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EX-31.2 - EX-31.2 - Advaxis, Inc.v212665_ex31-2.htm
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EX-23.1 - EX-23.1 - Advaxis, Inc.v212665_ex23-1.htm
EX-31.1 - EX-31.1 - Advaxis, Inc.v212665_ex31-1.htm
EX-32.1 - EX-32.1 - Advaxis, Inc.v212665_ex32-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
 
x  ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE FISCAL YEAR ENDED - OCTOBER 31, 2010
 
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)
02-0563870
(I.R.S. Employer Identification No.)
   
Technology Centre of New Jersey
675 US Highway One
North Brunswick, New Jersey
(Address of Principal Executive Offices)
08902
(Zip Code)
   
(732) 545-1590
(Issuer’s Telephone Number)
 
   
Securities registered under Section 12(b) of the Exchange Act:
Common Stock - $.001 par value
The Common Stock is listed on the Over-The-Counter
Bulletin  Board (OTC:BB)
  
  
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

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

 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 (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes ¨    No ¨

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will 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 ¨
Accelerated filer ¨
   
Non-accelerated filer ¨
Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨ No x
 
As of April 30, 2010, the aggregate market value of the voting common equity held by non-affiliates was approximately $22,116,980 based on the closing bid price of the registrant’s common stock on the Over the Counter Bulletin Board. (For purposes of determining this amount, only directors, executive officers, and 10% or greater stockholders and their respective affiliates have been deemed affiliates).
 
The registrant had 210,645,862 shares of Common Stock, par value $0.001 per share, issued and outstanding as of January 27, 2011.

 
 

 

EXPLANATORY NOTE

This Amendment No. 1 to the Company’s Annual Report on Form 10-K for the year ended October 31, 2010 as filed with the United States Securities and Exchange Commission (the “SEC”) on January 31, 2011 (the “Original Filing”), amends and restates (i) Item 8 of Part II of the Original Filing to correct typographical errors in the Statement of Operations on page F-3 of the Original Filing (see page F-3 below) and to update the last paragraph of the Subsequent Events footnote on page F-24 of the Original Filing (see page F-24 below) as of February 16, 2011 and (ii) Items 10 through 14 of Part III that were previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K. General Instruction G(3) to Form 10-K provides that registrants may incorporate by reference certain information from a definitive proxy statement which involves the election of directors if such definitive proxy statement is filed with the SEC within 120 days after the end of the fiscal year. We do not now anticipate that the Company’s definitive proxy statement involving the election of directors will be filed by February 28, 2011 (i.e., within 120 days after the end of the Company’s 2010 fiscal year).

Pursuant to Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, this Amendment No. 1 amends the Original Filing and contains new certifications pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002.

Except as described above, no other amendments have been made to the Original Filing. This Amendment No. 1 continues to speak as of the date of the Original Filing, and the Company has not updated the disclosure contained therein to reflect events that have occurred since the date of the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Company’s other filings made with the SEC subsequent to the filing of the Original Filing, including any amendments to those filings.

 
 

 

Table of Contents
Form 10-K Index

PART II
   
     
Item 8:
Financial Statements and Supplementary Data
1
     
PART III
   
     
Item 10
Directors, Executive Officers, Corporate Governance
1
Item 11
Executive Compensation
5
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
11
Item 13
Certain Relationships and Related Transactions, and Director Independence
12
Item 14
Principal Accountant Fees and Services
13
     
Part IV
   
     
Item 15:
Exhibits, Financial Statements Schedules
14

 
 

 

PART II

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 Firm appears on page F-1, and the Financial Statements and Notes to Financial Statements appear on pages F-2 to F-24.

PART III

Item 10:  Directors, Executive Officers, Corporate Governance

Executive Officers, Directors and Key Employees
 
The following are our executive officers and directors and their respective ages and positions as of January 27, 2011:
 
Name
 
Age
 
Position
         
Thomas A. Moore
 
60
 
Chief Executive Officer and Chairman of our Board of Directors
Dr. James Patton
 
52
 
Director
Roni A. Appel
 
43
 
Director
Dr. Thomas McKearn
 
61
 
Director
Richard Berman
 
68
 
Director
John Rothman, Ph.D.
 
62
 
Executive Vice President of Clinical and Scientific Operations
Mark J. Rosenblum
 
57
 
Chief Financial Officer, Senior Vice President and Secretary

Thomas A. Moore.  Mr. Moore joined our Board as an independent director in September 2006. Effective December 15, 2006, Mr. Moore was appointed our Chairman and Chief Executive Officer.  He is currently also a director of MD Offices, an electronic medical records provider, and Opt-e-scrip, Inc., which markets a clinical system to compare multiple drugs in the same patient.  He also serves as Chairman of the board of directors of Mayan Pigments, Inc., which has developed and patented Mayan pigment technology.  Previously, from June 2002 to June 2004 Mr. Moore was President and Chief Executive Officer of Biopure Corporation, a developer of oxygen therapeutics that are intravenously administered to deliver oxygen to the body’s tissues.  From 1996 to November 2000 he was President and Chief Executive Officer of Nelson Communications.  Prior to 1996, Mr. Moore had a 23-year career with the Procter & Gamble Company in multiple managerial positions, including President of Health Care Products where he was responsible for prescription and over-the-counter medications worldwide, and Group Vice President of the Procter & Gamble Company.  Mr. Moore is a graduate of Princeton University. Mr. Moore’s extensive business, managerial, executive and leadership experience in the healthcare industry make him particularly qualified to serve on our Board.
 
Mr. Moore is subject to a five year injunction, which came about because of a civil action captioned Securities & Exchange Commission v. Biopure Corp. et al. , No. 05-11853-PBS (D. Mass.), filed on September 14, 2005, which alleged that Mr. Moore made and approved misleading public statements about the status of FDA regulatory proceedings concerning a product manufactured by his former employer, Biopure Corp.  Mr. Moore vigorously defended the action.  On December 11, 2006, the SEC and Mr. Moore jointly sought a continuance of all proceedings based upon a tentative agreement in principle to settle the SEC action.  The SEC’s Commissioners approved the terms of the settlement, and the court formally adopted the settlement.
 
Dr. James Patton.  Dr. Patton has served as a member of our board of directors since February 2002, as Chairman of our board of directors from November 2004 until December 31, 2005 and as Advaxis’ Chief Executive Officer from February 2002 to November 2002.  Since February 1999, Dr. Patton was the the Vice President of Millennium Oncology Management, Inc., which provides management services for radiation oncology care to four sites.  Dr. Patton has been a trustee of Dundee Wealth US, a mutual fund family since October 2006.  In addition, he has been President of Comprehensive Oncology Care, LLC since 1999, a company which owned and operated a cancer treatment facility in Exton, Pennsylvania until its sale in 2008.  From February 1999 to September 2003, Dr. Patton also served as a consultant to LibertyView Equity Partners SBIC, LP, a venture capital fund based in Jersey City, New Jersey.  From July 2000 to December 2002, Dr. Patton served as a director of Pinpoint Data Corp. From February 2000 to November 2000, Dr. Patton served as a director of Healthware Solutions.  From June 2000 to June 2003, Dr. Patton served as a director of LifeStar Response.  He earned his B.S. from the University of Michigan, his Medical Doctorate from Medical College of Pennsylvania, and his M.B.A. from Penn’s Wharton School.  Dr. Patton was also a Robert Wood Johnson Foundation Clinical Scholar.  He has published papers regarding scientific research in human genetics, diagnostic test performance and medical economic analysis.  Dr. Patton’s experience as a trustee and consultant to funds that invest in life science companies provide him with the perspective from which we benefit. Additionally, Dr. Patton’s medical experience and service as a principal and director of other life science companies makes Dr. Patton particularly qualified to serve as our director.

 
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Roni A. Appel.  Mr. Appel has served as a member of our board of directors since November 2004.  He was our President and Chief Executive Officer from January 1, 2006 and Secretary and Chief Financial Officer from November 2004, until he resigned as our Chief Financial Officer on September 7, 2006 and as our President, Chief Executive Officer and Secretary on December 15, 2006.  From 1999 to 2004, he was a partner and managing director of LV Equity Partners (f/k/a LibertyView Equity Partners).  From 1998 until 1999, he was a director of business development at Americana Financial Services, Inc.  From 1994 to 1998 he was an attorney and completed his MBA at Columbia University. Mr. Appel’s longstanding service with us and his entrepreneurial investment career in early stage biotech businesses qualify him to serve as our director.
 
Dr. Thomas McKearn .  Dr. McKearn has served as a member of our board of directors since July 2002.  He brings more than 25 years of experience in the translation of biotechnology science into oncology products.  First as one of the founders of Cytogen Corporation, then as an Executive Director of Strategic Science and Medicine at Bristol-Myers Squibb and now as the VP of Strategic Medical Affairs at Agennix, Inc. (formerly GPC-Biotech), he has worked at bringing the most innovative laboratory findings into the clinic and through the FDA regulatory process for the benefit of cancer patients who need better ways to cope with their afflictions.  Prior to entering the biotechnology industry in 1981, Dr. McKearn received his medical, graduate and post-graduate training at the University of Chicago and served on the faculty of the Medical School at the University of Pennsylvania. Dr. McKearn’s experience in managing life science companies, his knowledge of medicine and his commercialization of biotech products particularly qualify him to serve as our director.
 
