Table of Contents

Form 10-KSB Index

PART 1	3
Item 1: Description of Business	3
Item 2: Description of Property.	33
Item 3: Legal Proceedings.	33
Item 4: Submission of Matters to a Vote of Security Holders.	34
PART II	34
Item 5: Market For Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.	34
Item 6: Management’s Discussion and Analysis or Plan of Operation	34
Item 7: Financial Statements	45
Item 8: Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	65
Item 8A: Controls And Procedures	65
Item 8 B: Other Information.	66
PART III	66
Item 9: Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance With Section 16(a) of the Exchange Act.	66
Item 10: Executive Compensation	70
Item 11: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	77
Item 12: Certain Relationships and Related Transactions, and Director Independence.	79
Item 13: Exhibits	81
Item 14: Principal Accountant Fees and Services	84

 

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Strategy

Based upon the results of our pre-clinical work and our Phase I clinical trial we have initiated the collaborations process with both the National Cancer Institute’s (“NCI”) Gynecologic Oncology Group (“GOG”) The Cancer Research United Kingdom  (“CRUK”) and to fund clinical development work using our ADX11-001 agent (formally called Lovaxin C).  These collaborations when finalized involve the treatment of recurrent metastatic cervical cancer patients with ADX11-001 in the US, and the treatment of Human Papilloma Virus (“HPV”) positive head and neck cancer patients with a combination of chemotherapy and radiotherapy and ADX11-001 in the UK.  Assuming that the results of this Phase II clinical research are favorable, we intend to conduct Phase III clinical studies to demonstrate safety, efficacy and the potency of the investigational immunotherapy. Such studies are expected to occur in the next five to ten years. Throughout this process, we will be meeting with the FDA prior to and at the conclusion of each phase to reach a consensus before initiating any studies, to minimize regulatory risks during this clinical development process. 

 

During the next 12 to 24 months our strategic focus is to develop sufficient human clinical data on ADX11-001, our first Listeria construct, to demonstrate conclusively the effectiveness of this technology. A technology based on attenuated Listeria that secrete an antigen LLO fusion protein that can be an effective platform for multiple therapies against cancer and infectious disease.  Our anticipated success with ADX11-001 will demonstrate that the company has the potential to be one of the world’s leading immunotherapy companies.  We plan on initiating the ADXS11-001 Phase II trial single blind, placebo controlled with three arms in CIN by June 2009. At the conclusion of the first arm we expect to generate an interim assessment of efficacy by December 2010 and depending on the preliminary outcome, complete the final two arms of the trial by December 2011. In series with the CIN trial we also are targeting the development of ADXS11-001 as an Orphan Drug for the treatment of late stage cervical cancer both in the US and Worldwide.  In this program we intend to apply for an Orphan Drug designation by the FDA. The projected date for filling this application is the February or March 2009 time frame.  A trial in this indication underwritten by the GOG (NCI) is anticipated to begin in 2009, as well as anticipating starting international studies designed to confirm the safety and effectiveness of this therapy in late stage cervical cancer in huge markets outside North American and Europe. If we are not successful in achieving the orphan status we still plan on pursuing this indication as outlined although the timelines would take 3 to 5 years longer.

 

Once the above programs are underway then we will enter our prostate construct ADXS31-142 (formerly called Lovaxin P) into human clinical trials as funds or partnerships are secured.

 

Given our expertise to genetically modify a host of Listeria vaccines, our longer term strategy will be to license the commercial development of ADXS11-001 for the indications of CIN and cervical cancer. On a global basis, these indications are extremely large and will require significant partner or partners. Based in these partnerships or licenses, we anticipate the generation of funds will provide will providing the financial platform to develop the preclinical and clinical development of prostate construct, breast cancer construct, and combination constructs which combine specific tumor antigens and anti-angiogenesis antigens into a single Listeria vector. It is not our intent to engage in commercial development beyond Phase II without entering into partnerships or a license agreement.

 

The GOG has agreed to conduct the field work for an additional Phase II multi-center study in cervical cancer at its own expense (an estimated value of about $2,500,000 to $3,000,000). While we will contribute financially to this trial the majority of the cost is underwritten by the NCI.  Similarly, in the UK, we are planning to collaborate in a 2 center study at The Royal Marsden (London) and Aintree (Liverpool) hospitals that is underwritten in full by Cancer Research United Kingdom.

Following Phase III studies, in collaboration with out partner(s) we intend to file a Biologics License Application (“BLA”) with the FDA. Prior to submission of the BLA, depending upon the data, we intend to possibly seek a Special Protocol Assessment and/or a Fast Track designation from the FDA, which shortens the internal FDA review process. As we accrue clinical data demonstrating the safety, efficacy and potency of ADX11-001 in Phase I and II clinical studies, we will also explore other regulatory approval options with the FDA that could expedite the licensure of the final immunotherapy.

We intend to continue to devote a portion of our resources to the continued pre-clinical development and optimization of our technology so as to develop it to its full potential and to find appropriate new drug candidates.  Specifically, we intend to focus upon research relating to combining our Listeria technology with new and additional tumor antigens, and newly developed strains of Listeria, which, if successful, may lead to additional cancer and infectious disease vaccines therapeutic products, to improve the Listeria platform by developing new Listeria mutants that are more suitable as live vaccine vectors, and to continue to develop the use of the Listeria virulence factor LLO as a component of a fusion protein based vaccine. These activities may require significant financial resources, as well as areas of expertise beyond those readily available. In order to provide additional resources and capital, we may enter into research, collaborative, or commercial partnerships, joint ventures, or other arrangements with competitive or complementary companies, including major international pharmaceutical companies, or with universities, such as Penn and UCLA. See “Business - Partnerships and Agreements - University of Pennsylvania.”

 

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Background

 

Cancer

 

Despite tremendous advances in science, cancer remains a major health problem, and for many it continues to be the most feared of diseases. Although age-adjusted mortality rates for all cancer fell during the 1990’s, particularly for the major cancer sites (lung, colorectal, breast, and prostate), mortality rates are still increasing in certain sites such as liver and non-Hodgkin’s lymphoma. In 2004, the last year for which we have reliable numbers, 1,437,180 cases of invasive cancer were diagnosed according to the American Cancer Society, and 565,650 patients are expected to die from cancer annually.

 

Cancer is the second largest cause of death in the United States, exceeded only by heart disease. The cost of treating cancer patients in 2007 is estimated to be $219.2 billion in healthcare costs and another $18.2 billion in indirect costs resulting from morbidity and lost productivity (source: Facts & Figures 2008, American Cancer Society). The NIH estimates the overall cost for cancer in the year 2005 at $209.9 billion: $74.06 billion for direct medical costs, $17.5 billion for indirect morbidity costs (loss of productivity due to illness) and, $118.4 billion for indirect mortality costs (cost of lost productivity due to premature death). (Source: cancer facts & figures 2006, American Cancer Society). The incidence of newly diagnosed cervical cancer in the US in 2007 was 11,070 (ibid) and numbers for newly diagnosed CIN are approximately about 250,000 patients per year based on 3.5 million abnormal Pap smears (source: Jones HW, Cancer 1995:76:1914-18; Jones BA and Davey, Arch Pathol Lab Med 2000; 124:672-81)

 

 US Cancer Rates (2004)

 

 

Immune System and Normal Antigen Processing

 

Living creatures, including humans, are continually confronted with potentially infectious agents. The immune system has evolved multiple mechanisms that allow the body to recognize these agents as foreign, and to target a variety of immunological responses, including innate, antibody, and cellular immunity that mobilize the body’s natural defenses against these foreign agents and will eliminate them.

 

Innate Immunity:

 

Innate immunity is the first step in the recognition of a foreign antigen, and underlies an adaptive (antigen specific) response by lymphocytes. This non-specific ingestion Phagocytosis by these cells results in their activation and the release of various soluble mediators of immune response such as cytokines, chemokines and co-stimulatory molecules.

 

Exogenous pathway of Adaptive Immunity (Class II pathway):

 

Proteins and foreign molecules ingested by Antigen Processing Cells (“APC”) are broken down inside digestive vacuoles into small pieces, called peptides, and the pieces are combined with proteins called Class 2 MHC (for Major Histocompatibility Complex) in a part of the cell called the endoplasmic reticulum. The MHC-peptide, termed and MHC-2 complex from the Class 2 (or exogenous) pathway, is then pushed out to the cell surface where it interacts with certain classes of lymphocytes (CD4+) such as helper T-cells that produce induce a proliferation of stimulate B-cells, which produce antibodies, or helper T cells that assist in the maturation of cytotoxic T-lymphocytes. This system is called the exogenous pathway, since it is the prototypical response to an exogenous antigen like bacteria. (Listeria generated MHC-2 responses are directed at the activation of helper T cell activation, as Listeria tends not to stimulate antibody formation.)

 

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Endogenous pathway of Adaptive Immunity (Class I pathway):

 

There exists another adaptive immune pathway, called the endogenous pathway. In this system, when one of the body's cells begins to create unusual proteins within the cytoplasm (as opposed to within he digestive phagosome), the protein is broken up into peptides in the cytoplasm and directed into the endoplasmic reticulum, where it is incorporated into an MHC-1 protein and trafficked to the cell surface. This signal then calls effector cells of the cellular immune system, especially CD8+ cytotoxic T-lymphocytes, to come and kill the cell. The endogenous pathway is primarily for elimination of virus-infected or cancerous cells.

 

  

Listeria based vaccines are unique for many reasons, one of which is that unlike viral vectors, DNA or peptide antigens or other vaccines, Listeria stimulates all of the above mechanisms of immune action. Our technology allows the body to recognize tumor-associated or tumor-specific antigens as foreign, thus creating the immune response needed to attack the cancer. It does this by utilizing a number of biologic characteristics of the Listeria bacteria and Advaxis proprietary antigen-fusion protein technology to stimulate multiple therapeutic immune mechanisms simultaneously in an integrated and coordinated manner.

 

Mechanism of Action

 

 

Because Listeria is a live bacterium it stimulates the innate immune system, thereby priming the adaptive immune system to better respond to the specific antigens that the Listeria carries, which viruses and other vectors do not do. This is a non-specific stimulation of the overall immune system that results when certain classes of pathogens such as bacteria (but not viruses) are detected. It provides some level of immune protection and also serves to prime the elements of adaptive immunity to respond in a stronger way to the specific antigenic stimulus. Listeria stimulates a strong innate response which engenders a strong adaptive response.

 

Antigen Presenting Cells (APC) are the scavengers’ in the body that circulate looking for foreign invaders.  When they find one they ingest it, break it down, and provide the fragments as molecular targets for the immune system to attack.  In this way they are the cells that direct a specific immune response, and Listeria has the ability to infect them.

When Listeria enters the body, it is seen as foreign by the antigen processing cells and ingested into cellular compartments called phagolysosomes, whose destructive enzymes kill most of the bacteria. A certain percentage of these bacteria, however, are able to break out of the phagolysosomes and enter into the cytoplasm of the cell, where they are relatively safe from the immune system. The bacteria multiply in the cell, and the Listeria is able to move to its cell surface so it can push into neighboring cells and spread.

 

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Figs 1-7. When Listeria enters the body, it is seen as foreign by the antigen processing cells and ingested into cellular compartments called phagolysosomes, whose destructive enzymes kill most of the bacteria, fragments of which are then presented to the immune system via the exogenous pathway.

 

 

Figs 8-10 A certain percentage of bacteria are able to break out of the lysosomes and enter into the cytoplasm of the cell, where they are safe from lysosomal destruction. The bacteria multiply in the cell, and the Listeria is able to migrate into neighboring cells and spread without entering the extracellular space. Antigen produced by these bacteria enter the Class I pathway and directly stimulate a cytotoxic T cell response.

 

It is the details of Listeria intracellular activity that are important for understanding Advaxis technology. Inside the lysosome, Listeria produces listeriolysin-O (“LLO”), a protein that digests a hole in the membrane of the lysosome that allows the bacteria to escape into the cytoplasm. Once in the cytoplasm, however, LLO is also capable of digesting a hole in the outer cell membrane. This would destroy the host cell, and spill the bacteria back out into the intercellular space where it would be exposed to more immune cell attacks and destruction. To prevent this, the body has evolved a mechanism for recognizing enzymes with this capability based upon their amino acid sequence. The sequence of approximately 30 amino acids in LLO and similar molecules is called the PEST sequence (for the predominant amino acids it contains) and it is used by normal cells to force the termination of proteins that need only have a short life in the cytoplasm. This PEST sequence serves as a routing tag that tells the cells to route the LLO in the cytoplasm and to the proteosome for digestion, which terminates its action and provides fragments that then go to the endoplasmic reticulum, where it is processed just like a protein antigen in the endogenous pathway to generate MHC-1 complexes.

 

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This mechanism is used by Listeria to its benefit because the actions of LLO enable the bacteria to avoid digestion in the lysosome and escape to the cytosol where they can multiply and spread and then be neutralized so that it does not kill the host cell. Advaxis isusing a technology that co-opts this mechanism by creating a protein that is comprised of the cancer antigen fused to a non-hemolytic portion of the LLO molecule that contains the PEST sequence. This serves to route the molecule for accelerated proteolytic degradation which accelerates both the rate of antigen breakdown and the amount of antigen fragments available for incorporation in to MHC-1 complexes; thus increasing the stimulus to activate cytotoxic T cells against a tumor specific antigen.

