In connection with our intended listing
on the OTCBB, we plan to implement a reverse stock split, in a range from
one-for-ten (1-for-10) to one-for-fifty (1-for-50), inclusive. The
reverse stock split is being implemented due to the low selling price of our
common stock and the large number of shares of common stock that we have
outstanding. The reverse stock split must be approved by our
stockholders, and there is no guarantee that such approval will be
obtained. If such approval is obtained and the reverse stock split is
implemented, there is no guarantee that the reverse stock split will increase
our share price. We also cannot guarantee that any increase in the
price of our common stock resulting from the reverse split will be proportionate
to the reverse split ratio, prevail in the market for any specific period of
time, increase the trading volume of our shares, or increase our ability to
raise capital through the sale of our shares. If the reverse stock
split fails to increase our share price proportionate to the reverse stock split
ratio, holders of our common stock will be adversely affected.
Our
internal control over financial reporting does not currently meet the standards
required by Section 404 of the Sarbanes-Oxley Act of 2002, and failure to
achieve and maintain effective internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act could have a material
adverse effect on our business and stock price.
We have not maintained internal control
over financial reporting in a manner that meets the standards of publicly traded
companies required by Section 404 of the Sarbanes-Oxley Act of
2002. The rules governing the standards that must be met for our
management to assess our internal control over financial reporting are complex
and require significant documentation, testing and possible
remediation. We expect to begin the process of reviewing, documenting
and testing our internal control over financial reporting after the
effectiveness of this Form 10, including potentially hiring additional key
management. There is no assurance that we will successful in being
able to attract additional management. We might also encounter
problems or delays in completing the implementation of any changes necessary to
make a favorable assessment of our internal control over financial
reporting. If we cannot favorably assess the effectiveness of our
internal control over financial reporting, investors could lose confidence in
our financial information and the price of our common stock could
decline.
Being
a public company will increase our administrative costs and might further strain
our resources and distract our management.
Upon the effectiveness of this Form 10,
we will again become a public reporting company. In complying with
the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC, we will
incur significant legal, accounting and other expenses that we did not incur as
a non-registered company. For example, we will be required to comply
with additional internal control requirements, we may pay higher rates for
director and officer liability insurance, and we will incur internal and
external costs to prepare and distribute periodic public reports in compliance
with our obligations under the securities laws. These additional
costs will lower our earnings and increase our ongoing need for
capital.
ITEM
2. FINANCIAL INFORMATION.
Management's
Discussion and Analysis of Financial Condition and Results of
Operation
The following discussion and analysis
of our financial condition and results of operations should be read in
conjunction with our financial statements and related notes appearing elsewhere
in this Form 10. In addition to historical information, this
discussion and analysis contains forward-looking statements that involve risks,
uncertainties, and assumptions. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including but not limited to those set forth under
"Risk Factors" and elsewhere in this Form 10.
General
Since our inception, we have
concentrated our efforts and resources on the development and commercialization
of individualized vaccine therapies and other technologies for the treatment of
cancer. These efforts require that we expend money in the development
and clinical testing of our products, as well as for maintaining operations and
facilities, for general and administrative expenses and general corporate
purposes.
We have been unprofitable since our
founding and we fund our losses primarily through debt and equity offerings of
common stock. We incurred a cumulative net loss of $126,570,950 from
inception through September 30, 2010 (of which $24,308,905 represents non-cash
losses attributable to accounting for our outstanding warrants and the imbedded
options in several of our convertible note agreements, which we will refer to
hereafter as "Non-Cash Derivative Charges"). We expect to continue to
incur operating losses, primarily due to the expenses associated with our
product development efforts and the cost of maintaining our manufacturing
facilities in the United States and, currently, in France.
Our financial statements are materially
impacted by our accounting for derivatives instruments related to our offering
of debt or equity securities. We have determined that in our
convertible loan financings, the conversion feature of the debt instrument, as
well as the warrants issued and related to our common stock, qualify as
derivative liabilities and must be accounted for as such. We measure
the value of our derivative liabilities with a mathematical model (binomial
model) that uses a number of factors including the historical fluctuations in
our share price, the exercise or conversion price of the instrument, current
market rates for government securities and the expected life of the
instrument. Due to the inputs, our liability becomes greater as our
share price increases (as the value of the shares we may potentially be called
upon to issue becomes larger), and the liability decreases as our share price
declines (as the value of the shares we may potentially be called upon to issue
becomes smaller). The changes in the value of our derivative
liabilities flow through our income statement each period, meaning that as our
share price declines we will report higher income than when our share price
increases and when our share price increases we will report lower income than
when our share price decreases. During the twelve months ended
December 31, 2009, we recorded a net loss of $19,424,459, of which $13,886,900
resulted from recording the change in derivative liability. During
the nine months ended September 30, 2010, we incurred a net loss of $16,276,890,
of which $10,289,905 was attributable to the change in the fair value of the
derivative liability as of September 30, 2010.
The continuation of our current plan of
operation requires us to raise significant additional capital immediately, and
if we are successful in raising capital, our ability in the future to raise
significant additional capital at once or through successive issuances to allow
us to develop products, obtain regulatory approval for our proposed products,
enter into agreements for product development, manufacturing and
commercialization, maintain operations and for general corporate
purposes. If we default on our obligations to CTCA pursuant to our
various agreements, especially if we fail to maintain our Philadelphia facility
to permit us to produce vaccine for patients who CTCA enrolls in our Phase
I/II clinical trials for O-VAX, we could lose our assets and control of our
Philadelphia facility. CTCA would currently have the right to seek
acceleration of our obligations and to take control of our Philadelphia facility
because we have not been servicing our CTCA debt. However, pursuant
to the Intercreditor Agreement, CTCA has agreed to forbear its right to
undertake certain actions as long as various conditions are met. If we do
not meet certain milestones and satisfy certain conditions under the
Intercreditor Agreement, then CTCA will be permitted under the
Intercreditor Agreement to take operational control of our Philadelphia
facility, by virtue of taking an assignment of the real estate lease covering
our Philadelphia facility, and to take ownership of certain assets in that
facility, including all licensures, contents, equipment and inventory then
located in or associated with the operation of our Philadelphia
facility. None of our products, including M-VAX, currently generate
any material revenue, and we may never achieve significant revenues or
profitable operations from the sale of M-VAX or any other products that we may
develop.
The major challenges for us and others
in the biopharmaceutical industry are the significant costs, time and
uncertainties related to efforts to obtain regulatory approval to market drug
products in the United States and foreign countries. Please refer to
the section entitled "Risk Factors" for further discussion regarding these
challenges.
Capitalization
As discussed under "Plan of
Operations—Background" below, we have undertaken certain transactions that have
significantly altered our capitalization. The table below sets forth
our capitalization as of January 31, 2011, setting forth the number of shares of
common stock currently outstanding and the fully-diluted number of shares that
would be outstanding in the event that all warrants and options presently issued
were exercised and Firebird elected to convert its notes obtained in the 2008
and 2010 financings into our common stock.
|
|
|
Common stock or common equivalents
|
|
|
Common
stock outstanding
|
|
|
591,322,214
|
|
|
Common
stock convertible from Series C Preferred Stock
|
|
|
1,030,756
|
|
|
Common
stock convertible from convertible notes
|
|
|
190,000,000
|
|
|
Options
and warrants outstanding
|
|
|
675,763,545
|
|
|
Total
options and warrants on a fully converted basis
|
|
|
1,458,116,515
|
|
Research
and Development Expenses
Our research and development activities
focus primarily on clinical development and trials of our AC Vaccine technology
for the treatment of melanoma and ovarian cancer. Our clinical
development program includes the development of techniques, procedures and tests
that need to be developed as part of the manufacturing of our biological product
so that the product can be evaluated and potentially approved by regulatory
authorities.
Our research and development expenses
consist primarily of costs associated with the clinical trials of our product
candidates, compensation and other expenses for research personnel, payments to
collaborators under contract research agreements, costs for our consultants and
compensation, materials, maintenance and supplies for the operation and
maintenance of our biological clean room facilities, which are necessary for the
production of materials to be used in clinical trials. All of these
costs qualify as research and development expenses in accordance with the
guidance included in ASC No. 730, "Accounting for Research and Development
Costs."
Manufacturing costs included in this
category relate to the costs of developing, supporting and maintaining
facilities and personnel that produce clinical samples in compliance with
cGMP. Our facilities and the personnel maintained for manufacturing
are currently at what we believe are at least the minimum required for
compliance with cGMP.
Cumulative research and development
costs incurred from inception through September 30, 2010 and December 31, 2009,
were $59,455,600 and $57,976,563, respectively. Research and
development costs were $1,479,037 for the nine months ended September 30, 2010
and $2,524,563 and $3,204,260 for the 12 months ended December 31, 2009 and
2008, respectively. The majority of these costs relate to the
maintenance and operation of our manufacturing facilities. Our
management estimates that greater than 90 percent of the periodic and cumulative
research and development expenses incurred relate to our one major program, the
AC Vaccine. At this time, due to the risks inherent in the clinical
trial process, risks associated with the product and product characterization
and risks associated with regulatory review and approval of clinical product
candidates, we are unable to estimate with any certainty the costs we will incur
in the continued development of our product candidates for commercialization,
but we believe they will be significant. For example, we would need
in excess of $50 million to complete the Phase II trial that we may conduct with
respect to M-VAX.
Operational
Expenditures
We
anticipate that the cost of keeping our Philadelphia facility functional,
employing our senior management and other personnel, professional fees
associated with resuming our status as a publicly reporting company trading on
an active market, maintaining our patents and other expenses necessary to remain
operational, including those for general corporate purposes, will be between
$450,000 and $550,000 per month for the next 12 to 16 months. This
level of cash usage is significant and will mean that even if we raise enough
capital to cover a year's worth of operating expenses, we will need to devote
significant management and other resources to additional capital raising
activities. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations—Liquidity and Capital
Resources."
Plan
of Operations
Background
In
October 2006, we announced that we had reached a SPA agreement with the FDA to
conduct a pivotal Phase III clinical trial for M-VAX, our AC Technology for the
treatment of patients with metastatic melanoma. The SPA is a written
agreement between AVAX and the FDA regarding the trial design, surrogate
endpoints to be used as a basis of filing for accelerated approval of M-VAX and
the statistical analysis plan necessary to support the FDA's approval of
M-VAX.
Under the SPA,
we agreed to enroll up to 387 patients with Stage IV melanoma in a Phase III
study, who will be assigned in a double-blind fashion at a two to one ratio to
M-VAX or a placebo vaccine. The data analysis plan for the study
includes an interim analysis of BOTRR (complete and partial) to be performed
when 50 percent of our patients (194 patients) have completed assessment of
their best anti-tumor response. The comparison of the BOTRRs for the
M-VAX and control groups will be used as the basis for an initial BLA submission
under 21 CFR 601 Subpart E, which provides for accelerated approval using a
surrogate endpoint in certain life threatening diseases. The analysis
of overall survival will be performed when the requisite number of patients have
reached, or failed to reach, as the case may be, the two-year survival mark
following the initiation of their treatment regimen, such that a conclusion can
be drawn as to whether at least 34 percent of patients have reached this overall
two-year survival benchmark or that it is no longer statistically possible for
such benchmark to be met.
In April
2007, we announced that we entered into definitive agreements for the sale to
certain accredited and institutional investors of approximately 80,000,000
shares of our common stock for gross proceeds of $10,000,000. In
connection with the purchase of the shares, we also agreed to issue to the
investors warrants to purchase an additional 80,000,000 shares of common
stock. Firebird participated in this offering in the amount of
$3,000,000, for which it received 24,000,000 shares of our common stock and
24,000,000 warrants. For a description of this transaction, please
see the section titled "Recent Sales of Unregistered Securities."
In
November 2007, we began enrollment in our Phase III Registration study for the
treatment of patients with Melanoma with M-VAX, our AC Technology for the
treatment of melanoma under the aforementioned SPA.
On
October 24, 2008, we issued a convertible promissory note (hereinafter
"2008 Note") in the amount of $1,321,000 to certain accredited investors,
including Firebird, which invested $500,000 of this amount, and JFE Hottinger
& Affiliates, which invested $250,000 of this amount. In
addition, the note holders were issued warrants to purchase 13,210,000 shares of
our common stock, as adjusted pursuant to the 2008 Note's anti-dilution
provisions. The notes and the warrants were sold pursuant to an
exemption from registration under the Securities Act. For a
description of this transaction, please see the section titled "Recent Sales of
Unregistered Securities."
On March
31, 2009, we filed a Form 15 with the SEC deregistering our common stock under
the Securities Act. Upon filing the Form 15, our obligation to file
reports and forms with the SEC, including Forms 10-K, 10-Q and 8-K, was
immediately suspended, and the deregistration and termination of our reporting
obligations became effective 90 days after filing. In addition, due
to our financial circumstances, our Board of Directors decided to
temporarily suspend enrollment for ongoing Phase III Registration in our M-VAX
trial for Stage IV melanoma patients. In March 2009, we contacted the
FDA and notified them that we were no longer accruing patients into this
study. We determined that it was necessary to take these steps in
order to preserve our limited remaining financial resources to remain marginally
operational, as we found it extremely difficult to raise capital to fund our
trials. These financing issues coincided with the FDA's 2007 decision
to reject Dendreon Corporation's BLA for its now commercially marketed prostate
cancer vaccine candidate Provenge®, despite the recommendation by the FDA's
Oncologic Drugs Advisory Committee that the vaccine be approved.
In 2007,
we entered into the CTCA Production Agreement, pursuant to which we were
required to fulfill certain production obligations for biological vaccines, and
CTCA was obligated to make certain payments to us and to purchase and install
several equipment items. We were unable to perform many of our
obligations and were in breach of the terms of the CTCA Production
Agreement. Subsequent to the initiatives taken by us in March 2009,
and due to our indebtedness to several creditors, including CTCA, as of April
27, 2009, we entered into the CTCA Security Agreement whereby the CTCA
Production Agreement would remain in effect, CTCA would control the operation
and maintenance of our Philadelphia facility for a period of six months and the
funds advanced to us as of that date for operating expenditures would become a
loan payable. During such period, during which CTCA operated and
maintained our Philadelphia facility, CTCA advanced to us the costs of
operations, and we granted to CTCA the unrestricted right to negotiate with all
vendors and customers of our Philadelphia facility. Pursuant to the
CTCA Security Agreement, we granted to CTCA a first priority security interest
in all of the personal property comprising our Philadelphia facility, including
all of our assets located at our Philadelphia facility and all intellectual
property owned by us and used in connection with our Philadelphia facility
whether then in existence or later acquired. As of December 31, 2009,
CTCA had made additional cost advances to us pursuant to the CTCA
Security Agreement of approximately $940,000 and made $400,000 in cash
advances. We are now receiving offsets against this loan in part
through the production of our AC Vaccines for CTCA, and as of December 31, 2010,
our balance owing to CTCA is $1,395,555.
If we
default on our obligations to CTCA pursuant to our various agreements,
especially if we fail to maintain our Philadelphia facility to permit us to
produce vaccine for patients who CTCA enrolls in our Phase I/II clinical
trials for O-VAX, we could lose our assets and control of our Philadelphia
facility. CTCA would currently have the right to seek acceleration of
our obligations and to take control of our Philadelphia facility because we have
not been servicing our CTCA debt. However, pursuant to the
Intercreditor Agreement, CTCA has agreed to forbear its right to undertake
certain actions as long as various conditions are
met. If certain conditions are not satisfied under the
Intercreditor Agreement, for example if we, among other things, fail to
obtain financing: (i) on or before September 30, 2011, in an amount that we
believe is reasonably sufficient to operate our Philadelphia facility and
produce CTCA's vaccines until at least December 31, 2011, and (ii) on or before
June 30, 2012, in an amount that we believe is reasonably sufficient to operate
our Philadelphia facility and produce CTCA's vaccines for one year thereafter,
then CTCA will be permitted under the Intercreditor Agreement to
exercise its aforementioned remedies. Pursuant to the CTCA Security
Agreement, we agreed that any transaction wherein we may be acquired by another
corporation or entity will not release us or our subsequent owner from our
obligations to produce AC Vaccine and other products pursuant to the CTCA
Security Agreement. In the event that we do not produce AC Vaccines,
or experience a substantial decline in the output of our
Philadelphia facility until the earlier of (a) 2012 and (b) our
production of up to 120 AC Vaccines, then CTCA has the right to take
operational control of our Philadelphia facility, by virtue of taking an
assignment of the real estate lease covering our Philadelphia facility, and to
take ownership of certain assets in that facility, including all licensures,
contents, equipment and inventory then located in or associated with the
operation of our Philadelphia facility. Upon the retirement of our
CTCA obligations, CTCA's security interest in our assets will cease to exist,
and our production obligations under the CTCA Security Agreement will continue
until the earlier of 2012 or our production of up to 120 AC Vaccines, at which
time we may negotiate a new production agreement.
In
October 2009, we closed a loan financing (hereinafter "2009 Note") pursuant to a
convertible note and warrant purchase agreement with our largest stockholder,
Firebird. Pursuant to the agreement, we issued a convertible
promissory note, originally due June 1, 2010, in the aggregate principal amount
of $1,400,000 and convertible at a price of $0.01 per share, and issued a
warrant to purchase, in aggregate, 93,333,333 shares (as subsequently adjusted
as described below) of our common stock, par value $0.004 per share at an
exercise price of $0.015 per share. The 2009 financing triggered the
anti-dilution provisions in the definitive agreements from the 2008 Note
involving the sale of convertible promissory notes and warrants to certain
accredited investors (including Firebird) and our current and then-existing
insiders. The proceeds of this financing were directed to working
capital, to recertify/obtain cGMP status for and operate our Philadelphia
facility, and to provide funding necessary to pursue a recapitalization in an
amount sufficient to seek funding for our pivotal Phase III clinical trial of
M-VAX for
the
treatment of Stage IV melanoma. We were unsuccessful in raising the
substantial amount of financing needed to fund our M-VAX trials following the
October 2009 financing. For a description of this transaction, please
see the section titled "Recent Sales of Unregistered Securities."
On
February 16, 2010, we entered into a convertible promissory note ("2010 Note")
in the amount of $231,000 with certain accredited investors similar to the terms
of the notes entered into in the 2008 Note above. The notes bear
interest at the rate of six percent and matured on June 1, 2010. The
notes are convertible into our common stock at a rate of $0.01 per share for
each dollar of unpaid principal and interest on the note. In
addition, the note holders were issued warrants to purchase 15,466,667 shares of
common stock at a price of $0.015 per share. These notes and warrants
were converted to shares of our common stock in connection with our October 2010
financing.
On April
1, 2010, we entered into a subscription agreement with certain of our existing
stockholders. Pursuant to the subscription agreement, the
stockholders could acquire additional shares of our common stock through the
exercise of previously issued warrants, after which they would receive a
replacement warrant at an exercise price of $0.015 per share, or they could
purchase a unit consisting of one share of common stock and a warrant to
purchase one share of common stock at $0.015 per share. Total
proceeds received were nine hundred and sixty thousand dollars ($960,000) and
resulted in the issuance of 64,000,000 shares of common stock and warrants to
purchase 64,000,000 shares of common stock at a price of $0.015 per
share.
On June
4, 2010, we entered into a subscription agreement of one million dollars
($1,000,000) with Firebird for the purchase of 20,000,000 shares of common stock
and warrants to purchase 100,000,000 shares of common stock at an exercise price
of $0.05 per share.
On
October 28, 2010, we entered into a non-binding agreement with Firebird to
invest up to $2,000,000 to meet our working capital needs. The
initial advance, in the amount of $1,300,000, was received on November 4, 2010
in consideration for the exercise of warrants, which had been issued in
connection with the June 4, 2010 financing, the number of which was adjusted in
connection with the agreement. Firebird consummated the initial
advance by exercising warrants for 111,111,111 shares of common stock, which, as
mentioned below, were modified as part of the agreement such that they were
exercisable at $0.0117 per share. The June 4, 2010 financing
agreement contained a provision that if Firebird exercised any or all of its
warrants in connection therewith within 12 months after their issuance, Firebird
would receive a replacement warrant for that number of warrants
exercised. Accordingly, we issued a replacement warrant to Firebird
to purchase 111,111,111 shares of common stock at an exercise price of $0.0117
per share. To the extent that Firebird exercises warrants to provide
us additional funds, and such funding is completed prior to June 4, 2011, we
will be required to issue up to an additional 316,239,316 replacement warrants
to Firebird at an exercise price of $0.0117 per share.
