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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended July 31, 2022

 

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

 

For the transition period from ________ to ________

 

Commission file number 001-36138

 

ADVAXIS, INC.

 

(Exact name of registrant as specified in its charter)

 

Delaware   02-0563870
(State or other jurisdiction   (IRS Employer
of incorporation or organization)   Identification No.)
     
9 Deer Park Drive, Suite K-1, Monmouth Junction, NJ   08852
(Address of principal executive offices)   (Zip Code)

 

(609) 452-9813
(Registrant’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Act:

 

None.

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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

 

Large Accelerated Filer   Accelerated Filer  
Non-accelerated Filer   Smaller Reporting Company  
Emerging growth company        

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

The number of shares of the registrant’s Common Stock, $0.001 par value, outstanding as of September 9, 2022 was 1,815,951.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page No.
     
PART I FINANCIAL INFORMATION 5
     
Item 1. Financial Statements (unaudited) 5
     
  Condensed Consolidated Balance Sheets 5
     
  Condensed Consolidated Statements of Operations 6
     
  Condensed Consolidated Statements of Cash Flows 7
     
  Notes to the Condensed Consolidated Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 28
     
Item 4. Controls and Procedures 28
     
PART II OTHER INFORMATION 29
     
Item 1. Legal Proceedings 29
     
Item 1A. Risk Factors 29
     
Item 5. Other Information 29
     
Item 6. Exhibits 29
     
SIGNATURES 30

 

 2 
 

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS

 

This quarterly report on Form 10-Q (“Form 10-Q”) of Advaxis, Inc. (the “Company”) includes statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, these forward-looking statements can be identified by the use of such terms as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or the negative or other variations thereon or comparable terminology, although not all forward-looking statements contain these words. They appear in a number of places throughout this Form 10-Q and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ongoing and planned discovery and development of drug candidates, the strength and breadth of our intellectual property, our ongoing and planned preclinical studies and clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product candidates, the degree of clinical utility of our product candidates, particularly in specific patient populations, expectations regarding clinical trial data, our results of operations, financial condition, our available cash, liquidity, prospects, growth and strategies, impacts of the ongoing coronavirus (“COVID-19”) pandemic, the ongoing conflict in the Ukraine, inflation and the Federal Reserve’s responses thereto, including increasing interest rates, the length of time that we will be able to continue to fund our operating expenses and capital expenditures, our expected financing needs and sources of financing, the industry in which we operate and the trends that may affect our industry or us.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to the occurrence and timing of events or circumstances, many of which are beyond the control of the Company. As a result of these, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Form 10-Q, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Form 10-Q, they may not be predictive of results or developments in future periods.

 

Some of the material factors that we believe could cause actual results to differ from those anticipated or predicted include:

 

  the success and timing of our clinical trials, including patient accrual;
     
  our ability to obtain and maintain regulatory approval or reimbursement of our product candidates for marketing;
     
  our ability to obtain the appropriate labeling of our products under any regulatory approval;
     
  our ability to develop and commercialize our products;
     
  the successful development and implementation of our sales and marketing campaigns;
     
  the change of key scientific or management personnel;
     
  the size and growth of the potential markets for our product candidates and our ability to serve those markets;
     
  our ability to successfully compete in the potential markets for our product candidates, if commercialized;
     
  regulatory developments in the United States and foreign countries;

 

 3 
 

 

  new products, product candidates or new uses for existing products or technologies introduced or announced by our competitors and the timing of these introductions or announcements;
     
  market conditions in the pharmaceutical and biotechnology sectors;
     
  our available cash;
     
  the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;
     
  our ability to obtain additional funding;
     
  any outcomes from our review of strategic transactions and options to maximize stockholder value;
     
  the ability of our product candidates to successfully perform in clinical trials and to resolve any clinical holds that may occur;
     
  our ability to obtain and maintain approval of our product candidates for trial initiation;
     
  the performance of third-party manufacturers;
     
  our ability to identify license and collaboration partners and to maintain existing relationships;
     
  the performance of our clinical research organizations, clinical trial sponsors, clinical trial investigators and collaboration partners for any clinical trials we conduct;
     
  our ability to successfully implement our strategy;
     
  our ability to maintain the listing of our common stock on the OTCQX® Best Market (“OTCQX”); and
     
  the factors described in the “Risk Factors” section of the Company’s annual report on Form 10-K for the fiscal year ended October 31, 2021 (the “2021 Annual Report on Form 10-K”), as updated and amended in other filings by the Company with the Securities and Exchange Commission (the “SEC”).

 

You should also read carefully the factors described in the “Risk Factors” section of the 2021 Annual Report on Form 10-K. Any forward-looking statements that we make in this Form 10-Q speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Form 10-Q except as required by the federal securities laws.

 

This Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.