 

 

Other mechanisms that Advaxis vaccines employ include Listeria ’s ability to increase the synthesis of myeloid cells such as Antigen Presenting Cells (“APC”) and T cells, and to stimulate the maturation of immature myeloid cells to increase the number of available activated immune cells that underlie a cancer killing response. Immature myeloid cells actually inhibit the immune system and Listeria removes this inhibition within the actual tumor. Also, Listeria and LLO both stimulate the synthesis, release, and expression of various chemicals which stimulate a therapeutic immune response. These chemicals are called cytokines, chemokines and co-stimulatory molecules. By doing this, not only are immune cells activated to kill cancers and clear them from the body, but local environments within tumors is created that support and facilitate a therapeutic response. Finally, in a manner that appears to be unique to Advaxis vaccines, our proprietary antigen-LLO fusion proteins, when delivered by Listeria do not stimulate cells caused regulatory T cells (“Tregs”) which are known to inhibit a therapeutic anticancer response. This does not occur when Listeria is engineered to deliver only a tumor specific antigen. The ability to reduce the effect of Tregs is currently under clinical investigation by other companies and is believed to be a significant mechanism of achieving a therapeutic response.

 

Dr. Yvonne Paterson

 

Dr. Paterson is a Professor in the Department of Microbiology at Penn and the inventor of our licensed technology. She has been an invited speaker at national and international health field conferences and leading academic institutions. She has served on many federal advisory boards, such as the NIH expert panel to review primate centers, the Office of AIDS Research Planning Fiscal Workshop, and the Allergy and Immunology NIH Study Section. She has written over 140 publications in immunology (including a recently published book) with emphasis during the last several years on the areas of HIV, AIDS and cancer research. Her instruction and mentorship has trained over 40 post-doctoral and doctoral students in the fields of Biochemistry and Immunology, many of whom are research leaders in academia and industry. She was recently elected a fellow of the American Association for the Advancement of Science.

 

Dr. Paterson is currently the principal investigator on grants from the federal government and charitable trusts totaling approximately $560,000 per year and the program director of training grants totaling approximately $1.8 million per year. Her research interests are broad, but her laboratory has been focused for the past ten years on developing novel approaches for prophylactic vaccines against infectious disease and immunotherapeutic approaches to cancer. The approach of the laboratory is based on a long-standing interest in the properties of proteins that render them immunogenic and how such immunogenicity may be modulated within the body.

 

Consulting Agreement. We entered into a renewed consulting agreement with Dr. Paterson on January 28, 2005 with an initial term expiring on January 31, 2006 with automatic renewals for up to six additional periods of six months each pursuant to which we have had access to Dr. Paterson’s consulting services for one full day per week. We are currently in our fourth renewal period. Dr. Paterson has advised us on an exclusive basis on various issues related to our technology, manufacturing issues, establishing our lab, knowledge transfer, and our long-term research and development program. Pursuant to the agreement, as of October 17, 2007, Dr. Paterson receives $7,000 per month. Upon the closing of an additional of $9 million in equity capital, Dr. Paterson’s rates shall increase to $9,000 per month. In addition, on February 1, 2005, Dr. Paterson received options to purchase 400,000 shares of our common stock at an exercise price of $0.287 per share with 40,000 fully vested when granted and the remaining 360,000 options vesting equally over 48 months; provided that Dr. Paterson remains a consultant over the four year period. She holds a total of 704,365 shares of Common Stock and options to purchase 569,048 shares of Common Stock of which 546,548 are options exercisable within 60 days of October 31, 2008.

 

Sponsored Research Agreement.

 

We entered into a sponsored research agreement on December 6, 2006 with Penn and Dr. Paterson under which we were obligated to pay $159,598 per year for a total period of 2 years covering the development of potential vaccine candidate based on our Listeria technology as well as other basic research projects. This Agreement was concluded on October 31, 2008.

 

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We intend to enter into additional sponsored research agreements with Penn in the future with respect to research and development on our product candidates.

 

We believe that Dr. Paterson’s continuing research will serve as a source of ongoing findings and data that both supports and strengthen the existing patents. Her work will expand the claims of the patent portfolio (potentially including adding claims for new tumor specific antigens, the utilization of new vectors to deliver antigens, and applying the technology to new disease conditions) and create the infrastructure for the future filing of new patents.

 

Dr. Paterson is also the chairman of our Scientific Advisory Board (“SAB”).

 

The Sage Group

 

On January 7, 2009 we signed an Agreement with The Sage Group (“Sage”) in a program to partner the Company’s vaccines. They do licensing deals and are based in New Jersey. Sage has worked with immunotherapies and believes in the Company’s promising vaccines. Their Agreement is for $5,000 per month starting in January through April 2009 and $10,000 per month from May 1 through February 2010 plus 5% of the deal, if completed in the first 24 months, 2 1/2% in the 12 months thereafter.

 

Dr. David Filer

 

On January 7 2005 we have entered a consulting agreement with Dr. David Filer, a biotech consultant. The Agreement provides that Dr, Filer   spend three days per month   assisting us with our development efforts, reviewing our scientific technical and business data and materials and introducing us to industry analysts, institutional investor collaborators and strategic partners. In consideration for the consulting services we pay Dr. Filer $2,000 per month. In addition, Dr. Filer received options to purchase 40,000 shares of common stock which are currently vested. As of October 1, 2007 we entered into a new two year agreement at a monthly fee of $5,000 including 1,500,000 $0.20 Warrants exercisable at $0.20 per warrant as consideration for his assistance in the raise on October 17, 2007 as well a his advisory services and assistance. This agreement is cancelable within 90 days notice.

 

Freemind Group LLC (“Freemind”)

 

We have entered into an agreement with Freemind to develop and manage our grant writing strategy and application program with Advaxis to pay Freemind according to a fee structure based on achievement of grants awarded to us at the rate of 6-7% of the grant amount. Advaxis will also pay Freemind fixed consulting fees based on the type of grants submitted, ranging from $5,000-7,000 depending on the type of application submitted. Freemind has extensive experience in accessing public financing opportunities, the national SBIR and related NIH/NCI programs. Freemind has assisted us in the past to file grant applications with NIH covering the use of ADX11-001 for cervical dysplasia. We have paid Freemind as of October 31, 2008, fees aggregating $29,500. We currently have no future plans to use this Group.

University of California

 

On March 14, 2004 we entered into a nonexclusive license and bailment agreement with the Regents of the University of California (“UCLA”) to commercially develop products using the XFL7 strain of Listeria monoctyogenes in humans and animals. The agreement is effective for a period of 15 years and is renewable by mutual consent of the parties. Advaxis paid UCLA an initial licensee fee and continues to pay annual maintenance fees for use of the Listeria. We may not sell products using the XFL7 strain Listeria other than agreed upon products or sublicense the rights granted under the license agreement without the prior written consent of UCLA.

 

Cobra Biomanufacturing PLC (“Cobra”)

 

In July 2003, we entered into an agreement with Cobra for the purpose of manufacturing our cervical cancer vaccine ADX11-001. Cobra has extensive experience in manufacturing gene therapy products for investigational studies. Cobra is a full service manufacturing organization that manufactures and supplies DNA-based therapeutics for the pharmaceutical and biotech industry. These services include the Good Manufacturing Practices (“GMP”) manufacturing of DNA, recombinant protein, viruses, mammalian cell products and cell banking. Cobra’s manufacturing plan for us involves several manufacturing stages, including process development, manufacturing of non-GMP material for toxicology studies and manufacturing of GMP material for the Phase I trial. The agreement to manufacture expired in December 2005 upon the delivery and completion of stability testing of the GMP material for the Phase I trial. Cobra has agreed to surrender the right to $300,000 of its existing fees for manufacturing in exchange for future royalties from the sales of ADX11-001 at the rate of 1.5% of net sales, with royalty payments not to exceed $1,950,000.

 

In November 2005, in order to secure production of ADXS11-001 on a long-term basis as well as other drug candidates which we are developing, we entered into a Strategic Collaboration and Long-Term Vaccine Supply Agreement for Listeria Cancer Vaccines, under which Cobra will manufacture experimental and commercial supplies of our Listeria cancer vaccines, beginning with ADXS11-001. This agreement leaves the existing agreement in place with respect to the studies contemplated therein, and supersedes a prior agreement and provides for mutual exclusivity, priority of supply, collaboration on regulatory issues, research and development of manufacturing processes that have already resulted in new intellectual property owned by Advaxis, and the long-term supply of live Listeria based vaccines on a discounted basis.

 

In October 20, 2007 we entered into a production agreement with Cobra to manufacture our Phase II clinical materials using a new methodology now required by the United Kingdom, and likely to be required by other regulatory bodies in the future. The contract is for £274,500 plus consumables and as of October 31, 2008 we have we have recorded $543,620 in full excluding consumables. In addition, we entered into a contract for £47,250 to fill the Listeria in vials and as of October 31, 2008, we have recorded $107,793 in full payment. We also have several other small contracts to cover, testing, stability and storage of our clinical supplies.

 

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LVEP Management, LLC (“LVEP”)

 

The Company entered into a consulting agreement with LVEP dated as of January 19, 2005, and amended on April 15, 2005, and October 31, 2005, pursuant to which Mr. Roni Appel served as Chief Executive Officer, Chief Financial Officer and Secretary of the Company and was compensated by consulting fees paid to LVEP. LVEP is owned by the estate of Scott Flamm (deceased January 2006) previously, one of our directors and a principal shareholder. Pursuant to an amendment dated December 15, 2006 (“effective date”) Mr. Appel resigned as President and Chief Executive Officer and Secretary of the Company on the effective date, but remains as a board member and consultant to the company until December 15, 2007. The term of the agreement as amended is 24 months from effective date. Mr. Appel will devote 50% of his time over the first 12 months of the consulting period to support the company. Also as a consultant, he will be paid at a rate of $22,500 per month in addition to benefits as provided to other company officers. He will receive severance payments over an additional 12 months at a rate of $10,416.67 per month and shall be reimbursed for family health care. All his stock options became fully vested on the effective date and are exercisable over the term. Also, Mr. Appel was issued 1,000,000 shares of our common stock on January 2, 2007. He received a $250,000 bonus with $100,000 paid on January 3, 2007 and the remainder was paid in October 2007.

 

On February 11, 2008 the Company and LVEP agreed to satisfy the balances of the LVEP Agreement with cash payments of $130,000 and $20,000 in the Company’s common stock (153,846 shares). The cash payment was made on February 12, 2008 and the shares were issued on April 4, 2008 and recorded at the market value of $14,615.

 

Pharm-Olam International Ltd. (“POI”)

 

In April 2005, we entered into a consulting agreement with POI, whereby POI is to execute and manage our Phase I clinical trial in ADXS11-001 for a fee of $430,000 plus reimbursement of certain expenses of $181,060. On December 13, 2006 we approved a change order reflecting the changes to the protocol the cost of which is estimated at $92,000 for a total contractual obligation of $522,000 excluding certain pass through expenses. On February 20, 2008, we approved change order 2 reflecting changes in the study for $175,000 in additional service fees for a total contractual service fee of $697,000. As of October 31, 2008 we have paid $440,650 toward the $697,000 portion of the agreement. In total the pass-through expenses ($119,346), patient cost ($135,272) and service fees totaled $951,618.

 

The Investor Relations Group, Inc (“IRG”)

 

We entered into an agreement with IRG whereby IRG is to serve as an investor relations and public relations consultant.  In consideration for performing its services, IRG was paid $10,000 per month plus out of pocket expenses, and 200,000 common shares. On December 1, 2008, we terminated this agreement.

 

Biologics Consulting Group, Inc. (“BCG”)

 

On June 1, 2006 we entered into an agreement with BCG and on June 11, 2007, we entered into an amendment No. 1 to provide biologics regulatory consulting services to the Company in support of the IND submission to the FDA. The tasks to be performed under this Agreement will be agreed to in advance by the Company and BCG. The term of the amendment No. 1 was from June 1, 2007 to June 1, 2008. This was a time and material agreement.

 

MediVector, Inc. (“MI”)

 

In May 2007 we entered into a Master Service Agreement with MI covering three projects to serve in clinical study planning, management and execution for our upcoming Phase II clinical study.   We paid MI $71,000 for its services. In early 2008 we terminated all agreements.

PATENTS AND LICENSES

 

Dr. Paterson and Penn have invested significant resources and time in developing a broad base of intellectual property around the cancer vaccine platform technology to which on July 1, 2002 (effective date) we entered into a 20-year exclusive worldwide license and a right to grant sublicenses pursuant to our license agreement with Penn. Penn currently has 12 issued and 67 pending patents in the United States and other countries including Japan, Canada, Israel, Australia, and the European Union, through the Patent Cooperation Treaty (PCT) system pursuant to which we have an exclusive license to exploit the patents. We believe that these patents will allow us to take a lead in the United States in the field of Listeria -based therapy.