Immediately
prior to Firebird's initial advance and as a condition thereof, except for
Firebird, (i) all holders of the 2008 Notes and warrants received in connection
therewith, (ii) all holders of warrants received in connection with the April
2010 financing, and (iii) all holders of the 2010 Notes agreed to convert their
notes to our common stock at an exercise price of $0.01 per share and to either
exercise or forfeit their warrants obtained in these financings. All
holders of warrants elected to forfeit their warrants. Pursuant to
the agreement, we agreed to issue an additional 65,470,085 shares of common
stock to Firebird, to increase the number of shares for which
the warrants issued in the June 4, 2010 financings could be exercised,
from 100,000,000 underlying shares to 427,350,425 shares, and
modify the exercise price of the warrants from $0.05 to $0.0117
per share. This modification along with our agreement to reduce or
eliminate the minimum change in price required to cause anti-dilution protection
to become effective, triggered the anti-dilution provisions of the all warrants
purchased by Firebird since 2008, such that all are now exercisable at $0.0117
per share. Interest on the 2008 Notes was accrued and paid to each
holder through June 1, 2010, the maturity date of the 2008 Notes at
that time. Any interest accrued as of that date was forfeited,
immediately before the 2008 Notes were converted to common
stock. Firebird agreed to forego its cash interest and instead
received interest in the form of common stock priced at the 2008 and 2009 Notes'
adjusted conversion price of $0.01 per share. Interest on the 2008
Notes started accruing again as of October 29, 2010 pursuant to the agreement
between Firebird and us to extend the term of the 2008 and 2009 Notes, as
described, with certain other modifications, below. Interest on the
2009 Notes never stopped accruing.
Pursuant
to the agreement, Firebird agreed to forfeit all 24,000,000 warrants it received
in connection with the April 2007 financing. At his election Dr.
Prendergast forfeited approximately 50 percent of the warrants issued to him as
compensation in April 2010, and we agreed to extend the maturity date of the
remaining 2007 warrants held by others by one year, such that they now
expire on October 24, 2013. These warrants are exercisable at $0.15
per share.
In late
January, 2011, Firebird provided us with an additional cash infusion of
$700,000, which was effected through Firebird's exercise of warrants received in
the June 2010 financing noted above at an exercise price of $0.0117 per share,
resulting in the issuance of 59,829,060 shares of our common stock to Firebird.
As part of the exercise of these warrants, replacement warrants
with substantially identical terms were issued to Firebird. To
the extent that Firebird exercises warrants from the June 2010 financing to
provide us with additional funds, and such funding is completed prior to June 4,
2011, we will be required to issue up to an additional 256,410,254 replacement
warrants to Firebird at an exercise price of $0.0117 per share.
On
January 5, 2011, we reached an agreement with Firebird to extend the term of the
2008 Notes and the 2009 Notes to September 30, 2011 (as well as to amend the
terms of all Note and warrant agreements between us and Firebird as of October
28, 2010). We have been in default on these Notes since their amended
maturity date of June 1, 2010. As consideration for the extension of
the maturity date, we agreed to increase the rate of interest on each note as of
October 28, 2010 by 200 basis points from six percent to eight percent and to
pay such interest on a quarterly rather than an annual basis. The
extension agreement also provided us the option to pay interest either in
kind or in common stock at the then effective conversion price rather than in
cash, provided that if cash interest is not paid, Firebird may determine whether
it will receive interest in kind or in common stock. The provisions
regarding the form, but not the timing, of the interest payment will apply
retroactively as if they were put in place on the initial issuance date of the
2008 and 2009 Notes.
In
addition, pursuant to the extension agreement, we were required to file this
Form 10 with the SEC prior to January 10, 2011. Because we did not
file this Form 10 by that date, Firebird received an additional 75 basis points
of interest from such date on the 2008 and 2009 Notes, respectively, and a
new interest rate of 8.75 percent effective as of that date. The
interest rate on the 2008 and 2009 Notes will increase by an additional 75 base
points if we do not file a Registration Statement under the Securities Act of
1933, as amended (the "Registration Statement") with the SEC within five
business days after the Form 10 is declared effective. The interest
rate on the 2008 and 2009 Notes will increase by a further 50 basis points as of
the tenth day (or the next subsequent business day if such day is not a business
day) of each subsequent calendar month (i) if we have not filed this Form 10 by
such date or (ii) if the Form 10 has been declared effective by the SEC, but the
Registration Statement has not been filed and such date is more than five
business days after the effective date of the Form 10. The interest
rate payable to the holders of the 2008 and 2009 Notes will also increase by 50
basis points on the 91st day after filing of the Form 10 if the Form 10 is not
declared effective by such date and will increase by an additional 50 basis
points as of the end of each 30-calendar-day period thereafter if the Form 10
has not been declared effective by the end of such period. After the
Form 10 has been declared effective, the interest rate payable to the holders of
the 2008 and 2009 Notes will be increased by (i) an additional 50 basis points
if the Registration Statement has not been declared effective as of the end of
the 45th day following the effective date of the Form 10 and (ii) an additional
50 basis points for each 30-calendar-day period thereafter if the Registration
Statement has not been declared effective by the end of such period.
Notwithstanding the foregoing, the aggregate increases in the interest rate
payable to the holders pursuant to our agreement with Firebird will not cause
the interest rate to exceed the lesser of (i) 18 percent per year and (ii) the
maximum interest rate permissible under applicable law.
Current
Plan of Operation
Our plan of operation is to continue
our Phase II trial for O-VAX in conjunction with CTCA, to build our corporate
and operational infrastructure and to rebuild interest in our various clinical
programs in each of the medical, scientific and investment communities, with the
ultimate goal of attempting to raise sufficient financing to fund Phase III
clinical trials for either M-VAX or O-VAX.
As noted above, the continuation of our
current plan of operation requires us to raise significant additional capital
immediately. If we are unable to do so, our ability to continue as a
going concern will be in jeopardy, likely causing us to cease operations and
potentially seek protection from our creditors by entering bankruptcy
proceedings.
Liquidity
and Capital Resources
We believe that our existing cash
balances and the $700,000 infusion that we received from Firebird, our majority
stockholder, in late January 2011 will be sufficient to fund our currently
planned level of operations into March 2011. To remain operational,
we will need to raise significant additional near-term
capital. Firebird has no obligation to provide us with any additional
funding. We must raise additional capital immediately if we are to
continue as a going concern. We need to raise a minimum of $6.5
million for the next 12 to 16 months in order to continue our Phase I/II
clinical trials (conducted in conjunction with CTCA) for O-VAX, the results of
which we expect, but cannot ensure, should be available in approximately 12 to
16 months, to position ourselves to commence a larger clinical study involving a
vaccine utilizing the AC Technology and for general corporate
purposes. If we do not complete our Phase I/II clinical trails for
O-VAX within this period, we will need a minimum of additional $400,000 for each
month after such period. Our ability to complete the O-VAX trial is
largely dependent on CTCA's timely delivery of tumor samples to us for
processing, which in turn is dependent upon CTCA's ability to find patients
eligible for our trial and recruit them. The timing of our receipt of
tumor samples from CTCA is thus beyond our control.
As a result of our continued losses,
our independent auditors have included an explanatory paragraph in their report
on our financial statements for the fiscal years ended December 31, 2009 and
2008, expressing substantial doubt as to our ability to continue as a going
concern. The inclusion of a going concern explanatory paragraph in
the report of our independent auditors will make it more difficult for us to
secure additional financing or enter into strategic relationships on terms
acceptable to us.
We continually evaluate our plan of
operation discussed above to determine the manner in which we can most
effectively utilize our limited cash resources. The timing of
completion of any aspect of our plan of operations is highly dependant upon the
availability of cash to implement that aspect of the plan and other factors
beyond our control. There is no assurance that we will successfully
obtain the required capital or revenues, or, if obtained, that the amounts will
be sufficient to fund our ongoing operations. The inability to secure
additional capital would have a material adverse effect on us, including the
possibility that we would have to sell or forego a portion or all of our assets,
cease operations or seek bankruptcy relief. Firebird has a security
interest in our intellectual property, and CTCA has a first priority security
interest in all of the personal property comprising our laboratory operations at
our Philadelphia facility, including all of our assets located at the laboratory
and all intellectual property owned by us and used in connection with the
laboratory. CTCA also has the right to assume the lease and operating
control of our Philadelphia facility under certain circumstances. For
a description of these security interests, see the section titled "Certain
Relationships and Related Transactions, and Director
Independence." If we discontinue our operations, we will not have
sufficient funds to pay any amounts to our stockholders.
Even if we raise additional capital in
the near future, if our current and planned clinical trials for the AC Vaccine
in the United States do not demonstrate continuing progress toward taking one or
more products to market, our ability to raise additional capital in the future
to fund our product development efforts would likely be seriously
impaired. The ability of a biotechnology company, such as AVAX, to
raise additional capital in the marketplace to fund its continuing development
operations is conditioned upon our continuing to move its development products
toward ultimate regulatory approval and commercialization. If in the
future we are not able to demonstrate adequate progress in the development of
one or more products, we will not be able to raise the capital we need to
continue our then-current business operations and business activities, and we
will likely not have sufficient liquidity or cash resources to continue
operating.
Because our working capital
requirements depend upon numerous factors, including progress of our research
and development programs, pre-clinical and clinical testing, timing and cost of
obtaining regulatory approvals, changes in levels of resources that we devote to
the development of manufacturing and marketing capabilities, competitive and
technological advances, status of competitors, and our ability to establish
collaborative arrangements with other organizations, there can be no assurance
that our current cash resources and non-binding commitments of cash will be
sufficient to fund our operations. At present, we have no committed
external sources of capital, and do not expect any significant product revenues
for the foreseeable future. Thus, we will require immediate
additional financing to fund future operations. In the event that we
are unable to continue to fund our operations, certain of our critical
manufacturing assets at our Philadelphia facility may be taken from us pursuant
to a security interest placed on these assets. There can be no
assurance, however, that we will be able to obtain funds on acceptable terms, if
at all.
Condensed
Consolidated Balance Sheet
The table
below summarizes the balance sheet information as of September 30, 2010
(unaudited) and December 31, 2009:
|
|
|
September 30, 2010
(Unaudited)
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
284,687
|
|
|
$
|
301,168
|
|
|
Plant
and equipment, net
|
|
|
85,800
|
|
|
|
114,827
|
|
|
Tax
refund receivable
|
|
|
293,109
|
|
|
|
616,742
|
|
|
Total
assets
|
|
$
|
663,596
|
|
|
$
|
1,032,737
|
|
|
Derivative
liabilities
|
|
$
|
25,708,905
|
|
|
$
|
15,419,000
|
|
|
Convertible
notes and loans payable
|
|
|
4,619,148
|
|
|
|
3,253,605
|
|
|
Other
current liabilities
|
|
|
3,809,043
|
|
|
|
3,958,250
|
|
|
Total
current liabilities
|
|
$
|
34,137,096
|
|
|
$
|
22,630,855
|
|
|
Total
stockholders' deficit
|
|
|
(33,473,500
|
)
|
|
|
(21,598,118
|
)
|
|
Total
liabilities and stockholders' deficit
|
|
$
|
663,596
|
|
|
$
|
1,032,737
|
|
Cash on hand as of September 30, 2010
and December 31, 2009 was $17,404 and $25,586, respectively.
During 2010 our French subsidiary
received from the French government its research tax credit related to
activities for 2009 which resulted in the decrease in the balance of the amount
receivable.
The derivative liabilities increased
for the nine months ended September 30, 2010 by $10,289,905. This
liability relates to recording, at market value, a liability related to the
underlying conversion option of our convertible notes payable and the underlying
warrants issued related to the convertible notes. We measure the
value of our derivative liabilities with a mathematical model (binomial model)
that uses a number of factors including the historical fluctuations in our stock
price, the exercise or conversion price of the instrument, current market rates
for government securities and the expected life of the
instrument. Due to the inputs, our liability becomes greater as our
stock price increases (as the value of the shares we may potentially be called
upon to issue becomes larger), and the liability decreases as our stock
price declines (as the value of the stock we may potentially be called upon to
issue becomes smaller).
Convertible notes and loans payable
represent the 2008 and 2009 Notes and advances of approximately $1.3 million
received from CTCA which are characterized as loans payable. Upon the
issuance of the 2008 and 2009 Notes in October of 2008 and October of 2009, a
debt discount was recorded for the full amount of the debt. This
discount is amortized each year over the term of the original
Note. The increase in the obligation is due to the full amortization
of the discount during 2010 to interest expense.
Other liabilities include accounts
payable, accrued expenses and advances received from government
entities. The liabilities have remained relatively
unchanged.
For more information on the balance
sheet and income statement items, please see the detailed audited and unaudited
financial statements attached.
Condensed Consolidated
Income Statement
The table
below summarizes the income statement information as of September 30, 2010
(unaudited) and December 31, 2009:
|
|
|
Nine Months Ended
September 30, 2010
Unaudited
|
|
|
Twelve Months
Ended
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
|
-
|
|
|
$
|
399,354
|
|
|
Research
and development
|
|
|
1,497,037
|
|
|
|
2,524,563
|
|
|
Selling,
general and administrative
|
|
|
3,359,123
|
|
|
|
2,758,379
|
|
|
Total
operating losses
|
|
$
|
(4,838,160
|
)
|
|
$
|
(4,883,588
|
)
|
|
Interest
income
|
|
|
-
|
|
|
|
342
|
|
|
Interest
expense
|
|
|
(1,148,825
|
)
|
|
|
(654,313
|
)
|
|
Change
in fair value of derivative liabilities
|
|
|
(10,289,905
|
)
|
|
|
(13,886,900
|
)
|
|
Net
loss
|
|
$
|
(16,276,890
|
)
|
|
$
|
(19,424,459
|
)
|
Detailed
analysis of operating results for the years ended December 31, 2009 and 2008 and
for the nine months ended September 30, 2010 and 2009 follow.
Results
of Operations for the Year Ended December 31, 2009, Compared with the Year Ended
December 31, 2008
Revenue recognized in 2009 was $399,354
compared to revenue recognized in 2008 of $649,124. The decrease in
revenues was due to the elimination of contract manufacturing activities in the
Lyon, France facility after the first half of 2009 due to our decision to
eliminate staff and personnel and other factors.
During 2009, our research and
development expenses decreased $679,697, or 21.2 percent, as compared to
2008. Expenses for the periods are broken out by region as
follows:
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
United
States
|
|
$
|
1,233,521
|
|
|
$
|
1,837,850
|
|
|
France
|
|
|
1,291,042
|
|
|
|
1,366,410
|
|
|
|
|
$
|
2,524,563
|
|
|
$
|
3,204,260
|
|
In the United States, expenses
decreased with the decision to inactivate the Phase III registration trial for
M-VAX and the stopping of patient accrual. This decrease was
partially offset by an increase in headcount in preparation for the re-launch of
production activities in our Philadelphia facility, where production resumed in
early 2010. The French expenses decreased due to the termination of
personnel in the manufacturing area, which was partially offset by termination
and severance payments.
Selling, general and administrative
expenses decreased $752,530, approximately 21.4 percent, in 2009 compared to
2008. Expenses for the periods are broken out by region as
follows:
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
United
States
|
|
$
|
2,314,991
|
|
|
$
|
3,148,984
|
|
|
France
|
|
|
443,388
|
|
|
|
361,925
|
|
|
|
|
$
|
2,758,379
|
|
|
$
|
3,510,909
|
|
Expenses
in the United States decreased with the termination of our former chief
executive officer. General and administrative expenses also decreased
due to the termination of activities related to the clinical
studies. In France, expenses increased from the previous
year. This was due to severance charges related to the termination of
the director general and increased legal expenses associated with maintaining
the activities of the Lyon operations.
The
write-down of the acquired intellectual property and other intangibles in 2008
relates to the termination of a number of key employees in the Lyon facility
during 2008.
Interest
income decreased from $54,852 earned in 2008 to $342 earned in
2009. The decrease is due to the decline in operating funds on hand
and lower interest rates paid during 2009 as compared to 2008.
Interest
expense in 2009 was $654,313 compared to $283,091 in 2008. The
increase is due to additional financing obtained during 2009 and the
amortization of deferred debt discounts in 2009.
The
change in fair value of derivative liabilities was $13,886,900 in 2009 as
compared to no charge during 2008. The charge relates to the
calculated value of the derivative instrument underlying the conversion feature
and warrants issued in the 2009 financing plus calculations of the value of the
underlying conversion features of the 2008 Notes plus related warrants, taking
into account the reduction of the conversion price of the Notes and the exercise
price of the warrants issued in the 2008 financing due to the triggering of the
anti-dilution provisions associated with those instruments upon the consummation
of the 2009 financing.
Results
of Operations for the Nine Months Ended September 30, 2010, Compared with the
Nine Months Ended September 30, 2009.
Revenue recognized in the first nine
months of 2010 was $0 compared to revenue recognized in the first nine months of
2009 of $369,348. The decrease in revenues was due to the elimination
of activities in the Lyon, France facility after the first half of 2009,
resulting in elimination of staff and personnel.
During 2010, our research and
development expenses decreased $608,635, or 29.2 percent, as compared to
2009. Expenses for the periods are broken out by region as
follows:
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
United
States
|
|
$
|
1,242,739
|
|
|
$
|
907,538
|
|
|
France
|
|
|
236,298
|
|
|
|
1,180,134
|
|
|
|
|
$
|
1,479,037
|
|
|
$
|
2,087,672
|
|
In the United States, expenses
increased due to the increase in manufacturing activities in Philadelphia to
support our ongoing O-VAX trial with CTCA. The French expenses
decreased due to the termination of personnel in the manufacturing area and the
ceasing of all manufacturing operations.
Selling, general and administrative
expenses increased $1,553,644, approximately 86.1 percent, in the first nine
months of 2010 compared to 2009. Expenses for the periods are broken
out by region as follows:
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
United
States
|
|
$
|
3,274,735
|
|
|
$
|
1,425,982
|
|
|
France
|
|
|
84,388
|
|
|
|
379,497
|
|
|
|
|
$
|
3,359,123
|
|
|
$
|
1,805,479
|
|
In the
United States, the increased costs relate to the recognition of option expenses
of $2,618,185 incurred for the issuance of options and warrants to officers,
employees, board members and consultants. In France, expenses
decreased due to the ceasing of operations and the business.
Interest
expense for the first nine months of 2010 was $1,148,825 compared to $70,210 for
the same period in 2009. The increase is due to additional financing
obtained during 2009 and the amortization of deferred debt discounts in
2010.
During
the first nine months of 2010, the change in fair value of the derivative
liabilities was an increase of $10,289,905 compared to $50,000 in the same
period for 2009. The increase in the liability for 2010 is due to the
change in the fair market value per share that increased from $0.04 per share at
December 31, 2009 to $0.05 at September 30, 2010. The increase in
2009 resulted from the adoption of various accounting standards and the
calculation of the original obligation on our 2008 and 2009 convertible debt and
related warrant issuances.
Assuming
we are successful in raising additional capital, we anticipate our spending over
the next 12 months for research and development and selling, general and
administrative expenses will increase as compared with 2009 and 2010, as we
continue to implement and accelerate the plan of operation described
above.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors, and we do not
have any special purpose entities.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations is
based on our consolidated financial statements that have been prepared in
conformity with accounting principles generally accepted in the United States of
America ("GAAP"). It requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
We
consider certain accounting policies related to impairment of long-lived assets,
intangible assets and accrued liabilities to be critical to our business
operations and the understanding of our results of operations:
Going
Concern
. As shown in the accompanying financial statements, we
have not been profitable and have reported recurring losses from
operations. These factors raise substantial doubt about our ability
to continue to operate in the normal course of business. The
accompanying financial statements do not include any adjustments that might be
necessary should we be unable to continue as a going concern.
Impairment of Long-Lived
Assets
. Management reviews for impairment whenever events or
changes in circumstances indicate that the carrying amount of property and
equipment may not be recoverable under the provisions of accounting for the
impairment of long-lived assets. If it is determined that an
impairment loss has occurred based upon expected future cash flows, the loss is
recognized in our statement of operations. During 2009 we recorded a
charge to expenses for the remaining depreciable basis of the equipment located
at our facility in Lyon, France.