 

 4 
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

ADVAXIS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

   July 31, 2022   October 31, 2021 
   (Unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $28,150   $41,614 
Prepaid expenses and other current assets   1,667    1,643 
Total current assets   29,817    43,257 
           
Property and equipment (net of accumulated depreciation)   73    118 
Intangible assets (net of accumulated amortization)   181    3,354 
Operating right-of-use asset (net of accumulated amortization)   19    40 
Other assets   11    11 
Total assets  $30,101   $46,780 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $90   $87 
Accrued expenses   1,510    2,836 
Current portion of operating lease liability   19    28 
Common stock warrant liability   287    4,929 
Total current liabilities   1,906    7,880 
           
Operating lease liability, net of current portion   -    12 
Total liabilities   1,906    7,892 
           
Contingencies – Note 8   -     -  
           
Series D convertible preferred stock- $0.001 par value; 0 shares authorized, 0 shares issued and outstanding at July 31, 2022 and October 31, 2021.   -    - 
           
Stockholders’ equity:          
Preferred stock, $0.001 par value; 5,000,000 shares authorized, 0 shares issued and outstanding at July 31, 2022 and October 31, 2021.   -    - 
Common stock - $0.001 par value; 170,000,000 shares authorized, 1,815,951 and 1,820,452 shares issued and outstanding at July 31, 2022 and October 31, 2021.   2    2 
Additional paid-in capital   466,561    467,486 
Accumulated deficit   (438,368)   (428,600)
Total stockholders’ equity   28,195    38,888 
Total liabilities and stockholders’ equity  $30,101   $46,780 

 

The accompanying notes should be read in conjunction with the financial statements.

 

 5 
 

 

ADVAXIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except share and per share data)

 

   2022   2021   2022   2021 
   Three Months Ended
July 31,
   Nine Months Ended
July 31,
 
   2022   2021   2022   2021 
                 
Revenue  $-   $250   $250   $3,240 
                     
Operating expenses:                    
Research and development expenses   2,233    1,703    5,371    8,616 
General and administrative expenses   2,053    2,678    6,331    9,038 
Intangible asset impairment   3,005    -    3,005    - 
Total operating expenses   7,291    4,381    14,707    17,654 
                     
Loss from operations   (7,291)   (4,131)   (14,457)   (14,414)
                     
Other income (expense):                    
Interest income, net   50    1    57    3 
Net changes in fair value of derivative liabilities   276    846    4,685    1,814 
Other income (expense)   2    -    (3)   229 
Net loss before income taxes   (6,963)   (3,284)   (9,718)   (12,368)
                     
Income tax expense   -    50    50    50 
                     
Net loss  $(6,963)  $(3,334)  $(9,768)  $(12,418)
Accretion of discount and redemption feature of convertible preferred stock   -    -    (1,025)   - 
Income available to common stockholders   (6,963)   (3,334)   (10,793)   (12,418)
                     
Net loss per common share, basic and diluted  $(3.83)  $(1.83)  $(5.93)  $(8.04)
                     
Weighted average number of common shares outstanding   1,817,761    1,820,452    1,819,545    1,543,927 

 

The accompanying notes should be read in conjunction with the financial statements.

 

 6 
 

 

ADVAXIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

 

   2022   2021 
   Nine Months Ended
July 31,
 
   2022   2021 
         
OPERATING ACTIVITIES          
Net loss  $(9,768)  $(12,418)
Adjustments to reconcile net loss to net cash used in operating activities:          
Share based compensation   74    511 
Gain on change in value of warrants   (4,642)   (1,814)
Gain on change in value of preferred stock redemption liability   (43)   - 
Loss on disposal of property and equipment   -    1,530 
Abandonment of intangible assets   159    90 
Impairment charges on intangible assets   3,005    - 
Depreciation expense   45    366 
Amortization expense of intangible assets   210    203 
Amortization of right-of-use asset   21    327 
Net gain on write-off of right-of-use asset and lease liability   -    (116)
Change in operating assets and liabilities:          
Prepaid expenses, other current assets and deferred expenses   (24)   488 
Other assets   -    171 
Accounts payable and accrued expenses   (1,323)   513 
Deferred revenue   -    (165)
Operating lease liabilities   (21)   (1,389)
Net cash used in operating activities   (12,307)   (11,703)
           
INVESTING ACTIVITIES          
Proceeds from disposal of property and equipment   -    219 
Cost of intangible assets   (201)   (323)
Net cash used in investing activities   (201)   (104)
           
FINANCING ACTIVITIES          
Net proceeds of issuance of Series D preferred stock   4,312    - 
Net proceeds of issuance of common stock and warrants   -    28,115 
Fractional shares cashed out   (18)   - 
Redemption of Series D preferred stock   (5,250)   - 
Warrant exercises   -    3,771 
Net cash (used in) provided by financing activities   (956)   31,886 
           
Net (decrease) increase in cash and cash equivalents   (13,464)   20,079 
Cash and cash equivalents at beginning of period   41,614    25,178 
Cash and cash equivalents at end of period  $28,150   $45,257 
           
SUPPLEMENTAL CASH FLOW INFORMATION          
Cash paid for taxes  $50   $50 
           
SUPPLEMENTAL DISCLOSURE OF NON-CASH AND FINANCING ACTIVITIES          
Reclassification of preferred stock redemption liability into equity upon redemption of preferred stock   44    - 
Accretion of discount and redemption feature of convertible preferred stock   1,025    - 

 

The accompanying notes should be read in conjunction with the financial statements.