 

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	Patents
	U.S. Patent No. 6,051,237, issued April 18, 2000. Patent Application No. 08/336,372, filed November 8, 1994 for “Specific Immunotherapy of Cancer Using a Live Recombinant Bacterial Vaccine Vector.” Expires April 18, 2017.
	U.S. Patent No. 6,565,852, issued May 20, 2003, Paterson, et al., CIP Patent Application No. 09/535,212, filed March 27, 2000 for “Specific Immunotherapy of Cancer Using a Live Recombinant Bacterial Vaccine Vector.” Expires November 8, 2014.
	U.S. Patent No. 6,099,848, issued August 8, 2000, Frankel et al., Patent Application No. 08/972,902 “Immunogenic Compositions Comprising DAL/DAT Double-Mutant, Auxotrophic, Attenuated Strains of Listeria and Their Methods of Use.” Filed November 18, 1997. Expires November 18, 2017.
	U.S. Patent No. 6,504,020, issued January 7, 2003, Frankel et al. Divisional Application No. 09/520,207 “Isolated Nucleic Acids Comprising Listeria DAL And DAT Genes”. Filed March 7, 2000, Expires November 18, 2017.
	U.S. Patent No. 6,635,749, issued October 21, 2003, Frankel, et al. Divisional U.S. Patent Application No. 10/136,253 for “Isolated Nucleic Acids Comprising Listeria DAL and DAT Genes.” Filed May 1, 2002, Expires November 18, 2017.
	U.S. Patent No. 5,830,702, issued November 3, 1998, Portnoy, et al. Patent Application No. 08/366,477, filed December 30, 1994 for “Live, Recombinant Listeria SSP Vaccines and Productions of Cytotoxic T Cell Response” Expires November 3, 2015.
	US Patent No. 6,767,542 issued July 27, 2004, Paterson, et al. Patent Application No. 09/735,450 for “Compositions and Methods for Enhancing Immunogenicity of Antigens.” Filed December 13, 2000. Expires March 29, 2020.
	US Patent No. 6,855,320 issued February 15, 2005, Paterson. Patent Application No. 09/537,642 for “Fusion of Non-Hemolytic, Truncated Form of Listeriolysin o to Antigens to Enhance Immunogenicity.” Filed March 29, 2000. Expires March 29, 2020.
	US Patent No. 7,135,188 issued November 14, 2006, Paterson, Patent Application No. 10/441,851 for “Methods and compositions for immunotherapy of cancer.” Filed May 20, 2003. Expires November 8, 2014.

 

Patent Applications

 

	U.S. Patent Application No. 10/239,703 for “Compositions and Methods for Enhancing Immunogenicity of Antigens.” Filed September 24, 2002, Paterson, et al.
	U.S. Patent Application No. 10/835,662, “Compositions and methods for enhancing the immunogenicity of antigens,” Filed April 30, 2004, Paterson et al
	U.S. Patent Application No. 20060135457 Methods for constructing antibiotic resistance free bacterial vaccines.Filed June 22, 2006
	U.S. Patent Application No. 10/949,667, “Methods and Compositions for Immunotherapy of Cancer,” Filed September 24, 2004, Paterson et al.
	U.S. Patent Application No. 11/223,945, “Listeria-based and LLO-based Vaccines,” Filed September 13, 2005, Paterson et al.
	U.S. Patent Application No. 11/727,889, “Compositions and Methods Comprising a MAGE-B Antigen” Filed March 28, 2007, Gravekamp, Paterson, Maciag.
	U.S. Patent Application No. PCT/US08/06048. for “Compositions and Methods Comprising KLK3, PSCA, FOLH1 Antigen”. Filed May 12, 2008, Paterson et al
	U.S. Patent Application No. 11/798,177 “Compositions and Methods Comprising KLK3 or FOLH1 Antigen” Filed May, 10, 2007. Paterson et al.
	U.S. Patent Application No. 11/376,564, “Compositions and Methods for Enhancing the Immunogenicity of Antigens,” Filed March 16, 2006, Paterson et al.
	U.S. Patent Application No. 11/376,572, “Compositions and Methods for Enhancing the Immunogenicity of Antigens,” Filed March 16, 2006, Paterson et al.
	U.S. Patent Application No. 11/373,528, “Compositions and Methods for Enhancing Immunogenicity of Antigens, “Filed March 13, 2006, Paterson et al.

 

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	U.S. Patent Application No. 11/415,271, “Methods and Compositions for Treatment of Non-Hodgkin’s Lymphoma, “ Filed May 2, 2006, Paterson et al.
	U.S. Patent Application No. 10/541,614 for “Enhancing the Immunogenicity of Bioengineered Listeria Monocytogenes by Passing through Live Animal Hosts.” Filed January 8, 2004.
	U.S. Patent Application No. 12/213,696 for “Non-Hemolytic LLO Fusion Proteins and Methods of Utilizing same.” Filed June 23, 2008, Paterson et al.
	U.S. Patent Application No. 11/715,497 for “Compositions and Methods for Treatment of Cervical Cancer.” Filed March 8, 2007, Paterson et al.
	U.S. Patent Application No. 11/203,408 for “Methods for Constructing Anitbiotic Resistance Free Vaccines.” Filed August 15, 2005. Paterson et al.
	U.S. Patent Application No. 11/203,415 for “Methods for Constructing Anitbiotic Resistance Free Vaccines.” Filed August 15, 2005. Paterson et al.
	U.S. Patent Application No.  2005/0048081 for “Immunogenic Compositions Comprising DAL/DAT Double Mutant,Auxotrophoic Attenuated Strains of Listeria and their Methods of Use”, Filed September 11, 2003
	U.S. Patent Application No. 12/216,806 for “Immunogenic Compositions Comprising DAL/DAT Double Mutant, Auxotrophoic Attenuated Strains of Listeria and their Methods of Use”, Filed July 10, 2008, Frankel et al.
	U.S. Application No. 11/785,249 for “Antibiotic Resistance Free Vaccines and Methods for Constructing and Using Same”, Filed April 16, 2007, Paterson et al.
	U.S. Application No. 11/818,965 for “Antibiotic Resistance Free Listeria Strains and Methods for Constructing and Using Same”, Filed April 27, 2007, Paterson et al.
	U.S. Application No. 12/084,829 for “LLO-Encoding DNA/Nucleic Acid Vaccines and Methods Comprising Same”, Filed May 12, 2008, Paterson et al.
	U.S. Application No. 12/084,969 for “Methods for Producing, Growing, and Preserving Listeria Vaccine Vectors”, Filed May 14, 2008, Paterson et al.
	U.S. Application No. 11/882,782 for “Methods and Compositions for Treating IGE-Mediated Diseases”, Filed August 6, 2007, Paterson et al.
	U.S. Application No. 11/822,870 for “Methods for Administering Tumor Vaccines”, Filed July 10, 2007, Paterson et al.
	U.S. Application No. 11/889,715 for “Compositions Comprising HMW-MAA and Fragments Thereof, and Methods of Use Thereof”, Filed August 15, 2007, Paterson et al.
	U.S. Application No. 61/071,792 for “Dual Delivery System for Heterologous Antigens”, Filed May 19, 2008, Maciag et al.
	U.S. Application No. 12/244,828 for “Compositions Comprising HMW-MAA and Fragments Thereof, and Methods of Use Thereof, Filed October 3, 2008, Paterson et al.

International

 

	Patents
	Australian Patent No. 730296, Patent Application No. 14108/99 for “Bacterial Vaccines Comprising Auxotrophic, Attenuated Strains of Listeria Expressing Heterologous Antigens.” Issued November 13, 1998, Frankel, et al. Expires November 13, 2018.
	Canadian Patent Application No. 2,309,790 for “Bacterial Vaccines Comprising Auxotrophic, Attenuated Strains of Listeria Expressing Heterologous Antigens.” Filed May 18, 2000, Frankel, et al. Issued January 9, 2007.
	Japanese Patent Application No. 515534/96, filed November 3, 1995 for “Specific Immunotherapy of Cancer Using a Live Recombinant Bacterial Vaccine Vector”, Paterson, et al. Issued August 10, 2007

 

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	Patent Applications
	Canadian Patent Application No. 2,404,164 for “Compositions and Methods for Enhancing Immunogenicity of Antigens.” Filed March 26, 2001, Paterson, et al.
	European Patent Application No. 1928324.1 for “Compositions and Methods for Enhancing Immunogenicity of Antigens.” Filed March 26, 2001, Paterson, et al.
	European Patent Application No. 98957980.0 for “Bacterial Vaccines Comprising Auxotrophic, Attenuated Strains of Listeria Expressing Heterologous Antigens.” Filed November 13, 1998, Frankel, et al.
	Israel Patent Application No. 151942 for “Compositions and Methods for Enhancing Immunogenicity of Antigens.” Filed March 26, 2001, Paterson, et al.
	Japanese Patent Application No. 2001-570290 for “Compositions and Methods for Enhancing Immunogenicity of Antigens.” Filed March 26, 2001, Paterson, et al.
	Canadian Patent Application No. PCT 2,581,331 for Listeria-Based and LLO Based Vaccines.” Filed September 14, 2005, Paterson et al.
	PCT International Patent Application No. PCT/US07/18091 for “Compositions Comprising HMW-MAA and Fragments Thereof, and Methods of Use Thereof.” Filed August 15, 2007, Paterson et al.
	European Patent Application No. 5811815.9 for “Listeria-Based and LLO-Based Vaccines.” Filed September 14, 2005, Paterson et al.
	Japanese Patent Application No. 2007-533537 for “Listeria-Based and LLO-Based Vaccines.” Filed September 14, 2005, Paterson et al.
	Australian Patent Application No. 20044204751 for “Enhancing the Immunogenicity of Bioengineered Listeria Monocytogenes by Passing through Live Animal Hosts.” Filed January 8, 2004.
	Canadian Patent Application No. 2,512,812 for “Enhancing the Immunogenicity of Bioengineered Listeria Monocytogenes by Passing through Live Animal Hosts.” Filed January 8, 2004
	European Patent Application No. EP04700858.6 for “Compositions, Methods and Kits for Enhancing the Immunogenicity of a Bacterial Vaccine Vector.” Filed
	Hong Kong Patent Application No. 06104227.1 for “Compositions, Methods and Kits for the Enhancing the Immunogenicity of  a Bacterial Vaccine Vector.” Filed January 8, 2004
	Israeli Patent Application No. 169553 for “Enhancing the Immunogenicity of Bioengineered Listeria Monocytogenes by Passing through Live Animal Hosts.” Filed January 8, 2004
	Japanese Patent Application No. 2006-500840 for “Enhancing the Immunogenicity of Bioengineered Listeria Monocytogenes by Passing through Live Animal Hosts.” Filed January 8, 2004
	Australian Patent No. 2005271247 for “Antibiotic Resistance Free DNA Vaccines.” Filed August 15, 2005, Paterson et al.
	Canadian Patent Application No. 2577270 for “Antibiotic Resistance Free DNA Vaccines.” Filed August 15, 2005, Paterson et al.
	European Patent Application No. 5810446.4 for “Antibiotic Resistance Free DNA Vaccines.” Filed August 15, 2005, Paterson et al.
	Japanese Patent Application No. 2007-525862 for “Antibiotic Resistance Free DNA Vaccines.” Filed August 15, 2005, Paterson et al.
	Australian Patent Application No. 2005271246 for “Methods for Constructing Antibiotic Resistance Free Vaccines.” Filed August 15, 2005. Paterson et al.
	Canadian Patent Application No. 2,577,306 for “Methods for Constructing Antibiotic Resistance Free Vaccines.” Filed August 15, 2005. Paterson et al.