Intangible
Assets
. We previously recorded an intangible asset related to
the personnel associated with our Lyon, France facility. Due to
head-count declines and dismissal of management at our facility, it was
determined that the value of the asset had completely declined and a charge was
recorded in the income statement.
Share-based
compensation
. Management determines value of stock-based
compensation to employees in accordance with Financial Accounting Standards
Board ("FASB") ASC 718, "Compensation – Stock
Compensation." Management determines value of stock-based
compensation to non-employees and consultants in accordance with and ASC 505,
"Equity-Based Payments to Non-Employees."
Derivative
liabilities
. FASB ASC 815, "Derivatives and Hedging," requires
all derivatives to be recorded on the balance sheet at fair value for fiscal
years beginning after December 15, 2008. As a result, certain
derivative warrant liabilities (namely those with a price protection feature)
are now separately valued as of January 1, 2009 and accounted for on our balance
sheet, with any changes in fair value recorded in earnings. On our
balance sheet as of December 31, 2009, we used the binomial lattice model to
estimate the fair value of these warrants. Key assumptions of the
binomial lattice option-pricing model include the adjusted market value of our
stock (calculated as the average daily trading price over the preceding year),
the exercise price of the warrants, applicable volatility rates, risk-free
interest rates, expected dividends and the instrument's remaining
term. These assumptions require significant management
judgment. In addition, changes in any of these variables during a
period can result in material changes in the fair value of (and resultant gains
or losses on) of this derivative instrument.
Research and Development
Costs
.
Research and
development costs, including payments related to research and license
agreements, are expensed when incurred. Contractual research expenses
are recorded pursuant to the provisions of the contract under which the
obligations originate. Research and development costs include all
costs incurred related to the research and development, including manufacturing
costs incurred, related to our research programs. We are required to
produce our products in compliance with cGMP, which requires a minimum level of
staffing, personnel and facilities testing and maintenance. Based
upon our current staffing level required to be in compliance with cGMP, we have
excess capacity.
Impact
of Recently Issued Accounting Standards
On
January 1, 2009, we adopted ASC 808-10, "Collaborative Arrangements" ("ASC
808-10"), which requires a certain presentation of transactions with third
parties and of payments between parties to a collaborative arrangement in our
statement of operations, along with disclosure about the nature and purpose of
the arrangement. The adoption of ASC 808-10 did not have any impact
on our results of operations, cash flows or financial position.
On January 1, 2009, we adopted ASC
815-40-15, "Derivatives and Hedging — Contracts in Entity's Own Equity
(Scope and Scope Exceptions)" ("ASC 815-40-15"), which requires that we apply a
two-step approach in evaluating whether an equity-linked financial instrument
(or embedded feature) is indexed to our own stock, including evaluating the
instrument's contingent exercise and settlement provisions. The
adoption of ASC 815-40-15 resulted in us adjusting our beginning balance of
retained earnings down by $132,100 as of January 1, 2009 and resulted in us
recording a change in fair value of our derivative liability on the statement of
operations for the 12 months ended December 31, 2009 of $13,886,900 and a
cumulative derivative liability on our balance sheet at December 31, 2009 of
$15,419,000.
During
the quarter ended June 30, 2009, we adopted ASC 855-10, "Subsequent Events"
("ASC 855-10") that establishes general standards of accounting and disclosure
for events that occur after the balance sheet date but before financial
statements are issued. The adoption of ASC 855-10 did not have any
impact on our results of operations, cash flows or financial
position.
Effective
during the quarter ended September 30, 2009, the FASB issued ASC 105-10,
"Generally Accepted Accounting Principles" that mandated that the FASB ASC
become the single official source of authoritative GAAP other than guidance
issued by the SEC, superseding existing FASB, American Institute of Certified
Public Accountants, Emerging Issues Task Force ("EITF"), and related
literature. The adoption of ASC 105-10 did not have any substantive
impact on our consolidated financial statements or related
footnotes.
In April
2010, the FASB issued Accounting Standards Update 2010-17 (ASU 2010-17),
"Revenue Recognition – Milestone Method (Topic 605): Milestone Method of Revenue
Recognition." The amendments in this Update are effective on a
prospective basis for milestones achieved in fiscal years, and interim periods
within those years, beginning on or after June 15, 2010. Early
adoption is permitted. If a vendor elects early adoption and the
period of adoption is not the beginning of the entity's fiscal year, the entity
should apply the amendments retrospectively from the beginning of the year of
adoption. We do not expect the provisions of ASU 2010-17 to have a
material effect on our financial position, results of operations or cash
flows.
In May 2010, the FASB issued Accounting
Standards Update 2010-19 (ASU 2010-19), "Foreign Currency (Topic 830): Foreign
Currency Issues: Multiple Foreign Currency Exchange Rates (SEC
Update)." The amendments in this Update discuss the translation of
foreign currency for consolidation in GAAP financial statements. This
Update is effective March 18, 2010. We do not expect the provisions
of ASU 2010-19 to have a material effect on our financial position, results of
operations or cash flows.
In July 2010, the FASB issued
Accounting Standards Update 2010-20 (ASU 2010-20), "Receivables (Topic 310):
Disclosures about the Credit Quality of Financing Receivables and the Allowance
for Credit Losses." The amendments in this update require disclosures
about the nature of credit risk in an entity's financing receivables, how that
risk is incorporated into the allowance for credit losses and the reasons for
any changes in the allowance. This Update is effective for interim
and annual reporting periods ending on or after December 15, 2010. We
do not expect the provisions of ASU 2010-20 to have a material effect on our
financial position, results of operations or cash flows.
ITEM
3. PROPERTIES.
We lease a pharmaceutical and gene
therapy clinical manufacturing facility in Lyon, France. The facility
consists of approximately 9,000 square feet, of which approximately 7,000 square
feet are utilized for manufacturing development, including 3,000 square feet of
clean rooms and 2,000 square feet for office space. Currently, the
monthly rental on the facility is approximately $29,900. The lease
was for a nine-year period through 2009 and was extendable for another nine-year
period. Currently, the lease is being extended on a month-by-month
basis.
We lease our Philadelphia facility,
which is used for our executive offices and is suitable for our clinical
manufacturing activities. The facility consists of approximately
11,900 square feet, of which approximately 9,300 square feet are suitable for
manufacturing development, while the remaining 2,600 square feet are used for
office space. We have options for additional
space. Currently, the monthly rental on the facility is approximately
$16,625. The lease was recently extended for a five-year period
through January 2013 and is extendable for one additional five-year
period.
We believe that each of these
properties is adequately covered by insurance.
ITEM
4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth, as of
January 31, 2011, certain information known to us regarding the beneficial
ownership of our common stock by:
|
|
▪
|
each
person known by us to be the beneficial owner of more than five percent of
our outstanding shares of common
stock;
|
|
|
▪
|
each
of our named executive officers;
and
|
|
|
▪
|
all
our current executive officers and directors as a
group.
|
|
Name and Address(1)
|
|
Number of Shares (2)
|
|
|
Percentage of
Outstanding Shares
|
|
|
|
|
|
|
|
|
|
|
Directors
and Executive Officers:
|
|
|
|
|
|
|
|
John
K. A. Prendergast, Ph.D.(3)
|
|
|
12,174,734
|
|
|
|
2.02
|
%
|
|
Andrew
W. Dahl, Sc.D.(3)
|
|
|
7,028,795
|
|
|
|
1.18
|
%
|
|
Carl
Spana, Ph.D.(3)
|
|
|
7,193,712
|
|
|
|
1.20
|
%
|
|
Henry
E. Schea, III(3)
|
|
|
2,587,500
|
|
|
|
*
|
|
|
All
Directors and Current Executive Officers as a group (4
persons)
|
|
|
28,984,741
|
|
|
|
4.71
|
%
|
|
5%
Stockholders:
|
|
|
|
|
|
|
|
|
|
Firebird
Global Master Fund, Ltd. and affiliates(4)
/c/
Trident Trust Company (Cayman) Limited
One
Capital Place, P.O. Box 847
George
Town, Grand Cayman KY1-1103
Cayman
Islands
|
|
|
1,085,310,434
|
|
|
|
80.49
|
%
|
|
JFE
Hottinger & Affiliates(5)
Hottingerstrasse
21
CH-8032
Zurich
Switzerland
|
|
|
60,082,490
|
|
|
|
9.94
|
%
|
*Represents
less than one percent.
(1)
Unless otherwise specified, the address for each of our directors and named
executive officers is c/o AVAX Technologies, Inc., 2000 Hamilton Street, Suite
204, Philadelphia, PA 19130.
(2) As
reported by such persons as of January 31, 2011. The percentage of
common stock beneficially owned is determined by adding the number of shares of
common stock issued and outstanding, 591,322,214 as of January 31, 2011, to the
number of shares issuable upon conversion of the Series C Preferred Stock,
1,030,756 as of January 31, 2011, except as indicated otherwise and except where
the person has the right to acquire shares within the next 60 days of January
31, 2011 pursuant to options, warrants or otherwise, which increases the number
of shares beneficially owned by such person and the number of shares outstanding
for determining that person's percentage of ownership. We have
determined beneficial ownership in accordance with the rules of the
SEC. Unless otherwise indicated in the footnotes to this table, each
stockholder named in the table has sole voting and investment power with respect
to all shares shown as beneficially owned by that stockholder.
(3)
Includes the following numbers of exercisable options and/or warrants
exercisable within 60 days of January 31,2011: (a) 9,205,518 for Dr.
Prendergast; (b) 5,770,000 for Dr. Dahl; (c) 5,870,000 for Dr. Spana; and (d)
2,587,500 for Mr. Schea.
(4) The
share number is based on our internal records and includes 190,000,000 shares
issuable upon conversion of convertible notes and 566,017,093 shares underlying
warrants. James Passin and Harvey Sawikin control FGS Advisors,
LLC, which serves as the investment manager of Firebird. Mr. Passin and
Harvey Sawikin may be deemed to have the ultimate investment and
voting control over these shares. Firebird has acquired on a
beneficial basis more than 50 percent of our company in various transactions in
2009 and 2010. For more information about these transactions, please
see the section titled "Recent Sales of Unregistered
Securities."
(5) The share number is based on our internal records and includes
12,060,000 shares underlying warrants. We are unable to determine who
has the ultimate voting or investment control over the shares held by JFE
Hottinger & Affiliates.
ITEM
5. DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth certain
information about our executive officers, key employees and directors as of the
date of this Form 10. There are no family relationship among any
directors and executive officers.
|
Name
|
|
Age
|
|
Position with our
Company
|
|
|
|
|
|
|
|
John
K. A. Prendergast, Ph.D.
|
|
56
|
|
Chief
Executive Officer and Chairman of the Board
|
|
|
|
|
|
|
|
Henry
E. Schea, III
|
|
58
|
|
Executive
Director of Global Manufacturing and Quality Control of AVAX and President
and General Director of Genopoïétic, S.A.
|
|
|
|
|
|
|
|
Andrew
W. Dahl, Sc.D.
|
|
67
|
|
Director
|
|
|
|
|
|
|
|
Carl
Spana, Ph.D.
|
|
48
|
|
Director
|
John K. A. Prendergast, Ph.D.
,
has served as our Chief Executive Officer since October 16, 2009 and is
responsible for our operations, financing and strategy. He has been a
member of our Board of Directors since July 1996, serving as Executive Chairman
of our Board of Directors since October 2003. Dr. Prendergast has
served as President and principal of Summercloud Bay, Inc., an independent
consulting firm providing services to the biotechnology industry, since
1993. He is co-founder of Palatin Technologies, Inc., a public
biopharmaceutical company, and has been Chairman of the Board of Palatin since
June 14, 2000 and a director since August 1996. Dr. Prendergast is a
member of the Board of MediciNova, Inc., a life science company, and was a
member of the Board of Avigen, Inc. until its acquisition by MediciNova in
2009. Currently, he is also Executive Chairman of the Board of
Directors of Antyra, Inc., a privately-held biopharmaceutical
firm. From October 1991 through December 1997, Dr. Prendergast was a
managing director of The Castle Group Ltd., a medical venture capital
firm. Dr. Prendergast received his M.Sc. and Ph.D. from the
University of New South Wales, Sydney, Australia and a C.S.S. in administration
and management from Harvard University.
Dr. Prendergast has in-depth knowledge
of our business and our competitive landscape and brings a historical
perspective to our Board coupled with extensive industry experience in corporate
development and finance in the life sciences field. He also brings
experience in establishing and operating small research and development
companies, including financing, strategic planning and implementation, and 15
years of public company board experience, including service as the chairman of
audit, compensation and governance committees at various companies for over ten
years.
Henry E. Schea, III
, has been
Executive Director of Global Manufacturing and Quality Control since November
2009 and has also served as the President and General Director of our
wholly-owned French subsidiary Genopoïétic since December 16,
2009. Mr. Schea has previously served as our Director of Global
Quality and Regulatory Affairs since March 2002. Mr. Schea has over
20 years experience in research, product development, GMP manufacturing and
quality control and assurance, with a focus on cell and gene
therapies. From 1981-1991, Mr. Schea served in various manufacturing
and quality control positions at Amgen. From 1991 through 2001, Mr.
Schea developed quality systems for new biotech firms including Gene Medicine
and Chimeric Therapies. Mr. Schea received his B.S. in Microbial
Genetics from the University of Massachusetts in 1976.
Andrew W. Dahl, Sc.D.
, has
been a member of our Board of Directors since September 1999. Since
May 2007, Dr. Dahl has served as Chief Innovation Executive of Fairview Health
Services, a $2.5 billion nonprofit health organization that is a clinical arm of
the University of Minnesota. From March 2005 to March 2007, Dr. Dahl
served as the Vice President of Consumer Driven Health and Human Resources
of Alegent Health, a nonprofit, multi-hospital and health system headquartered
in Omaha, Nebraska. He served as President and Chief Executive
Officer of Evolution Health, LLC, from July 2000 through February
2005. From July 1994 through December 1999, Dr. Dahl served as the
President and Chief Executive Officer of HealthNet, Inc. From July
1990 through March 1994, Dr. Dahl served as President and Chief Executive
Officer of IVF America, Inc. (now known as IntegraMed), where he was
instrumental in taking the corporation public. Dr. Dahl also served
as Executive Vice President and Chief Operating Officer of St. John Health and
Hospital Corporation in Detroit, a university-affiliated medical center, and was
Vice President for Development of the Hospital Corporation of America,
Management Company. Dr. Dahl received his Sc.D. from The Johns
Hopkins University and a M.P.A. from Cornell University. Dr. Dahl is
also a fellow in the American College of Health Care Executives.
Dr. Dahl has in-depth knowledge of our
company and extensive industry experience, having served as a senior executive
of healthcare services and bioscience companies for more than 20
years. He also brings experience with the going public process,
having led IVF America, Inc. (now known as IntegraMed) in its initial public
offering and listing on the NASDAQ Stock Market, LLC.
Carl Spana, Ph.D.
, has been a
member of our Board of Directors since September 1995 and was our Interim
President from August 1995 to June 15, 1996. Dr. Spana is a
co-founder of Palatin Technologies, Inc. and has been its President and Chief
Executive Officer since June 2000. He has been a director of Palatin
since June 1996 and has been a director of RhoMed Incorporated, a wholly-owned
subsidiary of Palatin, since July 1995. Dr. Spana has served Palatin
in other executive capacities prior to June 2000. Dr. Spana was a
director of Curalogic A/S, a privately held company, from 2005 to 2008.
Additionally, he was Vice President of Paramount Capital Investments, LLC, a
biotechnology and biopharmaceutical merchant-banking firm, and of The Castle
Group Ltd., a medical venture capital firm, from June 1993 to June
1996. Through his work at Paramount Capital Investments and
Castle Group, Dr. Spana co-founded and acquired several private biotechnology
firms. From July 1991 to June 1993, Dr. Spana was a Research
Associate at Bristol-Myers Squibb, where he was involved in scientific research
in the field of immunology. Dr. Spana received his Ph.D. in molecular
biology from The Johns Hopkins University and his B.S. in biochemistry from
Rutgers University.
Dr. Spana's qualifications for our
Board include his leadership experience, public company board experience, and
extensive industry experience. As our director since 1995, Mr. Spana
has in-depth knowledge of our company and, as a senior executive of life science
companies for more than 15 years, he also brings in-depth knowledge of the
industry in which we operate.
Our Board of Directors is currently
comprised of three directors. Drs. Dahl and Spana serve on our Audit
Committee, Compensation Committee, and Nominating and Governance
Committee.
Item
6. Executive Compensation.
Executive
Compensation
2010
Summary Compensation Table
The following table presents
information regarding the compensation for our fiscal year ended December 31,
2010 ("fiscal 2010") for all of our executive officers, including the president
and general director of our French subsidiary Genopoïétic, S.A. We
sometimes refer to these individuals collectively in this Form 10 as our "named
executive officers."
|
Name and Principal Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
|
Warrant
Awards
($)(1)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)(2)
|
|
|
John
K. A. Prendergast, Ph.D.
|
|
2010
|
|
|
264,000(3)
|
|
|
|
1,000,262
|
|
|
|
––
|
|
|
|
1,264,262
|
|
|
Chief
Executive Officer and
Chairman
of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry
E. Schea, III
|
|
2010
|
|
|
211,615
|
|
|
|
157,500
|
|
|
|
––
|
|
|
|
369,115
|
|
|
Executive
Director of Global Manufacturing and Quality Control;
President
and General Director of Genopoïétic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The
dollar amounts in this column reflect the grant date fair value of warrants
computed in accordance with FASB ASC Topic 718. On April 16, 2010,
our Board of Directors approved grants of warrants to Dr. Prendergast equivalent
to two percent of our fully diluted shares on an as-converted basis on April 16,
2010, representing an immediate grant of 16,671,036 warrants (with the grant
date fair value of $1,000,262). In October 2010, Dr. Prendergast
forfeited 50 percent of these warrants at his election. The terms of
the warrants provide for immediate vesting with cashless exercise at a strike
price of $0.015.
Our Board
of Directors have also approved the following grants that would be made to Dr.
Prendergast if any of the following events occurred: (i) a grant of warrants
equivalent to 1.5 percent of our fully diluted shares on an as-converted
basis on April 16, 2010 upon a financing of at least
$20,000,000 through an offering or merger and (ii) a grant of warrants
equivalent to 0.5 percent of our fully diluted shares on an as-converted basis
on April 16, 2010 upon accrual of 50 percent of the patients for the melanoma
pivotal trial, neither of which events have occurred
yet.
In
addition, on April 16, 2010, our Board of Directors granted 2,000,000
warrants and 1,000,000 options to Mr. Schea (with the grant date fair value of
$120,000 and $37,500, respectively). The terms of the warrants
provide for immediate vesting. The options vest quarterly over a
period of four years. See Note 1, "Description of Business and
Significant Accounting Policies – Stock Based Compensation," and Note 4, "Stock
Based Compensation," to our financial statements included herein for assumptions
underlying the valuation of equity awards.
(2) Our
named executive officers did not earn any bonuses for our fiscal
2010.
(3) We
paid $220,000 to Dr. Prendergast; the rest of the reported amount was
accrued.
Employment
Agreements
We currently do not have employment
agreements with any of our executive officers but are in a process of
negotiating an employment agreement with Dr. Prendergast, our Chief Executive
Officer.
2006
Equity Incentive Plan
On June 12, 2006, our Board of
Directors approved the 2006 Equity Incentive Plan, subject to stockholder
approval, authorizing up to 10,000,000 shares of common stock for granting both
incentive and nonqualified stock options, stock appreciation rights, restricted
stock or any combination of the foregoing to our employees, non-employee
directors, consultants and members of our scientific advisory
board. The exercise price and vesting period of the options are
determined by our Board of Directors at the date of grant. Options
may be granted up to 10 years after the plan's adoption date and generally
expire 10 years from the date of grant. This plan replaced our 2001
Stock Option Plan and our 2000 Directors' Option Plan as of the date of
enactment of the plan.