 

 7 
 

 

ADVAXIS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. NATURE OF OPERATIONS

 

Advaxis, Inc. (“Advaxis” or the “Company”) is a clinical-stage biotechnology company focused on the development and commercialization of proprietary Listeria monocytogenes (“Lm”)-based antigen delivery products. The Company is using its Lm platform directed against tumor-specific targets in order to engage the patient’s immune system to destroy tumor cells. Through a license from the University of Pennsylvania, Advaxis has exclusive access to this proprietary formulation of attenuated Lm called Lm TechnologyTM. Advaxis’ proprietary approach is designed to deploy a unique mechanism of action that redirects the immune system to attack cancer in three distinct ways:

 

  Alerting and training the immune system by activating multiple pathways in Antigen-Presenting Cells (“APCs”) with the equivalent of multiple adjuvants;
     
  Attacking the tumor by generating a strong, cancer-specific T cell response; and
     
  Breaking down tumor protection through suppression of the protective cells in the tumor microenvironment (“TME”) that shields the tumor from the immune system. This enables the activated T cells to begin working to attack the tumor cells.

 

Advaxis’ proprietary Lm platform technology has demonstrated clinical activity in several of its programs and has been dosed in over 470 patients across multiple clinical trials and in various tumor types. The Company believes that Lm Technology immunotherapies can complement and address significant unmet needs in the current oncology treatment landscape. Specifically, its product candidates have the potential to work synergistically with other immunotherapies, including checkpoint inhibitors, while having a generally well-tolerated safety profile.

 

COVID-19

 

On March 11, 2020, the World Health Organization characterized the outbreak of the novel coronavirus (“COVID-19”) as a global pandemic and recommended containment and mitigation measures. Since then, extraordinary actions have been taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world. The continued impact of the COVID-19 pandemic cannot be predicted at this time.

 

Liquidity and Capital Resources

 

Liquidity and Management’s Plans

 

Similar to other development stage biotechnology companies, the Company’s products that are being developed have not generated significant revenue. As a result, the Company has suffered recurring losses and requires significant cash resources to execute its business plans. These losses are expected to continue for the foreseeable future.

 

As of July 31, 2022, the Company had approximately $28.2 million in cash and cash equivalents. Although the Company expects to have sufficient capital to fund its obligations, as they become due, in the ordinary course of business until at least one year from the issuance of these consolidated financial statements, the actual amount of cash that it will need to operate is subject to many factors.

 

The Company recognizes it will need to raise additional capital in order to continue to execute its business plan in the future. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company or whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to further scale back its operations.

 

 8 
 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

 

Basis of Presentation/Estimates

 

The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) with respect to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and the accompanying unaudited interim condensed consolidated balance sheet as of July 31, 2022 has been derived from the Company’s October 31, 2021 audited financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements furnished include all adjustments (consisting of normal recurring accruals) necessary for a fair statement of the results for the interim periods presented.

 

Operating results for interim periods are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Significant estimates include the timelines associated with revenue recognition on upfront payments received, fair value and recoverability of the carrying value of property and equipment and intangible assets, fair value of warrant liability, grant date fair value of options, deferred tax assets and any related valuation allowance and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, based on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. Actual results could materially differ from these estimates.

 

These unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements of the Company as of and for the fiscal year ended October 31, 2021 and notes thereto contained in the Company’s 2021 Annual Report on Form 10-K, as filed with the SEC on February 14, 2022.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated.

 

Restricted Cash

 

On January 31, 2022, the Company transferred $5,250,000 into an escrow fund to fund a potential Series D preferred stock redemption. On April 6, 2022, the Series D convertible preferred stock was redeemed utilizing the entire amount held in the escrow fund.

 

Convertible Preferred Stock

 

Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity (“mezzanine”) until such time as the conditions are removed or lapse.

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For share-based derivative financial instruments, the Company used the Monte Carlo simulation model, the Black Scholes model and a binomial model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the consolidated balance sheet as current or non-current based on whether or not net-cash settlement of the instrument could be required within 12 months after the balance sheet date.