 

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	European Patent Application No. EP05808671.1 for “Methods for Constructing Antibiotic Resistance Free Vaccines.” Filed August 15, 2005. Paterson et al.
	PCT International. Patent Application No. PCT/US07/10635 for “Compositions and Methods for Treatment of Non-Hodgkins Lymphoma.” Filed May 2, 2007, Paterson et al.
	PCT International Patent Application No. PCT/US08/03067 for “Compositions and Methods for Treatment of Cervical Cancer.” Filed March 7, 2008, Paterson et al.
	Canadian Patent Application No. 2204666 for “Specific Immunotherapy of Cancer using a live Recombinant Bacterial Vaccine Vector”, Filed November 3, 1995, Paterson
	Japanese Patent Application No. 2007-125462 for “Specific Immunotherapy of Cancer using a Live Recombinant Bacterial Vaccine Vector”, Filed May 10, 2007, Paterson.
	Australian Patent Application No. 2005289957 for “Listeria-based and LLO-based Vaccines”, Filed September 14, 2005, Paterson et al
	Japanese Patent Application No. 2007-525861 for “Methods for Constructing Antibiotic Resistance Free Vaccines”, Filed August 15, 2005, Paterson et al.
	PCT International Application No. PCT/US08/04861 for “Antibiotic Resistance Free Listeria Strains and Methods for Constructing and Using Same”, Filed April 15, 2008, Paterson et al.
	PCT International Application No. PCT/US07/17479 for “Methods and Compositions for Treating IGE-Mediated Diseases”, Filed August 6, 2007, Paterson et al.
	PCT International Application No. PCT/US07/15686 for “Methods for Administering Tumor Vaccines”, Filed July 10, 2007, Paterson et al.
	European International Application No. 95939926.2 for “Specific Immunotherapy lf Cancer Using a Live Recombinant Bacterial Vaccine Vector, Filed November 3, 1995. Paterson
	Belgium Application No. 95939926.2 for “Specific Immunotherapy lf Cancer Using a Live Recombinant Bacterial Vaccine Vector, Filed November 3, 1995. Paterson
	Switzerland Application No. 95939926.2 for “Specific Immunotherapy lf Cancer Using a Live Recombinant Bacterial Vaccine Vector, Filed November 3, 1995. Paterson
	Germany Application No. 95939926.2 for “Specific Immunotherapy lf Cancer Using a Live Recombinant Bacterial Vaccine Vector, Filed November 3, 1995. Paterson
	France Application No. 95939926.2 for “Specific Immunotherapy lf Cancer Using a Live Recombinant Bacterial Vaccine Vector, Filed November 3, 1995. Paterson
	United Kingdom Application No. 95939926.2 for “Specific Immunotherapy lf Cancer Using a Live Recombinant Bacterial Vaccine Vector, Filed November 3, 1995. Paterson
	Ireland No. 95939926.2 for “Specific Immunotherapy lf Cancer Using a Live Recombinant Bacterial Vaccine Vector, Filed November 3, 1995. Paterson
	Lithuania No. 95939926.2 for “Specific Immunotherapy lf Cancer Using a Live Recombinant Bacterial Vaccine Vector, Filed November 3, 1995. Paterson
	Sweden No. 95939926.2 for “Specific Immunotherapy lf Cancer Using a Live Recombinant Bacterial Vaccine Vector, Filed November 3, 1995. Paterson

 

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United States

 

In 2001, an issue arose regarding the inventorship of U.S. Patent 6,565,852 and U.S. Patent Application No. 09/537,642. These patent rights are included in the patent rights licensed by Advaxis from Penn. It is contemplated by GlaxoSmithKline plc (“GSK”), Penn and us that the issue will be resolved through:  (1) a correction of inventorship to add certain GSK inventors, (2) where necessary and appropriate, an assignment of GSK’s possible rights under these patent rights to Penn, and (3) a sublicense from us to GSK of certain subject matter, which is not central to our business plan. To date, this arrangement has not been finalized and we cannot assure that this issue will ultimately be resolved in the manner described above. 

Pursuant to our license with Penn, we have an option to license from Penn any new future invention conceived by either Dr. Yvonne Paterson or by Dr. Fred Frankel in the vaccine area until June 17, 2009. We intend to expand our intellectual property base by exercising this option and gaining access to future inventions. Further, our consulting agreement with Dr. Paterson provides, among other things, that, to the extent that Dr. Paterson’s consulting work results in new inventions, such inventions will be assigned to Penn, and we will have access to those inventions under license agreements to be negotiated. See “Item 1. Description of Business -Partnerships and agreements -Penn.”

 

Our approach to the intellectual property portfolio is to create significant offensive and defensive patent protection for every product and technology platform that we develop. We work closely with our patent counsel to maintain a coherent and aggressive strategic approach to building our patent portfolio with an emphasis in the field of cancer vaccines.

 

We are aware of a private company, Anza Therapeutics Inc (“Anza”) (formerly Cerus Corporation), which has also been developing Listeria vaccines. We believe that through our exclusive license with Penn we have earliest known and dominant patent position in the U S for the use of recombinant Listeria monocytogenes expressing proteins or tumor antigens as a vaccine for the treatment of infectious diseases and tumors. We contested a challenge made by Anza to our patent position in Europe on a claim not available in the US that would limit Anza’s ability to conduct business in Europe but not materially affect Advaxis irrespective of the outcome. The EPO Board of Appeals in Munich, Germany has ruled in favor of The Trustees of the University of Pennsylvania and its exclusive licensee Advaxis Inc. and set aside a patent ruling that prevented the issuance of an approved technology patent as a result of an opposition filed by Anza. The ruling of the EPO Board of Appeal is final and can not be appealed. The granted claims, the subject matter of which was discovered by Dr. Yvonne Paterson, scientific founder of Advaxis, are directed to the use of recombinant bacteria expressing a tumor antigens for treatment of patients with cancer.

Based on searches of publicly available databases, we do not believe that Anza Therapeutics or any other third party owns any published Listeria patents or has any issued patent claims that might materially negatively affect our freedom to operate our business as currently contemplated in the field of recombinant Listeria monocytogenes.  Additionally, our proprietary position that is based on 12 issued patents and over 67 additional applications restricts anyone from using plasmid based Listeria constructs, or those that are bioengineered to deliver antigens fused to LLO or fragments of LLO.

Cerus has filed an opposition against European Patent Application Number 0790835 (EP 835 Patent) which was granted by the European Patent Office and which is assigned to The Trustees of the University of Pennsylvania and exclusively licensed to us. Cerus’ allegations in the Opposition are that the EP 835 Patent, which claims a vaccine for inducing a tumor specific antigen with a recombinant live Listeria, is deficient because of (i) insufficient disclosure in the specifications of the granted claims, (ii) the inclusion of additional subject matter in the granted claims, and (iii) a lack of inventive steps of the granted claims of the EP 835 Patent.

 

On November 29, 2006, following oral proceedings, the Opposition Division of the EPO determined that the claims of the patent as granted should be revoked due to lack of inventive step under EPO rules based on certain prior art publications.  We reviewed the formal written decision and filed an appeal on May 29, 2007.  On January 13, 2009 the EPO Board of Appeals in Munich, Germany ruled in favor of The Trustees of Penn and its exclusive licensee Advaxis Inc. and reversed a patent revocation that had resulted from an opposition filed by Anza. While this patent does not affect the manner in which Advaxis makes or uses its cancer vaccine products however by Anza’s failure to prevail precludes them from using certain methodologies they require in their anti-infective vaccines under development.

 

As of November 20, 2007, Cerus spun its immunotherapy/Listeria development effort off into a separate, privately financed company Anza Therapeutics, Inc. For more information about Anza Therapeutics, Inc. and its claims with respect to Listeria-based technology, you should visit their web site at www.anzatheraputics.com or to view Cerus’ publicly filed documents prior to November 20, 2007.

 

On January 7, 2009 the Company made the decision to discontinue its use of the Trademark Lovaxin and write-off of its intangible assets for trademarks resulting in an asset impairment of $91,453 as of October 31, 2008. The Company is currently developing a low cost and more classic coding system for our constructs. The rationale for this decision stemmed from several legal challenges to the Lovaxin name over the last two years and 21CFR rules not permitting companies to use names that are assigned to drugs in development after marketing approval. We will therefore focus company resources on product development and not the defense the Lovaxin name.

 

Governmental Regulation

 

The Drug Development Process

 

The FDA requires that pharmaceutical and certain other therapeutic products undergo significant clinical experimentation and clinical testing prior to their marketing or introduction to the general public. Clinical testing, known as clinical trials or clinical studies, is either conducted internally by pharmaceutical or biotechnology companies or is conducted on behalf of these companies by contract research organizations.

 

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The process of conducting clinical studies is highly regulated by the FDA, as well as by other governmental and professional bodies. Below, we describe the principal framework in which clinical studies are conducted, as well as describe a number of the parties involved in these studies.

 

Protocols. Before commencing human clinical studies, the sponsor of a new drug must typically receive governmental and institutional approval. In the US, Federal approval is obtained by submitting an investigational new drug application, or IND, to the FDA. The application contains what is known in the industry as a protocol. A protocol is the blueprint for each drug study. The protocol sets forth, among other things, the following:

·

Who must be recruited as qualified participants;

·

how often, and how to administer the drug;

·

what tests to perform on the participants; and

·

what dosage of the drug to give to the participants.

 

Institutional Review Board (Ethics Committee). An institutional review board is an independent committee of professionals and lay persons which reviews clinical research studies involving human beings and is required to adhere to guidelines issued by the FDA. The institutional review board does not report to the FDA, but its records are audited by the FDA. Its members are not appointed by the FDA. All clinical studies must be approved by an institutional review board. The institutional review board is convened by the institution where the protocol will be conducted and its role is to protect the rights of the participants in the clinical studies. It must approve the protocols to be used, and then oversees the conduct of the study, including: the communications which the company or contract research organization conducting the study at that specific site proposes to use to recruit participants, and the form of consent which the participants will be required to sign prior to their participation in the clinical studies.

 

Clinical Trials. Human clinical studies or testing of a potential product prior to Federal approval are generally done in three stages known as Phase I through Phase III testing. The names of the phases are derived from the CFR 21 that regulates the FDA. Generally, there are multiple studies conducted in each phase.

 

Phase I. Phase I studies involve testing a drug or product on a limited number of healthy participants, typically 24 to 100 people at a time. Phase I studies determine a drug’s basic safety and how the drug is absorbed by, and eliminated from, the body. This phase lasts an average of six months to a year. Cancer drugs, however, are a special case, as they are not given to normal healthy people. Typically, cancer therapeutics are initially tested on very late stage cancer patients.

 

Phase II. Phase II trials involve testing up to 200 participants at a time who may suffer from the targeted disease or condition. Phase II testing typically lasts an average of one to three years. In Phase II, the drug is tested to determine its safety and effectiveness for treating a specific illness or condition. Phase II testing also involves determining acceptable dosage levels of the drug. If Phase II studies show that a new drug has an acceptable range of safety risks and probable effectiveness, a company will continue to review the substance in Phase III studies. It is during phase II that everything that goes into a phase III test is determined.

 

Phase III. Phase III studies involve testing large numbers of participants, typically several hundred to several thousand persons. The purpose is to verify effectiveness and long-term safety on a large scale. These studies generally last two to six years. Phase III studies are conducted at multiple locations or sites. Like the other phases, Phase III requires the site to keep detailed records of data collected and procedures performed.

 

 

The drug approval process is time-consuming, involves substantial expenditures of resources, and depends upon a number of factors, including the severity of the illness in question, the availability of alternative treatments, and the risks and benefits demonstrated in the clinical trials.

 

On November 21, 1997, former President Clinton signed into law the FDA Modernization Act. That act codified the FDA’s policy of granting “Fast Track” approval for cancer therapies and other therapies intended to treat serious or life threatening diseases and that demonstrate the potential to address unmet medical needs. The Fast Track program emphasizes close, early communications between FDA and the sponsor to improve the efficiency of preclinical and clinical development, and to reach agreement on the design of the major clinical efficacy studies that will be needed to support approval. Under the Fast Track program, a sponsor also has the option to submit and receive review of parts of the NDA or BLA on a rolling schedule approved by FDA, which expedites the review process.

 

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The FDA’s Guidelines for Industry Fast Track Development Programs require that a clinical development program must continue to meet the criteria for Fast Track designation for an application to be reviewed under the Fast Track Program. Previously, the FDA approved cancer therapies primarily based on patient survival rates or data on improved quality of life. While the FDA could consider evidence of partial tumor shrinkage, which is often part of the data relied on for approval, such information alone was usually insufficient to warrant approval of a cancer therapy, except in limited situations. Under the FDA’s new policy, which became effective on February 19, 1998, Fast Track designation ordinarily allows a product to be considered for accelerated approval through the use of surrogate endpoints to demonstrate effectiveness. As a result of these provisions, the FDA has broadened authority to consider evidence of partial tumor shrinkage or other surrogate endpoints of clinical benefit for approval. This new policy is intended to facilitate the study of cancer therapies and shorten the total time for marketing approvals. Under accelerated approval, the manufacturer must continue with the clinical testing of the product after marketing approval to validate that the surrogate endpoint did predict meaningful clinical benefit. To the extent applicable we intend to take advantage of the Fast Track programs to obtain accelerated approval on our future products; however, it is too early to tell what effect, if any, these provisions may have on the approval of our product candidates.

 

Other Regulations

 

Various Federal and state laws, regulations, and recommendations relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase, storage, movements, import, export, use, and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, are used in connection with our research or applicable to our activities. They include, among others, the US Atomic Energy Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control Act, and Resources Conservation and Recovery Act, national restrictions on technology transfer, import, export, and customs regulations, and other present and possible future local, state, or federal regulation. The extent of governmental regulation which might result from future legislation or administrative action cannot be accurately predicted.

There is a series of international harmonization treaties, known as the ICH treaties that enable drug development to be conducted on an international basis.  These treaties specify the manner in which clinical trials are to be conducted, and if trials adhere to the specified requirements, then they are accepted by the regulatory bodies of in the signatory countries.  In this way the Advaxis phase I study conducted outside of the US was accepted by the FDA.

Manufacturing

 

The FDA requires that any drug or formulation to be tested in humans be manufactured in accordance with its GMP regulations. This has been extended to include any drug which will be tested for safety in animals in support of human testing. The GMPs set certain minimum requirements for procedures, record-keeping, and the physical characteristics of the laboratories used in the production of these drugs.

 

We have entered into a Long Term Vaccine Supply Agreement with Cobra for the purpose of manufacturing our vaccines. Cobra has extensive experience in manufacturing gene therapy products for investigational studies. Cobra is a full service manufacturing organization that manufactures and supplies DNA-based therapeutics for the pharmaceutical and biotech industry. These services include the GMP manufacturing of DNA, recombinant protein, viruses, mammalian cells products and cell banking. Cobra’s manufacturing plan for us calls for several manufacturing stages, including process development, manufacturing of non-GMP material for toxicology studies and manufacturing of GMP material for the Phase I and Phase II trials.