Richard Berman.  Mr. Berman has served as a member of our board of directors since September 1, 2005.  In the last five years, he served as a professional director and/or officer of about a dozen public and private companies.  He is currently Chairman of NexMed, Inc., a public biotech company, and National Investment Managers.  Mr. Berman is a director of six public companies: Broadcaster, Inc., Easy Link Services International, Inc., NexMed, Inc., National Investment Managers, Advaxis, Inc., and NeoStem, Inc.  Previously, Mr. Berman worked at Goldman Sachs and was Senior Vice President of Bankers Trust Company, where he started the M&A and Leverage Buyout Departments.  He is a past Director of the Stern School of Business of New York University, where he earned a B.S. and an M.B.A. He also has law degrees from Boston College and The Hague Academy of International Law. Mr. Berman’s extensive knowledge of our industry, his role in the governance of publically held companies and his directorships in other life science companies qualify him to serve as our director.
 
John Rothman, Ph.D.  Dr. Rothman joined our company in March 2005 as Vice President of Clinical Development and as of December 12, 2008 he was appointed to Executive Vice President of Clinical and Scientific Operations.  From 2002 to 2005, Dr. Rothman was Vice President and Chief Technology Officer of Princeton Technology Partners.  Prior to that he was involved in the development of the first interferon at Schering Inc., was director of a variety of clinical development sections at Hoffman LaRoche, and the Senior Director of Clinical Data Management at Roche.  While at Roche his work in Kaposi’s Sarcoma became the clinical basis for the first filed BLA which involved the treatment of AIDS patients with interferon.  Dr. Rothman completed his doctorate at City University of Los Angeles.
 
Mark J. Rosenblum. Effective as of January 5, 2010, Mr. Rosenblum joined our company as our Chief Financial Officer, Senior Vice President and Secretary. Mr. Rosenblum was the Chief Financial Officer of HemobioTech, Inc., a public company primarily engaged in the commercialization of human blood substitute technology licensed from Texas Tech University, from April 1, 2005 until December 31, 2009. From August 1985 through June 2003, Mr. Rosenblum was employed by Wellman, Inc., a public chemical manufacturing company.  Between 1996 and 2003, Mr. Rosenblum was the Chief Accounting Officer, Vice President and Controller at Wellman, Inc. Mr. Rosenblum holds both a Masters in Accountancy and a B.S. degree from the University of South Carolina. Mr. Rosenblum is a certified public accountant.
 
Board of Directors
 
Each director is elected for a period of one year and serves until the next annual meeting of stockholders, or until his or her successor is duly elected and qualified. Officers are elected by, and serve at the discretion of, our board of directors. The board of directors may also appoint additional directors up to the maximum number permitted under our by-laws, which is currently nine.

Director Independence
 
In accordance with the disclosure requirements of the SEC, and since the Over-The-Counter Bulletin Board (OTCBB) does not have its own rules for director independence, we have adopted the NASDAQ listing standards for independence effective April 2010. Although we are not presently listed on any national securities exchange, each of our directors, other than Mr. Thomas A. Moore and Mr. Roni Appel, is independent in accordance with the definition set forth in the NASDAQ rules. Each current member of the Audit Committee and Compensation Committee is an independent director under the NASDAQ standards. The Board considered the information included in transactions with related parties as outlined below along with other information the Board considered relevant, when considering the independence of each director.

 
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Committees of the Board of Directors

Our board of directors has three standing committees: the audit committee, the compensation committee, and the nominating and corporate governance committee.
 
Audit Committee
 
The audit committee of our board of directors is currently composed of two directors, both of whom satisfy the independence standards for audit committee members under the NASDAQ rules (although our securities are not listed on the NASDAQ stock market but are quoted on the OTC Bulletin Board).  For fiscal 2010, the audit committee was composed of Mr. Berman and Dr. Patton, with Mr. Berman serving as the audit committee’s financial expert as defined under Item 407 of Regulation S-K of the Securities Act of 1933, as amended, which we refer to as the Securities Act. Our board of directors has determined that the audit committee financial expert is independent as defined in (i) Rule 10A-3(b)(i)(ii) under the Exchange Act and (ii) under Section 121 B(2)(a) of the NYSE Amex Equities Company Guide (although our securities are not listed on the NYSE Amex Equities but are quoted on the OTC Bulletin Board).
 
The audit committee is responsible for the following:
 
 
·
reviewing the results of the audit engagement with the independent registered public accounting firm;
 
 
·
identifying irregularities in the management of our business in consultation with our independent accountants, and suggesting an appropriate course of action;
 
 
·
reviewing the adequacy, scope, and results of the internal accounting controls and procedures;
 
 
·
reviewing the degree of independence of the auditors, as well as the nature and scope of our relationship with our independent registered public accounting firm;
 
 
·
reviewing the auditors’ fees; and
 
 
·
recommending the engagement of auditors to the full board of directors.
 
Compensation Committee
 
The compensation committee of our board of directors consists of Mr. Berman and Dr. McKearn.  The compensation committee determines the salaries and incentive compensation of our officers subject to applicable employment agreements, and provides recommendations for the salaries and incentive compensation of our other employees and consultants.
 
Nominating and Corporate Governance Committee
 
The nominating and corporate governance committee of our board of directors currently consists of Mr. Berman and Mr. Moore. The nominating and corporate governance committee did not meet in fiscal 2010.  The functions of the nominating and corporate governance committee include the following:
 
 
·
identifying and recommending to the board of directors individuals qualified to serve as members of our board of directors and on the committees of the board;
 
 
·
advising the board with respect to matters of board composition, procedures and committees;
 
 
·
developing and recommending to the board a set of corporate governance principles applicable to us and overseeing corporate governance matters generally including review of possible conflicts and transactions with persons affiliated with directors or members of management; and
 
 
·
overseeing the annual evaluation of the board and our management.
 
The nominating and corporate governance committee will consider director candidates recommended by eligible stockholders. Stockholders may recommend director nominees for consideration by the nominating and corporate governance committee by writing to the Nominating and Corporate Governance, Attention: Chairman, Advaxis, Inc., Technology Centre of New Jersey, 675 US Highway One, New Brunswick, New Jersey, 08902. Any recommendations for director made to the nominating and corporate governance committee should include the nominee’s name and qualifications for membership on our board of directors, and should include the following information for each person being recommended or nominated for election as a director:

 
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·
The name, age, business address and residence address of the person;
 
 
·
The principal occupation or employment of the person;
 
 
·
The number of shares of our common stock which the person owns beneficially or of record; and
 
 
·
Any other information relating to the person that must be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors under Section 14 of the Exchange Act and its rules and regulations.
 
In addition, the stockholder’s notice must include the following information about such stockholder:
 
 
·
The stockholder’s name and record address;
 
 
·
The number of shares of our common stock that the stockholder owns beneficially or of record;
 
 
·
A description of all arrangements or understandings between the stockholder and each proposed nominee and any other person or persons, including their names, pursuant to which the nomination is to be made;
 
 
·
A representation that the stockholder  intends to appear in person or by proxy at the annual meeting to nominate the person or persons named in such stockholder’s notice; and
 
 
·
Any other information about the stockholder that must be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors under Section 14 of the Exchange Act and its rules and regulations.
 
The notice must include a written consent by each proposed nominee to being named as a nominee and to serve as a director if elected. No person will be eligible for election as a director of ours unless recommended by the nominating and corporate governance committee and nominated by our board of directors or nominated in accordance with the procedures set forth above. Candidates proposed by stockholders for nomination are evaluated using the same criteria as candidates initially proposed by the nominating and corporate governance committee.
 
We must receive the written nomination for an annual meeting not less than 90 days and not more than 120 days prior to the first anniversary of the previous year’s annual meeting of stockholders, or, if no annual meeting was held the previous year or the date of the annual meeting is advanced more than 30 days before or delayed more than 60 days after the anniversary date, we must receive the written nomination not more than 120 days prior to the annual meeting and not less than the later of 90 days prior to the annual meeting or ten days following the day on which public announcement of the date of the annual meeting is first made. For a special meeting, we must receive the written nomination not less than the later of 90 days prior to the special meeting or ten days following the day on which public announcement of the date of the special meeting is first made.
  