 

 9 
 

 

Net Income (Loss) per Share

 

Basic net income or loss per common share is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share give effect to dilutive options, warrants, restricted stock units and other potential common stock outstanding during the period. In the case of a net loss, the impact of the potential common stock resulting from warrants, outstanding stock options and convertible debt are not included in the computation of diluted loss per share, as the effect would be anti-dilutive. In the case of net income, the impact of the potential common stock resulting from these instruments that have intrinsic value are included in the diluted earnings per share. The table below sets forth the number of potential shares of common stock that have been excluded from diluted net loss per share:

 

   2022   2021 
   As of July 31, 
   2022   2021 
Warrants   377,818    377,818 
Stock options   11,118    12,892 
Total   388,936    390,710 

 

Reverse Stock Split

 

On March 31, 2022, the Company’s stockholders voted to approve an amendment to allow the Company to execute a reverse stock split of common stock within a range of 1 for 20 to 1 for 80, without reducing the authorized number of shares of the common stock, at the discretion of the Board of Directors. On June 3, 2022, the Board of Directors approved a 1 for 80 reverse stock split, which became effective on June 6, 2022. All references in this Report to number of shares, price per share and weighted average number of shares of common stock outstanding prior to this reverse stock split have been adjusted to reflect the reverse stock split on a retroactive basis, unless otherwise noted.

 

Recent Accounting Standards

 

In December 2019, the FASB issued ASU 2019-12, Simplification of Income Taxes (Topic 740) Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for public companies for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted this standard effective November 1, 2021 and it is not material to the financial results of the Company.

 

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity’s own equity, and modifies the guidance on diluted earnings per share (“EPS”) calculations as a result of these changes. The standard will be effective for the Company for fiscal years beginning after December 15, 2023 and can be applied on either a fully retrospective or modified retrospective basis. Early adoption is permitted for fiscal years beginning after December 15, 2020. The Company adopted this standard effective November 1, 2021 and it is not material to the financial results of the Company.

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements.

 

3. PROPERTY AND EQUIPMENT

 

Property and equipment, net consisted of the following (in thousands):

 

   July 31, 2022   October 31, 2021 
Laboratory equipment  $179   $179 
Computer equipment   241    241 
Total property and equipment   420    420 
Accumulated depreciation   (347)   (302)
Net property and equipment  $73   $118 

 

Depreciation expense for the three months ended July 31, 2022 and 2021 was approximately $13,000 and $50,000, respectively. Depreciation expense for the nine months ended July 31, 2022 and 2021 was approximately $45,000 and $366,000, respectively. During the nine months ended July 31, 2021, the Company incurred a loss on disposal of equipment of approximately $1,530,000, $968,000 of which is reflected in the research and development expenses and $562,000 of which is reflected in the general and administrative expenses in the condensed consolidated statement of operations.

 

 10 
 

 

4. INTANGIBLE ASSETS

 

Intangible assets, net consisted of the following (in thousands):

 

   July 31, 2022   October 31, 2021 
         
Patents  $275   $4,836 
License   44    777 
Software   98    98 
Total intangibles   417    5,711 
Accumulated amortization   (236)   (2,357)
Intangible assets  $181   $3,354 

 

The expiration dates of the existing patents range from 2022 to 2039 but the expiration dates can be extended based on market approval if granted and/or based on existing laws and regulations. Capitalized costs associated with patent applications that are abandoned without future value are charged to expense when the determination is made not to further pursue the application. Patent applications having a net book value of approximately $29,000 and $21,000 were abandoned and were charged to general and administrative expenses in the condensed consolidated statement of operations for the three months ended July 31, 2022 and 2021, respectively. Patent applications having a net book value of approximately $159,000 and $90,000 were abandoned and were charged to general and administrative expenses in the condensed consolidated statement of operations for the nine months ended July 31, 2022 and 2021, respectively. Amortization expense for intangible assets that was charged to general and administrative expense in the condensed consolidated statement of operations aggregated approximately $70,000 and $68,000 for the three months ended July 31, 2022 and 2021, respectively. Amortization expense for intangible assets that was charged to general and administrative expense in the condensed consolidated statement of operations aggregated approximately $210,000 and $203,000 for the nine months ended July 31, 2022 and 2021, respectively.

 

Management reviews its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. Net assets are recorded on the balance sheet for patents related to ADXS-HPV (AXAL), ADXS-HOT, ADXS-PSA, ADXS-HER2 and other products that are in development, and the Lm technology licensed from the University of Pennsylvania. There are various scenarios under which an impairment charge may be recorded, which include if a competitor were to gain FDA approval for a similar treatment before the Company, if future clinical trials fail to meet the targeted endpoints, or if a drug application is rejected or fails to be issued. Lastly, if the Company is unable to raise enough capital to continue funding its studies and developing its intellectual property, the Company would likely record an impairment to these assets.