We have entered into a GMP compliant filing of ADXS11-001 agreement with Vibalogics GmbH, Zeppelinstr. 2, 27472 Cuxhaven, Germany to fill up to 5,000 vials of our clinical supplies. This agreement was for €84,800 and is near completion in preparation for our Phase II CIN trial.

Competition

 

The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. As a result, our actual or proposed products could become obsolete before we recoup any portion of our related research and development and commercialization expenses. The biotechnology and biopharmaceutical industries are highly competitive, and this competition comes from both from biotechnology firms and from major pharmaceutical and chemical companies, including Antigenics, Inc., Anza Theraputics, Inc., Avi BioPharma, Inc., Biomira, Inc., Cellgenesis Inc., Biovest International, Cell Genesys, Inc., Dendreon Corporation, Pharmexa-Epimmune, Inc., Genzyme Corp., Progenics Pharmaceuticals, Inc., and Vical Incorporated each of which is pursuing cancer vaccines. Many of these companies have substantially greater financial, marketing, and human resources than we do (including, in some cases, substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). We also experience competition in the development of our products from universities and other research institutions and compete with others in acquiring technology from such universities and institutions. In addition, certain of our products may be subject to competition from products developed using other technologies, some of which have completed numerous clinical trials.

 

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We expect that our products under development and in clinical trials will address major markets within the cancer sector. Our competition will be determined in part by the potential indications for which drugs are developed and ultimately approved by regulatory authorities. Additionally, the timing of market introduction of some of our potential products or of competitors’ products may be an important competitive factor. Accordingly, the relative speed with which we can develop products, complete preclinical testing, clinical trials and approval processes and supply commercial quantities to market are expected to be important competitive factors. We expect that competition among products approved for sale will be based on various factors, including product efficacy, safety, reliability, availability, price and patent position. See “Item 1. Description of Business - Research and Development Programs” and “Item 1. Description of Business - Competition”.

 

We are aware of a private company, Anza (formerly Cerus Corporation), which has also been developing Listeria vaccines. We believe that through our exclusive license with Penn we have earliest known and dominant patent position in the US for the use of recombinant Listeria monocytogenes expressing proteins or tumor antigens as a vaccine for the treatment of infectious diseases and tumors. We contested a challenge made by Anza to our patent position in Europe on a claim not available in the US that would limit Anza’s ability to conduct business in Europe but not materially affect Advaxis irrespective of the outcome. The EPO Board of Appeals in Munich, Germany has ruled in favor of The Trustees of the University of Pennsylvania and its exclusive licensee Advaxis Inc. and reversed a patent ruling that revoked a technology patent that had resulted from an opposition filed by Anza. The ruling of the EPO Board of Appeal is final and can not be appealed. The granted claims, the subject matter of which was discovered by Dr. Yvonne Paterson, scientific founder of Advaxis, are directed to the method of creation and composition of matter of recombinant bacteria expressing a tumor antigens for treatment of patients with cancer. Based on searches of publicly available databases, we do not believe that Anza Therapeutics or any other third party owns any published Listeria patents or has any issued patent claims that might materially negatively affect our freedom to operate our business as currently contemplated in the field of recombinant Listeria monocytogenes.  Additionally, our proprietary position that is based on 12 issued patents and over 67 additional applications restricts anyone from using plasmid based Listeria constructs, or those that are bioengineered to deliver antigens fused to LLO or fragments of LLO.

Merck has developed the drug Gardasil and GSK has developed the drug Cervarix which can prevent cervical cancer by vaccinating women against the virus HPV, the cause of the disease.  Gardasil is directed against four HPV species while Cervarix is directed against two.  Neither of these agents works in women who have a prior exposure to the HPV strains that they prophylax against, nor are women protected from other strains of HPV that the drugs do not treat.  It has been written that these are cancer vaccines, which is not true.  They are anti-virus vaccines intended to prophylax against strains of the HPV virus.

 

The presence of these agents in the market does not eliminate the market for a therapeutic vaccine directed against invasive cervical cancer and cervical intraepithelial neoplasia for a number of reasons:

 

·

HPV is the most common sexually treated disease in the US, and since prior exposure to the virus renders these anti-viral agents ineffective they tend to be limited to younger women and do not offer protection for women who are already infected.  This is estimated to be as much as (or more than) 25% of the female population of the US.

 

·

There are believed to be approximately 10 high risk species of HPV, but these agents only protect against the most common 2-4 strains.  If a woman contracts a high risk HPV species that is not one of those the drugs won’t work.

 

·

Women with HPV are typically infected for over 20 years or more before they manifest cervical cancer.  Thus, the true prophylactic effect of these agents can only be inferred at this time.  There currently exists a significant population of young woman who have not received these agents, or for whom they will not work, and who will manifest HPV related cervical disease for the next 40+ years.

 

·

With the exception of the campaign to eradicate polio in which vaccination was mandatory for all school age children, vaccination is a difficult model to accomplish because it is virtually impossible to treat everyone in any given country, much less the entire world.  This is especially true for cervical cancer as the incentive for men to be vaccinated is small, and infected men keep the pathogen circulating in the population.

 

Taken together, experts believe that there will be a cervical cancer and CIN market for the foreseeable future.

 

Scientific Advisory Board (“SAB”)

 

We maintain a SAB consisting of internationally recognized scientists who advise us on scientific and technical aspects of our business. The SAB meets on an as needed basis to review specific projects and to assess the value of new technologies and developments to us. In addition, individual members of the scientific advisory board meet with us periodically to provide advice in particular areas of expertise. The scientific advisory board consists of the following members, information with respect to whom is set forth below: Yvonne Paterson, Ph.D.; Carl June, M.D.; Pramod Srivastava, Ph.D.; Bennett Lorber, M.D. David Weiner, Ph.D. and Mark Einstein, MD

 

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Dr. Yvonne Paterson. For a description of our relationship with Dr. Paterson, please see “Partnerships and Agreements-Dr. Yvonne Paterson

 

Carl June, M.D. Dr. June is currently Facility Director, Human Immunology Center and Professor, Pathology and Laboratory Medicine Translational Research at the Abramson Cancer Center at Penn, and previously a Director of Translational Research at the Center and Investigator of the Abramson Family Cancer Research Institute. He is a graduate of the Naval Academy in Annapolis, and Baylor College of Medicine in Houston. He had graduate training in immunology and malaria with Dr. Paul-Henri Lambert at the World Health Organization, Geneva, Switzerland from 1978 to 1979, and post-doctoral training in transplantation biology with Dr. E. Donnell Thomas at the Fred Hutchinson Cancer Research Center in Seattle from 1983 to 1986. He is board certified in Internal Medicine and Medical Oncology. Dr. June founded the Immune Cell Biology Program and was head of the Department of Immunology at the Naval Medical Research Institute from 1990 to 1995. Dr. June rose to Professor in the Departments of Medicine and Cell and Molecular Biology at the Uniformed Services University for the Health Sciences in Bethesda, Maryland before assuming his current positions as of February 1, 1999. Dr. June maintains a research laboratory that studies various mechanisms of lymphocyte activation that relate to immune tolerance and adoptive immunotherapy.

 

Pramod Srivastava, Ph.D. Dr. Srivastava is Professor of Immunology at the University of Connecticut School of Medicine, where he is also Director of the Center for Immunotherapy of Cancer and Infectious Diseases. He holds the Physicians Health Services Chair in Cancer Immunology at the University. Professor Srivastava is the Scientific Founder of Antigenics, Inc. He serves on the Scientific Advisory Council of the Cancer Research Institute, New York, and was a member of the Experimental Immunology Study Section of the National Institutes of Health of the U.S. Government (1994 to 1999). He serves presently on the Board of Directors of two privately held companies: Ikonisys (New Haven, Connecticut) and CambriaTech (Lugano, Switzerland). In 1997, he was inducted into the Roll of Honor of the International Union Against Cancer and was listed in Who’s Who in Science and Engineering. He is among the 20 founding members of the Academy of Cancer Immunology, New York. Dr. Srivastava obtained his bachelor’s degree in biology and chemistry and a master’s degree in botany (paleontology) from the University of Allahabad, India. He then studied yeast genetics at Osaka University, Japan. He completed his Ph.D. in biochemistry at the Center for Cellular and Molecular Biology, Hyderabad, India, where he began his work on tumor immunity, including identification of the first proteins that can mediate tumor rejection. He trained at Yale University and Sloan-Kettering Institute for Cancer Research. Dr. Srivastava has held faculty positions at the Mount Sinai School of Medicine and Fordham University in New York City.

 

Bennett Lorber, M.D. Dr. Lorber attended Swarthmore College where he studied zoology and art history. He graduated from the University of Pennsylvania School of Medicine and did his residency in internal medicine and fellowship in infectious diseases at Temple University, following which he joined the Temple faculty. At Temple he rose through the ranks to become Professor of Medicine and, in 1988, was named the first recipient of the Thomas Durant Chair in Medicine. He is also a Professor of Microbiology and Immunology and served as the Chief of the Section of Infectious Diseases until 2006. He is a Fellow of the American College of Physicians, a Fellow of the Infectious Diseases Society of America, and a Fellow of the College of Physicians of Philadelphia where he serves as College Secretary and as a member of the Board of Trustees. Dr. Lorber’s major interest in infectious diseases is in human listeriosis, an area in which he is regarded as an international authority. He has also been interested in the impact of societal changes on infectious disease patterns as well the relationship between infectious agents and chronic illness, and he has authored papers exploring these associations. He has been repeatedly honored for his teaching; among his honors are 10 golden apples, the Temple University Great Teacher Award, the Clinical Practice Award from the Pennsylvania College of Internal Medicine, and the Bristol Award from the Infectious Diseases Society of America. On two occasions the graduating medical school class dedicated their yearbook to Dr. Lorber. In 1996 he was the recipient of an honorary Doctor of Science degree from Swarthmore College.

 

David B. Weiner, Ph.D.   Dr. David Weiner received his B.S in Biology from the State University of New York and performed undergraduate research in the Department of Microbiology, Chaired by Dr. Arnie Levine, at Stony Brook University. He completed his MS. and Ph.D. in Developmental Biology/Immunology from the Children’s Hospital Research Foundation at the University of Cincinnati in 1986. He completed his Post Doctoral Fellowship in the Department of Pathology at the Penn in 1989, under the direction of Dr. Mark Greene. At that time he joined the Faculty at the Wistar Institute in Philadelphia. He was recruited back to the University of Pennsylvania in 1994. He is currently an Associate Professor with Tenure in the Department of Pathology, and he is the Associate Chair of the Gene Therapy and Vaccines Graduate Program at the Penn. Of relevance during his career he has worked extensively in the areas of molecular immunology, the development of vaccines and vaccine technology for infectious diseases and in the area of molecular oncology and immune therapy. His laboratory is considered one of the founders of the field of DNA vaccines as his group not only was the first to report on the use of this technology for vaccines against HIV, but was also the first group to advance DNA vaccine technology to clinical evaluation. In addition he has worked on the identification of novel approaches to inhibit HIV infection by targeting the accessory gene functions of the virus. Dr. Weiner has authored over 260 articles in peer reviewed journals and is the author of 28+ awarded US patents as well as their international counterparts. He has served and still serves on many national and international review boards and panels including NIH Study section, WHO advisory panels, the NIBSC, Department of Veterans Affairs Scientific Review Panel, as well as the FDA Advisory panel - CEBR, and AACTG among others. He also serves or has served in an advisory capacity to several Biotechnology and Pharmaceutical Companies. Dr. Weiner has, through training of young people in his laboratory, advanced over 35 undergraduate scientists to Medical School or Doctoral Programs and has trained 28 Post Doctoral Fellows and 7 Doctoral Candidates as well as served on 14 Doctoral Student Committees.

 

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Mark Einstein MD.  Dr. Einstein received his BS degree in Biology from the University of Miami, where he also received his MD with Research Distinction in Clinical Immunology.  He also has an MS in Clinical Research Methods, which he received with Distinction.  Dr. Einstein completed his residency in OB/GYN at Saint Barnabus Medical Center, and was a Galloway Fellow in Gynecologic Oncology at the Sloan-Kettering Cancer Center.  Dr. Einstein has been at the Albert Einstein Cancer Center and Montefiore Medical Center since 1999, where he has been an attending physician, Assistant Profession of Gynecologic Oncology, and currently the Director of Clinical Research of the Division of Gynecologic Oncology at the Albert Einstein College of Medicine and Cancer Center, and at the Montefiore Medical Center.  He is a Fellow of the American College of Obstetrics and Gynecology and the American College of Surgeons, as well as belonging to various research groups such as the American Association for Cancer Research and the American Society for Clinical Oncology.  Dr. Einstein’s honors and awards include; American Cancer Society Research Scholar, American Professors in Gynecology and Obstetrics McNeil Faculty Award, ACOG/3M Research Award, ACOG/Solvay Research Award, Berlex Oncology Foundation Scholar Award, and others.  Dr. Einstein is a member of the Gynecologic Oncology Group (NCI) Vaccine subcommittee, he chairs the Gynecologic Cancer Foundation National Cervical Cancer Education Campaign, he sits on the Translational Research Working Group Roundtable at NIH/NCI, the NHI AIDS malignancy Consortium, the Gynecologic Cancer Foundation Task Force for Cervical Cancer Screening and Prevention, as well as 3 separate committees for the Society of Gynecologic Oncologists.  Dr. Einstein is very active in the clinical assessment of new immunological technologies for the treatment of gynecologic cancers.