The nominating and corporate governance committee expects, as minimum qualifications, that nominees to our board of directors (including incumbent directors) will enhance our board of director’s management, finance and/or scientific expertise, will not have a conflict of interest and will have a high ethical standard. A director nominee’s knowledge and/or experience in areas such as, but not limited to, the medical, biotechnology, or life sciences industry, equity and debt capital markets and financial accounting are likely to be considered both in relation to the individual’s qualification to serve on our board of directors and the needs of our board of directors as a whole. Other characteristics, including but not limited to, the director nominee’s material relationships with us, time availability, service on other boards of directors and their committees, or any other characteristics which may prove relevant at any given time as determined by the nominating and corporate governance committee shall be reviewed for purposes of determining a director nominee’s qualification.
 
Candidates for director nominees are evaluated by the nominating and corporate governance committee in the context of the current composition of our board of directors, our operating requirements and the long-term interests of our stockholders. The nominating and corporate governance committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The nominating and corporate governance committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of our board of directors. In the case of incumbent directors whose terms of office are set to expire, the nominating and corporate governance committee reviews such directors’ overall service to us during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. The nominating and corporate governance committee meets to discuss and consider such candidates’ qualifications and then selects a nominee for recommendation to our board of directors by majority vote. To date, the nominating and corporate governance committee has not paid a fee to any third party to assist in the process of identifying or evaluating director candidates.

 
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Compensation Committee Interlocks and Insider Participation

The current members of the compensation committee are Mr. Berman and Dr. McKearn. Currently, none of such persons is an officer or employee of us or any of our subsidiaries. During fiscal 2010, none of our executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, whose executive officers served as a director or member of our compensation committee. No interlocking relationship, as defined by the Securities Exchange Act of 1934, as amended, exists between our board of directors or our Compensation Committee and the board of directors or compensation committee of any other company.

Compliance with Section 16(a) of the Securities Exchange Act of 1934
 
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and each person who owns more than ten percent of a registered class of our equity securities (collectively, “Reporting Persons”) to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and our other equity securities. Reporting Persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file. Based solely on the Company’s review of the copies of the forms received by it during the fiscal year ended October 31, 2010 and written representations that no other reports were required, the Company believes that each person who, at any time during such fiscal year, was a director, officer or beneficial owner of more than ten percent of the Company’s common stock complied with all Section 16(a) filing requirements during such fiscal year.

Code of Ethics
 
We have adopted a code of ethics that applies to our officers, employees and directors, including our principal executive officers, principal financial officer and principal accounting officer. The code of ethics sets forth written standards that are designated to deter wrongdoing and to promote:

 
·
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
 
·
full, fair, accurate, timely and understandable disclosure in reports and documents that a we file with, or submit to, the SEC and in other public communications made by us;
 
·
compliance with applicable governmental laws, rules and regulations;
 
·
the prompt internal reporting of violations of the code to an appropriate person or persons identified in our code of ethics; and
 
·
accountability for adherence to our code of ethics.

A copy of our code of ethics has been filed with the SEC as an exhibit to our Form 8-K dated November 12, 2004.

Item 11:  Executive Compensation

Summary Compensation Table
 
The following table sets forth the information as to compensation paid to or earned by our Chief Executive Officer and our two other most highly compensated executive officers during the fiscal years ended October 31, 2010 and 2009.  These individuals are referred to in this prospectus as our named executive officers.  As none of our named executive officers received non-equity incentive plan compensation or nonqualified deferred compensation earnings during the fiscal years ended October 31, 2010 and 2009, we have omitted those columns from the table.
 
Name and
Principal
Position
 
Fiscal Year
 
Salary
   
Bonus
   
Stock
Award(s)
(1)
   
Option
Award(s)
(1)
   
All Other
 Compensation
   
Total
 
                                         
Thomas A. Moore,
 
2010
  $ 350,000     $ -     $ 135,000 (7)   $ 224,800     $ 142,174 (3)   $ 851,974  
CEO and Chairman
 
2009
    350,000       -       71,250 (7)     223,500       17,582 (2)     662,332  
                                                     
Dr. John Rothman,
 
2010
    250,000       50,000       30,000 (4)     252,900       29,451 (5)     612,351  
Executive VP of Science & Operations
 
2009
    250,000       -       30,000 (4)     156,450       23,797 (5)     460,247  
                                                     
Mark J. Rosenblum
 
2010
    225,000       -               134,880       8,494 (6)     368,374  
Chief Financial Officer
 
2009
    -       -       -       -       -       -  
 
(1)
The amounts shown in this column represent the fair value on grant date in accordance with ASC 718 using the assumptions described under Stock Compensation in Note 2 to our financial statements included elsewhere in this prospectus.

(2)
Based on our cost of Mr. Moore’s coverage for health care.

 
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(3)
Based on our cost of Mr. Moore’s coverage for health care and interest received for the Moore Notes.

(4)
Represents $30,000 of base salary paid in shares of our common stock in lieu of cash, based on the average monthly stock price.

(5)
Based on our cost of his coverage for health care and the 401K company match he received.

(6)
Based on our cost of his coverage for health care.

(7)
For 2010, represents 750,000 shares of our common stock granted to Mr. Moore based on the financial raise milestone in his employment agreement valued at the market close price on June 29, 2010. For 2009, represents 750,000 shares of the Company’s common stock granted to him based on the financial raise milestone in his employment agreement valued at the market close price on April 4, 2008.
 
Discussion of Summary Compensation Table
 
We are party to an employment agreement with each of our named executive officers who is presently employed by us, other than Mr. Rosenblum.  Each employment agreement sets forth the terms of that officer’s employment, including among other things, salary, bonus, non-equity incentive plan and other compensation, and its material terms are described below.  In fiscal 2009 and fiscal 2010, we granted stock options to our named executive officers to purchase shares of our common stock and issued stock to our Chief Executive Officer.  The material terms of these grants are also described below.
 
Moore Employment Agreement and Option Agreements.  We are party to an employment agreement with Mr. Moore, dated as of August 21, 2007 (memorializing an oral agreement dated December 15, 2006), that provides that he will serve as our Chairman of the Board and Chief Executive Officer for an initial term of two years.  For so long as Mr. Moore is employed by us, Mr. Moore is also entitled to nominate one additional person to serve on our board of directors.  Following the initial term of employment, the agreement was renewed for a one year term, and is automatically renewable for additional successive one year terms, subject to our right and Mr. Moore’s right not to renew the agreement upon at least 90 days’ written notice prior to the expiration of any one year term.
 
Under the terms of the agreement, Mr. Moore was entitled to receive a base salary of $250,000 per year, subject to increase to $350,000 per year upon our successful raise of at least $4.0 million (which condition was satisfied on November 1, 2007) and subject to annual review for increases by our board of directors in its sole discretion.  The agreement also provides that Mr. Moore is entitled to receive family health insurance at no cost to him.  Mr. Moore’s employment agreement does not provide for the payment of a bonus.
 
In connection with our hiring of Mr. Moore, we agreed to grant Mr. Moore up to 1,500,000 shares of our common stock, of which 750,000 shares were issued on November 1, 2007 upon our successful raise of $4.0 million and 750,000 shares were issued on June 29, 2010 upon our successful raise of an additional $6.0 million (which condition was satisfied in January 2010).  In addition, on December 15, 2006, we granted Mr. Moore options to purchase 2,400,000 shares of our common stock.  Each option is exercisable at $0.143 per share (which was equal to the closing sale price of our common stock on December 15, 2006) and expires on December 15, 2016.  The options vested in 24 equal monthly installments.  On July 21, 2009, we granted Mr. Moore options to purchase 2,500,000 shares of our common stock.  Each option is exercisable at $0.10 per share (which was equal to the closing sale price of our common stock on July 21, 2009) and expires on July 21, 2019.  One-third of these options vested on the grant date, one-third of these options vested on the first anniversary of the grant and the remaining one-third will vest on the second anniversary of the grant.  On October 14, 2010, we granted Mr. Moore options to purchase 2,000,000 shares of our common stock. Each option is exercisable at $0.15 per share. These options vest over a three year period beginning one year from the grant date.
 
We have also agreed to grant Mr. Moore options to purchase an additional 1,500,000 shares of our common stock if the price of common stock (adjusted for any splits) is equal to or greater than $0.40 for 40 consecutive business days.  Pursuant to the terms of his employment agreement, all options will be awarded and vested upon a merger of the company which is a change of control or a sale of the company while Mr. Moore is employed.  In addition, if Mr. Moore’s employment is terminated by us, Mr. Moore is entitled to receive severance payments equal to one year’s salary at the then current compensation level.
 
Mr. Moore has agreed to refrain from engaging in certain activities that are competitive with us and our business during his employment and for a period of 12 months thereafter under certain circumstances.  In addition, Mr. Moore is subject to a non-solicitation provision for 12 months after termination of his employment.
 
Rothman Employment Agreement and Option Agreements.   We previously entered into an employment agreement with Dr. Rothman, Ph.D., dated as of March 7, 2005, that provided that he would serve as our Vice President of Clinical Development for an initial term of one year.  Dr. Rothman’s current salary is $305,000, consisting of $275,000 in cash and $30,000 in stock, payable in our common stock, based on the average closing stock price for such six month period.  While the employment agreement has expired and has not been formally renewed in accordance with the agreement, Dr. Rothman remains employed by us and is currently our Executive V.P. of Clinical and Scientific Operations.

