’s Common Stock. During the twelve months ended October 31, 2014, $6,251 was
withheld from employees, on an after-tax basis, in order to purchase 2,110 shares of the Company’s Common Stock. As of October 31,
2015, 22,827 shares of Company’s Common Stock remain available for issuance under the ESPP.
10. COMMITMENTS AND CONTINGENCIES:
Legal Proceedings
Iliad Research and Trading
On March 24, 2014, Iliad Research and Trading, L.P. (“Iliad”) filed a Complaint against the Company in the Third Judicial
District Court of Salt Lake County, Utah. On June 30, 2014, after Iliad had filed an Amended Complaint, the Company removed the action
to the United States District Court for the District of Utah. On August 1, 2014, Iliad filed a Second Amended Complaint (the “SAC”). Iliad
alleged that the Company granted a participation right to Tonaquint, Inc. (“Tonaquint”) in a securities purchase agreement between
Tonaquint and the Company (the “Purchase Agreement”), pursuant to which Tonaquint was entitled to participate in transactions that the
Company structured in accordance with Section 3(a)(10) of the Securities Act of 1933, as amended. Iliad further alleged that the
Company’s settlement with Ironridge Global IV, Ltd. (“Ironridge”), pursuant to which the Company issued certain shares of its Common
Stock to Ironridge in reliance on the Section 3(a)(10) exemption, occurred without adequate notice for Tonaquint to exercise its
participation right. In addition, Iliad alleged that it acquired all of Tonaquint’s rights under the Purchase Agreement in April 2013. The
SAC purports to assert claims for breach of contract (express and implied), fraud (federal securities, state securities and common law) and
conversion.
On November 24, 2014, in response to the Company’s motion to dismiss, the Court dismissed the conversion claim but denied the
remainder of the motion. On December 8, 2014, Advaxis filed its answer to the SAC and a counterclaim (the “Counterclaim”), alleging that
Iliad – by purporting to have surreptitiously preserved its claim for breach of Tonaquint’s alleged right to participate in the Ironridge
transaction – had fraudulently induced Advaxis to enter into the parties’ post-assignment Exchange and Settlement Agreement and, in the
alternative, had breached the covenant of good faith and fair dealing implied therein. On January 23, 2015, Iliad filed its Reply to
Counterclaim. On May 4, 2015, in response to Iliad’s motion for partial summary judgment concerning liability on the express contract
claim and Advaxis’ Rule 56(d) motion to deny that motion and allow discovery, the Court found that Advaxis had materially breached the
Purchase Agreement.
On September 10, 2015, the parties entered into a definitive confidential settlement agreement and the case was dismissed.
F-19
KCM
On August 21, 2015, Knoll Capital Management L.P. (“KCM”) filed a complaint against the Company in the Delaware Court of
Chancery. The complaint alleges the existence of an oral agreement for the purchase by Knoll from the Company of 1,666,666.67 shares of
Company stock at a price of $3.00 per share. KCM alleges that the Company breached this alleged agreement and seeks specific
performance or, alternatively, money damages for breach of contract. KCM served the Company with the complaint on August 31, 2015,
and then served an amended complaint on October 16, 2015. The Company moved to dismiss the amended complaint on October 26, 2015.
A hearing on the motion to dismiss is scheduled for January 11, 2016. The Company intends to defend itself vigorously.
Numoda
On June 19, 2009, the Company entered into a master agreement, and on July 8, 2009, entered into a Project Agreement with
Numoda Corporation (“Numoda”), to oversee Phase 2 clinical activity with axalimogene filolisbac for the treatment of invasive cervical
cancer and cervical intraepithelial neoplasia.
On October 1, 2014, the Company filed a Complaint against Numoda seeking a declaratory judgment that, with its tender to
Numoda of a check for $68,884, the Company had fully performed the parties’ Project Agreement and that Numoda was not entitled to
interest, costs or attorneys’ fees thereunder or otherwise. On January 23, 2015, the Company filed an Amended Complaint against Numoda
seeking an order directing Numoda to specifically perform its obligation to deliver to Advaxis all materials, information and other data
generated under the parties’ Project Agreement. On February 20, 2015, Numoda filed an Answer denying liability and asserting a number
of affirmative defenses. With Court approval of a stipulation of the parties, the Preliminary Conference was adjourned from May 28, 2015
until October 29, 2015. Before the Preliminary Conference occurred, the Court adjourned it without date. On November 20, 2015, the
Company and Numoda reached a confidential agreement in principal, which is subject to more formal documentation, to resolve the action.
Larkin and Bono
On July 27, 2015, a derivative complaint was filed by a purported Company shareholder in the Court of Chancery of the State of
Delaware against certain of the Company’s officers and directors styled Timothy Larkin v. O’Connor, et al., Case No. 11338-CB (Del. Ch.
July 27, 2015). The action was brought derivatively on behalf of the Company, which is also named as a nominal defendant. On August 20,
2015, a related derivative complaint was filed by a purported Company shareholder in the United States District Court for the District of
New Jersey against the same defendants styled David Bono v. O’Connor, et al., Case No. 3:15-CV-006326-FLW-DEA (D.N.J. Aug. 20,
2015). Both complaints are based on general allegations related to certain stock options granted to the individual defendants and generally
allege counts for breaches of fiduciary duty and unjust enrichment. The Bono complaint alleges additional claims for violation of Section
14(a) of the Securities Exchange Act of 1934 and for waste of corporate assets. Both complaints seek damages and costs of an unspecified
amount, disgorgement of compensation obtained by the individual defendants, and injunctive relief. At this early stage of each proceeding,
the Company does not express any opinion as to the likely outcome, but the Company intends to defend each action vigorously. On
September 30, 2015, Defendants in the Larkin action filed a Motion to Dismiss, which is currently pending. On October 27, 2015,
Defendants in the Bono action filed a Motion to Dismiss the Verified Stockholder Derivative Complaint or, in the Alternative, to Stay,
which is currently pending.
Clinical Trial Collaboration Agreements
Inctye
On February 10, 2015, the Company entered into a Clinical Trial Collaboration Agreement (the “Incyte Agreement”) with Incyte
Corporation (“Incyte”) for the development and analysis of a combination therapy for the treatment of cervical cancer. Under the terms of
the Incyte Agreement, the parties will contribute their respective compounds to be dosed in combination during the course of the study,
with Incyte acting as the sponsor of the study and taking the lead role in its conduct. The Incyte Agreement is to continue in full force and
effect until completion of the final study report or until earlier termination by either party. Costs for the study are to be split between the
parties, and Incyte will provide us with an invoice and supporting documents of our share of the costs incurred through the end of each
calendar quarter. During the year ended October 31, 2015, the Company incurred approximately $124,100 in expenses pertaining to the
Incyte agreement, and such expenses were a component of research and development expenses in the statement of operations.
Merck & Co., Inc.
On August 22, 2014, the Company entered into a Clinical Trial Collaboration and Supply Agreement (the “Merck Agreement”)
with Merck, pursuant to which the parties will collaborate on a Phase 1/2 dose-escalation and safety study. The Phase 1 portion of the study
will evaluate the safety of our Lm-LLO based immunotherapy for prostate cancer, ADXS31-142 (the “Advaxis Compound”) as
monotherapy and in combination with KEYTRUDA® (pembrolizumab), Merck’s humanized monoclonal antibody against PD-1, (the
“Merck Compound”) to determine a recommended Phase 2 combination dose. The Phase 2 portion will evaluate the safety and efficacy of
the Advaxis Compound in combination with the Merck Compound. Both phases of the study will be in patients with previously treated
metastatic castration-resistant prostate cancer. A joint development committee, comprised of equal representatives from both parties, is
responsible for coordinating all regulatory and other activities under, and pursuant to, the Merck Agreement.
F-20
Each party is responsible for their own internal costs and expenses to support the study, while we will be responsible for all third
party costs of conducting the study. Merck will be responsible for manufacturing and supplying the Merck Compound. We will be
responsible for manufacturing and supplying the Advaxis Compound. The Company will be the sponsor of the study and hold the IND
related to the study.
All data and results generated under the study (“Collaboration Data”) will be jointly owned by the parties, except that ownership of
data and information generated from sample analysis to be performed by each party on its respective compound will be owned by the party
conducting such testing. All rights to all inventions and discoveries, which claim or cover the combined use of the Advaxis Compound and
the Merck Compound shall belong jointly to the parties. Inventions and discoveries relating solely to the Advaxis Compound, or a live
attenuated bacterial vaccine, shall be the exclusive property of us. Inventions and discoveries relating solely to the Merck Compound, or a
PD-1 antagonist, shall be the exclusive property of Merck.
The Merck Agreement shall continue in full force and effect until completion of all of the obligations of the parties or a permitted
termination.
During the years ended October 31 2015 and 2014, the Company incurred approximately $1,723,000 and $72,000, respectively, in
expenses pertaining to the Merck agreement, and such expenses were a component of research and development expenses in the statement
of operations.
MedImmune/AstraZeneca
On July 21, 2014, the Company entered into a Clinical Trial Collaboration Agreement (the “MedImmune Agreement”) with
MedImmune, the global biologics research and development arm of AstraZeneca, pursuant to which the parties intend to initiate a Phase 1/2
clinical study in the United States to evaluate the safety and efficacy of MedImmune’s investigational anti-PD-L1 immune checkpoint
inhibitor, MEDI4736, in combination with our investigational Lm-LLO cancer immunotherapy, axalimogene filolisbac , as a combination
treatment for patients with advanced, recurrent or refractory cervical cancer and HPV-associated head and neck cancer. A joint steering
committee, composed of equal representatives from both parties, is responsible for various matters associated with the collaboration,
including protocol approval, as well as reviewing and monitoring the progress of the study.
MedImmune will be responsible for providing MEDI4736 at no cost, as well as costs related to the proprietary assays performed
by MedImmune or a third party on behalf of MedImmune. We will be the sponsor of the study and be responsible for the submission of all
regulatory filings to support the study, the negotiation and execution of the clinical trial agreements associated with each study site, and the
packaging and labelling of the Advaxis and MedImmune product candidates to be used in the study and the costs associated therewith. For
a period beginning upon the completion of the study and the receipt by MedImmune of the last final report for the study and ending one
hundred twenty (120) days thereafter (unless extended), MedImmune will be granted first right to negotiate in good faith in an attempt to
enter into an agreement with us with respect to the development, regulatory approval and commercialization of axalimogene filolisbac and
MEDI4736 to be used in combination with each other for the treatment or prevention of cancer. Neither party is obligated to enter into such
an agreement. In the event the parties do not enter an agreement and we obtain regulatory approval for axalimogene filolisbac in
combination with any PD-1 antibody or PD-L1 antibody, we shall pay MedImmune a royalty obligation and one-time payment.