Outstanding
Equity Awards at December 31, 2010
The following table sets forth
information relating to all of our named executive officers' outstanding option
and warrant awards as of the end of our fiscal 2010 (December 31,
2010). Except as provided below, none of our named executive officers
had any unvested restricted stock awards or any other equity-based awards
outstanding as of the end of our fiscal 2010.
|
|
|
Option/Warrant
Awards
|
|
Name
|
|
Grant Date
|
|
Number of Shares of
Common Stock
Underlying
Unexercised
Options/Warrants (#)
Exercisable
|
|
|
Number of Shares of
Common Stock
Underlying
Unexercised
Options/Warrants (#)
Unexercisable
|
|
|
Option/Warrant
Exercise Price ($)
|
|
Option/Warrant
Expiration Date
|
|
John
K. A. Prendergast, Ph.D.
|
|
1/1/2004(1)
|
|
|
40,000
|
|
|
|
––
|
|
|
|
0.170
|
|
1/1/2014
|
|
|
|
10/1/2004(1)
|
|
|
150,000
|
|
|
|
––
|
|
|
|
0.125
|
|
10/1/2014
|
|
|
|
6/7/2005(2)
|
|
|
275,000
|
|
|
|
––
|
|
|
|
0.270
|
|
6/7/2015
|
|
|
|
1/31/2006(1)
|
|
|
30,000
|
|
|
|
––
|
|
|
|
0.260
|
|
1/31/2016
|
|
|
|
8/27/2007(1)
|
|
|
375,000
|
|
|
|
––
|
|
|
|
0.190
|
|
8/27/2014
|
|
|
|
4/16/2010(3)
|
|
|
8,335,518
|
|
|
|
––
|
|
|
|
0.015
|
|
4/16/2020
|
|
Henry
E. Schea, III
|
|
2/2/2004(1)
|
|
|
100,000
|
|
|
|
––
|
|
|
|
0.170
|
|
2/2/2011
|
|
|
|
6/7/2005(1)
|
|
|
100,000
|
|
|
|
––
|
|
|
|
0.300
|
|
6/7/2012
|
|
|
|
8/7/2007(2)
|
|
|
200,000
|
|
|
|
––
|
|
|
|
0.19
|
|
8/7/2014
|
|
|
|
4/16/2010(4)
|
|
|
187,500
|
|
|
|
812,500
|
|
|
|
0.069
|
|
4/16/2017
|
|
|
|
4/16/2010(3)
|
|
|
2,000,000
|
|
|
|
––
|
|
|
|
0.015
|
|
4/16/2020
|
|
(1)
|
The
vesting schedule of these options provided for the vesting of 25 percent
on the grant date and the vesting of 25 percent on each of the next three
anniversaries of the grant date. The options granted in 2007
were awarded under our 2006 Equity Incentive Plan. All options
have fully vested.
|
|
(2)
|
These
options vested in 16 equal installments commencing on September 7, 2005,
at a rate of 1/16th per
quarter.
|
|
(3)
|
These
warrants vested immediately upon
issuance.
|
|
(4)
|
These
options vest quarterly over four years, commencing on April 16,
2010.
|
Payments
Upon Termination and Change in Control
2006 Equity Incentive Plan
Pursuant to our 2006 Equity Incentive
Plan, upon a plan participant's termination for cause, all of the participant's
options will immediately expire and be forfeited, whether or not then
exercisable. Unless otherwise defined in a participant's written
employment agreement in effect on the date of grant (as amended from time to
time thereafter) or in a participant's award grant agreement, "cause" means (i)
conviction of a felony or any crime or offense lesser than a felony involving
our property, (ii) conduct that has caused demonstrable and serious injury to
us, monetary or otherwise, (iii) willful refusal to perform or substantial
disregard of duties property assigned, as determined by us, or (iv) breach of
duty of loyalty to us or other act of fraud or dishonesty with respect to
us.
Upon a participant's death, disability
or retirement, the participant's options that are exercisable on the date of
death, disability or retirement will remain exercisable for, and otherwise
terminate at the end of, one year from the date of such death or disability (or,
in the case of retirement, 90 days from the date of retirement), but in no event
after the expiration date of the options; provided that, in the case of
disability and retirement, the participant does not engage in competition during
such one-year (or, in the case of retirement, 90-day) period without our Board's
or Compensation Committee's written consent. All of the participant's
options that were not exercisable on the date of retirement, death or disability
will be forfeited immediately upon such retirement, death or disability unless
such options become fully vested and exercisable in the discretion of our
Compensation Committee. Unless otherwise determined by our
Compensation Committee, upon cessation of services for any other reason, all of
the participant's options that were exercisable on the date of such cessation
will remain exercisable for, and will otherwise terminate at the end of, a
period of 30 days after the date of such cessation, but in no event after the
expiration date of the options; provided that the participant does not engage in
competition during such 30-day period without our Board's or Compensation
Committee's written consent. Unless otherwise determined by our
Compensation Committee, all of the participants' options that were not
exercisable at the end of such cessation shall be forfeited immediately upon
such cessation. If a participant other than our director, officer or
employee ceases to perform services for us due to retirement, death, disability
or any other reason, the provisions in the participant's award grant agreement
will control. Unless otherwise determined by our Compensation
Committee, upon a participant's cessation of services to us for any reason, all
restricted shares granted to the participant on which the restrictions have not
lapsed will be immediately forfeited to us.
If there is a change in control, all of
the participant's options will become fully vested and exercisable upon such
change in control and will remain so until their expiration date, whether or not
the grantee is subsequently terminated. Unless otherwise determined
by our Compensation Committee, immediately prior to a change in control during
any period of restriction, all restrictions on restricted shares granted to the
participant will lapse. "Change in control" is deemed to occur if (i)
any person or group directly or indirectly acquires 50 percent or more of the
combined voting power of our then outstanding voting securities; (ii) during any
period of two consecutive years, individuals who at the beginning of such period
constitute our Board of Directors and any new directors whose election by the
Board or nomination for election by our stockholders was approved by at least
two-thirds of the incumbent directors then still in office, cease for any reason
to constitute a majority of the Board, (iii) our stockholders approve a merger
or consolidation of our company with any other corporation unless (A) our voting
securities outstanding immediately prior to such merger or consolidation would
continue to represent more than 50 percent of the combined voting power of the
voting securities of our company or such surviving entity outstanding
immediately after such merger or consolidation or (B) such merger or
consolidation does not affect our corporate existence and following which our
chief executive officer and directors retain their positions with us
(constituting at least a majority of the Board), or (iv) our stockholders
approve a plan of complete liquidation of our company or an agreement for the
sale or disposition by us of all or substantially all assets. In the
event of any merger, consolidation or other reorganization in which we are not a
surviving or continuing corporation, or in which a change in control is to
occur, all of our obligations regarding options and restricted shares that were
granted under our 2006 Equity Incentive Plan and are outstanding may be assumed
by the surviving or continuing corporation or canceled in exchange for property,
including cash.
The foregoing description is not
complete. For additional information, please review our 2006 Equity
Incentive Plan.
We are not presently aware of any
pending or proposed transaction involving a change of our
control. However, as of January 31, 2011, Firebird owns approximately
55.59 percent of our issued and outstanding common stock, and may
be deemed to beneficially own approximately 80.49 percent of
our common stock (including for this purpose shares underlying
Firebird's convertible notes and warrants that are exercisable within 60 days of
January 31, 2011).
Director
Compensation
2010
Director Compensation Table
The following table sets forth
information regarding the compensation of our non-employee directors for our
fiscal 2010. Dr. Prendergast's compensation during our fiscal 2010 is
reflected in the 2010 Summary Compensation Table. Dr. Prendergast did
not receive additional compensation for his services as a director.
|
Name
|
|
Warrant
Awards
($)(1)(2)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
|
Andrew
W. Dahl, Sc.D.
|
|
|
336,000
|
|
|
|
––
|
|
|
|
336,000
|
|
|
Howard
S. Fischer(3)
|
|
|
1,000,262
|
|
|
|
––
|
|
|
|
1,000,262
|
|
|
Anne
T. Kavanagh(4)
|
|
|
99,000
|
|
|
|
––
|
|
|
|
99,000
|
|
|
Carl
Spana, Ph.D.
|
|
|
336,000
|
|
|
|
––
|
|
|
|
336,000
|
|
|
(1)
|
The
dollar amounts in this column reflect the grant date fair value of
warrants computed in accordance with FASB ASC Topic 718. We did
not grant any other equity awards to our non-employee directors during our
fiscal 2010. See Note 1, "Description of Business and
Significant Accounting Policies – Stock Based Compensation," and Note 4,
"Stock Based Compensation," to our financial statements included herein
for assumptions underlying the valuation of equity
awards.
|
|
(2)
|
The
aggregate number of all warrant awards for each current and
former director, outstanding as of December 31, 2010, is set forth in
the following table:
|
|
Director
|
|
Warrants Outstanding
|
|
Andrew
W. Dahl, Sc.D. (a)
|
|
5,600,000
|
|
Howard
S. Fischer (b)
|
|
16,671,036
|
|
Anne
T. Kavanagh
|
|
1,650,000
|
|
Carl
Spana, Ph.D. (a)
|
|
5,600,000
|
The
aggregate number of all option awards for each current and former director,
outstanding as of December 31, 2010, is set forth in the following
table:
|
Director
|
|
Options Outstanding
|
|
Andrew
W. Dahl, Sc.D.(c)
|
|
370,000
|
|
Howard
S. Fischer
|
|
––
|
|
Anne
T. Kavanagh
|
|
––
|
|
Carl
Spana, Ph.D.(d)
|
|
470,000
|
|
|
(a)
|
Drs.
Dahl and Spana were awarded 4,200,000 and 1,400,000 warrants to purchase
common stock with an exercise price of $0.015 granted on April 16, 2010,
all of which vested immediately. The warrants contain cashless
exercise provisions.
|
|
|
(b)
|
Mr.
Fischer was awarded 16,671,036 warrants to purchase common stock with an
exercise price of $0.015 granted on April 16, 2010, all of which vested
immediately. The warrants contain cashless exercise
provisions.
|
|
|
(c)
|
Dr.
Dahl received the following option grants: (i) 40,000 options, with the
exercise price of $0.170, granted on January 1, 2004 (with a January 1,
2014 expiration date); (ii) 30,000 options, with the exercise price of
$0.285, granted on January 1, 2006 (with a January 1, 2016 expiration
date); and (iii) 300,000 options, with the exercise price of $0.18,
granted on July 20, 2007 (with a July 20, 2017 expiration
date).
|
|
|
(d)
|
Dr.
Spana received the following option grants: (i) 40,000 options, with the
exercise price of $0.170, granted on January 1, 2004 (with a January 1,
2014 expiration date); (ii) 30,000 options, with the exercise price of
$0.285, granted on January 1, 2006 (with a January 1, 2016 expiration
date); and (iii) 100,000 options, with the exercise price of $0.125,
granted on October 1, 2004 (with a October 1, 2011 expiration date); and
(iv) 300,000 options, with the exercise price of $0.18, granted on July
20, 2007 (with a July 20, 2017 expiration
date).
|
(3) Mr.
Fischer resigned from our Board of Directors in October 2010.
(4) Ms.
Kavanagh resigned from our Board of Directors in October 2010.
On April 16, 2010, our Board of
Directors approved grants of 4,200,000 warrants (with the grant date fair value
of $252,000 and with immediate vesting) each to Drs. Dahl and Spana for their
Board service. On April 16, 2010, the Board approved grants of
1,400,000 warrants (with the grant date fair value of $84,000 and with immediate
vesting) each to Ms. Kavanagh (as an initial grant for joining our Board of
Directors) and Drs. Dahl and Spana (for their Board service in 2010) and an
additional grant of 250,000 warrants (with the grant date fair value of $15,000
and with immediate vesting) to Ms. Kavanagh (for Ms. Kavanagh
’
s Board
service in 2010). As compensation for Mr. Fischer's significant
contributions as a Board member, our Compensation Committee recommended and the
Board approved that Mr. Fischer receive two percent of our fully diluted shares
on an as-converted basis on April 16, 2010, representing an immediate grant of
approximately 16,671,036 warrants (with the grant date fair value of
$1,000,262). The terms of all warrants provided for immediate vesting
with cashless exercise at a strike price of $0.015.
We do not currently pay annual
retainers or Board and committee meeting fees to our non-employee
directors. We intend to compensate directors with cash payments and
warrants, as appropriate, but, as of the date hereof, no amounts have been
determined.
ITEM
7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Director
Independence
Our Board of Directors has determined
that Dr. Spana qualifies as an "audit committee financial expert," as defined by
the rules of the SEC. Drs. Dahl and Spana are independent directors
and committee members based on the listing standards of the NASDAQ Stock Market
LLC (the "NASDAQ"), which are the independence standards utilized by our Board
even though our common stock is not listed on the NASDAQ. Dr.
Prendergast is our chief executive officer and, therefore, is not an independent
director.
Certain
Relationships and Related Transactions
We have entered into a number of
transactions with Firebird, our largest stockholder. Firebird holds,
as of January 31, 2011, 1,085,310,434 shares of common stock (including shares
underlying convertible notes and warrants that are exercisable within 60 days of
January 31, 2011), or 80.49 percent, of our company. For a
description of these transactions, please see the section titled "Recent Sales
of Unregistered Securities."
On October 15, 2009, we and AVAX
International IP Holdings, Inc., our intellectual property subsidiary
(collectively, "AVAX"), entered into an intellectual property security agreement
with Firebird as a condition to Firebird's purchase of a $1.4 million
convertible note (2009 Note) and warrant from us. Pursuant to that
agreement, AVAX pledged and granted to Firebird a first priority security
interest in, and a lien on, all of the intellectual property assets now owned or
thereafter acquired by AVAX or in which AVAX had or may acquire any right, title
or interest, excluding any intellectual property assets to the extent that such
intellectual property assets were pledged, as of the date of the agreement, to
CTCA to secure certain of our obligations thereto (the "Firebird
Collateral"). The Firebird Collateral includes, among other things,
patents and patent applications, trade and service marks and their applications,
copyrights, exclusive copyright licenses and copyright applications, and
proceeds from the licensure or other transactions involving patents, trademarks,
copyrights and the like. The security agreement also covers all
formulae, processes, compounds, methods, know-how, and trade secrets relating to
the manufacture of AVAX's products under, utilizing, or in connection with, any
or all of the patents, trademarks and copyrights as well as all products and
proceeds of the foregoing, in any form. The grant of a security
interest in the Firebird Collateral by AVAX under this intellectual property
security agreement secures the payment or performance, as the case may be, of
all of our obligations then or thereafter existing under or in respect of the
purchase agreement and the 2009 Note, whether direct or indirect, absolute or
contingent, and whether for principal, reimbursement obligations, interest,
premiums, penalties, fees, indemnifications, contract causes of action, costs,
expenses or otherwise. So long as the obligation created pursuant to
the CTCA Security Agreement have not been paid, otherwise satisfied, cancelled
or terminated, CTCA has a first priority lien on the Firebird
Collateral.
In 2007,
we entered into the CTCA Production Agreement, pursuant to which we were
required to fulfill certain production obligations for biological vaccines, and
CTCA was obligated to make certain payments to us and to purchase and install
several equipment items. We were unable to perform many of our
obligations and were in breach of the terms of the CTCA Production
Agreement. Subsequent to the initiatives taken by us in March 2009,
and due to our indebtedness to several creditors, including CTCA, as of April
27, 2009, we entered into the CTCA Security Agreement whereby the CTCA
Production Agreement would remain in effect, CTCA would control the operation
and maintenance of our Philadelphia facility for a period of six months and the
$400,000 advanced to us as of that date for operating expenditures would become
a loan payable. During such period, during which CTCA operated and
maintained our Philadelphia facility, CTCA advanced to us the costs of
operations, and we granted to CTCA the unrestricted right to negotiate with all
vendors and customers of our Philadelphia facility. Pursuant to the
CTCA Security Agreement, we granted to CTCA a first priority security interest
in all of the personal property comprising our Philadelphia facility, including
all of our assets located at our Philadelphia facility and all intellectual
property owned by us and used in connection with our Philadelphia facility
whether then in existence or later acquired. As of December 31, 2009,
CTCA had made additional cost advances to us pursuant to the CTCA Security
Agreement of approximately $940,000 and made $400,000 in cash
advances. We are now repaying this loan in part through the
production of our AC Vaccines for CTCA, and as of December 31, 2010, our balance
owing to CTCA is $1,395,555.
If we
default on our obligations to CTCA pursuant to our various agreements,
especially if we fail to maintain our Philadelphia facility to permit us to
produce vaccine for patients who CTCA enrolls in our Phase I/II clinical
trial for O-VAX, we could lose our assets and control of our Philadelphia
facility. CTCA would currently have the right to seek acceleration of
our obligations and to take control of our Philadelphia facility because we have
not been servicing our CTCA debt. However, pursuant to the
Intercreditor Agreement, CTCA has agreed to forbear its right to undertake
certain actions as long as various conditions are met. If certain
conditions are not satisfied under the Intercreditor Agreement, for
example if we, among other things, fail to obtain financing: (i) on or
before September 30, 2011 in an amount that we believe is reasonably sufficient
to operate our Philadelphia facility and produce CTCA's vaccines until at least
December 31, 2011, and (ii) on or before June 30, 2012, in an amount that we
believe is reasonably sufficient to operate our Philadelphia facility and
produce CTCA's vaccines for one year thereafter, then CTCA will be
permitted under the Intercreditor Agreement to exercise its aforementioned
remedies. Pursuant to the CTCA Security Agreement, we agreed that any
transaction wherein we may be acquired by another corporation or entity will not
release us or our subsequent owner from our obligations to produce AC Vaccine
and other products pursuant to the CTCA Security Agreement. In the
event that we do not produce AC Vaccines, or experience a substantial
decline in the output of our Philadelphia facility until the
earlier of (a) 2012 and (b) our production of up to 120 AC
Vaccines, then CTCA has the right to take operational control of our
Philadelphia facility, by virtue of taking an assignment of the real estate
lease covering our Philadelphia facility, and to take ownership of certain
assets in that facility, including all licensures, contents, equipment and
inventory then located in or associated with the operation of our Philadelphia
facility. Upon the retirement of our CTCA obligations, CTCA's
security interest in our assets will cease to exist, and our production
obligations under the CTCA Security Agreement will continue until the earlier of
2012 or our production of up to 120 AC Vaccines, at which time we may negotiate
a new production agreement.
Dr. Spana provided a loan in the
aggregate of approximately $40,000 to us for operational needs during 2009 and
2010. We repaid this amount to Dr. Spana in 2009, without accruing
any interest.
In February 2009, we received a
judgment against us in favor of Mr. Rainey, our former Chief Executive Officer,
in the amount of $440,866, plus interest and costs. In October 2009,
we entered into a note with Mr. Rainey, pursuant to which we agreed to pay this
amount over time subject to certain conditions in consideration of which Mr.
Rainey agreed to vacate immediately his judgment against us. This
note has been paid in full and was retired. Mr. Rainey provided
consulting services to us during 2010 and received $75,968 for the services he
performed.
During our fiscal 2008 and 2007, we
paid cash compensation of $126,000 per year to Dr. Prendergast, who then served
as Chairman of our Board and took a more active role in assisting our existing
management. The compensation was voted upon and approved by the
Compensation Committee of our Board of Directors. Dr. Prendergast is
now our Chief Executive Officer and continues to serve as Chairman of our Board
of Directors. For his compensation during our fiscal 2009, we paid
Dr. Prendergast $76,500. For his compensation during our fiscal 2010,
please see the Summary Compensation table included in the section titled
"Executive Compensation" herein.
HSF Business Advisors, LLC ("HSFBA"),
of which Mr. Fischer, a former member of our Board of Directors, is the managing
member, served as a consultant to our company from October 2009 to December 31,
2009, during which period, at the request of our Board, HSFBA predominantly
advised us with respect to our capital raising efforts. During such
period HSFBA received cash compensation of $105,000. HSFBA currently
serves as a consultant to Firebird, our largest stockholder, and Mr.
Fischer attends our Board meetings as an observer on Firebird's
behalf.
ITEM
8. LEGAL PROCEEDINGS.
In May 2007, we completed a private
placement of securities to various institutional and accredited
investors. We had previously entered into an engagement letter, as
subsequently amended, with MDB Capital Group LLC in connection with the proposed
capital raising engagement. MDB Capital has made a demand that we pay
MDB Capital $195,000 in cash and issue MDB Capital warrants to purchase
2,080,000 shares of our common stock at an exercise price of $0.15 per share,
all as compensation to MDB Capital under the engagement letter. We
have conceded that we owe MDB Capital $15,000 in placement agent fees and a
placement agent warrant to purchase 160,000 shares of our common stock at $0.15
per share under the engagement letter. We believe that MDB Capital
had no role in identifying the other investors in the offering for which MDB
Capital claims compensation, and thus have denied that we owe MDB Capital any
additional cash compensation or placement agent warrants under the engagement
letter. MDB Capital has indicated its intention to pursue binding
arbitration of this dispute in accordance with the terms of the engagement
letter, but has to date made no effort to pursue any arbitration of this
matter.