 
6

 
 
In addition, on March 1, 2005, we granted Dr. Rothman options to purchase 360,000 shares of our common stock. Each option is exercisable at $0.287 per share (which was equal to the closing sale price of our common stock on March 1, 2005) and expires on March 1, 2015.  All of these options have vested.  On March 29, 2006, we granted Dr. Rothman options to purchase 150,000 shares of our common stock.  Each option is exercisable at $0.26 per share (which was equal to the closing sale price of our common stock on March 29, 2006) and expires on March 29, 2016.   One-fourth of these options vested on the first anniversary of the grant date, and the remaining vest in 12 equal quarterly installments.   On February 15, 2007, we granted Dr. Rothman options to purchase 300,000 shares of our common stock.  Each option is exercisable at $0.165 per share (which was equal to the closing sale price of our common stock on February 15, 2007) and expires on February 15, 2017.  One-fourth of these options vested on the first anniversary of the grant date, and the remaining vest in 12 equal quarterly installments.   Pursuant to the terms of the 2005 plan, at least 75% of Dr. Rothman’s options will be vested upon a merger of the company which is a change of control or a sale of the company while Dr. Rothman is employed, unless the administrator of the plan otherwise allows for all options to become vested.  On July 21, 2009, we granted Mr. Rothman options to purchase 1,750,000 shares of our common stock.  Each option is exercisable at $0.10 per share (which was equal to the closing sale price of our common stock on July 21, 2009) and expires on July 21, 2019.  One-third of these options vested on the grant date, one-third of these options vested on the first anniversary of the grant and the remaining one-third will vest on the second anniversary of the grant.  On October 14, 2010, we granted Dr. Rothman options to purchase 2,250,000 shares of our common stock. Each option is exercisable at $0.15 per share. These options vest over a three year period beginning one year from the grant date.
 
Dr. Rothman has agreed to refrain from engaging in certain activities that are competitive with us and our business during his employment and for a period of 18 months thereafter under certain circumstances.  In addition, Dr. Rothman is subject to a non-solicitation provision for 18 months after termination of his employment.
 
Rosenblum Compensation.  Mr. Rosenblum serves as our Chief Financial Officer, Senior Vice President and Secretary.  His current salary is $240,000 per annum, with a discretionary bonus of up to 30% of his base compensation awarded annually in March beginning in 2011.  While an employment agreement has not been formally entered into, Mr. Rosenblum remains employed by us.
 
In addition, on January 5, 2010 Mr. Rosenblum was granted options to purchase 1,000,000 shares of the our common stock with an exercise price equal to $0.128.  One third of these options vested on the date of grant, one third vested on January 5, 2011, and one third vests on the second anniversary of the date of grant.  On October 14, 2010, we granted Mr. Rosenblum options to purchase 1,200,000 shares of our common stock. Each option is exercisable at $0.15 per share. These options vest over a three year period beginning one year from the grant date.
 
Outstanding Equity Awards at Fiscal Year-End
 
The following table provides information about the number of outstanding equity awards held by our named executive officers at October 31, 2010.
 
    
Option Awards
 
Stock Awards
 
Name
 
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
   
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
   
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
   
Option
Exercise
Price ($)
 
Option
Expiration
Date
 
Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
   
Market Value
of Shares
or
Units of Stock
That Have
Not Vested ($)
   
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or
Other Rights
That Have
Not
Vested (#)
   
Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have
Not
Vested ($)
 
                                                   
Thomas A. Moore
    1,666,667       833,333 (1)           0.100  
7/21/19
        $              
      2,400,000                   0.143  
12/15/16
                       
              2,000,000 (2)           0.15  
10/14/20
                       
Dr. John Rothman
    1,166,667       583,333 (3)           0.100  
7/21/19
                       
      360,000                   0.287  
3/1/15
                       
      150,000       -             0.260  
3/29/16
                       
      281,250       18,750 (4)           0.165  
2/15/17
                       
              2,250,000 (5)           0.15  
10/14/20
                       
Mark J. Rosenblum
    666,666       333,334 (6)           0.1291  
1/05/20
                       
              1,200,000 (7)           0.15  
10/14/20
                       
 
 
7

 
 
(1)
Of these options, approximately 833,333 became exercisable on July 21, 2009, approximately 833,333 became exercisable on July 21, 2010 and approximately 833,333 will become exercisable on July 21, 2011.
 
(2)
Of these options, approximately 666,666 will become exercisable on October 14, 2011, approximately 666,667 will become exercisable on October 14, 2012 and approximately 666,667 will become exercisable on October 14, 2013.
 
(3)
Of these options, approximately 583,333 became exercisable on July 21, 2009, approximately 583,333 became exercisable on July 21, 2010 and approximately 583,333 will become exercisable on July 21, 2011.
 
(4)
Of these options, 75,000 became exercisable on February 15, 2008, 18,750 became exercisable in each quarter from the quarter ended April 30, 2008 through the quarter ended October 31, 2010, and 18,750 become exercisable February 15, 2011.
 
(5)
Of these options, 750,000 will become exercisable on October 14, 2011, 750,000 will become exercisable on October 14, 2012 and 750,000 will become exercisable on October 14, 2013.
 
(6)
Of these options, 333,333 became exercisable on January 5, 2010, 333,333 became exercisable on January 5, 2011 and 333,334 will become exercisable on January 5, 2012.
 
(7)
Of these options, 400,000 will become exercisable on October 14, 2011, 400,000 will become exercisable on October 14, 2012 and 400,000 will become exercisable on October 14, 2013.
 
Director Compensation
 
All of our non-employee directors earn a combination of cash compensation and awards of shares of our common stock.  Each non-employee director (other than Mr. Berman) earns 6,000 shares of our common stock per quarter. Additionally, each non-employee director earns $2,000 for each board meeting attended in person and $750 for each telephonic board meeting. In addition, each member of a committee of the Board earns $2,000 per meeting attended in person held on days other than board meeting days and $750 for each telephonic committee meeting. In addition, Mr. Berman, earns $2,000 a month in shares of our common stock based on the average closing price of our common stock for the preceding month.  The non-employee director compensation that was earned for the twelve months ended October 31, 2010, was not paid or issued. Our employee director does not receive any compensation for his services as a director.
 
The table below summarizes the compensation that was earned by our non-employee directors for fiscal 2010. As none of our non-employee directors received non-equity incentive plan compensation or nonqualified deferred compensation earnings during fiscal 2010, we have omitted those columns from the table.
 
 Name
 
Fees
Earned
or Paid
in Cash
($)
   
Stock
Awards
($)
   
Option
Awards
($)(1)
   
All other
Compensation
($)
   
Total
($)
 
                               
Roni A. Appel
  $ 5,500     $ 4,020 (2)   $ 28,100 (3)         $ 37,620  
Dr. James Patton
    9,000       4,020 (2)     28,100 (3)           41,120  
Dr. Thomas McKearn
    3,500       4,020 (2)     44,960 (4)           52,480  
Richard Berman
    7,750       24,000 (5)     44,960 (4)           76,710  

(1)
The amounts shown in this column represent the fair value on grant date in accordance with ASC 718 using the assumptions described under Stock Compensation in Note 2 to our financial statements included elsewhere in this prospectus.
 
(2)
Represents the grant date fair value of 6,000 shares of our common stock a quarter earned (but not paid or issued) if the member attends at least 75% of the meetings annually.
 
(3)
Based on the grant date fair value ($0.1124) of 250,000 options granted on October 14, 2010.
 
(4)
Based on the grant date fair value ($0.1124) of 400,000 options granted on October 14, 2010.
 
(5)
Based on $24,000 of compensation in the form of shares of our common stock earned but not issued to date.

 
8

 

2004 Stock Option Plan
 
In November 2004, our board of directors adopted and our stockholders approved the 2004 Stock Option Plan, which we refer to as the 2004 plan.  The 2004 plan provides for the grant of options to purchase up to 2,381,525 shares of our common stock to employees, officers, directors and consultants.  Options may be either “incentive stock options” or non-qualified options under the Federal tax laws.  Incentive stock options may be granted only to our employees, while non-qualified options may be issued, in addition to employees, to non-employee directors and consultants.  As of January 27, 2011, options to purchase 2,381,525 shares of our common stock have been granted under the 2004 plan.
 
The 2004 plan is administered by “disinterested members” of our board of directors or the compensation committee, who determine, among other things, the individuals who will receive options, the time period during which the options may be partially or fully exercised, the number of shares of common stock issuable upon the exercise of each option and the option exercise price.
 