 

During the three months ended July 31, 2022, the Company identified the following indicators of impairment under ASC 360 indicating that the patents and license carrying amounts might not be recoverable:

 

  Adverse changes in the business climate for biotechnology companies, particularly raising capital; and
  A significant reduction in the Company’s market capitalization during the nine months ended July 31, 2022.

 

The Company performed an impairment test under ASC 350 on its patents owned and in-licensed intellectual property. Under this test a fair value of the relevant asset is compared with the carrying amount of such asset. Fair value is calculated using a discounted cash flow analysis. Cash flows are discounted using a weighted average cost of capital derived from comparable companies, which reflects the costs of borrowing as well as the associated risk. The results of the impairment test indicated that the carrying value of the patents owned and in-licensed intellectual property exceeded the fair value. During the three months ended July 31, 2022, the Company recorded an impairment charge for patents owned and in-licensed intellectual property of approximately $3,005,000 in its condensed consolidated statement of operations.

 

 11 
 

 

As of July 31, 2022, the estimated amortization expense by fiscal year based on the current carrying value of intangible assets is as follows (in thousands):

 

    Fiscal year ending October 31, 
      
2022 (Remaining)   $24 
2023    94 
2024    63 
Total   $181 

 

5. ACCRUED EXPENSES:

 

The following table summarizes accrued expenses included in the condensed consolidated balance sheets (in thousands):

  

   July 31, 2022   October 31, 2021 
         
Salaries and other compensation  $116   $55 
Vendors   851    1,968 
Professional fees   343    613 
Other   200    200 
Total accrued expenses  $1,510   $2,836 

 

6. LEASES

 

Operating Leases

 

The Company previously leased a corporate office and manufacturing facility in Princeton, New Jersey under an operating lease that was set to expire in November 2025. On March 26, 2021, the Company entered into a Lease Termination and Surrender Agreement with respect to this lease agreement. The Lease Termination and Surrender Agreement provides for the early termination of the lease, which became effective on March 31, 2021. In connection with the early termination of the lease, the Company was required to pay a $1,000,000 termination payment. The unapplied security deposit totaling approximately $182,000 was credited against the termination fee for a net payment of approximately $818,000. The Company wrote off of the remaining right-of-use asset of approximately $4,512,000 and lease liability of approximately $5,628,000. After consideration of the termination payment and write off of the remaining right-of-use asset and lease liability, the Company recorded a net gain of approximately $116,000.

 

On March 25, 2021, the Company entered into a new one-year lease agreement for its corporate office/lab with base rent of approximately $29,000 per year, plus other expenses. This lease was accounted for as a short-term lease at inception, and the Company elected not to recognize a right-of-use asset and lease liability. In September 2021, the Company exercised its option to renew the lease, extending the lease term until March 25, 2023. Since the renewed lease term exceeded one-year, the lease no longer qualified for the short-term lease exception, resulting in the recognition of a right-of-use asset and operating lease liability of approximately $43,000.

 

Supplemental balance sheet information related to leases was as follows (in thousands):

  

   July 31, 2022   October 31, 2021 
Operating leases:           
Operating lease right-of-use assets  $19   $40 
           
Operating lease liability  $19   $28 
Operating lease liability, net of current portion   -    12 
Total operating lease liabilities  $19   $40 

 

 12 
 

 

Supplemental lease expense related to leases was as follows (in thousands):

  

Lease Cost (in thousands)  Statements of Operations Classification 

For the Three

Months Ended

July 31, 2022

  

For the Nine

Months Ended

July 31, 2022

 
Operating lease cost  General and administrative  $7   $22 
Variable lease cost  General and administrative   17    36 
Total lease expense     $24   $58 

 

Lease Cost (in thousands)  Statements of Operations Classification 

For the Three

Months Ended

July 31, 2021

  

For the nine

Months Ended

July 31, 2021

 
Operating lease cost  General and administrative  $-   $1,301 
Short-term lease cost  General and administrative   12    16 
Variable lease cost  General and administrative   4    165 
Total lease expense     $16   $1,482 

 

Other information related to leases where the Company is the lessee is as follows:

 

   July 31, 2022   October 31, 2021 
Weighted-average remaining lease term  0.7 years   1.4 years 
Weighted-average discount rate   3.79%   3.79%

 

Supplemental cash flow information related to operating leases was as follows:

 

  

For the Nine

Months Ended

July 31, 2022

  

For the Nine

Months Ended

July 31, 2021

 
Cash paid for operating lease liabilities  $22   $1,363 

 

Future minimum lease payments under non-cancellable leases as of July 31, 2022 were as follows:

 

      
Fiscal Year ending October 31,    
2022 (Remaining)  $7 
2023   13 
Total minimum lease payments   20 
Less: Imputed interest   1 
Total  $19 

 

 13 
 

 

7. COMMON STOCK PURCHASE WARRANTS AND WARRANT LIABILITY

 

Warrants

 