All intellectual property rights made, conceived or generated through the clinical trials that relate solely to a MedImmune
development product shall be owned solely by MedImmune. All intellectual property rights made, conceived or generated through the
clinical trials that relate solely to an Advaxis development product shall be owned solely by us. All intellectual property rights made,
conceived or generated through the clinical trials that relate to the combination of one or more MedImmune development product and one
or more Advaxis development product shall be jointly owned by both parties; provided, however that in the event the parties do not enter
into a clinical development and commercialization agreement, we will not exploit, commercialize or license the joint inventions, except for
the performance of its obligations under the MedImmune Agreement. MedImmune has the sole right to prosecute and enforce all patents
and other intellectual property rights covering all joint inventions and all associated costs will be shared by the parties.
The MedImmune Agreement shall remain in effect until the earlier of (i) permitted termination, (ii) the parties entering into a
clinical development and commercialization agreement or expiration of the negotiation period (unless extended), except with respect to
rights that survive termination. Either party may terminate the MedImmune Agreement upon thirty (30) days written notice upon material
breach of the other party, unless the breach is cured in such period or reasonable actions to cure the breach are initiated and pursued (if the
breach is not capable of being cured during the 30-day notice period). In addition, either party may terminate the MedImmune Agreement
immediately if the party determines in good faith that the trials may unreasonably affect the safety of trial subjects.
During the years ended October 31 2015 and 2014, the Company incurred approximately $1,888,000 and $50,000, respectively, in
expenses pertaining to the MedImmune agreement, and such expenses were a component of research and development expenses in the
statement of operations.
F-21
Office & Laboratory Lease
The Company’s corporate offices are currently located at 305 College Road East, Princeton, New Jersey 08540. On April 1, 2011,
the Company entered into a sublease agreement for such office, and the agreement expired on November 29, 2015.
In May 2015, the Company signed a direct lease for an expansion area, as well as a direct lease for the existing office, lab and
vivarium space upon the expiration of the sublease agreement, which is approximately 20,000 square foot of space in total in Princeton, NJ.
The lease term is seven years and expires on November 30, 2022. The Company paid a security deposit of $82,426. The lease requires base
annual rent of approximately $442,000 with annual increases in increments between 2% and 4% throughout the remainder of the lease.
Rent expense will be recognized on a straight line basis over the term of the lease. The lease contains two options to renew for five years
each.
Rent expense for the years ended October 31, 2015 and 2014 was $150,000 and $330,000, respectively.
Future minimum payments of the Company’s operating leases are as follows:
Year ended October 31,
2016
2017
2018
2019
2020
Thereafter
$
440,208
450,541
468,947
488,153
507,359
1,117,949
The Company plans to continue to rent necessary offices and laboratories to support its business.
Sale of Net Operating Losses (NOLs)
The Company may be eligible, from time to time, to receive cash from the sale of its Net Operating Losses under the State of New
Jersey NOL Transfer Program. In December 2015, the Company received a net cash amount of $1,609,349 from the sale of its state NOLs
and research and development tax credits for the period ended October 31, 2014. In December 2014, the Company received a net cash
amount of $1,731,317 from the sale of its state NOLs and research and development tax credits for the periods ended October 31, 2012 and
2013.
11. INCOME TAXES:
The income tax provision (benefit) consists of the following:
Federal
Current
Deferred
State and Local
Current
Deferred
Change in valuation allowance
Income tax provision (benefit)
October 31, 2015
October 31, 2014
$
$
- $
(14,513,684)
(1,609,349)
(1,840,276)
16,353,960
(1,609,349) $
-
(5,777,937)
(2,356,880)
1,008,338
4,769,599
(2,356,880)
The Company has U.S. federal net operating loss carryovers (NOLs) of approximately $101,075,000 and $75,348,000 at October
31, 2015 and 2014, respectively, available to offset taxable income which expire beginning in 2023. If not used, these NOLs may be subject
to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the
regulations. In 2016, the Company plans on undertaking a detailed analysis of any historical and/or current Section 382 ownership changes
that may limit the utilization of the net operating loss carryovers. The Company also has New Jersey State Net Operating Loss carryovers
of approximately $27,496,000 and $18,078,000 as of October 31, 2015 and October 31, 2014, respectively, available to offset future
taxable income through 2035.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation for taxable
income during the periods in which temporary differences representing net future deductible amounts become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this
assessment. After consideration of all the information available, Management believes that significant uncertainty exists with respect to
future realization of the deferred tax assets and has therefore established a full valuation allowance. For the years ended October 31, 2015
and 2014, the change in the valuation allowance was approximately $16,353,960 and $4,770,000.
The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose
uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must
be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be
taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.”
A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax
benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a
result of applying the provisions of ASC 740.
F-22
If applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as “Other
Income (Expense), Net” in the statement of operations. Penalties would be recognized as a component of “General and administrative” in
the statement of operations.
No interest or penalties on unpaid tax were recorded during the years ended October 31, 2015 and October 31, 2014, respectively.
As of October 31, 2015 and October 31, 2014, no liability for unrecognized tax benefits was required to be reported. The Company does
not expect any significant changes in its unrecognized tax benefits in the next year.
The Company files tax returns in the U.S. federal and state jurisdictions and is subject to examination by tax authorities beginning
with the year ended October 31, 2012.
The Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:
Deferred Tax Assets
Net operating loss carryovers
Stock-based compensation
Other deferred tax assets
Total deferred tax assets
Valuation allowance
Deferred tax asset, net of valuation allowance
Deferred Tax Liabilities
Other deferred tax liabilities
Total deferred tax liabilities
Net deferred tax asset (liability)
Years Ended
October 31, 2015
October 31, 2014
$
$
$
$
$
34,366,000 $
10,282,000
4,878,000
49,526,000 $
(47,466,000)
2,060,000 $
26,685,000
3,467,000
2,094,000
32,246,000
(31,112,000)
1,134,000
(2,060,000)
(2,060,000) $
- $
(1,134,000)
(1,134,000)
-
The expected tax (expense) benefit based on the statutory rate is reconciled with actual tax expense benefit as follows:
US Federal statutory rate
State income tax, net of federal benefit
Deferred tax adjustment
Change in valuation allowance
Income tax benefit from sale of New Jersey NOL carryovers
Other permanent differences
Income tax (provision) benefit
12. SHAREHOLDERS’ EQUITY:
Registered Direct Offerings
Years Ended
October 31, 2015
October 31, 2014
34.0%
5.9
(2.2)
(33.6)
3.3
(4.1)
3.3%
34.0
5.9
(13.3)
(25.3)
12.5
(1.3)
12.5%
On August 26, 2015, the Company entered into a licensing agreement with Knight Therapeutics Inc. (“Knight”), a Canadian-based
specialty pharmaceutical company focused on acquiring, in-licensing, selling and marketing innovative prescription and over-the-counter
pharmaceutical products, to commercialize in Canada the Company’s product candidates. Under the terms of the licensing agreement,
Knight will be responsible to conduct and fund all regulatory and commercial activities in Canada. The Company is eligible to receive
royalty and sales milestones as defined in the agreement.
F-23
In connection with the licensing agreement, the Company sold directly to Knight 359,454 shares of the common stock at $13.91
per share. In addition, the Company sold directly to Sectoral Asset Management, a leading Canadian-based global healthcare investment
advisor, 1,437,815 shares of common stock at $13.91 per share. The combined net proceeds to the Company from these direct investments
was approximately $25 million. The sale of the shares closed on August 28, 2015.
On February 18, 2015, the Company priced a registered direct offering of 3,068,095 shares of its Common Stock at $7.50 per
share. The transaction closed on February 19, 2015, and the Company received gross proceeds of approximately $23.0 million from the
offering. After deducting offering expenses, the net proceeds from the offering were approximately $22.3 million.
On December 19, 2014, the Company priced a registered direct offering of 3,940,801 shares of its Common Stock at $4.25 per
share. The transaction closed on December 22, 2014, and the Company received gross proceeds of approximately $16.7 million from the
offering. After deducting offering expenses, the net proceeds from the offering were approximately $15.8 million.
Public Offerings
On May 5, 2015, the Company closed on an underwritten public offering of 2,800,000 shares of Common Stock at a public
offering price of $19.00 per share. On May 20, 2015, the Company closed the underwriters’ overallotment option to purchase 420,000
shares of its Common Stock at a public offering price of $19.00 per share. The Company received gross proceeds of approximately $61.2
million from the May 2015 public offerings. After deducting offering expenses, the net proceeds from the May 2015 public offerings were
approximately $56.7 million.
On March 31, 2014, the Company closed its public offering of 4,692,000 shares of Common Stock, including 612,000 shares that
were offered and sold by the Company pursuant to the full exercise of the underwriters’ over-allotment option, at a price to the public of
$3.00 per share. Total gross proceeds from the offering were $14 million. After deducting underwriting discounts and commissions and
other offering expenses paid by the Company, net proceeds were approximately $12.7 million.
Licensing Agreement – Global BioPharma Inc.
On December 9, 2013, the Company entered into an exclusive licensing agreement for the development and commercialization of
axalimogene filolisbac with Global BioPharma, Inc. (“GBP”), a Taiwanese based biotech company funded by a group of investors led by
Taiwan Biotech Co., Ltd (TBC).
GBP plans to conduct registration trials with axalimogene filolisbac for the treatment of advanced cervical cancer. GBP is also
planning to conduct a randomized Phase 2, open-label, controlled study in HPV-associated NSCLC in patients following first-line induction
chemotherapy. Pending Taiwanese FDA approval, the study is planned to initiate in 2016 and will enroll up to 124 patients. This trial will
be fully funded by GBP. GBP will continue to explore the use of our lead product candidate in several other indications including head and
neck, and anal cancer.
GBP will pay Advaxis event-based financial milestones, an annual development fee, and annual net sales royalty payments in the
high single to double digits. In addition, as an upfront payment, GBP made an investment in Advaxis of $400,000 by purchasing from the
Company 108,724 shares of its Common Stock at a price of $3.68 per share, GBP also received 100,000 warrants at an exercise price of
$5.52 which expire in December 2018.
GBP will be responsible for all clinical development and commercialization costs in the GBP territory. GBP will also reimburse
the Company $2.25 million toward its U.S. registrational study, where such payment will help to offset development costs. GBP is
committed to establishing manufacturing capabilities for its own territory and to serving as a secondary manufacturing source for Advaxis
in the future. Under the terms of the agreement, Advaxis will exclusively license the rights of axalimogene filolisbac to GBP for Asia,
Africa, and former USSR territory, exclusive of India and certain other countries, for all HPV-associated indications. Advaxis retains
exclusive rights to axalimogene filolisbac for the rest of the world.
Licensing Agreement – Aratana Therapeutics
On March 19, 2014, the Company and Aratana entered into a definitive Exclusive License Agreement (the “Aratana Agreement”).