 

 Employees

 

As of October 31, 2008, we have full time nine employees. Of these nine employees eight employees hold the following degrees: 1 MD/JD, 1 MD/PhD, 3 PhD’s 1 MS & 2 BS, four serve in the research area two serve in the clinical/regulatory development area, and three serve in the general and administration area.

 

Our Chairman and Chief Executive Officer, Mr. Tom Moore joined our company on December 15, 2006. Mr. Roni Appel previously served as our President and Chief Executive Officer during the fiscal year 2006 resigned from this position on December 15, 2006. Mr. Appel still serves as a board of director member and remained as consultant to the company until December 15, 2007.

 

Dr. John Rothman our Executive Vice President of Science and Operations and Officer joined the company on March 7, 2005. Fred Cobb our Vice President, Finance and Principal Financial Officer joined the company on February 20, 2006. Doctor Vafa Shahabi our Director of Research and Development joined the company on March 1, 2005. Christine Chansky, MD, JD, FCLM, Executive Director, Product Development joined the company on March 24, 2008. Both of our Senior Scientists joined the company from Doctor Paterson’s lab at Penn.

 

We do not anticipate any significant increase in the number of employees in the clinical area and the research and development area to support clinical requirements, and in the general and administrative and business development areas over the next two years.

 

Compensation of Officers and Directors

 

Commencing in Fiscal 2008 the compensation plan for all non-employee Board is a combination of cash compensation per board meeting of $2,000 per meeting attended in person and $750 for each telephonic meeting and an annual issuance of company stock. For each non-employee director who attends a least 75% of the meetings on an annual basis will be issued 20,000 shares of the Company stock annually in Fiscal Year 2008 and, retrospectively for Fiscal Year 2007. All committee meetings are be compensated at $2,000 per meeting attended in person held on days other than Board meeting days and all telephonic meetings are also set at $750 per meeting. This plan is contingent upon Shareholder Approval at the company’s next Annual Meeting and the compensation allowed under this plan is accrued not paid until approval is granted. Mr. Berman is an exception to this plan because he receives $2,000 a month in company stock priced on the average monthly closing market price per share. Prior to Fiscal 2008 all of our non employee directors other than Mr. Berman didn’t received any compensation for their services as a director other than stock options and reimbursement of expenses.

 

The aggregate compensation paid to our directors and executive officers, including stock based compensation option value and other compensation for the twelve months ended October 31, 2006, 2007 and 2008 was approximately $970,669, $2,071,941 and $1,674,699, respectively. This amount has no amounts set aside or accrued to provide pension, severance, retirement, or similar benefits or expenses, and does benefits commonly reimbursed or paid by similarly situated companies.

 

 Compensation Committee Interlocks And Insider Participation

 

There were no interlocking relationships between us and other entities that might affect the determination of the compensation of its directors and executive officers.

 

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RISK FACTORS

 

Risks Specific to Us

 

We are a development stage company.  

 

We are an early stage development stage company with a history of losses and can provide no assurance as to future operating results. As a result of losses which will continue throughout our development stage, we may exhaust our financial resources and be unable to complete the development of our product. Our deficit will continue to grow during our drug development period.

 

We have sustained losses from operations in each fiscal year since our inception, and losses are expected to continue, due to the substantial investment in research and development, for the next five to ten or more years. As of October 31, 2008, we had an accumulated deficit of $17,533,044 and shareholders’ deficiency of $839,311. We expect to spend substantial additional sums on the continued administration and research and development of proprietary products and technologies with no certainty that our products will become commercially viable or profitable as a result of these expenditures.

 

We will require substantial additional financing in order to meet our business objectives.  

 

As of October 31, 2008, $475,000 in Notes were provided by our CEO Thomas Moore to enable the Company to stay in operations. In addition, as a result of our application to the New Jersey Technology Business Tax Certificate Transfer Program we applied for and received $922,020 from the sale of our Net Operating Loss (“NOL”) on December 12, 2008. These proceeds along with reductions in all highly compensated employees salaries as of January 4, 2009 are estimated to provide funds to allow the company to operate through early March 2009 allowing us time to raise additional funds. If successful in our raise of $8,000,000 we expect these funds to meet the needs for our Phase II CIN trial and operating plans, in part, over the next twelve to fifteen months. On December 15, 2008 Mr. Moore informed the Company that based on the funds generated by the NOL and personal considerations that he may not provide the full amount of funds. On December 15, 2008 the Board approved the revision of the repayment terms of his Agreement from the earlier of February 15, 2009 or when a major financing is concluded to June 15, 2009 or when a major financing is concluded. In consideration for this repayment extension, the company repaid $50,000 from the $475,000 he previously loaned.

We will be required to sell additional equity or debt securities or enter into other financial arrangements, including relationships with corporate and other partners, to raise substantial additional capital during the immediate term as well as the next two-to ten-year period of product development and FDA testing through Phase III testing. Depending upon market conditions, we may not be successful in raising sufficient additional capital for our short or long-term requirements. If we fail to raise sufficient additional financing, we will not be able to develop our product candidates, we will be required to reduce staff, reduce or eliminate research and development, slow the development of our product candidates and outsource or eliminate several business functions or cease operations altogether. Even if we are successful in raising such additional financing, we may not be able to successfully complete planned clinical trials, development, and marketing of all, or of any, of our product candidates. In such event, our business, prospects, financial condition and results of operations could be materially adversely affected. We may be required to reduce our staff, discontinue certain research or development programs of our future products, or cease to operate. We may not be able to conduct our Phase II clinical trial for ADX11-001. See “Management’s Discussion and Analysis and Results of Operations.”

 

Our limited operating history does not afford investors a sufficient history on which to base an investment decision.

 

We commenced our Listeria System vaccine development business in February 2002 and have existed as a development stage company since such time. Prior thereto we conducted no business. Accordingly, we have a limited operating history. Investors must consider the risks and difficulties we have encountered in the rapidly evolving vaccine and therapeutic biopharmaceutical industry. Such risks include the following:

	·	Competition from companies that have substantially greater assets and financial resources than we have;
	·	need for acceptance of products;
	·	ability to anticipate and adapt to a competitive market and rapid technological developments;
	·	amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure;
	·	need to rely on multiple levels of outside funding due to the length of the product development cycles and governmental approved protocols associated with the pharmaceutical industry; and
	·	dependence upon key personnel including key independent consultants and advisors.

 

 

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We can provide no assurance of the successful and timely development of new products.  

 

Our products are at various stages of research and development. Further development and extensive testing will be required to determine their technical feasibility and commercial viability. Our success will depend on our ability to achieve scientific and technological advances and to translate such advances into reliable, commercially competitive products on a timely basis. Immunotherapy and vaccine products that we may develop are not likely to be commercially available until five to ten or more years. The proposed development schedules for our products may be affected by a variety of factors, including technological difficulties, proprietary technology of others, and changes in governmental regulation, many of which will not be within our control. Any delay in the development, introduction or marketing of our products could result either in such products being marketed at a time when their cost and performance characteristics would not be competitive in the marketplace or in the shortening of their commercial lives. In light of the long-term nature of our projects, the unproven technology involved and the other factors described elsewhere in “Risk Factors,” there can be no assurance that we will be able to complete successfully the development or marketing of any new products. See “Item 1. Description of Business - Research and Development Program.”.

 

Our research and development expenses are subject to uncertainty.  

 

Factors affecting our research and development (R&D) expenses include, but are not limited to:

	·	Competition from companies that have substantially greater assets and financial resources than we have;
	·	need for acceptance of products;
	·	ability to anticipate and adapt to a competitive market and rapid technological developments;
	·	amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure;
	·	need to rely on multiple levels of outside funding due to the length of the product development cycles and governmental approved protocols associated with the pharmaceutical industry; and
	·	dependence upon key personnel including key independent consultants and advisors.

 

We are subject to numerous risks inherent in conducting clinical trials.

 

We must outsource our clinical trials and are in the process of negotiating with third parties to manage and execute our next trial. We are not certain that we will successfully conclude our recruitment for the completion of our next clinical trial. Delay in concluding recruitment and such agreements would delay the initiation of the Phase II CIN trial.

 

Agreements with clinical investigators and medical institutions for clinical testing and with other third parties for data management services place substantial responsibilities on these parties, which could result in delays in, or termination of, our clinical trials if these parties fail to perform as expected. For example, if any of our clinical trial sites fail to comply with FDA-approved good clinical practices, we may be unable to use the data gathered at those sites. If these clinical investigators, medical institutions or other third parties do not carry out their contractual duties or obligations or fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols or for other reasons, our clinical trials may be extended, delayed or terminated, and we may be unable to obtain regulatory approval for or successfully commercialize ADX11-001.

 

We or our regulators may suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to the patients enrolled in our clinical trials. In addition, regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to the patients enrolled in our clinical trials.

 

Our clinical trial operations are subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our clinical trial sites are not in compliance with applicable regulatory requirements for conducting clinical trials, we may receive reports of observations or warning letters detailing deficiencies, and we will be required to implement corrective actions. If regulatory agencies deem our responses to be inadequate, or are dissatisfied with the corrective actions we or our clinical trial sites have implemented, our clinical trials may be temporarily or permanently discontinued, we may be fined, we or our investigators may be precluded from conducting any ongoing or any future clinical trials, the government may refuse to approve our marketing applications or allow us to manufacture or market our products, and we may be criminally prosecuted.

 

The successful development of biopharmaceuticals is highly uncertain.

 

Successful development of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Products that appear promising in the early phases of development may fail to reach the market for several reasons including:

	·	Preclinical study results that may show the product to be less effective than desired (e.g., the study failed to meet its primary objectives) or to have harmful or problematic side effects;
	·	failure to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, additional time requirements for data analysis, or BLA preparation, discussions with the FDA, an FDA request for additional preclinical or clinical data, or unexpected safety or manufacturing issues.
	·	Manufacturing costs, formulation issues, pricing or reimbursement issues, or other factors that make the product uneconomical; and
	·	the proprietary rights of others and their competing products and technologies that may prevent the product from being commercialized.

 

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Success in preclinical and early clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to complete clinical studies and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one product to the next, and may be difficult to predict.

 

We must comply with significant government regulations.

 

The research and development, manufacture and marketing of human therapeutic products are subject to regulation, primarily by the FDA in the U.S. and by comparable authorities in other countries. These national agencies and other federal, state, local and foreign entities regulate, among other things, research and development activities (including testing in animals and in humans) and the testing, manufacturing, handling, labeling, storage, record keeping, approval, advertising and promotion of the products that we are developing. Noncompliance with applicable requirements can result in various adverse consequences, including delay in approving or refusal to approve product licenses or other applications, suspension or termination of clinical investigations, revocation of approvals previously granted, fines, criminal prosecution, recall or seizure of products, injunctions against shipping products and total or partial suspension of production and/or refusal to allow a company to enter into governmental supply contracts.

 

The process of obtaining requisite FDA approval has historically been costly and time-consuming. Current FDA requirements for a new human drug or biological product to be marketed in the U.S. include: (1) the successful conclusion of preclinical laboratory and animal tests, if appropriate, to gain preliminary information on the product’s safety; (2) filing with the FDA of an Investigational New Drug Application, or INDA, to conduct human clinical trials for drugs or biologics; (3) the successful completion of adequate and well-controlled human clinical investigations to establish the safety and efficacy of the product for its recommended use; and (4) filing by a Company and acceptance and approval by the FDA of a  NDA, for a drug product or a BLA for a biological product to allow commercial distribution of the drug or biologic. A delay in one or more of the procedural steps outlined above could be harmful to us in terms of getting our product candidates through clinical testing and to market.

 

In 2007, we completed a phase I trial of ADXS11-001 that demonstrated both safely administered doses and a dosage ceiling in end-stage cervical cancer patients. Based in part upon this work, we opened a U.S. IND in 2008 for our Phase II CIN trial.

 

We can provide no assurance that our products will obtain regulatory approval or that the results of clinical studies will be favorable.

 

 

We rely upon patents to protect our technology. We may be unable to protect our intellectual property rights and we may be liable for infringing the intellectual property rights of others.

 

Our ability to compete effectively will depend on our ability to maintain the proprietary nature of our technologies, including the Listeria System, and the proprietary technology of others with which we have entered into licensing agreements. We have licensed twelve patents that have been issued and sixty-seven patents are pending from Penn. Further, we rely on a combination of trade secrets and nondisclosure, and other contractual agreements and technical measures to protect our rights in the technology. We depend upon confidentiality agreements with our officers, employees, consultants, and subcontractors to maintain the proprietary nature of the technology. These measures may not afford us sufficient or complete protection, and others may independently develop technology similar to ours, otherwise avoid the confidentiality agreements, or produce patents that would materially and adversely affect our business, prospects, financial condition, and results of operations. Such competitive events, technologies and patents may limit our ability to raise funds, prevent other companies from collaborating with us, and in certain cases prevent us from further developing our technology due to third party patent blocking rights. Given the high cost of obtaining, maintaining and defending these patents we are always at risk of losing our agreement with Penn because of periodically and currently not having sufficient funds to meet these expenses.