Subject to a number of exceptions, the exercise price per share of common stock subject to an incentive option may not be less than the fair market value per share of common stock on the date the option is granted.  The per share exercise price of our common stock subject to a non-qualified option may be established by our board of directors, but will not, however, be less than 85% of the fair market value per share of common stock on the date the option is granted.  The aggregate fair market value of common stock for which any person may be granted incentive stock options which first become exercisable in any calendar year may not exceed $100,000 on the date of grant.
 
No stock option may be transferred by an optionee other than by will or the laws of descent and distribution, and, during the lifetime of an optionee, the option will be exercisable only by the optionee.  In the event of termination of employment or engagement other than by death or disability, the optionee will have no more than three months after such termination during which the optionee will be entitled to exercise the option to the extent vested at termination, unless otherwise determined by our board of directors.  Upon termination of employment or engagement of an optionee by reason of death or permanent and total disability, the optionee’s options remain exercisable for one year to the extent the options were exercisable on the date of such termination.  No similar limitation applies to non-qualified options.
 
We must grant options under the 2004 plan within ten years from the effective date of the 2004 plan.  The effective date of the 2004 plan was November 12, 2004.  Subject to a number of exceptions, holders of incentive stock options granted under the 2004 plan cannot exercise these options more than ten years from the date of grant.  Options granted under the 2004 plan generally provide for the payment of the exercise price in cash and may provide for the payment of the exercise price by delivery to us of shares of common stock already owned by the optionee having a fair market value equal to the exercise price of the options being exercised, or by a combination of these methods.  Therefore, if it is provided in an optionee’s options, the optionee may be able to tender shares of common stock to purchase additional shares of common stock and may theoretically exercise all of his stock options with no additional investment other than the purchase of his original shares.
 
Any unexercised options that expire or that terminate upon an employee’s ceasing to be employed by us become available again for issuance under the 2004 plan.
 
2005 Stock Option Plan
 
In June 2006 our board of directors adopted, and on June 6, 2006 our stockholders approved, the 2005 Stock Option Plan, which we refer to as the 2005 plan.
 
The 2005 plan provides for the grant of options to purchase up to 5,600,000 shares of our common stock to employees, officers, directors and consultants.  Options may be either “incentive stock options” or non-qualified options under the Federal tax laws.  Incentive stock options may be granted only to our employees, while non-qualified options may be issued to non-employee directors, consultants and others, as well as to our employees.  As of January 27, 2011, options to purchase 5,429,917 shares of our common stock have been granted under the 2005 plan.
 
The 2005 plan is administered by “disinterested members” of our board of directors or the compensation committee, who determine, among other things, the individuals who will receive options, the time period during which the options may be partially or fully exercised, the number of shares of common stock issuable upon the exercise of each option and the option exercise price.
 
Subject to a number of exceptions, the exercise price per share of common stock subject to an incentive option may not be less than the fair market value per share of common stock on the date the option is granted.  The per share exercise price of our common stock subject to a non-qualified option may be established by our board of directors, but will not, however, be less than 85% of the fair market value per share of common stock on the date the option is granted.  The aggregate fair market value of common stock for which any person may be granted incentive stock options which first become exercisable in any calendar year may not exceed $100,000 on the date of grant.

 
9

 

Except when agreed to by our board of directors or the administrator of the 2005 plan, no stock option may be transferred by an optionee other than by will or the laws of descent and distribution, and, during the lifetime of an optionee, the option will be exercisable only by the optionee.  In the event of termination of employment or engagement other than by death or disability, the optionee will have no more than three months after such termination during which the optionee will be entitled to exercise the option, unless otherwise determined by our board of directors.  Upon termination of employment or engagement of an optionee by reason of death or permanent and total disability, the optionee’s options remain exercisable for one year to the extent the options were exercisable on the date of such termination.  No similar limitation applies to non-qualified options.
 
We must grant options under the 2005 plan within ten years from the effective date of the 2005 plan.  The effective date of the 2005 plan was January 1, 2005.  Subject to a number of exceptions, holders of incentive stock options granted under the 2005 plan cannot exercise these options more than ten years from the date of grant.  Options granted under the 2005 plan generally provide for the payment of the exercise price in cash and may provide for the payment of the exercise price by delivery to us of shares of common stock already owned by the optionee having a fair market value equal to the exercise price of the options being exercised, or by a combination of these methods.  Therefore, if it is provided in an optionee’s options, the optionee may be able to tender shares of common stock to purchase additional shares of common stock and may theoretically exercise all of his stock options with no additional investment other than the purchase of his original shares.
 
Any unexercised options that expire or that terminate upon an employee’s ceasing to be employed by us become available again for issuance under the 2005 plan.

 2009 Stock Option Plan
 
Our board of directors adopted the 2009 Stock Option Plan effective July 21, 2009, and recommended that it be submitted to our shareholders for their approval at the next annual meeting.  On April 23, 2010, our board of directors approved and adopted, and on June 1, 2010 our stockholders approved, the amended and restated 2009 Stock Option Plan, which we refer to as the 2009 plan.  As of January 27, 2011, options to purchase 19,409,732 shares of our common stock have been granted under the 2009 plan, not including options to purchase 2,366,667 shares of our common stock that were granted under the 2009 plan and subsequently cancelled.
 
The 2009 plan is to be administered by the compensation committee of our board of directors; provided, however, that except as otherwise expressly provided in the 2009 plan, our board of directors may exercise any power or authority granted to the compensation committee under the 2009 plan. Subject to the terms of the 2009 plan, the compensation committee is authorized to select eligible persons to receive options, determine the type, number and other terms and conditions of, and all other matters relating to, options, prescribe option agreements (which need not be identical for each participant), and the rules and regulations for the administration of the 2009 plan, construe and interpret the 2009 plan and option agreements, correct defects, supply omissions or reconcile inconsistencies therein, and make all other decisions and determinations as the compensation committee may deem necessary or advisable for the administration of the 2009 plan.
 
An aggregate of 20,000,000 shares of our common stock (subject to adjustment by the compensation committee) are reserved for issuance upon the exercise of options granted under the 2009 plan. The maximum number of shares of common stock to which options may be granted to any one individual under the 2009 plan is 6,000,000 (subject to adjustment by the compensation committee).  The shares acquired upon exercise of options granted under the 2009 plan will be authorized and issued shares of our common stock.  Our shareholders will not have any preemptive rights to purchase or subscribe for any common stock by reason of the reservation and issuance of common stock under the 2009 plan.  If any option granted under the 2009 plan should expire or terminate for any reason other than having been exercised in full, the unpurchased shares subject to that option will again be available for purposes of the 2009 plan.
 
The persons eligible to receive awards under the 2009 plan are the officers, directors, employees, consultants and other persons who provide services to us or any related entity.  An employee on leave of absence may be considered as still in our or a related entity’s employ for purposes of eligibility for participation in the 2009 plan.  All options granted under the 2009 plan must be evidenced by a written agreement.  The agreement will contain such terms and conditions as the compensation committee shall prescribe, consistent with the 2009 plan, including, without limitation, the exercise price, term and any restrictions on the exercisability of the options granted.  For any option granted under the 2009 plan, the exercise price per share of common stock may be any price determined by the compensation committee; however, the exercise price per share of any incentive stock option may not be less than the fair market value of the common stock on the date such incentive stock option is granted.
 
The compensation committee may permit the exercise price of an option to be paid for in cash, by certified or official bank check or personal check, by money order, with already owned shares of common stock that have been held by the optionee for at least six (6) months (or such other shares as we determine will not cause us to recognize for financial accounting purposes a charge for compensation expense), the withholding of shares of common stock issuable upon exercise of the option, by delivery of a properly executed exercise notice together with such documentation as shall be required by the compensation committee (or, if applicable, the broker) to effect a cashless exercise, or a combination of the above.  If paid in whole or in part with shares of already owned common stock, the value of the shares surrendered is deemed to be their fair market value on the date the option is exercised.

 
10

 
 
No incentive stock option, and unless the prior written consent of our compensation committee is obtained (which consent may be withheld for any reason) and the transaction does not violate the requirements of Rule 16b-3 of the Exchange Act, no non-qualified stock option granted under the 2009 plan is assignable or transferable, other than by will or by the laws of descent and distribution.  During the lifetime of an optionee, an option is exercisable only by him or her, or in the case of a non-qualified stock option, by his or her permitted assignee.
 
The expiration date of an option under the 2009 plan will be determined by our compensation committee at the time of grant, but in no event may such an option be exercisable after 10 years from the date of grant.  An option may be exercised at any time or from time to time or only after a period of time in installments, as determined by our compensation committee.  Our compensation committee may in its sole discretion accelerate the date on which any option may be exercised. Each outstanding option granted under the 2009 plan may become immediately fully exercisable in the event of certain transactions, including certain changes in control of us, certain mergers and reorganizations, and certain dispositions of substantially all our assets.
 