Pursuant to the Agreement, Advaxis granted Aratana an exclusive, worldwide, royalty-bearing, license, with the right to sublicense, certain
Advaxis proprietary technology that enables Aratana to develop and commercialize animal health products that will be targeted for
treatment of osteosarcoma and other cancer indications in animals. Under the terms of the Aratana Agreement, Aratana paid an upfront
payment to the Company, of $1 million. As this license has stand-alone value to Aratana (who has the ability to sublicense) and was
delivered to Aratana, upon execution of the Aratana Agreement, the Company recorded the $1 million payment as licensing revenue in the
three months ended April 30, 2014. Aratana will also pay the Company up to an additional $36.5 million based on the achievement of
certain milestones with respect to the advancement of products pursuant to the terms of the Aratana Agreement. In addition, Aratana may
pay the Company an additional $15 million in cumulative sales milestones pursuant to the terms of the Aratana Agreement.
Advaxis (i) issued and sold 306,122 shares of Advaxis’ Common Stock to Aratana at a price of $4.90 per share, which was equal
to the closing price of the Common Stock on the NASDAQ Capital Market on March 19, 2014, and (ii) issued a ten-year warrant to
Aratana giving Aratana the right to purchase up to 153,061 additional shares of Advaxis’ Common Stock at an exercise price of $4.90 per
share. In connection with the sale of the Common Stock and warrants, Advaxis received aggregate net proceeds of $1,500,000.
F-24
Based on the above licensing agreement, the Company expects to derive the majority of revenue from patent licensing if clinical
development is successful. In general, these revenue arrangements provide for the payment of contractually determined fees in
consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company. The
intellectual property rights granted may be perpetual in nature, or upon the final milestones being met, or can be granted for a defined,
relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an
additional minimum upfront payment. The Company recognizes licensing fees when there is persuasive evidence of a licensing
arrangement, fees are fixed or determinable, delivery has occurred and collectability is reasonably assured.
Stock Purchase Agreements
On May 15, 2014, the Company issued 45,323 shares of its Common Stock pursuant to the Securities Purchase Agreement with
Yenson.
13. FAIR VALUE
The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are
(i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on
the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value
which are the following:
● Level 1 — Quoted prices in active markets for identical assets or liabilities.
● Level 2— Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data
or substantially the full term of the assets or liabilities.
● Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets
or liabilities.
The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of October 31, 2015
and October 31, 2014:
October 31, 2015
Level 1
Level 2
Level 3
Total
Common stock warrant liability, warrants exercisable at
$10.63- $18.75 from November 2015 through August
2017
-
-
89,211
89,211
October 31, 2014
Level 1
Level 2
Level 3
Total
Common stock warrant liability, warrants exercisable
at $2.76 - $21.25 from November 2014 through
August 2017
$
Common stock warrant liability:
Beginning balance
Issuance of additional warrants due to anti-dilution provisions
Change in fair value
Ending Balance
F-25
- $
- $
32,091 $
32,091
October 31,
2015
2014
32,091 $
8,169
48,950
89,211 $
646,734
4,446
(619,089)
32,091
$
$
14. SUBSEQUENT EVENTS
On November 3, 2015, the Company issued 1,667 shares of Common Stock to a member of management, which represents the
anniversary vesting period of an inducement grant pursuant to his Employment Agreement.
On November 5, 2015, the Company granted to executives 1,090,000 options with a fair value of $11,677,538. The options vest
annually in equal installments such that 100% of the options will by the third anniversary of the grant date, and the vesting of 350,000 of
the options are subject to a performance condition. The stock options vest one-third after the one year anniversary, one-third after the two
year anniversary and one-third after the three year anniversary.
On November 5, 2015, the Company granted to Directors 295,000 options with a fair value of $3,160,432. The options vest
annually in equal installments such that 100% of the options will by the third anniversary of the grant date. The stock options vest one-third
after the one year anniversary, one-third after the two year anniversary and one-third after the three year anniversary.
On November 5, 2015, the Company issued 4,687 shares of Common Stock to the Board of Directors, which represents a portion
of their quarterly retainer fees.
On November 16, 2015, the Company issued 2,500 shares of Common Stock a member of management, which represents the
initial vesting period of an inducement grant pursuant to his Employment Agreement.
On November 20, 2015, the Company issued 16,467 shares of Common Stock valued at $203,547 to accredited investors as
payment for consulting services rendered.
On November 30, 2015, the Company issued 1,195 shares of Common Stock to its Executive Officers, pursuant to their
Employment Agreements.
On December 1, 2015, the Company issued 1,657 shares of Common Stock valued at $20,000 to an accredited investor as
payment for consulting services rendered.
On December 7, 2015, the Company issued 1,875 shares of Common Stock to members of management, which represents the
initial vesting period of an inducement grant pursuant to their Employment Agreements.
On December 21, 2015, the Company issued 5,625 shares of Common Stock to members of management, which represents the
initial vesting period of an inducement grant pursuant to their Employment Agreements.
On December 29, 2015, the Company issued 122,662 shares of Common Stock to an accredited investor, pursuant to a warrant
exercise.
On December 31, 2015, the Company issued 2,044 shares of Common Stock to its Executive officers, pursuant to their
Employment Agreements.
On January 4, 2016, the Company issued 11,875 shares of Common Stock to members of management, which represents the
initial vesting period of an inducement grant pursuant to their Employment Agreements.
On January 7, 2016, the Company issued 5,000 of Common Stock valued at $43,150 to an accredited investor as payment for
consulting services rendered.
F-26
CONFIDENTIAL TREATMENT REQUESTED. Confidential portions of this document have been redacted and have been
separately filed with the Commission.
Exhibit No. 10.57
License Agreement
This License Agreement (this “Agreement”) is made effective as of August 25, 2015 by and between Advaxis, Inc., a corporation formed
under the laws of Delaware (“Advaxis”) having its place of business at 305 College Road East, Princeton, NJ 08540, and Knight
Therapeutics Inc. (“Knight” and together with Advaxis, the “Parties”) and located at 376 Victoria Avenue, Suite 220, Montreal, Quebec,
Canada, H3Y 1C3.
RECITALS
WHEREAS, Knight has expertise in obtaining regulatory approvals for pharmaceutical products in Canada and commercializing those
products;
WHEREAS, Advaxis has developed ADXS-HPV, ADXS-HER2, and ADXS-PSA and may develop additional products and owns certain
information, proprietary data, know-how and other intellectual property (i.e., patents, methods, techniques, specifications, formulae and the
like) necessary to develop, manufacture and register the Products (the “Information”);
WHEREAS, Advaxis seeks to grant an exclusive, non-transferable license to register and commercialize the Products in the Territory for
use in the Field;
WHEREAS, Advaxis will supply the Products to Knight for use in the commercialization of the Products in the Territory under an Advaxis
brand in the Territory and Knight will, in turn, pay a license fee and such other payments as noted herein;
NOW THEREFORE, in consideration of the payments and the mutual promises and conditions set forth herein, the sufficiency and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions
1.1. “Affiliate” means any Person that, directly or indirectly, controls, is controlled by or is under common control with a Party for so
long as such control exists, where “control” means the decision-making authority as to such Person and, further, where such control
shall be presumed to exist where a Person owns more than fifty percent (50%) of the equity (or such lesser percentage which is the
maximum allowed to be owned by a foreign corporation in a particular jurisdiction) entitled to vote regarding composition of the
board of directors or other body entitled to direct the affairs of the entity.
1.2. “Clinical IP” shall mean (i) all preclinical and clinical protocols, studies, data, results, study-related forms, materials and reports
(e.g., investigator brochures, informed consent forms, data safety monitoring board related documents, patient recruitment related
materials, biocompatibility studies, animal studies, safety studies, and chemistry, manufacturing and control data) resulting from any
preclinical or clinical study or trial of any Product in the Field that is conducted by or under the direction of Advaxis or its permitted
partners.
1.3. “Field” means * and any other or future indications to be approved in the Territory.
1.4. “Inability to Supply” means the failure of Advaxis to supply the volumes of Products indicated in an accepted order within thirty
(30) days after the agreed upon delivery date for such volumes set forth in such accepted order, for any reason whatsoever, including
Product does not meet the applicable specifications.
1.5. “Intellectual Property Rights” means those patent and other intellectual property and proprietary rights owned or licensed by
Advaxis and embodied in Products which, absent the license granted in Section 2.1, would be infringed by Knight’s activities
contemplated under this Agreement.
1.6. “Long Term Inability to Supply” means an Inability to Supply that lasts for more than ninety (90) days.
1.7. “Marketing Authorization Approval” means approval by the applicable regulatory authority for marketing and sale of the Products
in the Field in the Territory.
1.8. “Net Sales” means, with respect to any period, the total amount billed or invoiced on sales of the Product during such period
anywhere in the Territory by Knight and its associated parties to unaffiliated third parties in bona fide arm’s length transactions, less
the following deductions, in each case to the extent reasonable and customarily provided to unaffiliated entities and actually allowed
and taken with respect to such sales:
(i) credits, price adjustments or allowances for damaged products, returns or rejections of the Product;
(ii) normal and customary trade, cash and quantity discounts, allowances and credits (other than price discounts granted at the time
of invoicing which have already been included in the gross amount invoiced);
(iii) chargeback payments, repayments and rebates (or the equivalent thereof) granted to or imposed by group purchasing
organizations, managed health care organizations or federal, state/provincial, local and other governments, including any or all of
their regulatory authorities, agencies, review boards or tribunals, or trade customers;
(iv) sales, value-added (to the extent not refundable in accordance with applicable law), and excise taxes, tariffs and duties, and
other taxes directly related to the sale (but not including taxes assessed against the income derived from such sale).
(v) stocking allowances; and
(vi) any other payment which reduces gross revenue and is permitted to be deducted in calculating net sales in accordance with
Canadian GAAP.
* Confidential material redacted and filed separately with the Commission.
Net Sales shall include the amount or fair market value of all other consideration received by Knight and its associated parties in
respect of sales of the Product, whether such consideration is in cash, payment in kind, exchange, or other form. Net Sales shall not
include sales between or among Knight or its associated Parties unless any such associated party is the end user. Subject to the
above, Net Sales shall be calculated in accordance with the standard internal policies and procedures of Knight, which shall at all
times be in accordance with IFRS.
1.9. “Party” or “Parties” means individually Knight or Advaxis and collectively Knight and Advaxis.
1.10.“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, joint venture,
proprietorship or other de jure entity organized under the laws of any jurisdiction.
1.11.“Products” means Advaxis * including * and any and all improvements made to such products.
1.12.“Short Term Inability to Supply” means an Inability to Supply that lasts longer than thirty (30) days but no more than ninety (90)
days.
1.13.“Term” has the meaning assigned thereto in Section 9.1.
1.14.“Territory” means Canada.
2. Appointment; Responsibilities and Activities
2.1 Exclusive Appointment and License. During the Term of and subject to all other terms and conditions of this Agreement, Advaxis
hereby appoints Knight as an independent, exclusive distributor of Products in the Field in the Territory and Knight hereby accepts such
appointment. Advaxis will not, and will ensure that none of its Affiliates sell Products to any third party in the Territory for the Field or
appoint any third party as distributor of the Products for the Field in the Territory. During the Term and subject to all other terms and
conditions of this Agreement, Advaxis hereby grants Knight an exclusive non-transferable right and license, under the Intellectual Property
Rights, to use, have used, register, have registered, commercialize, have commercialized, sell, have sold, import and distribute, market and
promote Products in the Field and the Territory.