Francois Martelet v. Avax et.
al.
is a breach of contract claim filed by Dr. Martelet,
our former Chief Executive Officer, against us and our Board of
Directors. The case was filed on June 30, 2009 in the Federal court
in the Eastern District of Pennsylvania under civil docket number
09-2925. Dr. Martelet is suing us and our Board of
Directors personally for nonpayment of wages and for nonpayment of
severance. The exposure on the wage claim is less than two
hundred and fifty thousand ($250,000) dollars. Dr. Martelet
has demanded approximately six hundred and fifty thousand
($650,000) on the severance claim. However, we believe that
our exposure on the severance claim is minimal as Dr. Martelet was
terminated for cause and is not entitled to severance. Dr. Martelet
has also demanded punitive damages via N.J.S.A. 34:11-4.1
et
seq.
Procedurally, the Court has set deadlines for
establishing a trial date for this matter sometime during the summer of
2011. We are in the process of trying to settle this matter without
further litigation but we expect to file a counterclaim
against Dr. Martelet for a breach of contract and a breach of
fiduciary duties, if necessary.
We are periodically involved in
ordinary, routine litigation and administrative proceedings incidental to our
business. As of the date of this Form 10, there are no other pending
or, to our knowledge, threatened claims against us.
ITEM
9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
Market
Price of Our Common Stock
No established market currently exists
for our common stock. Our common stock is presently quoted on the
over-the-counter "Pink Sheets" under the symbol "AVXT.PK." We do not
currently intend to list our common stock on a national securities
exchange. Upon the effectiveness of this Form 10, we plan to have our
common stock authorized for trading on the OTCBB, but there is no guarantee that
we will be successful in achieving this authorization. Even if our
common stock trades on the OTCBB, there is no guarantee that the volume of
trading in shares of our common stock, or the prices at which our common
stock trades, will improve. Future sales of our common stock on the
OTCBB, or the perception that those sales may occur, could adversely affect the
prevailing market price at such time and our ability to raise equity capital in
the future.
We were previously an SEC-reporting
company. Our common stock was publicly traded on the OTCBB from
December 19, 1996 through July 9, 1997. From 1997 until 2003,
our common stock was listed for quotation on the NASDAQ under the symbol "AVXT,"
initially on the NASDAQ Small Cap Market and later on the NASDAQ National Market
(currently, the NASDAQ Capital and NASDAQ Global Markets,
respectively). Our common stock was moved from the NASDAQ National
Market to the NASDAQ Small Cap Market in 2002 and was delisted from the NASDAQ
in August 2003 due to our failure to maintain the NASDAQ's minimum continuing
listing standards. From August 2003 through March 2009, our common
stock was traded on the OTCBB. On March 31, 2009, we filed a Form 15
with the SEC deregistering our common stock under the Securities
Act. Upon filing the Form 15, our obligation to file reports and
forms with the SEC, including Forms 10-K, 10-Q and 8-K, was immediately
suspended, and the deregistration and termination of our reporting obligations
became effective 90 days after filing. Since March 2009 through the
present day, our common stock has been traded on the over-the-counter "Pink
Sheets."
The following table sets forth the high
and low sales prices per share of our common stock, as traded on the
over-the-counter "Pink Sheets," during each calendar quarter during 2008, 2009
and 2010. Over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions. The closing price per share of our common stock
reported on the "Pink Sheets" on January 31, 2011 was $0.06.
|
|
|
High
|
|
|
Low
|
|
|
Fiscal
year ended December 31, 2008
|
|
|
|
|
|
|
|
First quarter ended March 31,
2008
|
|
$
|
0.150
|
|
|
$
|
0.080
|
|
|
Second quarter ended June 30,
2008
|
|
|
0.130
|
|
|
|
0.080
|
|
|
Third quarter ended September
30, 2008
|
|
|
0.090
|
|
|
|
0.040
|
|
|
Fourth quarter ended December
31, 2008
|
|
|
0.051
|
|
|
|
0.010
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
First quarter ended March 31,
2009
|
|
$
|
0.020
|
|
|
$
|
0.007
|
|
|
Second quarter ended June 30,
2009
|
|
|
0.034
|
|
|
|
0.008
|
|
|
Third quarter ended September
30, 2009
|
|
|
0.140
|
|
|
|
0.012
|
|
|
Fourth quarter ended December
31, 2009
|
|
|
0.290
|
|
|
|
0.070
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ending December 31, 2010
|
|
|
|
|
|
|
|
|
|
First quarter ended March 31,
2010
|
|
$
|
0.180
|
|
|
$
|
0.070
|
|
|
Second quarter ended June 30,
2010
|
|
|
0.15
|
|
|
|
0.06
|
|
|
Third quarter ended September
30, 2010
|
|
|
0.063
|
|
|
|
0.015
|
|
|
Fourth quarter (ended December
31, 2010)
|
|
|
0.12
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ending December 31, 2011
|
|
|
|
|
|
|
|
|
|
First quarter (through January
31, 2011)
|
|
$
|
0.09
|
|
|
$
|
0.04
|
|
As of January 31, 2011, there were
591,322,214 shares of common stock outstanding, which were held by approximately
290 record stockholders. In addition, the 33,500 shares of Series C
Preferred Stock outstanding as of January 31, 2011, were convertible into
1,030,756 shares of common stock. In addition to these outstanding
shares, as of January 31, 2011, we have reserved 10,000,000 shares of common
stock for issuance of awards under our 2006 equity compensation
plan.
62,445,754 shares of our common stock
have previously been registered under the Securities Act, of which 59,452,422
shares relate to non-affiliates. Shares of our common stock that are
restricted securities will be eligible for resale in compliance with Rule 144
("Rule 144") or Rule 701 ("Rule 701") of the Securities Act following the
effectiveness of this Form 10, subject to the requirements described
below. "Restricted Securities," as defined under Rule 144, were
issued and sold by us in reliance on exemptions from the registration
requirements of the Securities Act. These shares may be sold in the
public market only if registered or if they qualify for an exemption from
registration, such as Rule 144 or Rule 701, which rules are summarized
below. These shares will generally become available for sale in the
public market as follows:
|
|
|
Approximately
146,892,421 restricted shares will be eligible for immediate sale upon the
effectiveness of this Form 10; and
|
|
|
|
Approximately 445,460,549
restricted shares will be eligible for sale in the public market 90 days
after the effectiveness of this Form 10, subject to the holding period,
volume, manner of sale and other limitations, where required, under Rule
144 and Rule 701.
|
Rule
144
Below is a summary of the
requirements for sales of our common stock pursuant to Rule 144, as in
effect on the date of this Form 10, after the effectiveness of this Form
10:
Affiliates
Affiliates will be able
to sell their shares under Rule 144 beginning 90 days after the
effectiveness of this Form 10, subject to all other requirements of Rule
144. In general, under Rule 144, an affiliate would be entitled
to sell within any three-month period a number of shares that does not exceed
one percent of the number of shares of our common stock then
outstanding. Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of current public
information about us.
Persons who may be deemed to be our
affiliates generally include individuals or entities that control, or are
controlled by, or are under common control with, our company and may include our
directors and officers, as well as our significant stockholders, including
Firebird.
Non-Affiliates
For a person who has not been deemed to
have been one of our affiliates at any time during the 90 days preceding a
sale, sales of our shares of common stock held longer than six months, but less
than one year, will be subject only to the current public information
requirement and can be sold under Rule 144 beginning 90 days after the
effectiveness of this Form 10. A person who is not deemed to have
been one of our affiliates at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least one year,
is entitled to sell the shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144 upon the
effectiveness of this Form 10.
Rule
701
Rule 701 under the Securities Act, as
in effect on the date of this Form 10, permits resales of shares in reliance
upon Rule 144 but without compliance with certain restrictions of Rule 144,
including the holding period requirement. Most of our employees,
executive officers, directors or consultants who purchased shares under a
written compensatory plan or contract may be entitled to rely on the resale
provisions of Rule 701, but all holders of Rule 701 shares are required to wait
until 90 days after the effective date of this Form 10 before selling their
shares under Rule 701.
Registration
Rights
Holders of the aggregate of 592,352,970
shares of our common stock (62,445,754 of which shares have previously been
registered under the Securities Act), 190,000,000 shares issuable upon
conversion of the 2008 and 2009 Notes and options and warrants to purchase an
aggregate of up to 675,763,545 shares of our common stock may require us to
register their shares for resale under the Securities Act after the
effectiveness of this Form 10. Registration of these shares under the
Securities Act would result in the shares becoming freely tradable without
restrictions under the Securities Act immediately upon the effectiveness of such
registration. Any sales of securities by these stockholders could
adversely affect the trading prices of our common stock.
Equity
Compensation Plan
As soon as practicable after the
effectiveness of the Form 10, we may file a registration statement on Form S-8
under the Securities Act registering our common stock subject to outstanding
options or reserved for issuance under our equity compensation
plan. That registration statement will become effective immediately
upon filing, and shares covered by that registration statement will thereupon be
eligible for sale in the public markets, subject to grant of the underlying
awards, vesting provisions and Rule 144 limitations applicable to our
affiliates.
Dividend
Policy
We have not paid any cash dividends on
our common stock since our formation. We do not intend to declare any
dividends on our common stock in the foreseeable future. We
anticipate that all our earnings and other resources, if any, will be retained
by us for investment in our business. In addition, the terms of
existing or future agreements may limit our ability to pay
dividends. Therefore, our stockholders should not expect to receive a
return on their shares through the receipt of dividends.
ITEM
10. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years prior to the filing
of this Form 10, we issued the following unregistered
securities. Each such sale was exempt from registration under the
Securities Act. Unless indicated otherwise, the transactions involved
accredited investors only and were entered into in reliance upon Regulation D
and/or Section 4(2) of the Securities Act for an exemption from the registration
provisions of the Securities Act. Except as specified below, we used
the proceeds of the private offerings described in this Form 10 for general
working capital purposes, including funding of our plan of
operation. Unless specified otherwise, no underwriters were involved
in the following issuances of our securities.
Private
Placements and Issuances of Convertible Notes
On April 13, 2007, we completed a
private financing in the aggregate principal amount of $10,007,500 at a price of
$0.125 per share with various institution and individual investors, including
Firebird, our largest stockholder, in reliance upon the exemption from
registration in Regulation D under Section 4(2) of the Securities
Act. We received gross proceeds of $10,007,500. In
connection with the private placement, we also issued to the investors
80,060,000 shares of common stock and associated warrants to purchase an
additional 80,060,000 shares of common stock at an exercise price of $0.15 per
share.
In addition,
we agreed to pay $580,350 and to issue warrants to purchase 6,190,400 shares of
common stock at a warrant exercise price of $0.15 per share to certain advisors
relating to this private offering. Firebird participated in this
offering in the amount of $3,000,000, for which it recovered 24,000,000 shares
of our common stock and 24,000,000 warrants. We received net proceeds
from this private offering, after offering related expenses, of approximately
$9.0 million and used these proceeds to continue to implement our plan of
operation. A partnership in which Mr. Rainey, our then President and
Chief Executive Officer, is a 50 percent partner and Mr. Rainey's brother is the
other 50 percent partner, purchased $50,000 shares of common stock and related
warrants to purchase shares of common stock in the April 2007
offering. John K. A. Prendergast, Carl Spana and Andrew Dahl, our
directors, also purchased $50,000, $20,000 and $20,000, respectively, of shares
of common stock and associated warrants to purchase shares of common stock in
this offering. Our Board of Directors approved the participation of
Dr. Prendergast, Dr. Spana, Dr. Dahl and Mr. Rainey in the private
placement.
On October 24, 2008, we issued the
2008 Note in the amount of $1,321,000 to certain accredited investors,
including Firebird, which invested $500,000 of this amount, and JFE Hottinger
& Affiliates, which invested $250,000 of this amount. Pursuant to
an initial agreement, the notes were to bear interest at the rate of six percent
and to mature December 31, 2008. The notes are convertible into our
common stock at a rate of $0.09 per share for each dollar of unpaid principal
and interest on the note. In addition, the note holders were issued
warrants to purchase 13,210,000 shares of our common stock at a price of $0.10
per share. The balance of accrued principal plus interest as of
December 31, 2008 was $1,336,825. At the time the 2008 Note was
issued, we recorded a debt discount relating to the detached warrants in the
amount of $264,000. We amortized the resultant debt discount over the
term of the 2008 Note through the original maturity date.
An amendment to the 2008 Note was
entered to extend the due date through March 31, 2009. During October
2009, in connection with the 2009 Note, below, an additional amendment to the
2008 Note was entered into with all investors, which adjusted the conversion
price for the notes to a rate of $0.015 per share and extended the due date of
the 2008 Note through June 1, 2010. As of December 31, 2009, the 2008
Note and accrued interest balance was $1,417,035. The 2011 amendment
to these notes is described below.
In October 2009, we issued the 2009
Note in the amount of $1,400,000 to Firebird. The 2009 Note
bears interest at the rate of six percent and matures on June 1,
2010. The notes are convertible into our common stock at a rate of
$0.01 per share for each dollar of unpaid principal and interest on the 2009
Note. In addition, the note holder was issued warrants to purchase
93,333,333 shares (as subsequently adjusted) of our common stock at a price of
$0.015 per share. The note holder was also provided a security
interest in certain intellectual property maintained by us pursuant to our
license agreement with TJU. Upon the issuance of the 2009 Note and
warrants, a debt discount was calculated, which is limited to the amount of the
notes issued. At the time the 2009 Note was issued, we recorded a
debt discount (beneficial conversion) relating to the conversion feature in the
amount of $1,400,000. The aggregate intrinsic value of the difference
between the market price of our common stock on October 14, 2009 and the
conversion price of the 2009 Note was in excess of the face value of the
$1,400,000 value of the notes, and thus, a full debt discount was recorded in an
amount equal to the face value of the debt. We are amortizing the
resultant debt discount over the term of the 2009 Note through their maturity
date. This discount is being amortized to interest expense over the
life on the 2009 Note through June 1, 2010. As of December 31, 2009,
the balance of the loan plus accrued interest was $1,417,721 less unamortized
loan discount of $933,333. The proceeds of this financing were
directed to working capital, to recertify and operate our Philadelphia facility
and to provide funding necessary to pursue a recapitalization in an amount
sufficient to seek funding for our pivotal Phase III clinical trial of M-VAX
for
the
treatment of Stage IV melanoma. The 2011 amendment to these Notes is
described below.
The 2008 and 2009 Notes have
anti-dilution price protection written into the Notes that adjusts the
conversion price feature down to match any future debt or equity offerings that
are below market price or if they are priced below the conversion price of the
Notes while the Notes are still outstanding. In accordance with the
agreements for the issuance of the 2008 and 2009 Notes, we also issued to the
investors warrants to purchase our common stock that are based upon a conversion
price agreed to in the note agreements, as amended. These warrants
contain anti-dilution price protection in the event that we issue common stock
at a price that is lower than the exercise price of the warrant.
On February 16, 2010, we issued the
2010 Note in the amount of $231,000 to certain accredited investors similar
to the terms of the notes issued in the 2008 Note above. The
notes bear interest at the rate of six percent and mature on June 1,
2010. The notes are convertible into our common stock at a rate of
$0.01 per share for each dollar of unpaid principal and interest on the
note. In addition, the note holders were issued warrants to purchase
15,466,667 shares of common stock at a price of $0.015 per
share. These notes and warrants were converted to shares of our
common stock in connection with our October 2010 financing.
On April 1, 2010, we entered into a
subscription agreement with certain of our existing stockholders, including
Firebird. Pursuant to the subscription agreement, the stockholders
could acquire additional shares of common stock of our company through the
exercise of previously issued warrants, after which they would receive a
replacement warrant at an exercise price of $0.015 per share or could purchase a
unit which consists of one share of common stock and a warrant to purchase one
share of common stock at $0.015 per share. Our total proceeds
received were $960,000 and resulted in the issuance of 64,000,000 shares of
common stock and warrants to purchase 64,000,000 shares of common stock at a
price of $0.015 per share.
On June 4, 2010, we entered into a
subscription agreement with Firebird for the purchase of 20,000,000 shares of
common stock and warrants to purchase 100,000,000 shares of common stock at an
exercise price of $0.05 per share for an aggregate purchase amount of
$1,000,000.
On
October 28, 2010, we entered into a non-binding agreement with Firebird to
invest up to $2,000,000 to meet our working capital needs. The
initial advance, in the amount of $1,300,000, was received on November 4, 2010
in consideration for the exercise of warrants, which had been issued in
connection with the June 4, 2010 financing, the number of which was adjusted in
connection with the agreement. Firebird consummated the initial
advance by exercising warrants for 111,111,111 shares of common stock, which, as
mentioned below, were modified as part of the agreement such that they were
exercisable at $0.0117 per share. The June 4, 2010 financing
agreement contained a provision that if Firebird exercised any or all of its
warrants in connection therewith within 12 months after their issuance, Firebird
would receive a replacement warrant for that number of warrants
exercised. Accordingly, we issued a replacement warrant to Firebird
to purchase 111,111,111 shares of common stock at an exercise price of $0.0117
per share. To the extent that Firebird exercises warrants to provide
us additional funds, and such funding is completed prior to June 4, 2011, we
will be required to issue up to an additional 316,239,316 replacement warrants
to Firebird at an exercise price of $0.0117 per share.
Immediately
prior to Firebird's initial advance and as a condition thereof, except for
Firebird, (i) all holders of the 2008 Notes and warrants received in connection
therewith, (ii) all holders of warrants received in connection with the April
2010 financing, and (iii) all holders of the 2010 Notes agreed to convert their
notes to our common stock at an exercise price of $0.01 per share and to either
exercise or forfeit their warrants obtained in these financings. All
holders of warrants elected to forfeit their warrants. Pursuant to
the agreement, we agreed to issue an additional 65,470,085 shares of common
stock to Firebird, to increase the number of shares for which
the warrants issued in the June 4, 2010 financings could be exercised,
from 100,000,000 underlying shares to 427,350,425 shares, and
modify the exercise price of the warrants from $0.05 to $0.0117 per
share. This modification along with our agreement to reduce or
eliminate the minimum change in price required to cause anti-dilution protection
to become effective, triggered the anti-dilution provisions of the all warrants
purchased by Firebird since 2008, such that all are now exercisable at $0.0117
per share. Interest on the 2008 Notes was accrued and paid to each
holder through June 1, 2010, the maturity date of the 2008 Notes at
that time. Any interest accrued as of that date was forfeited,
immediately before the 2008 Notes were converted to common
stock. Firebird agreed to forego its cash interest and instead
received interest in the form of common stock priced at the 2008 and 2009 Notes'
adjusted conversion price of $0.01 per share. Interest on the 2008
Notes started accruing again as of October 29, 2010 pursuant to the agreement
between Firebird and AVAX to extend the term of the 2008 and 2009 Notes, as
described, with certain other modifications, below. Interest on the
2009 Notes never stopped accruing.
Pursuant
to the agreement, Firebird agreed to forfeit all 24,000,000 warrants it received
in connection with the April 2007 financing. At his election Dr.
Prendergast forfeited 50 percent of the warrants issued to him as compensation
in April 2010, and we agreed to extend the maturity date of the remaining
2007 warrants held by others by one year, such that they now expire on
October 24, 2013. These warrants are exercisable at $0.15 per
share.
In late
January 2011, Firebird provided us with an additional cash infusion of $700,000,
which was effected through Firebird's exercise of warrants received in the June
2010 financing noted above at an exercise price of $0.0117 per share, resulting
in the issuance of 59,829,060 shares of our common stock to
Firebird. As part of the exercise of these warrants, replacement
warrants with substantially identical terms were issued to
Firebird. To the extent that Firebird exercises warrants from the
June 2010 financing to provide us with additional funds, and such funding is
completed prior to June 4, 2011, we will be required to issue up to an
additional 256,410,254 replacement warrants to Firebird at an exercise price of
$0.0117 per share.