As of July 31, 2022 and October 31, 2021, there were outstanding and exercisable warrants to purchase 377,818 shares of our common stock with exercise prices ranging from $20.00 to $224.00 per share. Information on the outstanding warrants is as follows:

 

Exercise Price  

Number of

Shares

Underlying

Warrants

   Expiration Date  Type of Financing
$20.00    879   September 2024  September 2018 Public Offering
$224.00    4,092   July 2024  July 2019 Public Offering
$28.00    57,230   November 2025  November 2020 Public Offering
$56.00    140,552   April 2026  April 2021 Registered Direct Offering (Accompanying Warrants)
$56.00    175,065   5 years after the date such warrants become exercisable, if ever  April 2021 Private Placement (Private Placement Warrants)
 Grand Total    377,818       

 

As of July 31, 2022 and October 31, 2021, the Company had 201,874 of its total 377,818 outstanding warrants classified as equity (equity warrants).

 

Warrant Liability

 

As of July 31, 2022 and October 31, 2021, the Company had 175,944 of its total 377,818 outstanding warrants from an April 2021 private offering of common stock and warrants (the “April 2021 Private Placement”) and a September 2018 public offering of common stock and warrants (the “September 2018 Public Offering”) classified as liabilities (liability warrants).

 

The warrants issued in the April 2021 Private Placement will become exercisable only on such day, if ever, that is 14 days after the Company files an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock, $0.001 par value per share from 170,000,000 shares to 300,000,000 shares. These warrants expire five years after the date they become exercisable. As of July 31, 2022, the Company did not have sufficient authorized common stock to allow for the issuance of common stock underlying these warrants. The Company did not receive stockholder authorization to increase the authorized shares from 170,000,000 to 300,000,000 shares at the stockholder’s meeting commenced on June 3, 2021. The Company was subsequently required to file a proxy to seek an increase in the number of authorized shares and did not file such a proxy but rather elected to seek a reverse stock split to, among other things, increase the shares available. Accordingly, based on certain indemnification provisions of the securities purchase agreement, the Company concluded that liability classification is warranted. The Company utilized the Black Scholes model to calculate the fair value of these warrants at issuance and at each subsequent reporting date.

 

In measuring the warrant liability for the warrants issued in the April 2021 Private Placement at July 31, 2022 and October 31, 2021, the Company used the following inputs in its Black Scholes model:

  

   July 31, 2022   October 31, 2021 
Exercise Price  $56.00   $56.00 
Stock Price  $3.73   $38.80 
Expected Term   5.00 years    5.00 years 
Volatility %   112%   106%
Risk Free Rate   2.70%   1.18%

 

The September 2018 Public Offering warrants contain a down round feature, except for exempt issuances as defined in the warrant agreement, in which the exercise price would immediately be reduced to match a dilutive issuance of common stock, options, convertible securities and changes in option price or rate of conversion. As of July 31, 2022, the down round feature was triggered four times and the exercise price of the warrants were reduced from $1,800.00 to $20.00. The warrants require liability classification as the warrant agreement requires the Company to maintain an effective registration statement and does not specify any circumstances under which settlement in other than cash would be permitted or required. As a result, net cash settlement is assumed and liability classification is warranted. For these liability warrants, the Company utilized the Monte Carlo simulation model to calculate the fair value of these warrants at issuance and at each subsequent reporting date.

 

 14 
 

 

In measuring the warrant liability for the September 2018 Public Offering warrants at July 31, 2022 and October 31, 2021, the Company used the following inputs in its Monte Carlo simulation model:

 

   July 31, 2022   October 31, 2021 
Exercise Price  $20.00   $24.00 
Stock Price  $3.73   $38.80 
Expected Term   2.12 years    2.87 years 
Volatility %   104%   123%
Risk Free Rate   2.89%   0.77%

 

At July 31, 2022 and October 31, 2021, the fair value of the warrant liability was approximately $287,000 and $4,929,000, respectively. For the three months ended July 31, 2022 and 2021, the Company reported income of approximately $276,000 and $846,000, respectively, due to changes in the fair value of the warrant liability. For the nine months ended July 31, 2022 and 2021, the Company reported income of approximately $4,642,000 and $1,814,000, respectively, due to changes in the fair value of the warrant liability.

 

8. COMMITMENTS AND CONTINGENCIES

 

Atachbarian

 

On November 15, 2021, a purported stockholder of the Company commenced an action against the Company and certain of its directors in the U.S. District Court for the District of New Jersey, entitled Atachbarian v. Advaxis, Inc., et al., No. 3:21-cv-20006. The plaintiff alleges that the defendants breached their fiduciary duties and violated Section 14(a) and Rule 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder by allegedly failing to disclose certain matters in its Registration Statement on Form S-4 (Commission File No. 333-259065 (the “Registration Statement”) filed in connection with a proposed merger with Biosight Ltd. (the “Previously Proposed Merger”). On December 15, 2021, pursuant to an understanding reached with the plaintiff, the Company made certain other additional disclosures that mooted the demands asserted in the complaint. On December 17, 2021, the plaintiff filed a notice of voluntary dismissal with prejudice. On February 7, 2022, the Company and the plaintiff reached a settlement agreement, which is recorded in general and administrative expenses in the condensed consolidated statement of operations.