 

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We are aware of a private company, Anza  (formerly Cerus Corporation), which has also been developing Listeria vaccines. We believe that through our exclusive license with Penn we have earliest known and dominant patent position in the US for the use of recombinant Listeria monocytogenes expressing proteins or tumor antigens as a vaccine for the treatment of infectious diseases and tumors. We  contested a challenge made by Anza to our patent position in Europe on a claim not available in the US that would limit Anza’s ability to conduct business in Europe but not materially affect Advaxis irrespective of the outcome. The EPO Board of Appeals in Munich, Germany has ruled in favor of The Trustees of the University of Penn and its exclusive licensee Advaxis and reversed a patent ruling that revoked a technology patent that had resulted from an opposition filed by Anza. The ruling of the EPO Board of Appeal is final and can not be appealed. The granted claims, the subject matter of which was discovered by Dr. Yvonne Paterson, scientific founder of Advaxis, are directed to the method of preparation and composition of matter of recombinant bacteria expressing a tumor antigens for treatment of patients with cancer. Based on searches of publicly available databases, we do not believe that Anza or any other third party owns any published Listeria patents or has any issued patent claims that might materially negatively affect our freedom to operate our business as currently contemplated in the field of recombinant Listeria monocytogenes.  Additionally, our proprietary position that is based on 12 issued patents and over 67 additional applications restricts anyone from using plasmid based Listeria constructs, or those that are bioengineered to deliver antigens fused toLLO or fragments of LLO.

Cerus has filed an opposition against European Patent Application Number 0790835 (EP 835 Patent)which was granted by the EPOand which is assigned to The Trustees of the University of Penn and exclusively licensed to us. Cerus’ allegations in the Opposition are that the EP 835 Patent, which claims a vaccine for inducing a tumor specific antigen with a recombinant live Listeria, is deficient because of (i) insufficient disclosure in the specifications of the granted claims, (ii) the inclusion of additional subject matter in the granted claims, and (iii) a lack of inventive steps of the granted claims of the EP 835 Patent.

 

On November 29, 2006, following oral proceedings, the Opposition Division of the EPO determined that the claims of the patent as granted should be revoked due to lack of inventive step under EPO rules based on certain prior art publications.

 

We reviewed the formal written decision and filed an appeal on May 29, 2007, On January 13, 2009 the EPO Board of Appeals in Munich, Germany has ruled in favor of The Trustees of Penn and its exclusive licensee Advaxis and reversed a patent revocation that had resulted from an opposition filed by Anza. The ruling of the EPO Board of Appeal is final and can not be appealed. While this patent does not affect the manner in which Advaxis makes or uses its cancer vaccine products however by Anza’s failure to prevail will preclude them from using certain methodologies they require in their anti-infective vaccines under development. See “Item 1. Description of Business—Patents and Licenses

 

As of November 20, 2007, Cerus spun its immunotherapy/Listeria development effort off into a separate, privately financed company Anza Therapeutics, Inc. For more information about Anza Therapeutics, Inc. and its claims with respect to Listeria-based technology, you should visit their web site at www.anzatheraputics.com or to view Cerus’ publicly filed documents prior to November 20, 2007.

 

We are dependent upon our license agreement with Penn, as well as proprietary technology of others.  

 

The manufacture and sale of any products developed by us will involve the use of processes, products or information, the rights to certain of which are owned by others. Although we have obtained licenses with regard to the use of Penn’s patents as described herein and certain of such processes, products and information of others, we can provide no assurance that such licenses will not be terminated or expire during critical periods, that we will be able to obtain licenses for other rights which may be important to us, or, if obtained, that such licenses will be obtained on commercially reasonable terms. Also, given the high cost of obtaining, maintaining and defending these patents we are always at risk of losing our agreement with Penn because of periodically and currently not having sufficient funds to meet these expenses.

If we are unable to maintain and/or obtain licenses, we may have to develop alternatives to avoid infringing or the patents of others, potentially causing increased costs and delays in product development and introduction or preclude the development, manufacture, or sale of planned products. Some of our licenses provide for limited periods of exclusivity that require minimum license fees and payments and/or may be extended only with the consent of the licensor. We can provide no assurance that we will be able to meet these minimum license fees in the future or that these third parties will grant extensions on any or all such licenses. This same restriction may be contained in licenses obtained in the future. Additionally, we can provide no assurance that the patents underlying any licenses will be valid and enforceable. Furthermore, in 2001, an issue arose regarding the inventorship of U.S. Patent 6,565,852 and U.S. Patent Application No. 09/537,642. These patent rights are included in the patent rights licensed by us from Penn. GSK, Penn and we expect that the issue will be resolved through a correction of inventorship to add certain GSK inventors, where necessary and appropriate, an assignment of GSK’s possible rights under these patent rights to Penn, and a sublicense from us to GSK of certain subject matter, which is not central to our business plan. To date, this arrangement has not been finalized and we cannot assure that this issue will ultimately be resolved in the manner described above. See “Item 1. Description of Business - Patents and Licenses.” To the extent any products developed by us are based on licensed technology, royalty payments on the licenses will reduce our gross profit from such product sales and may render the sales of such products uneconomical. See “Item 1. Description of Business -Partnerships and Agreements - Penn.”

 

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We have no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such.

 

We do not intend to create facilities to manufacture our products and therefore are dependent upon third parties to do so. We currently have an agreement with Cobra for production of our immunotherapies and vaccines for research and development and testing purposes. We also have an agreement with Vibalogics to provide ADXS11-001 in vials for clinical supplies. Our reliance on third parties for the manufacture of our products creates a dependency that could severely disrupt our research and development, our clinical testing, and ultimately our sales and marketing efforts if the source of such supply proves to be unreliable or unavailable. If the contracted manufacturing source is unreliable or unavailable, we may not be able to replace the development of our product candidates, including the clinical testing program, could not go forward and our entire business plan could fail.

 

If we are unable to establish or manage strategic collaborations in the future, our revenue and product development may be limited.

 

Our strategy includes eventual substantial reliance upon strategic collaborations for marketing and commercialization of , and we may rely even more on strategic collaborations for research, development, marketing and commercialization of our other product candidates. To date, we have not entered into any strategic collaborations with third parties capable of providing these services although we have been heavily reliant upon third party outsourcing for our research and development activities. In addition, we have not yet marketed or sold any of our product candidates or entered into successful collaborations for these services in order to ultimately commercialize our product candidates. Establishing strategic collaborations is difficult and time-consuming. Our discussion with potential collaborators may not lead to the establishment of collaborations on favorable terms, if at all. For example, potential collaborators may reject collaborations based upon their assessment of our financial, regulatory or intellectual property position. If we successfully establish new collaborations, these relationships may never result in the successful development or commercialization of our product candidates or the generation of sales revenue. To the extent that we enter into co-promotion or other collaborative arrangements, our product revenues are likely to be lower than if we directly marketed and sold any products that we may develop.

 Management of our relationships with our collaborators will require:

	·	Significant time and effort from our management team;
	·	coordination of our research and development programs with the research and development priorities of our collaborators; and
	·	effective allocation of our resources to multiple projects.

 

 

We may incur substantial liabilities from any product liability claims if our insurance coverage for those claims is inadequate.

 

We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials, and will face an even greater risk if the product candidates are sold commercially. An individual may bring a liability claim against us if one of the product candidates causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves against the product liability claim, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

	·	Decreased demand for our product candidates,
	·	injury to our reputation,
	·	withdrawal of clinical trial participants,
	·	costs of related litigation,
	·	substantial monetary awards to patients or other claimants,
	·	loss of revenues,
	·	the inability to commercialize product candidates, and
	·	increased difficulty in raising required additional funds in the private and public capital markets.

 

We must bind insurance coverage before our Phase II CIN trial begins for each clinical trial site. We do not have product liability insurance because we do not have products on the market. We intend to obtain insurance coverage and to expand such coverage to include the sale of commercial products if marketing approval is obtained for any of our product candidates. However, insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost and we may not be able to obtain insurance coverage that will be adequate to satisfy any liability that may arise.

 

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We may incur significant costs complying with environmental laws and regulations.

 

We will use hazardous materials, including chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment. As appropriate, we will store these materials and wastes resulting from their use at our or our outsourced laboratory facility pending their ultimate use or disposal. We will contract with a third party to properly dispose of these materials and wastes. We will be subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials and wastes. We may also incur significant costs complying with environmental laws and regulations adopted in the future.

 

 If we use biological and hazardous materials in a manner that causes injury, we may be liable for damages.

 

Our research and development and manufacturing activities will involve the use of biological and hazardous materials. Although we believe our safety procedures for handling and disposing of these materials will comply with federal, state and local laws and regulations, we cannot entirely eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of these materials. We do not carry specific biological or hazardous waste insurance coverage, workers compensation or property and casualty and general liability insurance policies which include coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended or terminated.

 

We need to attract and retain highly skilled personnel; we may be unable to effectively manage growth with our limited resources.

 

At the date of this report, we have nine employees. We do not intend to significantly expand our operations and staff unless we get adequate financing. If funded then our new employees may include key managerial, technical, financial, research and development and operations personnel who will not have been fully integrated into our operations. We don’t expect the expansion of our business to place a significant strain on our limited managerial, operational and financial resources. We will be required to expand our operational and financial systems significantly and to expand, train and manage our work force in order to manage the expansion of our operations. Our failure to fully integrate any new employees into our operations could have a material adverse effect on our business, prospects, financial condition and results of operations.

Commencing January 1, 2009 we are operating under an agreement with AlphaStaff, a Professional Employment Organization (“PEO’). They provide a full-services of payroll and Human Resources company to focus on our human resource needs as a small organization but now with the effectiveness and benefits of larger company. Our ability to attract and retain highly skilled personnel is critical to our operations and expansion. We face competition for these types of personnel from other technology companies and more established organizations, many of which have significantly larger operations and greater financial, technical, human and other resources than we have. We may not be successful in attracting and retaining qualified personnel on a timely basis, on competitive terms, or at all. If we are not successful in attracting and retaining these personnel, our business, prospects, financial condition and results of operations will be materially adversely affected. In such circumstances we may be unable to conduct certain research and development programs, unable to adequately manage our clinical trials of ADXS11-001 and other products, and unable to adequately address our management needs. As of the pay period ending January 4, 2009 we reduced the salary of the highly compensated employees to meet the economic challenges and our cash flow needs.  See “Item 6. Management’s Discussion and Analysis or Plan of Operations,” “Item 1. Description of Business - Strategy,” and “Item 1. Description of Business—Employees.”

 

We depend upon our senior management and key consultants and their loss or unavailability could put us at a competitive disadvantage.

 

We depend upon the efforts and abilities of our senior executives, as well as the services of several key consultants, including Yvonne Paterson, Ph.D. The loss or unavailability of the services of any of these individuals for any significant period of time could have a material adverse effect on our business, prospects, financial condition and results of operations. We have not obtained, do not own, nor are we the beneficiary of, key-person life insurance. See “Item 10. Executive Compensation—Employment Agreements.”

 

Risks Related to the Biotechnology / Biopharmaceutical Industry

 

The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. We may be unable to compete with more substantial enterprises.

 

The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition.  Competition in the biopharmaceutical industry is based significantly on scientific and technological factors. These factors include the availability of patent and other protection for technology and products, the ability to commercialize technological developments and the ability to obtain governmental approval for testing, manufacturing and marketing. We compete with specialized biopharmaceutical firms in the U.S., Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies have focused their development efforts in the human therapeutics area, including cancer. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies. These companies, as well as academic institutions and governmental agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with other companies in the pharmaceutical field will also depend to a considerable degree on the continuing availability of capital to us. 

 

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We expect that our products under development and in clinical trials will address major markets within the cancer sector with a superior technology that is both safer and more effective than our competitors. Our competition will be determined in part by the potential indications for which drugs are developed and ultimately approved by regulatory authorities. Additionally, the timing of market introduction of some of our potential products or of competitors’ products may be an important competitive factor. Accordingly, the relative speed with which we can develop products, complete preclinical testing, clinical trials and approval processes and supply commercial quantities to market is expected to be important competitive factors. We expect that competition among products approved for sale will be based on various factors, including product efficacy, safety, reliability, availability, price and patent position. See “Item 1. Description of Business - Research and Development Programs” and “Item 1. Description of Business - Competition.”

 

Risks Related to the Securities Markets and Investments in our Common Stock

 

The price of our common stock may be volatile.