On
January 5, 2011, we reached an agreement with Firebird to extend the term of the
2008 Notes and the 2009 Notes to September 30, 2011 (as well as to amend the
terms of all Note and warrant agreements between us and Firebird as of October
28, 2010). We have been in default on these Notes since their amended
maturity date of June 1, 2010. As consideration for the extension of
the maturity date, we agreed to increase the rate of interest on each note as of
October 28, 2010 by 200 basis points from six percent to eight percent and to
pay such interest on a quarterly rather than an annual basis. The
extension agreement also provided us the option to pay interest either in
kind or in common stock at the then effective conversion price rather than in
cash, provided that if cash interest is not paid, Firebird may determine whether
it will receive interest in kind or in common stock. The provisions
regarding the form, but not the timing, of the interest payment will apply
retroactively as if they were put in place on the initial issuance date of the
2008 and 2009 Notes.
In
addition, pursuant to the extension agreement, we were required to file this
Form 10 with the SEC prior to January 10, 2011. Because we did not
file this Form 10 by that date, Firebird received an additional 75 basis points
of interest from such date on the 2008 and 2009 Notes, respectively, and a
new interest rate of 8.75 percent effective as of that date. The
interest rate on the 2008 and 2009 Notes will increase by an additional 75 base
points if we do not file a Registration Statement with the SEC within five
business days after the Form 10 is declared effective. The interest
rate on the 2008 and 2009 Notes will increase by a further 50 basis
points as of the tenth day (or the next subsequent business day if such day is
not a business day) of each subsequent calendar month (i) if we have not filed
this Form 10 by such date or (ii) if the Form 10 has been declared effective by
the SEC, but the Registration Statement has not been filed and such date is more
than five business days after the effective date of the Form 10. The
interest rate payable to the holders of the 2008 and 2009 Notes will also
increase by 50 basis points on the 91st day after filing of the Form 10 if the
Form 10 is not declared effective by such date and will increase by an
additional 50 basis points as of the end of each 30-calendar-day period
thereafter if the Form 10 has not been declared effective by the end of such
period. After the Form 10 has been declared effective, the interest
rate payable to the holders of the 2008 and 2009 Notes will be increased by (i)
an additional 50 basis points if the Registration Statement has not been
declared effective as of the end of the 45th day following the effective date of
the Form 10 and (ii) an additional 50 basis points for each 30-calendar-day
period thereafter if the Registration Statement has not been declared effective
by the end of such period. Notwithstanding the foregoing, the aggregate
increases in the interest rate payable to the holders pursuant to our agreement
with Firebird will not cause the interest rate to exceed the lesser of (i) 18
percent per year and (ii) the maximum interest rate permissible under applicable
law.
Compensation
Plans and Arrangements
From March 31, 2009, the date we filed
a Form 15 suspending our reporting obligations, to December 31, 2010, we granted
3,217,500 stock options to purchase an aggregate of 3,217,500 shares of common
stock, with an exercise price of $0.069 per share, and 37,085,518 warrants to
purchase an aggregate of 37,085,518 shares of common stock, with an exercise
price of $0.015 per share, to certain of our employees, consultants and
directors under our equity compensation plan and outside of the plan, in each
case as compensation for services provided by such parties to us. The
grants of these awards were intended to be exempt from registration pursuant to
Rule 701, or pursuant to Section 4(2) under the Securities Act relative to the
transactions by our company not involving any public offering, to the extent an
exemption from such registration was required. From March 31, 2009,
the date we filed a Form 15 suspending our reporting obligations, to December
31, 2010, none of these options or warrants have been exercised.
ITEM
11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED.
General
On December 31, 2010, we filed an
amendment to our certificate of incorporation with the Secretary of State of the
State of Delaware to authorize the issuance of up to two billion five hundred
and twenty five million (2,525,000,000) shares of which five million (5,000,000)
are designated as preferred shares, par value $0.01 per share, and the remaining
two billion five hundred and twenty million (2,520,000,000) shares are
designated as common stock, par value $0.004 per share. As of January
31, 2011, we had issued and outstanding 534,789,538 shares of common stock and
33,500 shares of Series C Preferred Stock, which were convertible into 1,030,756
shares of common stock.
Proposed
Reverse Stock Split
In connection with our intended listing
on the OTCBB, we plan to implement a reverse stock split, in a range from
one-for-ten (1-for-10) to one-for-fifty (1-for-50), inclusive. The
reverse stock split is being implemented due to the low selling price of our
common stock and the large number of shares of common stock that we have
outstanding. The reverse stock split must be approved by our
stockholders, and there is no guarantee that such approval will be
obtained. If such approval is obtained and the reverse stock split is
implemented, there is no guarantee that the reverse stock split will increase
our share price. We also cannot guarantee that any increase in the
price of our common stock resulting from the reverse split will be proportionate
to the reverse split ratio, prevail in the market for any specific period of
time, increase the trading volume of our shares, or increase our ability to
raise capital through the sale of our shares. If the reverse stock
split fails to increase our share price proportionate to the reverse stock split
ratio, holders of our common stock will be adversely affected.
Common
Stock
Each holder of our common stock is
entitled to one vote for each share held of record. There is no right
to cumulative voting of shares for the election of directors. The
common stock is not entitled to preemptive rights and is not subject to
redemption or assessment. Each share of common stock is entitled to
share ratably in distributions to stockholders and to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. Upon our liquidation, dissolution or winding up,
the holders of shares of common stock are entitled to receive, pro-rata, our
assets which are legally available for distribution to
stockholders. The issued and outstanding shares of common stock are
validly issued, fully paid and non-assessable.
Preferred
Shares
We are authorized to issue up to
5,000,000 preferred shares, par value $0.01 per share. Our preferred
shares can be issued in one or more series as may be determined from
time-to-time by our Board of Directors. In establishing a series, our
Board of Directors is required to give to it a distinctive designation so as to
distinguish it from the shares of all other series and classes, to fix the
number of shares in such series, and the preferences, rights and restrictions
thereof. All shares of any one series shall be alike in every
particular. Our Board of Directors has the authority, without
stockholder approval, to fix the rights, preferences, privileges and
restrictions of any series of preferred shares including, without limitation:
(i) the rate of distribution, (ii) the price at and the terms and conditions on
which shares shall be redeemed, (iii) the amount payable upon shares for
distributions of any kind, (iv) the terms and conditions on which shares may be
converted if the shares of any series are issued with the privilege of
conversion and (v) voting rights except as limited by law.
We could authorize the issuance of a
series of preferred shares which would grant to holders preferred rights to our
assets upon liquidation, the right to receive dividend coupons before dividends
would be declared to holders of shares of common stock, and the right to the
redemption of such shares, together with a premium, prior to the redemption to
common stock. Our current stockholders have no redemption
rights.
Series
A Preferred Stock
At one time, we had designated and
issued shares of Series A Preferred Stock, par value $0.01 per
share. Pursuant to an automatic conversion provision in the
Certificate of Designations therefor, all outstanding shares of Series A
Preferred Stock were converted into shares of common stock effective June
1996. Thereafter, the Series A Preferred Stock was eliminated
pursuant to a Certificate of Elimination filed by us.
Series
B Preferred Stock
At one time, we had designated and
issued shares of Series B Preferred Stock, par value $0.01 per
share. Pursuant to an automatic conversion provision in the
Certificate of Designations therefor, all outstanding shares of Series B
Preferred Stock were converted into shares of common stock in March
2000. Thereafter, the Series B Preferred Stock was eliminated
pursuant to a Certificate of Elimination filed by us.
Series
C Preferred Stock
Our Board of Directors has authorized
the issuance of up to 120,000, of which 33,500 are outstanding as of January 31,
2011, shares of Series C Preferred Stock, par value $0.01 per share, the rights,
preferences and characteristics of which include a liquidation preference in the
amount of $100 per share in the event of: (i) our liquidation, dissolution or
winding up, (ii) a sale or other disposition of all or substantially all of our
assets, or (iii) if we cease to exist as a result of a merger, reorganization,
combination or similar transaction in which we are not the surviving corporation
or the shares of our common stock constituting in excess of 50 percent of our
voting power are exchanged for or changed into other stock, cash or any other
property.
Dividends
The holders of Series C Preferred Stock
are entitled to receive dividends as, when and if declared by our Board of
Directors out of funds legally available therefor. If we declare a
dividend or distribution on the common stock, the holders of the Series C
Preferred Stock will be entitled to receive for each share of Series C Preferred
Stock a dividend or distribution in the amount of the dividend or distribution
that would be received by a holder of common stock into which each share of
Series C Preferred Stock is convertible on the record day of the dividend or
distribution. We do not intend to pay cash dividends on the Series C
Preferred Stock or the underlying common stock for the foreseeable
future.
Conversion
Each share of Series C Preferred Stock
is convertible, in whole or part, at the option of the holder at any time after
the initial issuance date into 30.76923 shares of common stock based upon an
initial conversion price of $3.25 per share of common stock (the Initial
Conversion Price). The conversion price is subject to adjustment upon
the occurrence of certain mergers, reorganizations, consolidations,
reclassifications, stock dividends or stock splits, which will result in an
increase or decrease in the number of shares of common stock
outstanding.
Mandatory
Conversion
We have the right at any time to cause
the Series C Preferred Stock to be converted in whole or in part, on a pro rata
basis, into common stock if the common stock is then listed on the NASDAQ and
the closing price of the common stock exceeds 300 percent of the then applicable
conversion price for at least 20 trading days in any 30 consecutive trading day
period. We do not currently intend to list our shares on the NASDAQ
or any other national securities exchange.
Liquidation
Upon (i) our liquidation, dissolution
or winding up, whether voluntary or involuntary, (ii) a sale or other
disposition of all or substantially all of our assets, or (iii) merger or
consolidation (a Merger Transaction) in which we are not the surviving entity
and shares of common stock consisting in excess of 50 percent of the voting
power of our company are exchanged (subparagraphs (i), (ii) and (iii) being
collectively referred to as a Liquidation Event), after payment or provision for
payment of the debts and other liabilities, the holders of the Series C
Preferred Stock then outstanding will first be entitled to receive, pro rata (on
the basis of the number of the preferred shares then outstanding), and in
preference to the holders of the common stock and any other series of junior
stock, an amount per share equal to $100.00 plus accrued but unpaid dividends,
if any (the Liquidating Payment); provided, however, that in the case of a
Merger Transaction, such $100.00 per share may be paid in cash and/or securities
of the surviving entity in such Merger Transaction. In the case of
any Liquidation Event, after payment to the holders of the Series C Preferred
Stock of the Liquidating Payment, each share of Series C Preferred Stock then
outstanding will be converted into the kind and amount of shares of stock or
other consideration receivable in connection with such transaction by a holder
of the number of shares of common stock into which such share of Series C
Preferred Stock could have been converted immediately prior to such
transaction.
Voting
Rights
The holders of the Series C Preferred
Stock have the right at all meetings of stockholders to the number of votes
equal to the number of shares of common stock issuable upon conversion of the
Series C Preferred Stock at the record date for determination of the
stockholders entitled to vote. So long as 25 percent of the shares of
Series C Preferred Stock initially issued remain outstanding, the holders of
66.67 percent of the Series C Preferred Stock are entitled to approve (i) any
amendment to the Certificate of Incorporation or our Bylaws that would affect
adversely the relative rights, preferences, qualifications, limitations or
restrictions of the Series C Preferred Stock, or (ii) any authorization or
issuance or any increase in the authorized amount of any class or series of
stock or any security convertible into stock of such class or series ranking
prior to the Series C Preferred Stock upon our liquidation, dissolution or
winding up or a sale of all or substantially all of our assets or as to any
dividends or distributions. Except as provided above or as required
by applicable law, the holders of the Series C Preferred Stock will be entitled
to vote together with the holders of the common stock and not as a separate
class.
Registration
Rights
Holders of the aggregate of 592,352,970
shares of our common stock (62,445,754 of which shares have previously been
registered under the Securities Act), 190,000,000 shares issuable upon
conversion of the 2008 and 2009 Notes and options and warrants to purchase an
aggregate of up to 675,763,545 shares of our common stock may require us to
register their shares for resale under the Securities Act after the
effectiveness of this Form 10. Registration of these shares under the
Securities Act would result in the shares becoming freely tradable without
restrictions under the Securities Act immediately upon the effectiveness of such
registration. Any sales of securities by these stockholders could
adversely affect the trading prices of our common stock and other
securities.
Anti-Takeover
Provisions
As of January 31, 2011, Firebird owns
approximately 55.59 percent of our issued and outstanding common stock,
and may be deemed to beneficially own approximately 80.49 percent of
our common stock (including for this purpose shares underlying
Firebird's convertible notes and warrants that are exercisable within 60 days of
January 31, 2011). Firebird's large ownership percentage of our
company could impede change-of-control transactions that our other stockholders
may want to initiate or support.
In addition, our Certificate of
Incorporation and our Bylaws contain provisions that might have an anti-takeover
effect. These provisions, which are summarized below, may have the
effect of delaying, deterring or preventing a change in our
control. They could also impede a transaction in which our
stockholders might receive a premium over the then-current market price of our
common stock and our stockholders' ability to approve transactions that they
consider to be in their best interests.
Our Certificate of Incorporation
permits our Board of Directors to issue preferred shares. We could
authorize the issuance of a series of preferred shares which would grant to
holders preferred rights to our assets upon liquidation, the right to receive
dividend coupons before dividends would be declared to holders of shares of our
common stock, and the right to the redemption of such shares, together with a
premium, prior to the redemption to common stock. Our current
stockholders have no redemption rights. In addition, as we have a
large number of authorized but unissued shares, our Board of Directors could
issue large blocks of voting stock to fend off unwanted tender offers or hostile
takeovers without further stockholder approval.
Our Bylaws provide that our
stockholders may call a special meeting of stockholders only upon the request of
at least 20 percent of the holders of our issued and outstanding shares entitled
to vote. This provision could delay a stockholder vote on certain
matters, such as a business combination or removal of directors, and could have
the effect of deterring a change in our control. Our stockholders
may, however, take action by written consent without a stockholder
meeting.
In the future, we may become subject to
Section 203 of the Delaware General Corporation Law, also known as the
Delaware Merger Moratorium Statute. In general, Section 203,
subject to specific exceptions, prohibits a publicly-held Delaware corporation
from engaging in any "business combination" with any "interested stockholder"
for a period of three years following the date that the stockholder became an
interested stockholder, unless:
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prior
to that date, the Board of Directors approved either the business
combination or the transaction that resulted in the stockholder becoming
an interested stockholder;
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upon
consummation of the transaction that resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85
percent of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned by directors, officers and specific
employee stock plans; or
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on
or after that date, the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders,
and not by written consent, by the affirmative vote of the holders of at
least 66 2/3 percent of the outstanding voting stock that is not owned by
the interested stockholder.
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Section 203 defines "business
combination" to include:
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any
merger or consolidation involving the corporation and the interested
stockholder;
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any
sale, lease, exchange, mortgage, transfer, pledge or other disposition of
10 percent or more of the assets of the corporation involving the
interested stockholder;
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subject
to limited exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder;
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any
transaction involving the corporation that has the effect of increasing
the proportionate share of the corporation's stock of any class or series
beneficially owned by the interested stockholder;
and
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the
receipt by the "interested stockholder" of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
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In general, an "interested stockholder"
is an entity or individual who, together with affiliates and associates, owns,
or within three years prior to the determination of the "interested stockholder"
status owned, 15 percent or more of a corporation's outstanding voting
stock.
If we become subject to Section 203,
the provisions of Section 203 could encourage companies interested in
acquiring us to negotiate in advance with our Board of Directors since the
stockholder approval requirement would be avoided if our Board of Directors
approves either the business combination or the transaction that results in the
stockholder becoming an interested stockholder. These provisions also
could have the effect of preventing changes in our management or could make it
more difficult to accomplish transactions that stockholders may otherwise deem
to be in their best interests.
Transfer
Agent
The transfer agent for our common stock
is Computershare Trust Company, N.A., 350 Indiana Street, Suite 750, Golden, CO
80401. Telephone number is (303) 262-0600.
ITEM
12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our company was organized under the
laws of the State of Delaware, and, therefore, we are subject to Section 145 of
the General Corporation Law of the State of Delaware (the
"DGCL"). Article Nine of our Certificate of Incorporation provides
that the liability of our directors is eliminated to the fullest extent
permitted by Section 102(b)(7) of the DGCL. Pursuant to
Section 102(b)(7) of the DGCL, directors will not be personally liable to a
corporation or its stockholders for monetary damages for breach of their
fiduciary duties as directors, except for liability: (a) for any breach of
the duty of loyalty to the corporation or its stockholders; (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (c) under Section 174 of the DGCL (providing for
director liability for unlawful payments of dividends or unlawful stock
repurchases or redemptions); or (d) for any transaction from which the
director derived an improper personal benefit. This limitation of
liability does not apply to non-monetary remedies that may be available, such as
injunctive relief or rescission, nor does it relieve our directors from
complying with Federal or state securities laws.
Section 145 of the DGCL grants
each Delaware corporation the power to indemnify its directors and officers
against liability for certain of their acts. Article Seven of our
Certificate of Incorporation provides that we will indemnify and advance
expenses to our directors and officers to the fullest extent permitted by
Section 145.
Article Five of our Bylaws provides
that we will, to the fullest extent permitted by law, indemnify each person who
is or was our director or officer, or is or was serving at our request as a
director or officer of another corporation. Pursuant to the DGCL, an
officer or director will not be entitled to indemnification if (a) the
officer or director did not act in good faith and in a manner reasonably
believed by him or her to be in, or not opposed, to the best interests of AVAX,
or (b) the officer or director is subject to criminal action or proceedings
and had reasonable cause to believe his or her conduct was
unlawful. In addition, in derivative actions, no indemnification will
be made in respect of any claim, issue or matter as to which the officer or
director has been adjudged to be liable to us unless and only to the extent that
the Delaware Court of Chancery or the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such officer or director is fairly
and reasonably entitled to indemnity for such expenses which the Delaware Court
of Chancery or such other court deems appropriate.
We have also obtained certain
liability insurance coverage for our directors and officers.
ITEM
13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statement information
required by this Item 13 is set forth at the end of this Form 10 beginning
on page F-1 and is hereby incorporated into this Item 13 by
reference.
ITEM
14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Effective January 8, 2010, BBD, LLP
(formerly Briggs, Bunting & Dougherty LLP) ("BBD") resigned as our principal
accountant by mutual agreement between us and BBD.
The audit report issued by BBD for our
fiscal year dated December 31, 2007 was an unqualified opinion that included an
explanatory paragraph describing conditions that raised substantial doubt about
our ability to continue as a going concern due to our (1) recurring losses
from operations and (2) concerns whether we had adequate capital to fund
our operations through 2008.
The decision to change auditors has
been considered and approved by the Audit Committee of our Board of
Directors.
During
our two most recent fiscal years and all subsequent interim periods preceding
BBD's resignation, there were no disagreements with BBD concerning accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
During our two most recent fiscal years
and all subsequent interim periods preceding BBD's resignation, BBD did not
advise us of any of the following:
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that
the internal controls necessary for us to develop reliable financial
statements do not exist;
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that
information came to BBD's attention that led it to no longer be able to
rely on management's representations, or that made it unwilling to be
associated with the financial statements prepared by
management;
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(1)
the need for BBD to expand significantly the scope of its audit, or that
information came to its attention during our two most recent fiscal years
or any subsequent interim period preceding BBD's resignation, that if
further investigated may have (a) materially impacted the fairness or
reliability of either (i) a previously issued audit report or the
underlying financial statements, or (ii) the financial statements issued
or to be issued covering the fiscal period(s) subsequent to the date of
the most recent financial statements covered by an audit report (including
information that may have prevented it from rendering an unqualified audit
report on those financial statements), or (b) caused BBD to be
unwilling to rely on management's representations or be associated with
our financial statements, and (2) that, due to their resignation, or for
any other reason, BBD did not so expand the scope of its audit or conduct
such further investigation; or
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(1)
that information has come to their attention that it has concluded
materially impacts the fairness or reliability of either (a) a
previously issued audit report or the underlying financial statements, or
(b) the financial statements issued or to be issued covering the
fiscal period(s) subsequent to the date of the most recent financial
statements covered by an audit report (including information that, unless
resolved to BBD's satisfaction, would prevent it from rendering an
unqualified audit report on those financial statements), and
(2) that, due to their resignation, or for any other reason, the
issue has not been resolved to BBD's satisfaction prior to its
resignation.