 

Purported Stockholder Claims Related to Biosight Transaction

 

Between September 16, 2021, and November 4, 2021, the Company received demand letters on behalf of six purported stockholders of the Company, alleging that the Company failed to disclose certain matters in the Registration Statement, and demanding that the Company disclose such information in a supplemental disclosure filed with the SEC. On October 14, 2021, the Company filed an amendment to the Registration Statement and on November 8, 2021, the Company made certain other additional disclosures that mooted the demands asserted in the above-referenced letters. The six plaintiffs have made settlement demands. On May 20, 2022, the Company and one of the plaintiffs have reached a settlement agreement, which is recorded in general and administrative expenses in the condensed consolidated statement of operations. The Company believes it has adequately accrued for settlements with the other five shareholders, which is recorded in accrued expenses in the condensed consolidated balance sheet.

 

In addition, the Company received certain additional demands from stockholders asserting that the proxy materials filed by the Company in connection with the Previously Proposed Merger contained alleged material misstatements and/or omissions. Certain stockholders also demanded books and records of the Company pursuant to Delaware law. In response to these demands, the Company agreed to make, and did make, certain supplemental disclosures to the proxy materials. The stockholders have made settlement demands. On July 18, 2022, the Company and the plaintiffs reached settlement agreements, which is recorded in general and administrative expenses in the condensed consolidated statement of operations.

 

 15 
 

 

Purported Stockholder Claims Related to Series D Convertible Preferred Stock Offering

 

On February 17, 2022, the Company received a letter on behalf of purported stockholders of the Company, demanding certain books and records pursuant to Delaware law regarding the proposed issuance of super voting preferred stock. The Company agreed to provide certain books and records to the stockholders and agreed to make, and did make, a supplemental disclosure to the proxy materials. The stockholders have made settlement demands. On July 18, 2022, the Company and the plaintiffs reached settlement agreements, which is recorded in general and administrative expenses in the condensed consolidated statement of operations.

 

9. TEMPORARY EQUITY

 

Series D Convertible Preferred Stock Offering

 

On January 31, 2022, the Company consummated an offering with certain institutional investors for the private placement of 1,000,000 shares of Series D convertible redeemable preferred stock (the “Series D Preferred Stock”). The shares, which have since been redeemed in accordance with their terms as described below, and are thus no longer outstanding as of July 31, 2022, had an aggregate stated value of $5,000,000. Each share of the Series D preferred stock had a purchase price of $4.75, representing an original issue discount of 5% of the stated value. The shares of Series D Preferred Stock were convertible into shares of the Company’s common stock, upon the occurrence of certain events, at a conversion price of $20.00 per share. The conversion, at the option of the stockholder, could occur at any time following the receipt of the stockholders’ approval for a reverse stock split. The Company was permitted to compel conversion of the Series D Preferred Stock after the fulfillment of certain conditions and subject to certain limitations. The Series D Preferred Stock also had a liquidation preference over the shares of common stock, and could be redeemed by the investors, in accordance with certain terms, for a redemption price equal to 105% of the stated value, or in certain circumstances, 110% of the stated value. Total net proceeds from the offering, after deducting the financial advisor’s fees and other estimated offering expenses, were approximately $4.3 million.

 

Since the Series D preferred stock had a redemption feature at the option of the holder, it was classified as temporary equity. At the January 31, 2022 issuance date, the Series D preferred stock was recorded on the balance sheet at approximately $4,225,000, which is the $4,312,000 net proceeds less the $87,000 value of the bifurcated preferred stock redemption liability (see below).

 

On April 6, 2022, the holders of all 1,000,000 outstanding shares of the Series D Preferred Stock exercised their right to cause the Company to redeem all of such shares at a price per share equal to 105% of the stated value per share of $5.00, and such shares were redeemed accordingly. The $1,025,000 accretion of the Series D convertible preferred stock to its redemption value was recorded as a reduction in additional paid-in capital (see Note 10).

 

Preferred Stock Redemption Liability

 

The Company evaluated the preferred stock redemption feature under ASC 815. Since the preferred stock redemption feature is not considered to be clearly and closely related to the preferred stock host and the redemption feature meets the four characteristics of a derivative under ASC 815, the preferred stock redemption feature is required to be bifurcated from the preferred stock host and valued as a liability. The Company utilized a binomial model to calculate the fair value of the preferred stock redemption feature at issuance.