2.2 Knight’s responsibilities. Knight agrees to utilize its license rights described herein to carry out the activities described in this
Agreement with the aim to: (1) obtain and maintain Marketing Authorization Approval; and (2) commercialize the Products in the Territory
for use in the Field under an Advaxis brand, subject to applicable laws in the Territory. Advaxis shall have the right (but not the obligation)
to participate with Knight in any discussions with a regulatory authority regarding matters related to the regulatory approval or
commercialization activities in the Territory. Knight shall notify Advaxis immediately upon receipt of regulatory authority request for any
such discussions, inspections or investigations relating to commercialization of the Products in the Territory. For marketing authorization
outside the Territory, Advaxis will have sole responsibility for obtaining necessary regulatory authorizations, registrations, licenses, or
approvals as may be necessary from regulatory authorities outside the Territory or any institutional review board or ethics committees
overseeing such trial and shall have sole responsibility for any other development activities to obtain marketing authorization outside the
Territory.
* Confidential material redacted and filed separately with the Commission.
2.3 Advaxis responsibilities. Advaxis shall provide to Knight, at its expense, those portions of any application previously submitted by
Advaxis for regulatory approval of the Products in the Field in and outside the Territory that are required to be included in Knight’s
applications for regulatory approval in the Territory. In addition, Advaxis hereby grants Knight a right to reference to all data and
information contained or referenced in any regulatory filings for the Products and to all Clinical IP. Knight hereby grants Advaxis a right of
reference to all data and information contained or referenced in Knight’s regulatory filings for the Products.
2.4 Knight shall advise Advaxis, by written or oral communications, as and when requested, of the progress and status of its regulatory and
commercial activities and shall advise Advaxis promptly, by written or oral communications, of all significant developments.
2.5 Supply.
2.5.1 Upon approval of the first Product, and for each such later Product, Knight will provide Advaxis a rolling twenty-four (24)
month forecast of Product supply needed, with a three (3) month frozen period.
2.5.2 Advaxis shall supply and deliver finished Products to Knight in finished packaged format, manufactured in compliance with
the specifications and all applicable laws in the Territory on a cost plus goods sold basis not to exceed * U.S. dollars ($*(US)) per unit. Such
cost shall be invoiced at the time of delivery. Invoices shall be paid within thirty (30) days of receipt and shall be deducted by Knight from
the Net Sales Royalty payable under Section 3.2. Knight will supply Advaxis with labeling for the Products and Knight will be solely
responsible for ensuring such labeling is compliant with the applicable laws, regulations, guidelines, and standards of each jurisdiction
within the Territory.
2.5.3 Knight will handle and store all Products supplied by Advaxis in accordance with applicable laws and regulations and
generally accepted industry standards. All arriving packages will be thoroughly inspected upon receipt for correct labeling and packaging
integrity. Knight will contact Advaxis, no later than ten (10) business days, via phone or email about any receipt issues, including
nonconformances, modifications in shipping conditions, or conditions of the Products which may delay processing, use, sale or distribution.
Should any Products received be deemed unacceptable for processing, Knight promptly will communicate with Advaxis about the nature of
the issue. More specific handling requirements and all quality requirements and specifications of the Products with related responsibilities
will be set forth in the quality agreement to be mutually agreed upon by the Parties in writing and executed within ninety (90) days after
Marketing Authorization Approval of the first Product (“ Quality Agreement”). A certificate of analysis shall accompany each shipment of
Products to Knight and Knight shall be responsible for any failure of the Products to meet specifications to the extent caused by shipping,
storage or handling conditions occurring after delivery to Knight. Replacement of Products found to be nonconforming due to
circumstances occurring after delivery to Knight will be at Knight’s sole expense. Advaxis shall have the right to investigate any
nonconformances reported by Knight.
* Confidential material redacted and filed separately with the Commission.
2.5.4. Advaxis shall use commercially reasonable efforts to ensure that there is a sufficient quantity of the fully finished Products
to cover the requirement of Knight’s promotion and distribution of the Products. All the quality requirements and specifications of the
Products with related responsibilities will be detailed in the Quality Agreement.
2.5.5. Inability to supply.
(i) In the event of a partial inability to supply Product for which an order has been accepted by Advaxis, Advaxis shall allocate
inventory to Knight for the Territory on a pro-rata basis when compared to other markets, including the US.
(ii) In the event of a Short Term Inability to Supply, Advaxis shall pay Knight an amount equal to *% of the gross amount which
would have been invoiced by Knight for the sale of the Products according to the forecast provided by Knight to Advaxis.
(iii) in the event of a Long Term Inability to Supply, the Parties agree to act in good faith and make reasonable efforts to find a
mutually acceptable solution. If a mutually acceptable solution is not agreed within thirty (30) days, Knight will have the right to terminate
this Agreement by giving notice to Advaxis. In addition to its termination rights, Knight will be entitled to cease all payments to Advaxis
and purchase the Products directly from a third party. For greater certainty, Advaxis hereby grants Knight the non-exclusive license to use
Intellectual Property Rights to have the Products manufactured by a third party and Advaxis shall assist Knight in sourcing Products from a
third party.
2.6 Each Party agrees to act in good faith in performing its obligations under this Agreement and shall notify the other Party as promptly as
possible in the event of any delay that is likely to adversely affect its performance under this Agreement.
2.7 Knight represents that, to its knowledge, no person who will perform activities under this Agreement has been suspended, debarred or
subject to temporary denial of approval, nor is under consideration to be suspended, debarred or subject to temporary denial of approval, by
the U.S. Food and Drug Administration from working in or providing services, directly or indirectly, to any applicant for approval of a drug
product or any pharmaceutical or biotechnology company under the Generic Drug Enforcement Act of 1992, as amended. In the event that
during the term of this Agreement, Knight becomes aware that person who is or was involved in the performance of any activities on behalf
of Knight under this Agreement becomes disbarred, or is in the process of disbarment, or are otherwise listed in the FDA’s Clinical
Investigator Disqualification Proceedings database or has a hearing pending for disqualification, Knight will promptly notify the Advaxis in
writing. Knight further represents that, to its knowledge, no person who will perform activities under this Agreement has been (i) convicted
of an offense related to any Federal or State healthcare program, including (but not limited to) those within the scope of 42 U.S.C. § 1320a-
7(a); (ii) excluded, suspended or is otherwise ineligible for Federal or State healthcare program participation, including (but not limited to)
persons identified on the General Services Administration’s List of Parties Excluded from Federal Programs or the HHS/OIG List of
Excluded Individuals/Entities; or is otherwise ineligible for Federal or State healthcare program participation or (iii) debarred from or under
any Federal or State healthcare program (including, but not limited to debarment under Section 306 of the Federal Food, Drug and
Cosmetic Act (21 USC 335a). In the event any of the foregoing occurs or is in the process of occurring Knight will promptly notify
Advaxis.
* Confidential material redacted and filed separately with the Commission.
2.8 Intentionally omitted.
2.9 Intentionally omitted.
2.10 Knight shall (i) use the Products solely for purposes of performing its obligations under this Agreement; (ii) not use the Product in any
manner inconsistent with this Agreement; and (iii) use, store, transport, handle, sell, distribute and dispose of the Products in compliance
with applicable law, as well as all reasonable instructions of Advaxis. Knight shall not reverse engineer, reverse compile, disassemble or
otherwise attempt to derive the composition or underlying information, structure or ideas of the Products, and in particular shall not analyze
the Products by physical, chemical or biochemical means except as necessary to perform its obligations under the Agreement.
2.11 Knight shall commercialize, market, promote, advertise, price, sell and distribute the Products in the Territory in compliance with
applicable law.
2.12 Recalls of commercialized Product in the Territory shall be discussed and agreed upon by a meeting conducted with appropriate
Knight and Advaxis personnel. The Parties agree to enter into a Pharmacovigilance Agreement within ninety (90) days of receipt of a
Marketing Authorization Approval of the first Product (“PV Agreement”). The PV Agreement will cover the handling of adverse events.
2.13 Right of First Refusal. During the Term of and subject to all other terms and conditions of this Agreement, Advaxis hereby grants to
Knight a right of first refusal (“Right of First Refusal”) with respect to the exclusive license and distribution rights to the Products
(excluding *), in the Field, for *. Knight shall advise Advaxis within fifteen (15) business days of its receipt of a notice from Advaxis which
details a bona fide unrelated third party offer related to such rights for * (with a copy of such offer, with the name of the third party deleted
or redacted), and whether it intends to accept such terms and conditions. Thereafter, the Parties will enter into exclusive and good faith
negotiations to conclude an agreement on such proposed terms and conditions. If the Parties have not entered into a binding agreement with
respect to the exclusive license and distribution rights to the Products (excluding *) in the Field for *, confirming such terms and conditions
within thirty (30) business days of Knight’s exercise of its rights hereunder (during which period Advaxis shall negotiate exclusively with
Knight with respect thereto), then Advaxis shall be entitled to enter into an agreement with the aforesaid third party on no less favorable
terms and conditions provided in the notice to Knight.
* Confidential material redacted and filed separately with the Commission.
3. License; License Fees; Royalties; Intellectual Property
3.1 Subject to the terms of this Agreement and the Securities Purchase Agreement entered into on the date hereof between Advaxis and
Knight, Knight shall subscribe for, and Advaxis shall immediately issue to Knight, $5,000,000 worth of freely tradable Advaxis shares. As
partial consideration for, and subject to, Knight’s agreement to subscribe for such Advaxis shares, Advaxis hereby grants to Knight an
exclusive, non-transferable license to use, have used, register, have registered, commercialize, have commercialized, sell, have sold,
import, distribute, market and promote the Products in the Field in the Territory under an Advaxis brand, subject to applicable laws.
Registration of the Products in the Territory shall be in the name of Knight and Knight shall exclusively hold any marketing authorizations
in the Territory. Subject to the terms and conditions of this Agreement, Advaxis retains the exclusive right to manufacture the Products.
The license granted herein includes the right for Knight to request sublicenses for third parties, which request Advaxis shall not
unreasonably withhold or delay, in accordance with the terms of this Agreement, for the purpose of performing the commercialization
activities within the Territory and Field. All sublicenses granted by Knight shall be subject to the terms and conditions of this Agreement
and Knight shall enter into a written sublicense agreement with each sublicensee which will contain terms and conditions fully consistent
with the terms and conditions contained in this Agreement. Knight shall use commercially reasonable efforts to include in any sublicense
agreement express permission to assign all of the rights and obligations under such agreement to Advaxis without consent from the
sublicensee. Knight shall provide to Advaxis a draft copy of each sublicense agreement intended to be entered into by Knight and any
sublicensee, in each case, for a period of 10 (ten) days before execution of such sublicense agreement to allow Advaxis to ascertain if the
terms and conditions set forth therein are fully consistent with the terms and conditions contained in this Agreement, provided that Knight
may redact in its entirety from such draft any sensitive, confidential or proprietary information that is not necessary to ascertain Knight’s or
a sublicensee’s compliance with the terms and conditions of this Agreement (including, without limitation, Knight’s payment, notification,
recordkeeping and reporting obligations hereunder). Knight shall provide to Advaxis a true and complete copy of each sublicense
agreement entered into by Knight and any sublicensee, and of each amendment to any such sublicense agreement, in each case, within thirty
(30) days after execution of such sublicense agreement or amendment. In addition, Knight shall notify Advaxis in writing of the
termination of any sublicense agreement within thirty (30) days after such termination. No sublicense hereunder shall limit or affect the
obligations of Knight under this Agreement, and Knight shall remain fully responsible for each sublicensee’s compliance with the
applicable terms and conditions of this Agreement. Knight agrees to take diligent and all commercially reasonable efforts to enforce the
terms of each sublicense agreement against the relevant sublicensee in the event of a material breach thereof.