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Effective June 11, 2010, we engaged a
new independent accountant, WithumSmith+Brown, PC ("WithumSmith"), to audit our
financial statements. During our two most recent fiscal years, and
subsequent interim periods prior to engaging WithumSmith, neither AVAX nor
someone on our behalf consulted WithumSmith regarding: (1) the application
of accounting principles to a specified transaction, either completed or
proposed; (2) the type of audit opinion that might be rendered on our
financial statements; or (3) any matter that was either the subject of a
disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of
Regulation S-K) or a reportable event (as described in paragraph (a)(1)(v)
of Item 304 of Regulation S-K).
We provided BBD with a copy of the
disclosures set forth in this section above prior to the date that this Form 10
was filed with the SEC. We also requested that BBD furnish us with a
letter addressed to the SEC stating whether it agrees with the statements made
above in response to Item 304(a) of Regulation S-K and, if not,
stating the respects in which it does not agree. The letter of BBD
provided in response to that request, which states that BBD is in agreement with
the above disclosures (apart from the second sentence of the immediately
preceding paragraph regarding WithumSmith, with which BBD stated that it was not
in a position to agree or disagree), has been filed as an exhibit to this Form
10.
ITEM
15. FINANCIAL STATEMENTS AND EXHIBITS.
Financial statements:
Please
see the following financial statements set forth below beginning on page
F-1:
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F-1
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|
|
Audited
Consolidated Financial Statements
|
Page
F-3
|
|
|
|
|
Unaudited
Condensed Consolidated Financial Statements
|
Page
F-31
|
Exhibits:
A list of exhibits
filed with this Form 10 is contained in the exhibit index to this Form 10 and is
incorporated herein by reference.
AVAX
Technologies, Inc.
(a
development stage company)
Consolidated
Financial Statements
Years
ended December 31, 2009 and 2008 and for the period from January 12,
1990
(Incorporation)
to December 31,
2009
Contents
|
Report
of Independent Registered Public Accounting Firm, WithumSmith+Brown, P.C.,
December 31, 2009 and 2008
|
|
F-1
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm, BBD, LLP (formerly
Briggs, Bunting & Dougherty, LLP), December 31, 2007
|
|
F-2
|
|
|
|
|
|
Audited
Consolidated Financial Statements:
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
|
F-3
|
|
Consolidated
Statements of Operations and Comprehensive Loss for the years ended
December 31, 2009 and 2008 and for the period from January 12, 1990
(incorporation) to December 31, 2009
|
|
F-4
|
|
Consolidated
Statements of Stockholders’ Equity (Deficit) for the years ended December
31, 2009 and 2008 and for the period from January 12, 1990 (incorporation)
to December 31, 2009
|
|
F-5
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009 and 2008
and for the period from January 12, 1990 (incorporation) to December 31,
2009
|
|
F-9
|
|
Notes
to Consolidated Financial Statements
|
|
F-11
|
|
|
|
|
|
Unaudited
Condensed Consolidated Financial Statements:
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2010 and September 30,
2009 (unaudited)
|
|
F-31
|
|
Condensed
Consolidated Statements of Operations and Comprehensive Loss for the nine
months ended September 30, 2010 and 2009 and for the period from January
12, 1990 (incorporation) to September 30, 2010 (unaudited)
|
|
F-32
|
|
Condensed
Consolidated Statements of Cash Flows for the nine months ended September
30, 2010 and 2009 and for the period from January 12, 1990 (incorporation)
to September 30, 2010 (unaudited)
|
|
F-33
|
|
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
|
F-35
|
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
AVAX
Technologies, Inc. and Subsidiaries:
We have
audited the accompanying consolidated balance sheets of AVAX Technologies, Inc.
and Subsidiaries (a development stage company) as of December 31, 2009 and 2008
and the related consolidated statements of operations and comprehensive loss,
stockholders’ equity (deficit) and cash flows for each of the years in the two
year period ended December 31, 2009, and for the period from January 12, 1990
(date of inception) to December 31, 2009. These consolidated
financial statements are the responsibility on the Company’s
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The Company’s
consolidated financial statements as of and for the period from January 12, 1990
(date of inception) through December 31, 2007 were audited by other auditors
whose report, dated April 15, 2008, expressed an unqualified opinion on those
statements. The consolidated financial statements for the period from
January 12, 1990 (date of inception) through December 31, 2007 reflect total
revenues and net loss of $8,973,206 and $84,254,830 respectively, of the related
totals. The other auditors’ report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for such prior periods,
is based solely on the report of such other auditors.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits and the report of other auditors provide a reasonable basis for
our opinion.
In our
opinion, based on our audits and the report of other auditors, the consolidated
financial statements referred to above present fairly, in all material respects
the consolidated financial position of AVAX Technologies, Inc. and Subsidiaries
as of December 31, 2009 and 2008 and the consolidated results of their
operations and their cash flows for each of the years in the two year period
ended December 31, 2009, and for the period from January 12, 1990 (date of
inception) to December 31, 2009 in conformity with accounting principles
generally accepted in the United States of America.
As
discussed in Note 1 to the consolidated financial statements, the Company has
adopted the provisions of FASB ASC topic 815-40-15, “Derivatives and Hedging –
Contracts in Entity’s Own Equity (Scope and Exceptions)” as of January 1,
2009.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1,
the Company is currently in the development stage, had a net loss of
approximately $19,425,000 for the year ended December 31, 2009 and had a deficit
accumulated under the development stage of approximately $110,294,000 as of
December 31, 2009. Further, the Company has utilized, from inception
of approximately, $80,003,000 of cash from operating
activities. These matters raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard
to these matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/
WithumSmith+Brown, PC
Princeton,
New Jersey
February 2
,
2011
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Stockholders
AVAX
Technologies, Inc.
We have
audited the accompanying consolidated balance sheets of AVAX Technologies, Inc.
(a development stage company) and subsidiaries as of December 31, 2007 and 2006,
and the related consolidated statements of operations and comprehensive loss,
stockholders’ equity (deficit), and cash flows for each of the two years in the
period ended December 31, 2007 and the period January 12, 1990 (incorporation)
through December 31, 2007. These financial statements are the
responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for
our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of AVAX Technologies,
Inc. and subsidiaries as of December 31, 2007, and the consolidated results of
their operations and their cash flows for each of the two years in the period
then ended and for the period from January 12, 1990 (incorporation) to December
31, 2007 in conformity with U.S. generally accepted accounting
principles.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, the Company has incurred recurring
losses from operations and may not have adequate capital to fund its operations
through 2008. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans
concerning these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As
discussed in Note 1 to the financial statements, effective January 1, 2006, the
Company changed its method of accounting for stock-based compensation in
accordance with the Statement of Financial Accounting Standards No. 123 (Revised
2004),
"Share-Based
Payment."
/s/
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia,
Pennsylvania
April
15, 2008
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Consolidated
Balance Sheets
|
|
|
December 31,
2009
|
|
|
December 31,
2008
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
|
|
$
|
25,586
|
|
|
$
|
550,806
|
|
|
Accounts
receivable
|
|
|
–
|
|
|
|
184,210
|
|
|
Inventory
|
|
|
–
|
|
|
|
10,285
|
|
|
Value
Added Tax receivable
|
|
|
47,855
|
|
|
|
48,951
|
|
|
Prepaid
expenses and other current assets
|
|
|
227,727
|
|
|
|
283,535
|
|
|
Total
current assets
|
|
|
301,168
|
|
|
|
1,077,787
|
|
|
Plant
and equipment, net
|
|
|
114,827
|
|
|
|
543,986
|
|
|
Tax
refund receivable
|
|
|
616,742
|
|
|
|
1,047,590
|
|
|
Total
assets
|
|
$
|
1,032,737
|
|
|
$
|
2,669,363
|
|
|
Liabilities
and stockholders’ deficit
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
2,289,024
|
|
|
$
|
1,997,169
|
|
|
Accrued
and withheld payroll tax liabilities
|
|
|
998,146
|
|
|
|
818,970
|
|
|
Deferred
revenue
|
|
|
–
|
|
|
|
400,000
|
|
|
Governmental
advances payable
|
|
|
671,080
|
|
|
|
734,407
|
|
|
Derivative
liabilities
|
|
|
15,419,000
|
|
|
|
-
|
|
|
Convertible
notes payable, net of discount of $933,333 and $0 in 2009 and 2008,
respectively
|
|
|
1,901,423
|
|
|
|
1,336,825
|
|
|
Loans
payable
|
|
|
1,352,182
|
|
|
|
-
|
|
|
Total
current liabilities
|
|
|
22,630,855
|
|
|
|
5,287,371
|
|
|
Stockholders’
deficit
:
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value:
|
|
|
|
|
|
|
|
|
|
Authorized
5,000,000 shares, including Series C – 120,000 shares
|
|
|
|
|
|
|
|
|
|
Series
C convertible preferred stock:
|
|
|
|
|
|
|
|
|
|
33,500
Issued and outstanding shares at December 31, 2009 and 2008 (liquidation
preference - $3,350,000)
|
|
|
335
|
|
|
|
335
|
|
|
Common
stock, $.004 par value:
|
|
|
|
|
|
|
|
|
|
500,000,000
shares authorized at December 31, 2009 and 2008; 141,574,997 shares issued
and outstanding at December 31, 2009 and 2008
|
|
|
566,300
|
|
|
|
566,300
|
|
|
Additional
paid-in capital
|
|
|
87,796,318
|
|
|
|
87,224,723
|
|
|
Subscription
receivable
|
|
|
(422
|
)
|
|
|
(422
|
)
|
|
Accumulated
other comprehensive income
|
|
|
333,411
|
|
|
|
328,557
|
|
|
Deficit
accumulated during the development stage
|
|
|
(110,294,060
|
)
|
|
|
(90,737,501
|
)
|
|
Total
stockholders’ deficit
|
|
|
(21,598,118
|
)
|
|
|
(2,618,008
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
1,032,737
|
|
|
$
|
2,669,363
|
|
See
accompanying notes to consolidated financial statements.
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Consolidated
Statements of Operations and Comprehensive Loss
|
|
|
Year ended
December 31,
|
|
|
Period from
January 12, 1990
(Incorporation) to
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Gain
from sale of the product
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
1,951,000
|
|
|
Product
and contract service revenue
|
|
|
399,354
|
|
|
|
649,124
|
|
|
|
7,864,572
|
|
|
Grant
revenue
|
|
|
–
|
|
|
|
–
|
|
|
|
206,112
|
|
|
Total
revenue
|
|
|
399,354
|
|
|
|
649,124
|
|
|
|
10,021,684
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
2,524,563
|
|
|
|
3,204,260
|
|
|
|
57,976,563
|
|
|
Acquired
in process research and development
|
|
|
–
|
|
|
|
–
|
|
|
|
4,420,824
|
|
|
Write
down of acquired intellectual property and other
intangibles
|
|
|
–
|
|
|
|
188,387
|
|
|
|
3,604,478
|
|
|
Amortization
of acquired intangibles
|
|
|
–
|
|
|
|
–
|
|
|
|
715,872
|
|
|
Selling,
general and administrative
|
|
|
2,758,379
|
|
|
|
3,510,909
|
|
|
|
44,228,669
|
|
|
Total
costs and expenses
|
|
|
5,282,942
|
|
|
|
6,903,556
|
|
|
|
110,946,406
|
|
|
Total
operating loss
|
|
|
(4,883,588
|
)
|
|
|
(6,254,432
|
)
|
|
|
(100,924,722
|
)
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
342
|
|
|
|
54,852
|
|
|
|
6,259,785
|
|
|
Interest
expense
|
|
|
(654,313
|
)
|
|
|
(283,091
|
)
|
|
|
(1,749,471
|
)
|
|
Change
in fair value of derivative liabilities
|
|
|
(13,886,900
|
)
|
|
|
-
|
|
|
|
(14,019,000
|
)
|
|
Other,
net
|
|
|
-
|
|
|
|
–
|
|
|
|
143,193
|
|
|
Total
other income (expense), net
|
|
|
(14,540,871
|
)
|
|
|
(228,239
|
)
|
|
|
(9,365,493
|
)
|
|
Loss
from continuing operations
|
|
|
(19,424,459
|
)
|
|
|
(6,482,671
|
)
|
|
|
(110,290,215
|
)
|
|
Loss
from discontinued operations
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,845
|
)
|
|
Net
loss
|
|
|
(19,424,459
|
)
|
|
|
(6,482,671
|
)
|
|
|
(110,294,060
|
)
|
|
Amount
payable for liquidation preference
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,870,033
|
)
|
|
Net
loss attributable to common stockholders
|
|
$
|
(19,424,459
|
)
|
|
|
(6,482,671
|
)
|
|
$
|
(112,164,093
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per common share – basic and diluted
|
|
$
|
(0.14
|
)
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
Weighted-average
number of common shares outstanding
|
|
|
141,574,997
|
|
|
|
141,574,997
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(19,424,459
|
)
|
|
$
|
(6,482,671
|
)
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
4,854
|
|
|
|
(86,414
|
)
|
|
|
|
|
|
Comprehensive
loss
|
|
$
|
(19,419,605
|
)
|
|
$
|
(6,569,085
|
)
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Consolidated
Statements of Stockholders’ Equity (Deficit)
|
|
|
Series A
Convertible
Preferred Stock
|
|
|
Series B
Convertible
Preferred Stock
|
|
|
Series C
Convertible
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-In
|
|
|
Subscription
|
|
|
Deferred
|
|
|
Unrealized
Loss on
Marketable
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Deficit
Accumulated
During the
Development
|
|
|
Total
Stockholders’
Equity
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
Securities
|
|
|
Income
|
|
|
Stage
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services in January 1990
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
582,500
|
|
|
$
|
2,330
|
|
|
$
|
920
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
3,250
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(889
|
)
|
|
|
(889
|
)
|
|
Balance
at December 31, 1990
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
582,500
|
|
|
|
2,330
|
|
|
|
920
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(889
|
)
|
|
|
2,361
|
|
|
Issuance
of common stock for services in August 1991
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
230,000
|
|
|
|
920
|
|
|
|
5,830
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
6,750
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(97,804
|
)
|
|
|
(97,804
|
)
|
|
Balance
at December 31, 1991
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
812,500
|
|
|
|
3,250
|
|
|
|
6,750
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(98,693
|
)
|
|
|
(88,693
|
)
|
|
Conversion
of note payable to related party to common stock in June
1992
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
22,913
|
|
|
|
92
|
|
|
|
160,465
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
160,557
|
|
|
Issuance
of common stock for services in May and June 1992
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
264,185
|
|
|
|
1,056
|
|
|
|
6,444
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
7,500
|
|
|
Issuance
of Series A convertible preferred stock, net of issuance cost in June,
July and September 1992
|
|
|
1,287,500
|
|
|
|
12,875
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,258,837
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,271,712
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(607,683
|
)
|
|
|
(607,683
|
)
|
|
Balance
at December 31, 1992
|
|
|
1,287,500
|
|
|
|
12,875
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,099,598
|
|
|
|
4,398
|
|
|
|
2,432,496
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(706,376
|
)
|
|
|
1,743,393
|
|
|
Issuance
of common stock for services in July and November 1993
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
8,717
|
|
|
|
35
|
|
|
|
24,965
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
25,000
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,610,154
|
)
|
|
|
(1,610,154
|
)
|
|
Balance
at December 31, 1993
|
|
|
1,287,500
|
|
|
|
12,875
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,108,315
|
|
|
|
4,433
|
|
|
|
2,457,461
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,316,530
|
)
|
|
|
158,239
|
|
|
Issuance
of common stock for services in July 1994
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3,750
|
|
|
|
15
|
|
|
|
4,485
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
4,500
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(781,221
|
)
|
|
|
(781,221
|
)
|
|
Balance
at December 31, 1994
|
|
|
1,287,500
|
|
|
|
12,875
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,112,065
|
|
|
|
4,448
|
|
|
|
2,461,946
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,097,751
|
)
|
|
|
(618,482
|
)
|
|
Common
stock returned and canceled in April and May 1995
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(307,948
|
)
|
|
|
(1,232
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,232
|
)
|
|
Shares
issued in September and November 1995
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,777,218
|
|
|
|
7,109
|
|
|
|
–
|
|
|
|
(7,109
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Amount
payable for liquidation preference
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(738,289
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(738,289
|
)
|
|
Net
income
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,380,571
|
|
|
|
1,380,571
|
|
|
Balance
at December 31, 1995
|
|
|
1,287,500
|
|
|
|
12,875
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,581,335
|
|
|
|
10,325
|
|
|
|
1,723,657
|
|
|
|
(7,109
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,717,180
|
)
|
|
|
22,568
|
|
|
Repurchase
of common stock in March 1996
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(77,901
|
)
|
|
|
(
312
|
)
|
|
|
–
|
|
|
|
312
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Payment
of subscription receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,771
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,771
|
|
|
Conversion
of Series A preferred stock in June 1996
|
|
|
(1,287,500
|
)
|
|
|
(12,875
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
321,875
|
|
|
|
1,288
|
|
|
|
11,587
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Consolidated
Statements of Stockholders’ Equity (Deficit) (continued)
|
|
|
Series A
Convertible
Preferred Stock
|
|
|
Series B
Convertible
Preferred Stock
|
|
|
Series C
Convertible
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-In
|
|
|
Subscription
|
|
|
Deferred
|
|
|
Unrealized
Loss on
Marketable
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Deficit
Accumulated
During the
Development
|
|
|
Total
Stockholders’ Equity
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
Securities
|
|
|
Income
|
|
|
Stage
|
|
|
(Deficit)
|
|
|
Issuance
of common stock and Series B preferred stock in a private placement in May
and June 1996
|
|
|
–
|
|
|
|
–
|
|
|
|
258,198
|
|
|
|
2,582
|
|
|
|
–
|
|
|
|
–
|
|
|
|
129,099
|
|
|
|
516
|
|
|
|
22,217,397
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
22,220,495
|
|
|
Issuance
of common stock and Series B preferred stock for services in June
1996
|
|
|
–
|
|
|
|
–
|
|
|
|
1,000
|
|
|
|
10
|
|
|
|
–
|
|
|
|
–
|
|
|
|
500
|
|
|
|
2
|
|
|
|
99,988
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
100,000
|
|
|
Exercise
of warrants in June and July 1996
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
156,250
|
|
|
|
626
|
|
|
|
5,624
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
6,250
|
|
|
Amount
payable for liquidation preference
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,131,744
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,131,744
|
)
|
|
Compensation
related to stock options granted in May and September 1996
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,076,373
|
|
|
|
–
|
|
|
|
(1,076,373
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Amortization
of deferred compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
112,949
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
112,949
|
|
|
Unrealized
loss on marketable securities
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,037
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,037
|
)
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,536,842
|
)
|
|
|
(1,536,842
|
)
|
|
Balance
at December 31, 1996
|
|
|
–
|
|
|
|
–
|
|
|
|
259,198
|
|
|
|
2,592
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3,111,158
|
|
|
|
12,445
|
|
|
|
24,002,882
|
|
|
|
(4,026
|
)
|
|
|
(963,424
|
)
|
|
|
(2,037
|
)
|
|
|
–
|
|
|
|
(3,254,022
|
)
|
|
|
19,794,410
|
|
|
Payment
of subscription receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,761
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,761
|
|
|
Write-off
of subscription receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,833
|
)
|
|
|
1,833
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Exercise
of warrants in April and June 1997
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
49,770
|
|
|
|
199
|
|
|
|
(199
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Conversion
of preferred to common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
(55,039
|
)
|
|
|
(551
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
1,421,403
|
|
|
|
5,685
|
|
|
|
(5,134
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Repurchase
of fractional shares
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(26
|
)
|
|
|
–
|
|
|
|
(76
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(76
|
)
|
|
Realization
of loss on marketable securities