Unless otherwise provided in the option agreement, the unexercised portion of any option granted under the 2009 plan shall automatically be terminated (a) three months after the date on which the optionee’s employment is terminated for any reason other than (i) cause (as defined in the 2009 plan), (ii) mental or physical disability, or (iii) death; (b) immediately upon the termination of the optionee’s employment for cause; (c) one year after the date on which the optionee’s employment is terminated by reason of mental or physical disability; or (d) one year after the date on which the optionee’s employment is terminated by reason of optionee’s death, or if later, three months after the date of optionee’s death if death occurs during the one year period following the termination of the optionee’s employment by reason of mental or physical disability.
 
Unless earlier terminated by our board, the 2009 plan will terminate at the earliest of (a) such time as no shares of common stock remain available for issuance under the 2009 plan, (b) termination of the 2009 plan by our board, or (c) the tenth anniversary of the effective date of the 2009 plan.  Options outstanding upon expiration of the 2009 plan shall remain in effect until they have been exercised or terminated, or have expired.

Item 12:  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of January 27, 2011 of:
 
 
·
each person who is known by us to be the beneficial owner of more than 5% of our outstanding common stock;
 
 
·
each of our directors;
 
 
·
each of our named executive officers; and
 
 
·
all of our directors and executive officers as a group.
 
As used in the table below and elsewhere in this prospectus, the term beneficial ownership with respect to our common stock consists of sole or shared voting power (which includes the power to vote, or to direct the voting of shares of our common stock) or sole or shared investment power (which includes the power to dispose, or direct the disposition of, shares of our common stock) through any contract, arrangement, understanding, relationship or otherwise, including a right to acquire such power(s) during the 60 days following January 27, 2011.
 
Unless otherwise indicated in the footnotes to this table, and subject to community property laws where applicable, we believe each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.  Applicable percentages are based on 210,645,862 shares of common stock outstanding as of January 27, 2011, adjusted as required by the rules promulgated by the SEC.  Unless otherwise indicated, the address for each of the individuals and entities listed in this table is the Technology Centre of New Jersey, 675 U.S. Highway One, North Brunswick, New Jersey 08902.

 
11

 
 
Name and Address
of Beneficial Owner
 
Number of
Shares of our Common
Stock
Beneficially Owned
   
Percentage 
of Class
Beneficially Owned
 
             
Thomas A. Moore
    10,252,171 (1)     4.8 %
Roni A. Appel
    6,919,225 (2)     3.2 %
Richard Berman
    2,190,933 (3)     1.0 %
Dr. James Patton
    3,345,830 (4)     1.6 %
Dr. Thomas McKearn
    1,014,054 (5)     *  
Dr. John Rothman
    4,162,922 (6)     1.9 %
Mark J. Rosenblum
    666,666 (7)     *  
All Current Directors and Executive Officers as a Group (7 people)
    28,551,801 (8)     13.4 %

* Less than 1%.
 
(1)
Represents 5,352,171 issued shares of our common stock and options to purchase 4,900,000 shares of our common stock exercisable within 60 days.  However, it excludes warrants to purchase 6,091,956 shares of our common stock, limited by a 4.99% beneficial ownership provision in the warrants that would prohibit him from exercising any of such warrants to the extent that upon such exercise he, together with his affiliates, would beneficially own more than 4.99% of the total number of shares of our common stock then issued and outstanding (unless Mr. Moore provides us with 61 days' notice of the holders waiver of such provisions).
 
(2)
Represents 4,130,134 issued shares of our common stock, options to purchase 2,729,091 shares of our common stock exercisable within 60 days and 60,000 shares of our common stock earned but not yet issued.
 
(3)
Represents 760,624 issued shares of our common stock, options to purchase 900,001 shares of our common stock exercisable within 60 days and 530,308 shares of our common stock earned but not yet issued.
 
(4)
Represents 2,820,576 issued shares of our common stock, options to purchase 423,254 shares of our common stock exercisable within 60 days and 102,000 shares earned but not yet issued.
 
(5)
Represents 179,290 issued shares of our common stock, options to purchase 732,764 shares of our common stock exercisable within 60 days and 102,000 shares of our common stock earned but not yet issued.
 
(6)
Represents 275,775 issued shares of our common stock, options to purchase 2,503,749 shares of our common stock exercisable within 60 days and 1,383,398 shares of our common stock earned but not yet issued.
 
(7)
Represents options to purchase 666,666 shares of our common stock exercisable within 60 days.
 
(8)
Represents an aggregate of 13,518,570 shares of our common stock, options to purchase 12,855,525 shares of our common stock exercisable within 60 days, and 2,177,706 shares of our common stock earned but not yet issued.
 
Item 13:  Certain Relationships and Related Transactions, and Director Independence

Our policy is to enter into transactions with related parties on terms that, on the whole, are no more favorable, or no less favorable, than those available from unaffiliated third parties.  Based on our experience in the business sectors in which we operate and the terms of our transactions with unaffiliated third parties, we believe that all of the transactions described below met this policy standard at the time they occurred.
 
On September 22, 2008, we entered into a note purchase agreement with our Chief Executive Officer, Thomas A. Moore, pursuant to which we agreed to sell to Mr. Moore, from time to time, one or more senior promissory notes, which we refer to as the Moore Notes.  On June 15, 2009, we amended the terms of the Moore Notes to increase the amounts available from $800,000 to $950,000 and to change the maturity date of the Moore Notes from June 15, 2009 to the earlier of January 1, 2010 or our next equity financing resulting in gross proceeds to us of at least $6.0 million.  On February 15, 2010, we agreed to amend the terms of the Moore Notes such that (i) Mr. Moore had the option to elect to receive accumulated interest thereon on or after March 17, 2010 (which amounted to approximately $130,000), (ii) we were to begin to make monthly installment payments of $100,000 on the outstanding principal amount on April 15, 2010; provided, however, that the balance of the principal will be repaid in full on consummation of our next equity financing resulting in gross proceeds to us of at least $6.0 million and (iii) we will retain $200,000 of the repayment amount for investment in our next equity financing.  As of April 30, 2010, approximately $850,000 in Moore Notes were outstanding and payable to Mr. Moore.  In May 2010, we issued 1,176,471 shares of common stock to Mr. Moore (based on a price of $0.17 per share) in satisfaction of $200,000 of Moore Notes.

 
12

 

The Moore Notes bear interest at a rate of 12% per annum, compounded quarterly, and may be prepaid in whole or in part at our option without penalty at any time prior to maturity.  In consideration of Mr. Moore’s original agreement to purchase the Moore Notes, we agreed that concurrently with an equity financing resulting in gross proceeds to us of at least $6.0 million, we will issue to Mr. Moore a warrant to purchase our common stock, which will entitle Mr. Moore to purchase a number of shares of our common stock equal to one share per $1.00 invested by Mr. Moore in the purchase of the Moore Notes.  The terms of these warrants were subsequently modified by our board of directors based on the terms of the senior bridge financing increasing the number of shares underlying the warrant from one share per $1.00 invested to two and one-half shares.  The terms of these warrants were further modified by our board of directors to increase the number of shares underlying the warrant from two and one-half shares per $1.00 invested to three shares.  The final terms are anticipated to contain the same terms and conditions as warrants issued to investors in the subsequent financing (which are currently exercisable at $0.17 per share).

Item 14:  Principal Accountant Fees and Services

McGladrey & Pullen, LLP (“M&P”) have billed or anticipate billing the Company as follows for the year ended October 31, 2010 and 2009.

The following table sets forth the fees billed by our independent accountants for each of our last two fiscal years for the categories of services indicated:

   
Fiscal Year
2010
   
Fiscal Year
2009
 
Audit Fees-McGladrey and Pullen, LLP
 
$
103,708
   
$
94,500
 
Audit Related Fees-McGladrey and Pullen, LLP
   
23,668
     
10,000
 
Tax Fees-RSM McGladrey, Inc. (1)
   
12,000
     
13,000
 
Total
 
$
139,376
   
$
117,500
 
(1) Consists of professional services rendered by a company aligned with our principal accountant for tax compliance and tax advice.

Audit Fees: The Company recorded fees of $103,708 and $94,500, respectively, in connection with its audit of the Company’s financial statements for the fiscal years ended October 31, 2010 and 2009 and its review of the Company’s interim financial statements included in the Company’s Quarterly Reports on Form 10-Q for the periods ended January 31, April 30, and July 31.

Audit-Related Fees: The Company recorded fees of $23,668 and $10,000, respectively, in connection with audit-related services for the fiscal year ended October 31, 2010 and 2009, primarily for review of comments to the Securities and Exchange Commission in its review of securities registration documents and the Company’s replies and for assistance with private placement memorandums and other document reviews.
 
Tax Fees: The Company recorded fees of $12,000 and $13,000, respectively, in connection with tax fees for the fiscal year ended October 31, 2010 and 2009, primarily due to RSM McGladrey, Inc. amending and preparing the Company’s tax returns.  The Company engaged RSM McGladrey, Inc. to amend and prepare the Company’s 2009 tax returns and amend years 2008, and 2007.