* Confidential material redacted and filed separately with the Commission.
Except as expressly provided in this Agreement, no license or other right is or shall be created or granted hereunder by implication,
estoppel or otherwise.
3.2 Royalty and Sales Milestones. Upon commercialization of each Product (*, *, and *) in the Territory, Knight will pay Advaxis a royalty
(inclusive of cost of goods) of *% of Net Sales (“Royalty”) and will retain *% of Net Sales. The Royalty will be payable to Advaxis by
Knight on a quarterly basis whether such sales are made by Knight or any sublicensee thereof. Further, Knight shall be entitled to deduct
amounts paid for cost of goods sold under Section 2.5.2 from such quarterly Royalty payments.
In addition, Knight will pay sales milestones as detailed below.
Sales milestones: Knight will pay the following sales milestones (“Sales Milestones”) for each Product
● $* in the event annual Net Sales exceed $*
● $* in the event annual Net Sales exceed $*
● $* in the event annual Net Sales exceed $*
● $* in the event annual Net Sales exceed $*
● $* in the event annual Net Sales exceed $*
● $* in the event annual Net Sales exceed $*
● $* in the event annual Net Sales exceed $*
● In no event shall Knight be required to pay any of the sales milestones payments for more than one (1) time for each Product.
Notwithstanding anything herein to the contrary, Knight will only start paying Royalty and Sales Milestones after Knight has recovered $*.
3.3 Audit. Knight, and any of its subcontractors or sublicensees hereunder, shall maintain complete and accurate books and records
regarding Net Sales and Royalties due under the terms of this Agreement. During the Term of this Agreement, Advaxis shall have the right
to audit, no more than one time per year, such books and records, as directly related to the Products, by an independent certified auditor
selected by Advaxis and accepted by Knight, whose acceptance shall not be unreasonably withheld, to confirm Net Sales and Royalties due
hereunder. Such audit will take place during reasonable business hours and upon at least thirty (30) days prior written notice, and shall not
unduly interfere with Knight’s operations. Such auditor will execute a written confidentiality agreement with Knight and will disclose to
Advaxis only such information as is reasonably necessary to provide Advaxis with information regarding any actual discrepancies between
the amounts reported or paid and the amounts payable under this Agreement. Such auditor will send a copy of its report to Advaxis within
thirty (30) days of delivery of such report to Knight. Such report will include the methodology and calculations used to determine the
results. Prompt adjustments shall be made by the Parties to reflect the results of such audit. Records to be available under an inspection shall
include all relevant documents pertaining to payments specified above, including all relevant documents received by Knight from
sublicensees. Advaxis shall bear the fees and expenses of such audit, provided that, if an underpayment of more than five percent (5%) of
the payments due for any calendar year is discovered in any inspection, then Knight shall bear all fees and expenses of that audit within
thirty (30) days after receipt of invoice from Advaxis.
* Confidential material redacted and filed separately with the Commission.
Without limiting any other rights or remedies available to Advaxis, Knight shall pay Advaxis interest of *% on any royalty payments that
are not paid within * (*) days of the close of the quarter.
3.4 Knight shall notify Advaxis immediately in writing without delay if Knight can anticipate its inability to commercialize the Products in
the Territory.
3.5 Knight shall pay for all marketing authorization, commercialization, and registration costs in the Territory.
3.6 Subject to the terms and conditions of this Agreement, any Product patents, designs, methods, prototypes, finished product, clinical
data, product applications, formulas, technical processes, techniques, compounds, inventions, discoveries, improvements, technology and
know-how, whether or not patentable, that Knight conceives, develops or reduces to practice in the course of performing its activities
(collectively, the “ Developments”) to research, develop, have developed, make, have made, offer for sale, sell and have sold Products in
the Territory will be exclusively owned by Advaxis. Advaxis shall be free to incorporate the relevant data and results in any regulatory
filings and use any such data or results in filing for additional Patents. Knight agrees to and shall use reasonable care in inventorying,
handling and safeguarding all Information, patents and Developments.
3.7 Knight understands and agrees that it shall have no ownership to any regulatory filing in the United States made by Advaxis in respect
of the Product.
3.8 Knight acknowledges that the Product shall be used exclusively for the performance of its obligations under this Agreement and shall
not be used for the benefit of any other party.
3.9 All payments by Knight to Advaxis under this Agreement shall be made in U.S. Dollars to the following account via wire transfer:
*
ABA #*
Account Name: Advaxis, Inc.
Account Number: *
* Confidential material redacted and filed separately with the Commission.
3.10 Currency Conversion. The calculation of the amounts payable hereunder will first be determined in the currency of the country the
transaction was consummated and then converted into equivalent United States funds. The exchange rate will be the average of the rates
over the course of the applicable calendar quarter, as appropriate, as reported by the Board of Governors of the Federal Reserve System
during such calendar quarter as appropriate, provided that in the event that a reporting period is less than a full calendar quarter, the
exchange rate will be based on the average for the relevant time.
4. Intellectual Property
4.1 “Inventions” shall mean all inventions and discoveries which are (i) made, developed, conceived, or first reduced to practice through
the use, without limitation, of the Products in the performance of the development and commercialization activities under this Agreement,
and/or (ii) made, developed, conceived, or first reduced to practice by a Party through the use of any data or study results developed as a
result of this Agreement. Any such Inventions shall be owned exclusively by Advaxis.
4.2 Intentionally omitted.
4.3 Advaxis shall be free to incorporate the relevant data and results in any regulatory filings and use any such data or results in filing for
additional patents. Knight agrees to and shall use reasonable care in inventorying, handling and safeguarding all materials, information,
patents and Inventions.
4.4 All information and materials furnished by a Party pursuant to this Agreement and all associated intellectual property rights will remain
the exclusive property of the furnishing Party, including without limitation Advaxis’s ownership of the Products, its license to its
proprietary technology platform, and ownership of its drug candidates. All pre-existing or independently developed technology and
associated intellectual property rights used by Knight in conducting the Projects will remain the exclusive property of Knight. No rights are
granted by either Party to their pre-existing intellectual property except the limited licenses expressly set forth herein. Knight will not
attempt to reverse engineer, characterize, or ascertain the chemical structure of Advaxis’s Products or other elements of the Advaxis
proprietary technology platform except as necessary to perform its obligations under the Agreement.
4.5 Advaxis shall own the brand name for the Product in the Territory and shall grant Knight an exclusive license within the Territory to
use Advaxis’ trademarks, marks and trade names (collectively, the “ Trademarks”) to advertise, promote, market and sell the Products in
the Field in the Territory. Advaxis shall be solely responsible for all expenses associated with filing and maintaining trademark registrations
for the brand name in the Territory. In addition, Advaxis shall be solely responsible for prosecution and enforcement of any infringement of
the Advaxis Trademarks.
5. Confidentiality
5.1 Both Advaxis and Knight agree that, subject to the limitations set forth in Section 5.3 hereof, all information disclosed to the other
party, whether in oral, written or graphic form, shall be deemed “Confidential Information” of the disclosing party. In particular,
“Confidential Information” means any scientific, technical, trade or business information, intellectual property, data or materials
possessed by a Party which is treated by such Party as confidential or proprietary, including information pertaining to strains, cells,
antibodies, organisms, chemical compounds, products, formulations, technologies, techniques, methodologies, algorithms, computer
programs, computer security systems and processes, assay systems, procedures, tests, data, documentation, reports, sources of supply,
know-how, patent positioning, results, applications, documents, processes, compositions, inventions, trade secrets, protocols, regulatory
information, relationships with employees and consultants, business plans, business developments, research, development, process
development, manufacturing, commercialization, and marketing, and any other confidential information about or belonging to a Party’s
affiliates, suppliers, licensors, licensees, partners, collaborators, customers or others, and is provided by one Party (the “Discloser”) to the
other Party (the “Recipient”) under this Agreement.
5.2 Each Party agrees that, except in connection with the performance of its obligations under this Agreement or the exercise of its rights or
licenses under this Agreement, it will not otherwise use in any way for its own account or the account of any third party, nor disclose or
transfer to any third party, any Confidential Information revealed to it by the other Party; provided, however, that Confidential Information
may be disclosed pursuant to a regulation, law, court order or rule of any applicable securities exchange, but only to the minimum extent
required to comply with such regulation, order, or rule and with advance written notice to the Discloser; and provided further that a
Recipient may disclose Confidential Information to its subsidiaries, affiliates, professional advisors, consultants, agents provided that they
are under confidentiality and use limitations consistent with those in this Agreement and such Party will be liable for breaches of the
restrictions set forth in this Agreement by all such persons. Each Party will take commercially reasonable efforts to protect the
confidentiality of the other Party’s Confidential Information, such precaution not to be less than the precautions each Party takes to protect
the confidentiality of its own Confidential Information of the same kind.
5.3 Both Advaxis and Knight agree that, notwithstanding the above, the obligations of confidentiality shall not be deemed to apply to:
(a) Information which at the time of disclosure is or thereafter becomes generally known or available to the public, through no wrongful act
or failure to act on the part of the receiving party.
(b) Information that was known by or in the possession of the receiving party at the time of receiving such information from the disclosing
party as evidenced by written records.
(c) Information obtained by the receiving party from a third party source who is not breaching a commitment of confidentiality to the
disclosing party by revealing such information to the receiving party.
(d) Information that is the subject of a granted written permission to disclose that is issued by the disclosing party to the other party.
(e) Information that is independently developed by the Recipient, outside the scope of any Project under this Agreement, without the use of
and/or reference to the Discloser’s Confidential Information.
(f) Information that is required to be disclosed pursuant to the law, but only to the extent required to be disclosed; provided, however, the
disclosing party notifies the other party in writing and gives the other party reasonable time to comment on the same prior to disclosure.