 

In measuring the preferred stock redemption liability at April 6, 2021 (redemption date) and January 31, 2022 (issuance date), the Company used the following inputs in its binomial model:

 

   April 6, 2022   January 31, 2022 
Exercise Price  $20.00   $20.00 
Stock Price  $9.04   $10.88 
Volatility %   96%   105%
Risk Free Rate   1.25%   1.00%

 

At April 6, 2022 and January 31, 2022, the fair value of the preferred stock redemption liability was approximately $44,000 and $87,000, respectively. On April 6, 2022, the Series D convertible preferred stock was redeemed, and the $44,000 preferred stock redemption liability was reclassified into other paid-in capital (see Note 10). For the three months and nine months ended July 31, 2022, the Company reported income of approximately $0 and $44,000, respectively, due to a change in the fair value of the preferred stock redemption liability.

 

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10. STOCKHOLDERS’ EQUITY

 

A summary of the changes in stockholders’ equity for the nine months ended July 31, 2022 and 2021 is presented below (in thousands, except share data):

   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
   Preferred Stock   Common Stock   Additional Paid-In   Accumulated   Total  Shareholders’ 
   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
Balance at November 1, 2020   -   $-    975,897   $2   $440,916   $(410,738)  $30,180 
Stock-based compensation         -           -    -           -    236    -    236 
Advaxis public offerings, net of offering costs   -    -    383,333    -    8,550    -    8,550 
Warrant exercises   -    -    92,375    -    2,586    -    2,586 
Net loss   -    -    -    -    -    (3,977)   (3,977)
Balance at January 31, 2021   -   $-    1,451,605   $2   $452,288   $(414,715)  $37,575 
Stock-based compensation   -    -    69    -    215    -    215 
Stock option exercises   -    -    4    -    -    -    - 
Advaxis public offerings, net of offering costs   -    -    230,794    -    13,683    -    13,683 
Warrant exercises   -    -    137,968    -    1,185    -    1,185 
Issuance of shares to employees under ESPP Plan   -    -    12    -    -    -    - 
Net loss   -    -    -    -    -    (5,107)   (5,107)
Balance at April 30, 2021   -   $-    1,820,452   $2   $467,371   $(419,822)  $47,551 
Stock-based compensation   -    -    -    -    60    -    60 
Net loss   -    -    -    -    -    (3,334)   (3,334)
Balance at July 31, 2021   -   $-    1,820,452   $2   $467,431   $(423,156)  $44,277 

 

   Preferred Stock   Common Stock   Additional Paid-In   Accumulated   Total  Shareholders’ 
   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
Balance at November 1, 2021   -   $-    1,820,452   $2   $467,486   $(428,600)  $38,888 
Stock-based compensation          -           -    -             -    26    -    26 
Net loss   -    -    -    -    -    (365)   (365)
Balance at January 31, 2022   -   $-    1,820,452   $2   $467,512   $(428,965)  $38,549 
Stock-based compensation   -    -    -    -    23    -    23 
Accretion of discount and redemption feature of convertible preferred stock   -    -    -    -    (1,025)   -    (1,025)
Convertible preferred stock redemption   -    -    -    -    44    -    44 
Net loss   -    -    -    -    -    (2,440)   (2,440)
Balance at April 30, 2022   -   $-    1,820,452   $2   $466,554   $(431,405)  $35,151 
Stock-based compensation   -    -    -    -    25    -    25 
Fractional shares cashed out   -    -    (4,501)   -    (18)   -    (18)
Net loss   -    -    -    -    -    (6,963)   (6,963)
Balance at July 31, 2022   -    -    1,815,951    2    466,561    (438,368)   28,195 

 

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11. SHARE BASED COMPENSATION

 

The following table summarizes share-based compensation expense included in the condensed consolidated statements of operations (in thousands):

   2022   2021   2022   2021 
  

Three Months Ended

July 31,

  

Nine Months Ended

July 31,

 
   2022   2021   2022   2021 
Research and development  $12   $29   $36   $142 
General and administrative   13    31    38    369 
Total  $25   $60   $74   $511 

 

Stock Options

 

A summary of changes in the stock option plan for the nine months ended July 31, 2022 is as follows:

 

   Shares  

Weighted Average Exercise

Price

   Weighted Average Remaining Contractual Life In Years   Aggregate Intrinsic Value (in thousands) 
Outstanding as of October 31, 2021   11,192   $1,550.26    7.80   $34 
Cancelled or expired   (74)   22,200.00           
Outstanding as of July 31, 2022   11,118   $1,412.82    7.06   $       - 
Vested and exercisable at July 31, 2022   7,490   $2,077.20    6.64   $- 

 

The following table summarizes information about the outstanding and exercisable options at July 31, 2022:

  

Options Outstanding  Options Exercisable 
       Weighted   Weighted       Weighted   Weighted 
       Average   Average