All Other Fees: No fees were classified outside the recorded Audit, Audit Related and Tax fees.
 
The Audit Committee will pre-approve all auditing services and the terms thereof (which may include providing comfort letters in connection with securities underwriting) and non-audit services (other than non-audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board) to be provided to us by the independent auditor; provided, however, the pre-approval requirement is waived with respect to the provisions of non-audit services for us if the "de minimus" provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied. This authority to pre-approve non-audit services may be delegated to one or more members of the Audit Committee, who shall present all decisions to pre-approve an activity to the full Audit Committee at its first meeting following such decision. The Audit Committee may review and approve the scope and staffing of the independent auditors' annual audit plan.

 
13

 

PART IV

Item 15: Exhibits, Financial Statements Schedules.

See Index of Exhibits below. The Exhibits are filed with or incorporated by reference in this report.

** Filed herewith

(a) Exhibits.    The following exhibits are included herein or incorporated herein by reference.
 
Exhibit
Number
 
Description of Exhibit
23.1**
 
Consent of McGladrey & Pullen, LLP.
     
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

 
14

 

SIGNATURE

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 North Brunswick, Middlesex County, State of New Jersey, on this 25th day of February, 2011.

  
ADVAXIS, INC.
     
 
By:
/s/ Thomas Moore
   
Thomas Moore, Chief Executive Officer and Chairman
of the Board

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/ Thomas Moore
 
Chief Executive Officer and Chairman of the Board
 
February 25, 2011
Thomas Moore
 
(Principal Executive Officer)
   
         
/s/ Mark J. Rosenblum
 
Chief Financial Officer, Senior Vice President and Secretary
 
February 25, 2011
Mark J. Rosenblum
 
(Principal Financial and Accounting Officer)
   
         
*
 
Executive Vice President of Science and Operations
 
February 25, 2011
John M. Rothman
 
(Chief Operating Officer)
   
         
*
 
Director
 
February 25, 2011
Roni Appel
       
         
*
 
Director
 
February 25, 2011
Thomas McKearn
       
         
*
 
Director
 
February 25, 2011
James Patton
       
         
*
 
Director
 
February 25, 2011
Richard Berman
       
 
* By the signature set forth below, the undersigned, pursuant to the duly authorized power of attorney filed with the SEC, has signed this Amendment to the Annual Report on behalf of the person indicated.

/s/ Mark J. Rosenblum
Mark J. Rosenblum

 
15

 

ADVAXIS, INC.
INDEX TO FINANCIAL STATEMENTS
 
   
Page
Advaxis, Inc.
   
     
Reports of Independent Registered Public Accounting Firm
 
F-1
     
Balance Sheets as of October 31, 2010  and  2009
 
F-2
     
Statements of Operations for the years ended October 31, 2010 and 2009 and the period from
   
March 1, 2002 (Inception) to October 31, 2010
 
F-3
     
Statements of Stockholders’ Equity (Deficiency) for the Period from March 1, 2002 (Inception) to
   
October 31, 2010
 
F-4
     
Statements of Cash Flows for the years ended October 31, 2010 and 2009 and the period from
   
March 1, 2002 (Inception) to October 31, 2010
 
F-6
     
Notes to the Financial Statements
 
F-8

 
 

 
 
Report of Independent Registered Public Accounting Firm
 
To the Board of Directors and Shareholders

Advaxis, Inc.
North Brunswick, New Jersey

We have audited the accompanying balance sheets of Advaxis, Inc. as of October 31, 2010 and 2009, and the related statements of operations, stockholders' equity (deficiency), and cash flows for the years then ended and for the cumulative period from March 1, 2002 (inception) to October 31, 2010.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advaxis, Inc. as of October 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended and the cumulative period from March 1, 2002 (inception) to October 31, 2010 in conformity with U.S. generally accepted accounting principles.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s products are being developed and have not generated significant revenues. As a result, the Company has suffered recurring losses and its liabilities exceed its assets. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
/s/ McGLADREY & PULLEN, LLP
McGLADREY & PULLEN, LLP
 
New York, New York
January 31, 2011, except for the last paragraph of Note 13 for which the date is February 16, 2011

 
F-1

 
 
ADVAXIS, INC.
(A Development Stage Company)
Balance Sheet
 
   
October 31,
2010
   
October 31,
2009
 
ASSETS
           
Current Assets:
           
Cash
  $ 108,381     $ 659,822  
Grant Receivable
    244,479       -  
Prepaid expenses
    38,511       36,445  
Total Current Assets
    391,371       696,267  
                 
Deferred expenses
    233,322       288,544  
Property and Equipment (net of accumulated depreciation)
    28,406       54,499  
Intangible Assets (net of accumulated amortization)
    2,125,991       1,371,638  
Deferred Financing Cost
    -       299,493  
Other Assets
    96,096       3,876  
                 
TOTAL ASSETS
  $ 2,875,186     $ 2,714,317  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
               
Current Liabilities:
               
Accounts payable
  $ 2,586,008     $ 2,368,716  
Accrued expenses
    647,125       917,250  
Convertible Bridge Notes and fair value of embedded derivative
    751,456       2,078,851  
Notes payable – current portion, including interest payable
    687,034       1,121,094  
Total Current Liabilities
    4,671,623       6,485,911  
Common Stock Warrant
    13,006,194       11,961,734  
Total Liabilities
    17,677,817       18,447,645  
                 
Shareholders’ Deficiency:
               
Preferred stock, $0.001 par value; 5,000,000 shares authorized; Series B Preferred Stock; issued and outstanding 789 at October 31, 2010 and 0 at October 31, 2009. Series A Preferred Stock; issued and outstanding 0 at October 31, 2010 and 0 at October 31, 2009
            -  
Common Stock - $0.001 par value; authorized 500,000,000 shares, issued and outstanding  198,100,817 in 2010 and 115,638,243 in 2009
    198,101       115,638  
Additional Paid-In Capital
    23,074,978       754,834  
Stock Subscription Receivable
    (10,659,710 )        
Deficit accumulated during the development stage
    (27,416,000 )     (16,603,800 )
Total Shareholders’ Deficiency
    (14,802,631 )     (15,733,328 )
TOTAL LIABILITIES & SHAREHOLDERS’ DEFICIENCY
  $ 2,875,186     $ 2,714,317  

The accompanying notes and the report of independent registered public accounting firm should be read in conjunction with the financial statements.
 
 
F-2

 
 
ADVAXIS, INC.
(A Development Stage Company)
Statement of Operations
 
   
Year Ended
October 31,
   
Year Ended
October 31,
   
Period from
March 1, 2002
(Inception) to
October 31,
 
   
2010
   
2009
   
2010
 
                   
Revenue
  $ 508,481     $ 29,690     $ 1,863,343  
Research & Development Expenses
    4, 904,298       2,315,557       15,077,839  
General & Administrative Expenses
    3,530,198       2,701,133       16,239,898  
Total Operating expenses
    8,434,496       5,016,690       31,317,737  
Loss from Operations
    (7,926,015 )     (4,987,000 )     (29,454,394 )
Other Income (expense):
                       
Interest expense
    (3,814,863 )     (851,008 )     (5,750,354 )
Other Income
    80,161               326,618  
Gain on note retirement
    123,963       -       1,656,440  
Net changes in fair value of common stock warrant liability and embedded derivative liability
    445,576       5,845,229       4,648,573  
Net Income/( Loss) before income tax benefit
    (11,091,178 )     7,221       (28,573,117 )
Income Tax Benefit
    278,978       922,023       1,201,001  
Net Income/( Loss)
    (10,812,200 )     929,244       (27,372,116 )
Dividends attributable to preferred shares
    -       -       43,884  
Net Income/( Loss) applicable to Common Stock
  $ (10,812,200 )   $ 929,244     $ (27,416,000 )
Net Income/(Loss) per share, basic
  $ (0.07 )   $ 0.01          
Net Income/(Loss) per share, diluted
  $ (0.07 )   $ 0.01          
                         
Weighted average number of shares outstanding, basic
    150,928,808       113,365,584          
                         
Weighted average number of shares outstanding, diluted
    150,928,808       118,264,246          

The accompanying notes and the report of independent registered public accounting firm should be read in conjunction with the financial statements.