5.4 During the term of this Agreement and for a period of * (*) years thereafter, each party shall maintain all Confidential Information in
trust and confidence and shall not disclose any Confidential Information to any third party or use any such information for any unauthorized
purpose, other than as authorized in Section 5.3 hereof or as necessary to accomplish the purpose of this Agreement subject to an
appropriate binder of confidentiality as set forth in Section 5.5 hereof. Each party may use such Confidential Information only to the extent
required to accomplish the purposes of this Agreement. Confidential Information shall not be used for any purpose or in any manner that is
not consistent with this Agreement or that would constitute a violation of any laws or regulations including, without limitation, the export
control laws of the United States. Each party hereby agrees that it will not in any way attempt to obtain, either directly or indirectly, any
information regarding any Confidential Information from any third party who has been employed by, provided consulting services to, or
received in confidence information from, the other party.
5.5 Both parties shall make diligent efforts to ensure that all employees, consultants, agents, subcontractors and manufacturing contractors
who may have access to Confidential Information of the other party, and any other third parties who might have access to Confidential
Information, will use such information in a manner consistent with the terms of this Agreement and will be bound by the terms set forth in
this Section 5. No Confidential Information shall be disclosed to any employees, subcontractors, agents or consultants who do not have a
need to receive such information.
5.6 To the extent either party discloses Confidential Information of the other party to an employee, consultant, subcontractor, or other third-
party (collectively “Agents”) or permits an Agent to have access to such Confidential Information, such party shall assign to the other party
any claims it may have against the Agent as a result of the Agent further disclosing or misusing such Confidential Information.
5.7 To the extent that either Party reasonably determines that it is required to make a filing or any other public disclosure with respect to
this Agreement or the terms or existence hereof to comply with the requirements, rules, laws or regulations of any applicable stock
exchange, TSX, NASDAQ or any governmental or regulatory authority or body (the “Requesting Body”), including, without limitation,
the U.S. Securities and Exchange Commission or the Canadian Securities Administrators (collectively, the “Disclosure Obligations”), such
Party shall promptly inform the other Party thereof and shall use reasonable efforts to maintain the confidentiality of the other Party’s
Confidential Information and terms of this Agreement in any such filing or disclosure. Prior to making any such filing of a copy of this
Agreement, the Parties shall mutually agree on the provisions of this Agreement for which the Parties shall seek confidential treatment, it
being understood that if one Party determines to seek confidential treatment for a provision for which the other Party does not, then the
Parties will use reasonable efforts in connection with such filing to seek the confidential treatment of any such provision. The Parties shall
cooperate, each at its own expense, in such filing, including without limitation such confidential treatment request, and shall execute all
documents reasonably required in connection therewith. The Parties will reasonably cooperate in responding promptly to any comments
received from the Requesting Body with respect to such filing in an effort to achieve confidential treatment of such redacted form; provided
that a Party shall be relieved of such obligation to seek confidential treatment for a provision requested by the other Party if such treatment
is not achieved after the second round of responses to comments from the Requesting Body.
* Confidential material redacted and filed separately with the Commission.
5.8 Except as expressly provided in this Section 5, each Party agrees not to disclose any terms of this Agreement to any third party without
the prior written consent of the other Party (which shall not be unreasonably withheld or delayed). Each party (the “Providing Party”)
may, however, provide a copy of this Agreement or otherwise disclose its terms in connections with any financing transaction, provided
that the person or entity to whom a copy of this Agreement is provided or to whom the terms of this Agreement are disclosed is bound to
the Providing Party by reasonable confidentiality obligations, and provided further that the Providing Party is responsible for breaches or
confidentiality hereunder by such person or entity to whom a copy of this Agreement is provided or to whom the terms of this Agreement
are disclosed. Notwithstanding the foregoing and subject to Section 5.7, the Parties may issue a mutually agreed upon press release
announcing the execution of this Agreement and describing the relationship of the Parties under the Agreement. In addition, each Party
may disclose to third parties the information disclosed in such press release without the need for further approval by the other Party, and
Advaxis may disclose to third parties (via press releases or otherwise) the achievement of any material milestones in connection with this
Agreement without prior approval by Knight.
6. Publications and Publicity
6.1 Each Party may include the other Party’s name and logo on its website and marketing materials so long as any such usage is limited to
reporting factual events or occurrences only (for example, referencing the existence of the licensing agreement) and does not constitute a
commercial endorsement of the products and services of the other Party.
6.2 Advaxis shall have the first right to present and/or publish any results, that may be generated by Knight under this Agreement. In any
such publication or presentation, Advaxis will acknowledge Knight’s contribution (including authorship if appropriate under the
circumstances and customary practice).
7. Covenants; Representations and Warranties
7.1 Knight hereby covenants to Advaxis that:
(a) it shall use commercially reasonable efforts to perform its obligations hereunder in a professional and competent manner and in
accordance with the terms of this Agreement; and
(b) it warrants that all activities, services, and any goods rendered shall be provided in compliance with the applicable laws of the Territory.
(c) Knight, during the term of this Agreement, shall neither use nor have commercialized the Product other than in accordance with this
Agreement.
7.2 Advaxis represents and warrants that:
(a) all Product that it shall manufacture, store, ship or distribute to Knight shall be manufactured, stored, shipped or distributed in
compliance with all applicable laws and specifications as approved by Health Canada;
(b) it is free to enter into this Agreement; and, it has, and will continue to have, the legal power, authority and right to perform its
obligations hereunder;
(c) it has the full and unfettered right to grant to Knight all of the rights granted to it hereunder;
(d) all the intellectual property licensed hereunder is valid and enforceable and is owned or validly licensed by Advaxis;
(e) it has obtained all consents necessary to grant the rights to Knight hereunder;
(f) it has provided or will provide Knight with all Intellectual Property Rights necessary for Knight to perform its obligations under this
Agreement;
(g) it has informed Knight about all material information in its possession or control concerning the safety and efficacy of the Products, and
any material side effects, injury, toxicity or sensitivity reactions and incidents associated with all uses, studies, investigations or tests
involving the Products (animal or human) throughout the world; and
(h) All clinical data used to support approval followed good clinical practices and all manufactured Product followed a validated good
manufacturing process.
7.3 Each of Advaxis and Knight represents and warrants to the other that it has the full right and authority to enter into this Agreement and
to perform its obligations hereunder.
7.4 In performing their respective obligations hereunder, the Parties acknowledge that their corporate policies require that each Party’s
business be conducted within the letter and spirit of the law. By signing this Agreement, each Party agrees to conduct the business
contemplated herein in a manner which is consistent with all applicable laws, including without limitation the U.S. Foreign Corrupt
Practices Act (or similar foreign laws as may be applicable) and good business ethics. Specifically, each Party agrees that it has not, and
covenants that it, its affiliates, and its and its affiliates’ directors, employees, officers, and anyone acting on its behalf, will not, in
connection with the performance of this Agreement, directly or indirectly, make, promise, authorize, ratify or offer to make, or take any
action in furtherance of, any payment or transfer of anything of value for the purpose of influencing, inducing or rewarding any act,
omission or decision to secure an improper advantage; or improperly assisting it in obtaining or retaining business for it or the other Party,
or in any way with the purpose or effect of public or commercial bribery.
7.5 EXCEPT AS EXPRESSLY PROVIDED HEREIN, ADVAXIS MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
PRODUCT.
8. Indemnification; Limitation of Liability
8.1 Knight shall defend, indemnify and hold harmless Advaxis, Advaxis’s affiliates, their agents, employees, officers, directors and
permitted successors and assigns (each, an “Advaxis Indemnitee”), from any liabilities, losses, claims, actions, demands, damages, costs,
expenses, settlements made or reasonably approved by Knight, and judgments (including reasonable attorneys’ fees and other costs of
litigation) (hereinafter referred to as “Liabilities”), directly arising out of or related to the use, labeling, storage, handling, marketing,
promotion, import, export, sale or distribution of Product by Knight or the breach of any covenant, warranty or representation by Knight or
Knight’s negligence, omissions or willful misconduct, except to the extent that such Liabilities are directly attributable to the breach of this
Agreement by Advaxis or any negligence or willful misconduct by Advaxis.
8.2 Advaxis shall defend, indemnify and hold harmless Knight, Knight’s affiliates, their agents, employees, officers, directors and
permitted successors and assigns (each, a “Knight Indemnitee”), from any liabilities, losses, claims, actions, demands, damages, costs,
expenses, settlements made or reasonably approved by Advaxis, and judgments (including reasonable attorneys’ fees and other costs of
litigation), directly arising out of or related to (i) the breach of any covenant, warranty or representation by Advaxis, (ii) Advaxis’s
negligence, omissions or willful misconduct, or (iii) a claim or allegation by a third party that Products infringe or misappropriate a patent,
trademark or trade secret right of such third party. In addition, Advaxis shall indemnify, defend and hold Knight Indemnitees harmless
from and against any third party due to damage to property, personal injury or death arising from a defect in the Products, except to the
extent that such damage to property, personal, injury or death: (a) are directly attributable to the breach of this Agreement by Knight, (b)
result from any negligent or willful misconduct by Knight, (c) result through no fault of Advaxis during shipment to Knight, (d) result by
accident, negligence or misuse on the part of anyone other than Advaxis, or (e) result from an alteration of the Product by any party other
than Advaxis, except to the extent that such Liabilities are directly attributable to the breach of this Agreement by Knight or any negligence
or willful misconduct by Knight.
8.3 Intentionally omitted.
8.4 OTHER THAN WITH RESPECT TO FRAUD, WILLFUL MISCONDUCT, GROSS NEGLIGENCE AND THE
CONFIDENTIALITY OBLIGATIONS OF EACH PARTY HEREUNDER, IN NO EVENT SHALL EITHER PARTY (OR ANY OF ITS
AFFILIATES OR SUBCONTRACTORS) BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL,
PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS OR DAMAGES FOR LOST OPPORTUNITIES),
WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF THE
DEVELOPMENT OR SUPPLY OF PRODUCT OR ANY BREACH OF OR FAILURE TO PERFORM ANY OF THE PROVISIONS OF
THIS AGREEMENT OR ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN OR MADE PURSUANT TO
THIS AGREEMENT, EXCEPT THAT SUCH LIMITATION SHALL NOT APPLY TO DAMAGES PAID OR PAYABLE TO A THIRD
PARTY BY AN INDEMNIFIED PARTY FOR WHICH THE INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION
HEREUNDER.
9. Term and Termination
9.1 Term. This Agreement will commence on the date first set forth above and shall have an initial term of * (*) years following the launch
of each Product (the “Initial Term”). At the end of the Initial Term, this Agreement will continue to automatically renew for additional *
(*) year periods, unless this Agreement is terminated sooner in accordance with this Section 9 (the “Renewal Term”). The Initial Term and
the Renewal Term (if applicable) are collectively referred to as the “Term”.
9.2 Termination for Breach. Either Party may terminate or suspend its performance under this Agreement in the event of a breach of a
material term of this Agreement by the other Party, which breach is not cured within thirty (30) business days after written notice by the
non-breaching Party to the breaching Party.