 

The trading price of our common stock may fluctuate substantially. The price of the common stock that will prevail in the market after the sale of the shares of common stock by the selling stockholders may be higher or lower than the price you have paid, depending on many factors, some of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose part or all of your investment in our common stock. Those factors that could cause fluctuations include, but are not limited to, the following:

	·	Price and volume fluctuations in the overall stock market from time to time;
	·	fluctuations in stock market prices and trading volumes of similar companies;
	·	actual or anticipated changes in our net loss or fluctuations in our operating results or in the expectations of securities analysts;
	·	general economic conditions and trends;
	·	major catastrophic events;
	·	sales of large blocks of our stock;
	·	departures of key personnel;
	·	changes in the regulatory status of our product candidates, including results of our clinical trials;
	·	events affecting Penn or any future collaborators;
	·	announcements of new products or technologies, commercial relationships or other events by us or our competitors;
	·	regulatory developments in the United States and other countries;
	·	failure of our common stock to be listed or quoted on the Nasdaq Stock Market, American Stock Exchange or other national market system;
	·	changes in accounting principles; and
	·	discussion of us or our stock price by the financial and scientific press and in online investor communities;
	·	the dilution effect of options, warrants, or the ratchet of subsequent financings triggered by lower stock prices.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price, we may therefore be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

 

 Our common stock is considered   to be a “penny stock.”

 

Our common stock may be deemed to be a “penny stock” as that term is defined in Rule 3a51-1, promulgated under the Exchange Act. Penny stocks are stocks:

	·	With a price of less than $5.00 per share;
	·	that are not traded on a “recognized” national exchange;
	·	whose prices are not quoted on the NASDAQ automated quotation system; or
	·	of issuers with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average revenue of less than $6,000,000 for the last three years.

 

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Section 15(g) of the Exchange Act and Rule 15g-2 promulgated there under require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a “penny stock” for the investor’s account. We urge potential investors to obtain and read this disclosure carefully before purchasing any shares that are deemed to be “penny stock.”

 

Rule 15g-9 promulgated under the Exchange Act requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any “penny stock” to that investor. This procedure requires the broker-dealer to:

 

	·	Obtain from the investor information about his or her financial situation, investment experience and investment objectives;
	·	reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has enough knowledge and experience to be able to evaluate the risks of “penny stock” transactions;
	·	provide the investor with a written statement setting forth the basis on which the broker-dealer made his or her determination; and
	·	receive a signed and dated copy of the statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives.

Compliance with these requirements may make it harder for investors in our common stock to resell their shares to third parties. Accordingly, our common stock should only be purchased by investors, who understand that such investment is a long-term and illiquid investment, and are capable of and prepared to bear the risk of holding the common stock for an indefinite period of time.

 

A limited public trading market may cause volatility in the price of our common stock.

 

Our common stock began trading on the OTC:BB on July 28, 2005 and is quoted under the symbol ADXS.OB. The quotation of our common stock on the OTC: BB does not assure that a meaningful, consistent and liquid trading market currently exists, and in recent years such market has experience extreme price and volume fluctuations that have particularly affected the market prices of many smaller companies like us. Our common stock is thus subject to this volatility. Sales of substantial amounts of common stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our common stock and our stock price may decline substantially in a short time and our shareholders could suffer losses or be unable to liquidate their holdings. Also there are large blocks of restricted stock that have met the holding requirements under Rule 144 that can be unrestricted and sold. Our stock is thinly traded due to the limited number of shares available for trading on the market thus causing large swings in price.

 

There is no assurance of an established public trading market.

 

A regular trading market for our common stock may not be sustained in the future. The effect on the OTC:BB of these rule changes and other proposed changes cannot be determined at this time. The OTC:BB is an inter-dealer, over-the-counter market that provides significantly less liquidity than the NASDAQ Stock Market. Quotes for stocks included on the OTC:BB are not listed in the financial sections of newspapers as are those for the NASDAQ Stock Market. Therefore, prices for securities traded solely on the OTC:BB may be difficult to obtain and holders of common stock may be unable to resell their securities at or near their original offering price or at any price. Market prices for our common stock will be influenced by a number of factors, including:

·

The issuance of new equity securities pursuant to a future offering;

	·	changes in interest rates;
	·	competitive developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
	·	variations in quarterly operating results;
	·	change in financial estimates by securities analysts;
	·	the depth and liquidity of the market for our common stock;
	·	investor perceptions of our company and the technologies industries generally; and
	·	general economic and other national conditions.

 

Our common stock is quoted on the OTC:BB. In addition we are subject to a covenant to use our best efforts to apply to be listed on the American Stock Exchange or quoted on the Nasdaq National Stock Market.

 

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We may not be able to achieve secondary trading of our stock in certain states because our common stock is not nationally traded.

 

Because our common stock is not approved for trading on the Nasdaq National Market or listed for trading on a national securities exchange, our common stock is subject to the securities laws of the various states and jurisdictions of the United States in addition to federal securities law. This regulation covers any primary offering we might attempt and all secondary trading by our stockholders. While we intend to take appropriate steps to register our common stock or qualify for exemptions for our common stock, in all of the states and jurisdictions of the United States, if we fail to do so, the investors in those jurisdictions where we have not taken such steps may not be allowed to purchase our stock or those who presently hold our stock may not be able to resell their shares without substantial effort and expense. These restrictions and potential costs could be significant burdens on our stockholders.

 

If we fail to remain current on our reporting requirements, we could be removed from the OTC:BB, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

 

Companies trading on the OTC:BB, such as us, must be reporting issuers under Section 12 of the Exchange Act, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC:BB. If we fail to remain current on our reporting requirements, we could be removed from the OTC:BB. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

 

We may be exposed to potential risks resulting from new requirements under Section 404 of the Sarbanes-Oxley Act of 2002.

 

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we will be required, beginning with our year ending October 31, 2009, to include in our annual report our assessment of the effectiveness of our internal control over financial reporting for fiscal years ending on or after December 15, 2008. Furthermore, our independent registered public accounting firm will be required to attest to whether our assessment of the effectiveness of our internal control over financial reporting is fairly stated in all material respects and separately report on whether it believes we have maintained, in all material respects, effective internal control over financial reporting for fiscal years ending on or after December 15, 2009. We have not yet completed our assessment of the effectiveness of our internal control over financial reporting. We expect to incur additional expenses and diversion of management’s time as a result of performing the system and process evaluation, testing and remediation required in order to comply with the management certification and auditor attestation requirements.

Our executive officers, directors and principal stockholders control our business and may make decisions that are not in our best interests.

 

Our officers, directors and principal stockholders, and their affiliates, in the aggregate, beneficially own, as of October 31, 2008, 16.9% of the outstanding shares of our common stock on a fully diluted basis. As a result, such persons, acting together, have the ability to substantially influence all matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets, and to control our management and affairs. Accordingly, such concentration of ownership may have the effect of delaying, deferring or preventing a change in discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would be beneficial to other stockholders.

 

 Sales of additional equity securities may adversely affect the market price of our common stock and your rights in us may be reduced.

 

We expect to continue to incur product development and selling, general and administrative costs, and to satisfy our funding requirements, we will need to sell additional equity securities, which may be subject to registration rights. The sale or the proposed sale of substantial amounts of our common stock in the public markets may adversely affect the market price of our common stock and our stock price may decline substantially. Our stockholders may experience substantial dilution and a reduction in the price that they are able to obtain upon sale of their shares. Also, new equity securities issued may have greater rights, preferences or privileges than our existing common stock. With the current market price at lower levels than the historical prices shareholders are exposed to significant dilution both from additional raises and the triggering of the ratchet clauses in the existing warrants.

 

Additional authorized shares of common stock available for issuance may adversely affect the market.

 

We are authorized to issue 500,000,000 shares of our common stock. As of October 31, 2008, we had 109,319,520 shares of our common stock issued and outstanding, excluding shares issuable upon exercise of our outstanding warrants and options. As of October 31, 2008, we had outstanding 8,812,841 options to purchase shares of our common stock at a weighted exercise price of $0.215 per share and outstanding warrants to purchase 97,187,400 shares of our common stock, with exercise prices ranging from $0.162 to $0.287 per share including 3,333,333 warrants purchased for $0.149 with an exercise price of $0.001 per share. Pursuant to our 2004 Stock Option Plan, 2,381,525 shares of common stock are reserved for issuance under the plan. Pursuant to our 2005 Stock Option Plan, 5,600,000 shares of common stock are reserved for issuance under the plan. In addition, we have granted 1,001,399 options as non-plan options. To the extent the shares of common stock are issued or options and warrants are exercised, holders of our common stock will experience dilution. In addition, in the event of any future financing of equity securities or securities convertible into or exchangeable for, common stock, holders of our common stock may experience dilution.

 

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Shares eligible for future sale may adversely affect the market.

 

Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock. The Company’s most recent prospectus covered 109,482,917 issued and outstanding shares of our common stock, which represented approximately 100.15% of our outstanding shares of our common stock as of October 31, 2008. As additional shares of our common stock become available for resale in the public market pursuant to this offering, and otherwise, the supply of our common stock will increase, which could decrease its price. Some or all of the shares of common stock may be offered from time to time in the open market pursuant to Rule 144, and these sales may have a depressive effect on the market for our shares of common stock. In general, a person who has held restricted shares for a period of at least six months from the date of purchase may, upon filing with the SEC a notification on Form 144, sell into the market common stock in an amount equal to the greater of 1% of the outstanding shares or the average weekly number of shares sold in the last four weeks prior to such sale. Such sales may be repeated once each three months, and any of the restricted shares may be sold by a non-affiliate after they have been held two years.

 

We are able to issue shares of preferred stock with rights superior to those of holders of our common stock. Such issuances can dilute the tangible net book value of shares of our common stock.

 

Our Certification of Incorporation provide for the authorization of 5,000,000 shares of “blank check” preferred stock. Pursuant to our Certificate of Incorporation, our Board of Directors is authorized to issue such “blank check” preferred stock with rights that are superior to the rights of stockholders of our common stock, at a purchase price then approved by our Board of Directors, which purchase price may be substantially lower than the market price of shares of our common stock, without stockholder approval. Such issuances can dilute the tangible net book value of shares of our common stock.

We do not intend to pay dividends.

 

We have never declared or paid any dividends on our securities. We currently intend to retain our earnings for funding growth and, therefore, do not expect to pay any dividends in the foreseeable future.

 

 

            Intangible assets consist of patents, and licenses which are amortized on a straight-line basis over their remaining useful lives, which are estimated to be twenty years Capitalized license costs represent the value assigned to the Company’s 20 year exclusive worldwide license with the Penn. The value of the license is based on management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future uses. This license includes the exclusive right to exploit 12 issued and 67 pending patents. As of October 31, 2008, capitalized costs associated with patents filed and granted are estimated to be $624,324 and the estimated costs associated with patents pending are estimated to be $718,501. The expirations of the existing patents range from 2014 to 2020. Capitalized costs associated with patent applications that are abandoned are charged to expense when the determination is made not to pursue the application. Amortization expense for licensed technology and capitalized patent cost is included in general and administrative cost. There have been no patent applications abandoned and charged to expense in the current or prior year that were material in value.

On January 7, 2009 the Company made the decision to discontinue the use of the Trademark Lovaxin and write-off of its intangible assets for trademarks resulting in an asset impairment of $91,453 as of October 31, 2008. The Company is currently developing a low cost and more classic coding system for our constructs. The rational for this decision stemmed from several legal challenges to the Lovaxin name over the last two years and 21CFR rules not permitting companies to use names that are assigned to drugs in development after marketing approval. We will therefore focus company resources on product development and not the defense the Lovaxin name.

 

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Accounting for Warrants and Convertible Securities

 

The Company evaluates whether warrants issued should be accounted for as liabilities or equity based on the provisions of EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and potentially Settled in, a Company’s Own Stock. The EITF lists conditions under which warrants are required to be classified as liabilities, including the existence of registration rights where significant penalties could be required to be paid to the holder of the instrument in the event the issuer fails to register the shares under a preset time frame, or where the registration statement fails to remain effective for a preset time period. Warrants accounted for as liabilities are required to be recorded at fair value, with changes in fair value recorded in operations.

 

For convertible debt instruments, the Company determines whether the conversion feature must be bifurcated and accounted for as a derivative liability in accordance with the provisions of EITF 00-19. The first step of the analysis is to determine whether the debt instrument is a conventional convertible instrument, in which case the embedded conversion option would qualify for equity classification and would not be bifurcated from the debt instrument. If the debt does not meet the definition of a conventional convertible instrument, the Company will analyze whether the conversion feature should be accounted for as a liability or equity under the provisions of EITF 00-19. The most common reason a debt instrument would not be considered to be a conventional convertible instrument is where the conversion price is variable. If the conversion feature does qualify for equity classification, the Company will assess whether there is a beneficial conversion feature that must be accounted for under the provisions of EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratio, and EITF 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments.  

 

Due to the limited nature of the Company’s operations, the Company has not identified any other accounting policies involving estimates or assumptions that are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and where the impact of the estimates and assumptions on financial condition or operating performance is material.

 

Impact of Inflation

 

We believe that our results of operations are not dependent upon moderate changes in inflation rates.

 

Off-Balance Sheet Arrangement

 

The Company is obligated under a non-cancelable operating lease for laboratory and office space expiring in May 31, 2009 with aggregate future minimum payments due amounting to $44,005.

 

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