 
F-3

 
 
ADVAXIS, INC.
(a development stage company)
STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIENCY)
Period from March 1, 2002 (inception) to October 31, 2010
 
   
Preferred Stock
   
Common Stock
           
Deficit
       
   
Number of
Shares of
Outstanding
   
Amount
   
Number of shares
of outstanding
   
Amount
 
Stock
Subscription
Receivable
 
Additional Paid-
in Capital
   
Accumulated
During the
Development Stage
   
Shareholders’
Equity (Deficiency)
 
Preferred stock issued
    3,418     $ 235,000                               $ 235,000  
Common Stock Issued
                    40,000     $ 40       $ (40 )              
Options granted to consultants & professionals
                                      10,493           $ 10,493  
Net Loss
                                              (166,936 )   $ (166,936 )
Retroactive restatement to reflect re-capitalization on Nov. 12, 2004
    (3,481 )     (235,000 )     15,557,723       15,558         219,442                  
Balance at December 31, 2002
                    15,597,723     $ 15,598       $ 229,895     $ (166,936 )   $ 78,557  
                                                           
Note payable converted into preferred stock
    232       15,969                                       $ 15,969  
Options granted to consultants and professionals
                                      8,484             $ 8,484  
Net loss
                                              (909,745 )   $ (909,745 )
Retroactive restatement to reflect re-capitalization on Nov. 12, 2004
    (232 )     (15,969 )                       15,969                  
Balance at December 31, 2003
                    15,597,723     $ 15,598       $ 254,348     $ (1,076,681 )   $ (806,735 )
                                                           
Stock dividend on preferred stock
    638       43,884                                 (43,884 )        
Net loss
                                              (538,076 )   $ (538,076 )
Options granted to consultants and professionals
                                      5,315               5,315  
Retroactive restatement to reflect re-capitalization on Nov. 12, 2004
    (638 )     (43,884 )                       43,884                  
Balance at October 31, 2004
                    15,597,723     $ 15,598       $ 303,547     $ (1,658,641 )   $ (1,339,496 )
                                                           
Common Stock issued to Placement Agent on re-capitalization
                    752,600       753         (753 )                
Effect of re-capitalization
                    752,600       753         (753 )                
Options granted to consultants and professionals
                                      64,924               64,924  
Conversion of Note payable to Common Stock
                    2,136,441       2,136         611,022               613,158  
Issuance of Common Stock for cash, net of shares to Placement Agent
                    17,450,693       17,451         4,335,549               4,353,000  
Issuance of common stock to consultants
                    586,970       587         166,190               166,777  
Issuance of common stock in connection with the registration statement
                    409,401       408         117,090               117,498  
Issuance costs
                                      (329,673 )             (329,673 )
Net loss
                                              (1,805,789 )     (1,805,789 )
Restatement to reflect re- capitalization on Nov. 12, 2004 including cash paid of $44,940
                                      (88,824 )             (88,824 )
Balance at October 31, 2005
                    37,686,428     $ 37,686       $ 5,178,319     $ (3,464,430 )   $ 1,751,575  
                                                           
Options granted to consultants and professionals
                                      172,831               172,831  
Options granted to employees and directors
                                      71,667               71,667  
Conversion of debenture to Common Stock
                    1,766,902       1,767         298,233               300,000  
Issuance of Common Stock to employees and directors
                    229,422       229         54,629               54,858  
 
 
F-4

 
 
Issuance of common stock to consultants
                556,240       557             139,114             139,674  
Net loss
                                              (6,197,744 )     (6,197,744 )
Balance at October 31, 2006
                40,238,992       40,239             5,914,793       (9,662,173 )     (3,707,141 )
                                                           
Common Stock issued
                59,228,334       59,228             9,321,674               9,380,902  
Offering Expenses
                                      (2,243,535 )             (2,243,535 )
Options granted to consultants and professionals
                                      268,577               268,577  
Options granted to employees and directors
                                      222,501               222,501  
Conversion of debenture to Common Stock
                6,974,202       6,974             993,026               1,000,010  
Issuance of Common Stock to employees and directors
                416,448       416             73,384               73,800  
Issuance of common stock to consultants
                1,100,001       1,100             220,678               221,778  
Warrants issued on conjunction with issuance of common stock
                                      1,505,550               1,505,550  
Net loss
                                              (2,454,453 )     (2,454,453 )
Balance at October 31, 2007
                107,957,977     $ 107,957           $ 16,276,648     $ (12,116,626 )   $ 4,267,979  
Common Stock Penalty Shares
                211,853       212             31,566       -       31,778  
Offering Expenses
                                      (78,013 )             (78,013 )
Options granted to consultants and professionals
                                      (42,306 )             (42,306 )
Options granted to employees and directors
                                      257,854               257,854  
Issuance of Common Stock to employees and directors
                995,844       996             85,005               86,001  
Issuance of common stock to consultants
                153,846       154             14,462               14,616  
Warrants issued to consultant
                                      39,198               39,198  
Net loss
                                              (5,416,418 )     (5,416,418 )
Balance at October 31, 2008
                109,319,520     $ 109,319           $ 16,584,414     $ (17,533,044 )   $ (839,311 )
                                                           
Common stock issued upon exercise of warrants
                3,299,999       3,300             (3,300 )             0  
Warrants classified as a  liability
                                      (12,785,695 )             (12,785,695 )
Issuance of common Stock Warrants
                                      (3,587,625 )             (3,587,625 )
Options granted to professionals and consultants
                                      12,596               12,596  
                                                           
Options granted to employees and directors
                        0             467,304               467,304  
Issuance of common stock to employees and directors
                422,780       423             17,757               18,180  
Issuance of common stock to consultants
                2,595,944       2,596             49,383               51,979  
Net Income/ (Loss)
                                              929,244       929,244  
Balance at October 31, 2009
                115,638,243     $ 115,638           $ 754,834     $ (16,603,800 )   $ (15,733,328 )
                                                           
Preferred Stock issued
    789       -                             6,828,293               6,828,293  
Common stock issued upon exercise of warrants
                    62,265,059       62,265       (10,659,710 )     18,647,522               8,050,077  
Options granted to employees and directors
                                            455,166               455,166  
Common stock issued upon conversion of Bridge Notes
                    15,413,960       15,414               3,306,677               3,322,091  
Common stock issued to Numoda
                    3,500,000       3,500               591,500               595,000  
Common stock issued to University of Pennsylvania
                    388,889       389               69,611               70,000  
Common stock issued to employees and directors
                    750,000       750               114,750               115,500  
Common stock issued to former employees
                    144,666       145               (145 )             -  
Issuance of common stock warrants
                                            (7,693,230 )             (7,865,520 )
Net Income/ (Loss)
                                                    (10,812,200 )     (10,812,200 )
Balance at October 31, 2010
    789       -       198,100,817     $ 198,101     $ (10,659,710 )   $ 23,074,978     $ (27,416,000 )   $ (14,802,631 )
 
The accompanying notes and the report of independent registered public accounting firm should be read in conjunction with the financial statements.

 
F-5

 
 
ADVAXIS, INC.
(A Development Stage Company)
Statement of Cash Flows
 
               
Period from
 
               
March 1
 
               
2002
 
   
Year ended
   
Year ended
   
(Inception) to
 
   
October 31,
   
October 31,
   
October 31,
 
   
2010
   
2009
   
2010
 
OPERATING ACTIVITIES
                 
Net Income (Loss)
 
$
(10,812,200
 
$
929,244
   
$
(27,372,116
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                       
Non-cash charges to consultants and employees for options and stock
   
570,664
     
571,525
     
3,005,419
 
Amortization of deferred financing costs
   
-
     
-
     
260,000
 
Amortization of deferred expenses
   
212,952
     
61,456
     
274,408
 
Amortization of discount on Bridge Loans
   
550,040
     
123,846
     
673,886
 
Impairment of intangible assets
   
-
     
-
     
26,087
 
Non-cash interest expense
   
3,238,054
     
698,650
     
4,464,520
 
(Gain) Loss on change in value of warrants and embedded derivative
   
(445,576
)
   
(5,845,229
)
   
.(4,648,573
Warrant Expense
   
206,275
     
-
     
206,275
 
Value of penalty shares issued
   
-
     
-
     
149,276
 
Depreciation expense
   
38,528
     
36,648
     
167,266
 
Amortization expense of intangibles
   
100,420
     
74,508
     
462,352
 
Gain on note retirement
   
(123,963
   
-
     
(1,656,440
)
(Increase) decrease in prepaid expenses
   
(2,066
   
2,417
     
(38,510
)
(Increase) decrease in grant receivable
   
(244,479
)
   
-
     
(244,479
)
Decrease (increase) in other assets
   
(89,956
   
-
     
(93,833
)
Increase in accounts payable
   
388,924
     
1,421,838
     
3,167,193
 
(Decrease) increase in accrued expenses
   
167,143
     
(109,540
)
   
634,761
 
(Decrease) increase in interest payable
   
(178,700
   
-
     
(160,409
Net cash used in operating activities
   
(6,423,940
)
   
(2,034,636
)
   
(20,722,917
)
INVESTING ACTIVITIES
                       
Cash paid on acquisition of Great Expectations
   
-
     
-
     
(44,940
)
Purchase of property and equipment
   
(12,436
   
-
     
(150,093
)
Cost of intangible assets
   
(854,773
)
   
(308,749
)
   
(2,619,382
)
Net cash used in Investing Activities
   
(867,209
)
   
(308,749
)
   
(2,814,415
)
FINANCING ACTIVITIES
                       
Proceeds from convertible secured debenture
   
80,000
     
-