9.3 Termination for Bankruptcy or Insolvency. Either Party may terminate this Agreement immediately upon written notice to the other
Party in the event the other Party shall have become insolvent or bankrupt, or shall have made an assignment for the benefit of its creditors,
or there shall have been appointed a trustee or receiver of the other Party for all or a substantial part of its property, or any case or
proceeding shall have been commenced or other action taken by or against the other Party in bankruptcy or seeking reorganization,
liquidation, dissolution, winding-up, arrangement, composition or readjustment of its debts or any relief under any bankruptcy, insolvency,
reorganization or other similar act or law of any jurisdiction now or hereinafter in effect (an “Insolvency Event”).
9.4 Advaxis Right to Not Renew Agreement. Advaxis may choose, it its sole discretion, not to renew the Agreement at the end of the Initial
Term or a Renewal Term by providing written notice to Knight during the period that is ninety (90) days prior to expiration of the Initial
Term or Renewal Term, as applicable. In the case of non-renewal, Advaxis shall pay Knight the greater of (1) $ * to Knight plus all costs
incurred by Knight, including all payments made to Advaxis in performance of its obligations under this Agreement, or (2) * (*) times the
previous 12 months Net Sales of the Products in the Territory.
9.5 Termination by Advaxis. Except as otherwise agreed to between the Parties and notwithstanding anything to the contrary in this
Agreement, during a period of * (*) years following the execution of this Agreement, in the event that Advaxis is required to repurchase the
rights to the Products in the Territory granted under this Agreement, in order to secure and close a bona fide global or North American
licensing deal for the distribution of the Products, Advaxis may terminate this Agreement by written notice given to Knight. The effective
date of termination shall be ninety (90) days from the date the notice is given unless a later date is specified in the notice. In the event that
Advaxis terminates this Agreement pursuant to this Section 9.5, Advaxis shall pay Knight an early termination fee of U.S. $* payable within
thirty (30) days of the effective date of termination.
* Confidential material redacted and filed separately with the Commission.
9.6 Effect of Termination. In the event of termination, Knight will pay all outstanding fees and expenses accrued through the effective date
of termination. In the event of termination of this Agreement, Knight may continue to distribute Products, in accordance with, and subject
to, the terms and conditions of this Agreement, until the earlier to occur of (i) the sale of all existing Product in Knight’s possession at the
time of termination or expiration, or (ii) a period of six months following the date of termination or expiration (the “Phase Out Period”).
Upon termination of this Agreement, all licenses granted under this Agreement shall automatically terminate together with the Agreement.
10. Insurance
10.1 Each Party warrants that it maintains a policy or program of insurance at levels sufficient to support the indemnification obligations
assumed herein. Upon written request, a Party shall provide evidence of such insurance.
11. Notices
11.1 Any and all notices provided hereunder shall be sent to the respective parties by facsimile transmission, or mailed postage prepaid by
first-class certified or registered mail, or sent by a nationally recognized express courier service, or hand-delivered to the following
addresses:
If to Advaxis:
If to Knight:
Attention: President & Chief Executive Officer
305 College Road East
Princeton, NJ 08540
Phone: 609-452-9813
Fax: 609-452-9818
Attention: President & CEO
376 Victoria, Avenue, Suite 220
Montreal, Quebec
Canada, H3Z 1C3
Phone: 514 484 4830
Fax: 514 481 4116
Any notice, if sent properly addressed, postage prepaid, shall be deemed made three (3) days after the date of mailing as indicated on the
certified or registered mail receipt, or on the next business day if sent by express courier service or on the date of delivery or transmission if
hand-delivered, electronically delivered or sent by facsimile transmission.
12. General Provisions
12.1 This Agreement shall not be assignable by either Party without the prior express written consent of the other party, which consent
shall not be unreasonably withheld or delayed. Any assignment or attempt at same in the absence of such prior written consent shall be void
and without effect. For purposes of the provisions of this Section, a transfer by either Party of all or substantially all of its stock or assets
shall be deemed an assignment. As used in this Agreement, the term “affiliates” means corporations, partnerships or other business entities,
and the employees and agents thereof, which, directly or indirectly, are controlled by, control, or are under common control with Advaxis
or Knight. For purposes of this Agreement, “control” is the power whether by contract or ownership of equity interests to select a majority
of the board of directors or other supervisory management authority of an entity, whether directly or indirectly through a chain of entities
that are “controlled” within the foregoing meaning.
12.2 This Agreement shall be binding upon and inure to the benefit of and be enforceable by the Parties hereto and their respective
successors and permitted assigns.
12.3 No delay or omission by either party to exercise any right under this Agreement shall impair any such right or power or be construed to
be a waiver thereof. A waiver by either of the Parties hereto of any of the covenants, conditions or agreements to be performed by the other
shall not be construed to be a waiver of any succeeding breach thereof or of any covenant, condition or agreement herein contained. No
waiver or discharge of any provisions of this Agreement shall be valid unless it is in writing and is executed by the Party against whom
such change or discharge is sought to be enforced.
12.4 If a judicial determination is made that any of the provisions contained in this Agreement constitute an unreasonable restriction against
either Party or are otherwise unenforceable, such provision or provisions shall be rendered void or invalid only to the extent that such
judicial determination finds such provisions to be unreasonable or otherwise unenforceable, and the remainder of this Agreement shall
remain operative and in full force and effect.
12.5 This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware as though made and to be
fully performed in said State and any disputes shall be brought in the courts of Delaware.
12.6 At the request of the parties, this Agreement and the other ancillary agreements have been drafted in the English language and will be
or have been executed in the English language. Les soussignés ont expressément demandé que ce document et tous les documents annexes
soient rédigés en langue anglaise.
12.7 Headings. The headings contained in this Agreement do not form a substantive part of this Agreement and shall not be construed to
limit or otherwise modify its provisions.
12.8 This Agreement constitutes the entire Agreement between the Parties with respect to the subject matter hereof, and there are no related
understandings or agreements other than those that are expressed herein, and no change of any provision of this Agreement shall be valid
unless it is in writing and is executed by the party against whom such change is sought to be enforced. The Parties recognize that, during
the term of this Agreement, a purchase order, acknowledgement form or similar routine document (collectively “Forms”) may be used to
implement or administer provisions of this Agreement. Therefore, the Parties agree that the terms of this Agreement prevail in the event of
any conflict between this Agreement and the printed provisions of such Forms, or typed provisions of Forms that add to, vary, modify or
are at conflict with the provisions of this Agreement with respect to a Project Plan performed during the term of this Agreement. No
amendments, changes, additions, deletions or modifications to or of this Agreement shall be valid unless reduced to writing and signed by
the Parties hereto.
12.9 Except where the context otherwise requires, wherever used, the singular will include the plural, the plural the singular, the use of any
gender will be applicable to all genders, and the word “or” is used in the inclusive sense except where, by its context, it is clear to be
limitative (“or” and not “and”). Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to
calendar days. The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the
scope or intent of this Agreement or the intent of any provision contained in this Agreement. The term “including” as used herein shall be
deemed to be followed by the phrase “without limitation” or like expression. The term “will” as used herein means shall. References to
“Section” and “amendment” are references to the numbered sections of this Agreement and any amendments to this Agreement, unless
expressly stated otherwise. Except where the context otherwise requires, references to this “Agreement” shall include any amendments and
appendices attached to this Agreement and any later executed Project Plans under this Agreement. The language of this Agreement shall be
deemed to be the language mutually chosen by the Parties and no rule of strict construction will be applied against either Party hereto.
IN WITNESS WHEREOF, the respective representatives of the Parties have executed this Agreement as of the Effective Date.
KNIGHT THERAPEUTICS INC.
ADVAXIS, INC.
/s/ Amal Khouri
Amal Khouri
VP Business Development
Date:
August 25, 2015
/s/ Daniel J. O’Connor
Daniel J. O’Connor, Esq.
President & CEO
Date:
August 25, 2015
AMENDMENT NO. 4
TO EMPLOYMENT AGREEMENT
This Amendment No. 4 to Employment Agreement (this “Amendment”) is effective as of December 31, 2015, by and between
Advaxis, Inc., a Delaware corporation (the “Company”), and Robert Petit (“Executive”). Capitalized words used in this Agreement but not
otherwise defined shall have the meanings assigned to such terms in the Agreement
WHEREAS, the Company and Executive entered into an Employment Agreement, effective as of September 26, 2013, as
amended (the “Agreement”), pursuant to which the Company employed Executive in the capacity, for the period, and on the terms and
conditions set forth therein; and
WHEREAS, the Agreement originally provided that in the event the Company terminates Executive’s employment without Just
Cause, or if Executive voluntarily resigns with Good Reason, or if Executive’s employment is terminated due to disability, Executive would
be entitled to severance in the amount of his Base Salary, payable in equal monthly installments continuing for twelve (12) months
following Executive’s Termination Date (the “Severance Payments”); and
WHEREAS, the Company and Executive amended the Agreement in 2015 to provide that the Severance Payments would be paid
in a single lump sum within forty-five (45) days of Executive’s Termination Date (the “Severance Payment Amendment”); and
WHEREAS, in order to comply with Internal Revenue Code Section 409A, the Company and Executive desire to further amend
the Agreement to reverse the Severance Payment Amendment to provide that the Severance Payments will be payable in equal monthly
installments continuing for twelve (12) months following Executive’s Termination Date, consistent with the original terms of the
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, the parties agree
as follows:
1. The Agreement is hereby amended by deleting Section 4(b)(i) in its entirety and replacing it with the following:
“(i) equal monthly installments at the applicable Base Salary rate then in effect, as determined on the first day of the
calendar month immediately preceding the day of termination, to be paid beginning on the first day of the month following
such Termination Date and continuing twelve (12) months following the Termination Date (the “Severance Period”).
Whenever Severance Payments are payable to Executive hereunder during a time when Executive is partially or totally
disabled, and such disability would entitle him to disability income payments according to the terms of any plan or policy
now or hereafter provided by the Company, the Severance Payments payable to Executive hereunder shall be inclusive of
any such disability income and shall not be in addition thereto, even if such disability income is payable directly to
Executive by an insurance company under a policy paid for by the Company.”
2. Except as provided herein, the terms of the Agreement shall remain in full force and effect. The Agreement, as amended hereby,
constitutes the entire agreement between the parties hereto relating to the subject matter hereof, and supersedes all prior agreements and
understandings, whether oral or written, with respect to the same. No modification, alteration, amendment or revision of or supplement to
the Agreement, as amended hereby, shall be valid or effective unless the same is in writing and signed by both parties hereto.
* * * *
(signature page follows)
IN WITNESS WHEREOF, the parties have executed this Amendment No. 4 to the Agreement as of the day and year first above
written.
ADVAXIS, INC.
/s/ Daniel O’Connor
By:
Name: Daniel O’Connor
Title: President and CEO
EXECUTIVE
/s/ Robert Petit
Robert Petit
2
AMENDMENT NO. 3
TO EMPLOYMENT AGREEMENT
This Amendment No. 3 to Employment Agreement (this “Amendment”) is effective as of December 31, 2015, by and between
Advaxis, Inc., a Delaware corporation (the “Company”), and Sara M. Bonstein (“Executive”). Capitalized words used in this Agreement
but not otherwise defined shall have the meanings assigned to such terms in the Agreement.
WHEREAS, the Company and Executive entered into an Employment Agreement, effective as of March 24, 2014, as amended
(the “Agreement”), pursuant to which the Company employed Executive in the capacity, for the period, and on the terms and conditions
set forth therein; and
WHEREAS, the Agreement originally provided that in the event the Company terminates Executive’s employment without Just
Cause, or if Executive voluntarily resigns with Good Reason, or if Executive’s employment is terminated due to disability, Executive would
be entitled to severance in the amount of her Base Salary, payable in equal monthly installments continuing for twelve (12) months
following Executive’s Termination Date (the “Severance Payments”); and
WHEREAS, the Company and Executive amended the Agreement in 2015 to provide that the Severance Payments would be paid
in a single lump sum within forty-five (45) days of Executive’s Termination Date (the “Severance Payment Amendment”); and
WHEREAS, in order to comply with Internal Revenue Code Section 409A, the Company and Executive desire to further amend
the Agreement to reverse the Severance Payment Amendment to provide that the Severance Payments will be payable in equal monthly
installments continuing for twelve (12) months following Executive’s Termination Date, consistent with the original terms of the
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, the parties agree
as follows:
1. The Agreement is hereby amended by deleting Section 4(b)(i) in its entirety and replacing it with the following:
“(i) equal monthly installments at the applicable Base Salary rate then in effect, as determined on the first day of the
calendar month immediately preceding the day of termination, to be paid beginning on the first day of the month following
such Termination Date and continuing twelve (12) months following the Termination Date (the “Severance Period”).
Whenever Severance Payments are payable to Executive hereunder during a time when Executive is partially or totally
disabled, and such disability would entitle him to disability income payments according to the terms of any plan or policy
now or hereafter provided by the Company, the Severance Payments payable to Executive hereunder shall be inclusive of
any such disability income and shall not be in addition thereto, even if such disability income is payable directly to
Executive by an insurance company under a policy paid for by the Company.”
2. Except as provided herein, the terms of the Agreement shall remain in full force and effect. The Agreement, as amended hereby,
constitutes the entire agreement between the parties hereto relating to the subject matter hereof, and supersedes all prior agreements and
understandings, whether oral or written, with respect to the same. No modification, alteration, amendment or revision of or supplement to
the Agreement, as amended hereby, shall be valid or effective unless the same is in writing and signed by both parties hereto.
* * * *
(signature page follows)
IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 to the Agreement as of the day and year first above
written.
ADVAXIS, INC.
/s/ Daniel O’Connor
By:
Name: Daniel O’Connor
Title: President and CEO
EXECUTIVE
/s/ Sara M. Bonstein
Sara M. Bonstein
2
AMENDMENT NO. 4
TO EMPLOYMENT AGREEMENT
This Amendment No. 4 to Employment Agreement (this “Amendment”) is effective as of December 31, 2015, by and between
Advaxis, Inc., a Delaware corporation (the “Company”), and Daniel O’Connor (“Executive”). Capitalized words used in this Agreement
but not otherwise defined shall have the meanings assigned to such terms in the Agreement.
WHEREAS, the Company and Executive entered into an Employment Agreement, effective as of August 19, 2013, as amended
(the “Agreement”), pursuant to which the Company employed Executive in the capacity, for the period, and on the terms and conditions
set forth therein; and
WHEREAS, the Agreement originally provided that in the event the Company terminates Executive’s employment without Just
Cause, or if Executive voluntarily resigns with Good Reason, or if Executive’s employment is terminated due to disability, Executive would
be entitled to severance in the amount of his Base Salary, payable in equal monthly installments continuing for twelve (12) months
following Executive’s Termination Date (the “Severance Payments”); and
WHEREAS, the Company and Executive amended the Agreement in 2015 to provide that the Severance Payments would be paid
in a single lump sum within forty-five (45) days of Executive’s Termination Date (the “Severance Payment Amendment”); and
WHEREAS, in order to comply with Internal Revenue Code Section 409A, the Company and Executive desire to further amend
the Agreement to reverse the Severance Payment Amendment to provide that the Severance Payments will be payable in equal monthly
installments continuing for twelve (12) months following Executive’s Termination Date, consistent with the original terms of the
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, the parties agree
as follows:
1. The Agreement is hereby amended by deleting Section 4(b)(i) in its entirety and replacing it with the following:
“(i) equal monthly installments at the applicable Base Salary rate then in effect, as determined on the first day of the
calendar month immediately preceding the day of termination, to be paid beginning on the first day of the month following
such Termination Date and continuing twelve (12) months following the Termination Date (the “Severance Period”).
Whenever Severance Payments are payable to Executive hereunder during a time when Executive is partially or totally
disabled, and such disability would entitle him to disability income payments according to the terms of any plan or policy
now or hereafter provided by the Company, the Severance Payments payable to Executive hereunder shall be inclusive of
any such disability income and shall not be in addition thereto, even if such disability income is payable directly to
Executive by an insurance company under a policy paid for by the Company.”
2. Except as provided herein, the terms of the Agreement shall remain in full force and effect. The Agreement, as amended hereby,
constitutes the entire agreement between the parties hereto relating to the subject matter hereof, and supersedes all prior agreements and
understandings, whether oral or written, with respect to the same. No modification, alteration, amendment or revision of or supplement to
the Agreement, as amended hereby, shall be valid or effective unless the same is in writing and signed by both parties hereto.
* * * *
(signature page follows)
IN WITNESS WHEREOF, the parties have executed this Amendment No. 4 to the Agreement as of the day and year first above
written.
ADVAXIS, INC.
/s/ James Patton
By:
Name: James Patton
Title: Chairman of the Board
EXECUTIVE
/s/ Daniel O’Connor
Daniel O’Connor
2
AMENDMENT NO. 4
TO EMPLOYMENT AGREEMENT
This Amendment No. 4 to Employment Agreement (this “Amendment”) is effective as of December 31, 2015, by and between
Advaxis, Inc., a Delaware corporation (the “Company”), and Gregory T. Mayes (“Executive”). Capitalized words used in this Agreement
but not otherwise defined shall have the meanings assigned to such terms in the Agreement.
WHEREAS, the Company and Executive entered into an Employment Agreement, effective as of October 25, 2013, as amended
(the “Agreement”), pursuant to which the Company employed Executive in the capacity, for the period, and on the terms and conditions
set forth therein; and
WHEREAS, the Agreement originally provided that in the event the Company terminates Executive’s employment without Just
Cause, or if Executive voluntarily resigns with Good Reason, or if Executive’s employment is terminated due to disability, Executive would
be entitled to severance in the amount of his Base Salary, payable in equal monthly installments continuing for twelve (12) months
following Executive’s Termination Date (the “Severance Payments”); and
WHEREAS, the Company and Executive amended the Agreement in 2015 to provide that the Severance Payments would be paid
in a single lump sum within forty-five (45) days of Executive’s Termination Date (the “Severance Payment Amendment”); and
WHEREAS, in order to comply with Internal Revenue Code Section 409A, the Company and Executive desire to further amend
the Agreement to reverse the Severance Payment Amendment to provide that the Severance Payments will be payable in equal monthly
installments continuing for twelve (12) months following Executive’s Termination Date, consistent with the original terms of the
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, the parties agree
as follows:
1. The Agreement is hereby amended by deleting Section 4(b)(i) in its entirety and replacing it with the following:
“(i) equal monthly installments at the applicable Base Salary rate then in effect, as determined on the first day of the
calendar month immediately preceding the day of termination, to be paid beginning on the first day of the month following
such Termination Date and continuing twelve (12) months following the Termination Date (the “Severance Period”).
Whenever Severance Payments are payable to Executive hereunder during a time when Executive is partially or totally
disabled, and such disability would entitle him to disability income payments according to the terms of any plan or policy
now or hereafter provided by the Company, the Severance Payments payable to Executive hereunder shall be inclusive of
any such disability income and shall not be in addition thereto, even if such disability income is payable directly to
Executive by an insurance company under a policy paid for by the Company.”
2. Except as provided herein, the terms of the Agreement shall remain in full force and effect. The Agreement, as amended hereby,
constitutes the entire agreement between the parties hereto relating to the subject matter hereof, and supersedes all prior agreements and
understandings, whether oral or written, with respect to the same. No modification, alteration, amendment or revision of or supplement to
the Agreement, as amended hereby, shall be valid or effective unless the same is in writing and signed by both parties hereto.
* * * *
(signature page follows)
IN WITNESS WHEREOF, the parties have executed this Amendment No. 4 to the Agreement as of the day and year first above
written.
ADVAXIS, INC.
/s/ Daniel O’Connor
By:
Name: Daniel O’Connor
Title: President and CEO
EXECUTIVE
/s/ Gregory T. Mayes
Gregory T. Mayes
2
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statement of Advaxis, Inc. on Form S-8, (File No. 333-130080) and Form
S-3, (File No. 333-194009, File No. 333-203497) of our report dated January 8, 2016, with respect to our audits of the financial statements
of Advaxis, Inc. as of October 31, 2015 and 2014 and for the years then ended and our report dated January 8, 2016 with respect to our
audit of the effectiveness of internal control over financial reporting of Advaxis, Inc. as of October 31, 2015, which reports are included in
this Annual Report on Form 10-K of Advaxis, Inc. for the year ended October 31, 2015.
EXHIBIT 23.1
/s/ Marcum llp
Marcum llp
New York, NY
January 8, 2016
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18.U.S.C. 7350
(SECTION 302 OF THE SARBANES OXLEY ACT OF 2002)
I, Daniel J. O’Connor, certify that:
1.
I have reviewed this annual report on Form 10-K for the year ended October 31, 2015 of Advaxis, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of 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.
January 8, 2016
/s/ Daniel J. O’Connor
By:
Name: Daniel J. O’Connor
Title: Chief Executive Officer and President
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18. U.S.C. 7350
(SECTION 302 OF THE SARBANES OXLEY ACT OF 2002)
I, Sara M. Bonstein, certify that:
1.
I have reviewed this annual report on Form 10-K for the year ended October 31, 2015 of Advaxis, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of 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.
January 8, 2016
/s/ Sara M. Bonstein
By:
Name: Sara M. Bonstein
Title: Chief Financial Officer, Senior Vice President
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Advaxis, Inc., a Delaware corporation (the “Company”), on Form 10-K for the year ended
October 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief
Executive Officer, hereby certifies pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
that, to the undersigned’s knowledge:
(1) the Report of the Company filed today fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the
Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon request.
Date: January 8, 2016
/s/ Daniel J. O’Connor
By:
Name: Daniel J. O’Connor
Title: Chief Executive Officer and President
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Advaxis, Inc., a Delaware corporation (the “Company”), on Form 10-K for the year ended
October 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief
Financial Officer, hereby certifies pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
that, to the undersigned’s knowledge:
(1) the Report of the Company filed today fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the
Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon request.
Date: January 8, 2016
/s/ Sara M. Bonstein
By:
Name: Sara M. Bonstein
Title: Chief Financial Officer, Senior Vice President