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,037
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,037
|
|
|
Amortization
of deferred compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
269,100
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
269,100
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(4,266,125
|
)
|
|
|
(4,266,125
|
)
|
|
Balance
at December 31, 1997
|
|
|
–
|
|
|
|
–
|
|
|
|
204,159
|
|
|
$
|
2,041
|
|
|
|
–
|
|
|
|
–
|
|
|
|
4,582,305
|
|
|
|
18,329
|
|
|
|
23,995,640
|
|
|
|
(432
|
)
|
|
|
(694,324
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(7,520,147
|
)
|
|
|
15,801,107
|
|
|
Conversion
of preferred to common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
(91,470
|
)
|
|
|
(914
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
2,386,174
|
|
|
|
9,544
|
|
|
|
(8,630
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Payment
of subscription receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
10
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
10
|
|
|
Issue
shares based upon reset provisions
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3,029,339
|
|
|
|
12,117
|
|
|
|
(12,117
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Issue
compensatory shares to officer
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
9,301
|
|
|
|
38
|
|
|
|
24,962
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
25,000
|
|
|
Amortization
of deferred compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
269,100
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
269,100
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(5,838,130
|
)
|
|
|
(5,838,130
|
)
|
|
Balance
at December 31, 1998
|
|
|
–
|
|
|
|
–
|
|
|
|
112,689
|
|
|
|
1,127
|
|
|
|
–
|
|
|
|
–
|
|
|
|
10,007,119
|
|
|
|
40,028
|
|
|
|
23,999,855
|
|
|
|
(422
|
)
|
|
|
(425,224
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(13,358,277
|
)
|
|
|
10,257,087
|
|
|
Conversion
of preferred to common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
(38,805
|
)
|
|
|
(388
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
1,012,286
|
|
|
|
4,049
|
|
|
|
(3,661
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Issue
shares based upon reset provisions
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
20,885
|
|
|
|
84
|
|
|
|
(84
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Issuance
of Series C preferred stock in a private placement in March
1999
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
101,300
|
|
|
|
1,013
|
|
|
|
–
|
|
|
|
–
|
|
|
|
9,283,726
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
9,284,739
|
|
|
Exercise
of Warrants pursuant to cashless exercise provisions
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
37,500
|
|
|
|
150
|
|
|
|
27,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
27,150
|
|
|
Capital
contributed through sale of 20% interest in consolidated subsidiaries to
unrelated third party
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,099,200
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,099,200
|
|
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Consolidated
Statements of Stockholders’ Equity (Deficit) (continued
)
|
|
|
Series A
Convertible
Preferred Stock
|
|
|
Series B
Convertible
Preferred Stock
|
|
|
Series C
Convertible
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-In
|
|
|
Subscription
|
|
|
Deferred
|
|
|
Unrealized
Loss on
Marketable
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Deficit
Accumulated
During the
Development
|
|
|
Total
Stockholders’
Equity
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
Securities
|
|
|
Income
|
|
|
Stage
|
|
|
(Deficit)
|
|
|
Amortization
of deferred compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
269,100
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
269,100
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(7,867,563
|
)
|
|
|
(7,867,563
|
)
|
|
Balance
at December 31, 1999
|
|
|
–
|
|
|
|
–
|
|
|
|
73,884
|
|
|
|
739
|
|
|
|
101,300
|
|
|
|
1,013
|
|
|
|
11,077,790
|
|
|
|
44,311
|
|
|
|
35,406,036
|
|
|
|
(422
|
)
|
|
|
(156,124
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(21,225,840
|
)
|
|
|
14,069,713
|
|
|
Conversion
of preferred to common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
(73,884
|
)
|
|
|
(739
|
)
|
|
|
(14,550
|
)
|
|
|
(146
|
)
|
|
|
2,375,083
|
|
|
|
9,500
|
|
|
|
(8,615
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Private
placement of common stock, March 2000
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,259,494
|
|
|
|
9,039
|
|
|
|
24,186,656
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
24,195,695
|
|
|
Capital
contribution by shareholder
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
93,637
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
93,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of options and warrants
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
29,254
|
|
|
|
117
|
|
|
|
271,273
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
271,390
|
|
|
Shares
issued pursuant to acquisition of Subsidiary
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
800,000
|
|
|
|
3,200
|
|
|
|
7,596,800
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
7,600,000
|
|
|
Elimination
of contributed capital related to joint venture no longer
consolidated
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,099,200
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,099,200
|
)
|
|
Amortization
of deferred compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
156,124
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
156,124
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
80,009
|
|
|
|
–
|
|
|
|
80,009
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(16,276,749
|
)
|
|
|
(16,276,749
|
)
|
|
Balance
at December 31, 2000
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
86,750
|
|
|
|
867
|
|
|
|
16,541,621
|
|
|
|
66,167
|
|
|
|
65,446,587
|
|
|
|
(422
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
80,009
|
|
|
|
(37,502,589
|
)
|
|
|
28,090,619
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(38,894
|
)
|
|
|
–
|
|
|
|
(38,894
|
)
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(15,109,753
|
)
|
|
|
(15,109,753
|
)
|
|
Balance
at December 31, 2001
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
86,750
|
|
|
|
867
|
|
|
|
16,541,621
|
|
|
|
66,167
|
|
|
|
65,446,587
|
|
|
|
(422
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
41,115
|
|
|
|
(52,612,342
|
)
|
|
|
12,941,972
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
354,789
|
|
|
|
–
|
|
|
|
354,789
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(9,425,564
|
)
|
|
|
(9,425,564
|
)
|
|
Balance
at December 31, 2002
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
86,750
|
|
|
|
867
|
|
|
|
16,541,621
|
|
|
|
66,167
|
|
|
|
65,446,587
|
|
|
|
(422
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
395,904
|
|
|
|
(62,037,906
|
)
|
|
|
3,871,197
|
|
|
Conversion
of preferred to common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(50,000
|
)
|
|
|
(500
|
)
|
|
|
1,538,450
|
|
|
|
6,153
|
|
|
|
(5,653
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Common
stock warrants issued in conjunction with convertible notes
payable
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
142,500
|
|
|
|
--
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
142,500
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
10,175
|
|
|
|
–
|
|
|
|
10,175
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,286,100
|
)
|
|
|
(3,286,100
|
)
|
|
Balance
at December 31, 2003
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
36,750
|
|
|
|
367
|
|
|
|
18,080,071
|
|
|
|
72,320
|
|
|
|
65,583,434
|
|
|
|
(422
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
406,079
|
|
|
|
(65,324,006
|
)
|
|
|
737,772
|
|
|
Exercise
of warrants
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
338,400
|
|
|
|
1,354
|
|
|
|
47,037
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
48,391
|
|
|
Conversion
of bridge notes to common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
7,486,430
|
|
|
|
29,945
|
|
|
|
943,330
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
973,275
|
|
|
Private
placement of common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
10,166,667
|
|
|
|
40,667
|
|
|
|
2,852,656
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,893,323
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
20,739
|
|
|
|
–
|
|
|
|
20,739
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,457,908
|
)
|
|
|
(3,457,908
|
)
|
|
Balance
at December 31, 2004
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
36,750
|
|
|
$
|
367
|
|
|
|
36,071,568
|
|
|
$
|
144,286
|
|
|
$
|
69,426,457
|
|
|
$
|
(422
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
426,818
|
|
|
$
|
(68,781,914
|
)
|
|
$
|
1,215,592
|
|
|
Private
placement of common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
25,343,430
|
|
|
|
101,374
|
|
|
|
7,885,153
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
7,986,527
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
28,864
|
|
|
|
–
|
|
|
|
28,864
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,703,768
|
)
|
|
|
(3,703,768
|
)
|
|
Balance
at December 31, 2005
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
36,750
|
|
|
$
|
367
|
|
|
|
61,414,998
|
|
|
$
|
245,660
|
|
|
$
|
77,311,610
|
|
|
$
|
(422
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
455,682
|
|
|
$
|
(72,485,682
|
)
|
|
$
|
5,527,215
|
|
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Consolidated
Statements of Stockholders’ Equity (Deficit) (continued
)
|
|
|
Series A
Convertible
Preferred Stock
|
|
|
Series B
Convertible
Preferred Stock
|
|
|
Series C
Convertible
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-In
|
|
|
Subscription
|
|
|
Deferred
|
|
|
Unrealized
Loss on
Marketable
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Deficit
Accumulated
During the
Development
|
|
|
Total
Stockholders’
Equity
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Receivable
|
|
|
Compensation
|
|
|
Securities
|
|
|
Income
|
|
|
Stage
|
|
|
(Deficit)
|
|
|
Balance
at December 31, 2005
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
36,750
|
|
|
$
|
367
|
|
|
|
61,414,998
|
|
|
$
|
245,660
|
|
|
$
|
77,311,610
|
|
|
$
|
(422
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
455,682
|
|
|
$
|
(72,485,682
|
)
|
|
$
|
5,527,215
|
|
|
Stock
based compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
148,548
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
148,548
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
23,535
|
|
|
|
–
|
|
|
|
23,535
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(5,355,500
|
)
|
|
|
(5,355,500
|
)
|
|
Balance
at December 31, 2006
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
36,750
|
|
|
$
|
367
|
|
|
|
61,414,998
|
|
|
$
|
245,660
|
|
|
$
|
77,460,158
|
|
|
$
|
(422
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
479,217
|
|
|
$
|
(77,841,182
|
)
|
|
$
|
343,798
|
|
|
Conversion
of Series C Shares
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,250
|
)
|
|
|
(32
|
)
|
|
|
99,999
|
|
|
|
400
|
|
|
|
(368
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Private
placement of common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
80,060,000
|
|
|
|
320,240
|
|
|
|
8,998,120
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
9,318,360
|
|
|
Stock
based compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
199,148
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
199,148
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(64,246
|
)
|
|
|
–
|
|
|
|
(64,246
|
)
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(6,413,648
|
)
|
|
|
(6,413,648
|
)
|
|
Balance
at December 31, 2007
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
33,500
|
|
|
$
|
335
|
|
|
|
141,574,997
|
|
|
$
|
566,300
|
|
|
$
|
86,657,058
|
|
|
$
|
(422
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
414,971
|
|
|
$
|
(84,254,830
|
)
|
|
$
|
3,383,412
|
|
|
Stock
based compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
303,465
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
303,465
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(86,414
|
)
|
|
|
–
|
|
|
|
(86,414
|
)
|
|
Debt
discount (See Note 5)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
264,200
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
264,200
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(6,482,671
|
)
|
|
|
(6,482,671
|
)
|
|
Balance
at December 31, 2008
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
33,500
|
|
|
$
|
335
|
|
|
|
141,574,997
|
|
|
$
|
566,300
|
|
|
$
|
87,224,723
|
|
|
$
|
(422
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
328,557
|
|
|
$
|
(90,737,501
|
)
|
|
$
|
(2,618,008
|
)
|
|
Cumulative
effect of change in accounting principle (See Note 5)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(132,100
|
)
|
|
|
(132,100
|
)
|
|
Balance
at January 1, 2009, as adjusted
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
33,500
|
|
|
$
|
335
|
|
|
|
141,574,997
|
|
|
$
|
566,300
|
|
|
$
|
87,224,723
|
|
|
$
|
(422
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
328,557
|
|
|
$
|
(90,869,601
|
)
|
|
$
|
(2,750,108
|
)
|
|
Stock
based compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
571,595
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
571,595
|
|
|
Foreign
currency translation adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
4,854
|
|
|
|
–
|
|
|
|
4,854
|
|
|
Debt
discount (See Note 5)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(19,424,459
|
)
|
|
|
(19,424,459
|
)
|
|
Balance
at December 31, 2009
|
|
|
–
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
–
|
|
|
|
33,500
|
|
|
$
|
335
|
|
|
|
141,574,997
|
|
|
$
|
566,300
|
|
|
$
|
87,796,318
|
|
|
$
|
(422
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
333,411
|
|
|
$
|
(110,294,060
|
)
|
|
$
|
(21,598,118
|
)
|
See
accompanying notes to consolidated financial statements.
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Consolidated
Statements of Cash Flows
|
|
|
Year ended December 31
|
|
|
Period from
January 12, 1990 (Incorporation) to
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(19,424,459
|
)
|
|
$
|
(6,482,671
|
)
|
|
$
|
(110,294,060
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
441,836
|
|
|
|
294,224
|
|
|
|
5,820,787
|
|
|
Amortization
of debt discount on convertible notes payable
|
|
|
466,668
|
|
|
|
264,200
|
|
|
|
873,368
|
|
|
Extraordinary
gain related to negative goodwill on consolidated
subsidiary
|
|
|
–
|
|
|
|
–
|
|
|
|
(902,900
|
)
|
|
Cumulative
effect of change in accounting
|
|
|
–
|
|
|
|
–
|
|
|
|
(54,195
|
)
|
|
Amortization
of deferred gain on joint venture
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,805,800
|
)
|
|
Equity
in net loss of joint venture
|
|
|
–
|
|
|
|
–
|
|
|
|
1,703,763
|
|
|
Stock
based compensation expense
|
|
|
571,595
|
|
|
|
303,465
|
|
|
|
1,222,756
|
|
|
Minority
interest in net loss of consolidated subsidiary
|
|
|
–
|
|
|
|
–
|
|
|
|
(80,427
|
)
|
|
Acquired
in-process research and development charge
|
|
|
–
|
|
|
|
–
|
|
|
|
4,420,824
|
|
|
Write
down of acquired intellectual property and other
intangibles
|
|
|
–
|
|
|
|
188,387
|
|
|
|
3,604,478
|
|
|
Change
in fair value of derivative liabilities
|
|
|
13,886,900
|
|
|
|
–
|
|
|
|
13,886,900
|
|
|
Compensatory
stock issue
|
|
|
–
|
|
|
|
–
|
|
|
|
25,000
|
|
|
Gain
on sale of the product
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,951,000
|
)
|
|
Gain
on sale of intellectual property
|
|
|
–
|
|
|
|
–
|
|
|
|
(787
|
)
|
|
Accretion
of interest on common stock receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
(449,000
|
)
|
|
Accretion
of interest on amount payable to preferred stockholders and Former
Officer
|
|
|
–
|
|
|
|
–
|
|
|
|
449,000
|
|
|
Loss
on sale of furniture and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
246,254
|
|
|
Issuance
of common stock or warrants for services
|
|
|
–
|
|
|
|
–
|
|
|
|
423,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
184,210
|
|
|
|
(59,422
|
)
|
|
|
142,016
|
|
|
Inventory
|
|
|
10,285
|
|
|
|
867
|
|
|
|
41,916
|
|
|
Prepaid
expenses and other current assets
|
|
|
58,683
|
|
|
|
63,929
|
|
|
|
(33,419
|
)
|
|
Tax
refund receivable
|
|
|
441,003
|
|
|
|
(1,085,118
|
)
|
|
|
(323,627
|
)
|
|
Accounts
payable and accrued expenses
|
|
|
591,983
|
|
|
|
(489,499
|
)
|
|
|
2,305,551
|
|
|
Government
advances payable
|
|
|
(74,377
|
)
|
|
|
360,025
|
|
|
|
285,648
|
|
|
Deferred
revenue
|
|
|
-
|
|
|
|
150,000
|
|
|
|
360,292
|
|
|
Amount
payable to Former Officer
|
|
|
–
|
|
|
|
–
|
|
|
|
80,522
|
|
|
Net
cash used in operating activities
|
|
$
|
(2,845,673
|
)
|
|
$
|
(6,491,613
|
)
|
|
$
|
(80,002,851
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of marketable securities
|
|
|
–
|
|
|
|
–
|
|
|
|
(351,973,210
|
)
|
|
Proceeds
from sale of marketable securities
|
|
|
–
|
|
|
|
–
|
|
|
|
344,856,738
|
|
|
Proceeds
from sale of short-term investments
|
|
|
–
|
|
|
|
–
|
|
|
|
7,116,472
|
|
|
Purchases
of furniture and equipment
|
|
|
(12,677
|
)
|
|
|
(104,982
|
)
|
|
|
(3,847,724
|
)
|
|
Proceeds
from sale of furniture and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
51,119
|
|
|
Cash
acquired in acquisition of control of joint venture
|
|
|
–
|
|
|
|
–
|
|
|
|
991,634
|
|
|
Organization
costs incurred
|
|
|
–
|
|
|
|
–
|
|
|
|
(622,755
|
)
|
|
Net
cash used in investing activities
|
|
$
|
(12,677
|
)
|
|
$
|
(104,982
|
)
|
|
$
|
(3,427,726
|
)
|
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Consolidated
Statements of Cash Flows (continued)
|
|
|
Year ended December 31
|
|
|
Period from January 12, 1990
(Incorporation)
to
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of notes payable to related party
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
957,557
|
|
|
Principal
payments on notes payable to related party
|
|
|
–
|
|
|
|
–
|
|
|
|
(802,000
|
)
|
|
Proceeds
from loans payable and the related issuance of warrants
|
|
|
1,400,000
|
|
|
|
1,321,000
|
|
|
|
5,035,000
|
|
|
Principal
payments on loans payable
|
|
|
-
|
|
|
|
–
|
|
|
|
(1,389,000
|
)
|
|
Payments
for fractional shares from reverse splits and preferred stock
conversions
|
|
|
–
|
|
|
|
–
|
|
|
|
(76
|
)
|
|
Proceeds
from loans payable
|
|
|
914,884
|
|
|
|
–
|
|
|
|
914,884
|
|
|
Financing
costs incurred
|
|
|
–
|
|
|
|
–
|
|
|
|
(90,000
|
)
|
|
Shareholder
capital contribution
|
|
|
–
|
|
|
|
–
|
|
|
|
93,637
|
|
|
Payments
received on subscription receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
4,542
|
|
|
Proceeds
received from exercise of stock warrants
|
|
|
–
|
|
|
|
–
|
|
|
|
76,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination
of consolidated accounting treatment for joint venture
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,511,701
|
)
|
|
Capital
contribution through sale of interest in consolidated
subsidiary
|
|
|
–
|
|
|
|
–
|
|
|
|
2,624,000
|
|
|
Net
proceeds received from issuance of preferred and common
stock
|
|
|
–
|
|
|
|
–
|
|
|
|
78,170,851
|
|
|
Net
cash provided by financing activities
|
|
|
2,314,884
|
|
|
|
1,321,000
|
|
|
|
83,084,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
18,246
|
|
|
|
(76,806
|
)
|
|
|
371,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(525,220
|
)
|
|
|
(5,352,401
|
)
|
|
|
25,586
|
|
|
Cash
at beginning of period
|
|
|
550,806
|
|
|
|
5,903,207
|
|
|
|
–
|
|
|
Cash
at end of period
|
|
$
|
25,586
|
|
|
$
|
550,806
|
|
|
$
|
25,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Paid
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
Non-cash
activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of restricted stock compensation
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
25,000
|
|
|
Common
stock warrants issued with convertible notes
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
142,500
|
|
|
Conversion
of loan into common stock
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
950,000
|
|
|
Payment
of interest with common stock
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
23,275
|
|
|
Deferred
revenue converted to note payable
|
|
$
|
400,000
|
|
|
$
|
-
|
|
|
$
|
400,000
|
|
|
Debt
discount (See note 5)
|
|
$
|
1,400,000
|
|
|
$
|
264,200
|
|
|
$
|
1,664,200
|
|
|
Repayment
of note payable
|
|
$
|
22,500
|
|
|
$
|
–
|
|
|
$
|
22,500
|
|
See
accompanying notes to consolidated financial statements.
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Notes to
Consolidated Financial Statements
December
31, 2009 and 2008
|
1.
|
Description
of Business and Significant Accounting
Policies
|
Description
of Business
AVAX
Technologies, Inc. and its subsidiaries (the Company) is a development stage
biopharmaceutical company.
In
November 1995, the Company sold its leading product under development, an
over-the-counter nutritional, dietary, medicinal and/or elixorative food
supplement or drug and all of the related patents and other intellectual
property. The agreement was for $2.4 million in shares of common
stock of Interneuron Pharmaceuticals, Inc. (IPI), a public company, the parent
of the purchaser of the Product (the “Stock”). Certain common
stockholders of the Company were also common stockholders of
IPI. Pursuant to the terms of the agreement, the purchase price,
payable in two equal installments in December 1996 and 1997, was fixed, and the
number of shares of the Stock would vary depending on the quoted market price of
the Stock at such time. Because the Stock was receivable in two equal
annual installments, the gain from the sale of the Product, $1,951,000, was
calculated by discounting the value of the Stock receivable using a discount
rate of 15%.
Also in
November 1995, the Company entered into a license agreement with Thomas
Jefferson University (TJU) to develop, commercially manufacture and sell
products embodying immunotherapeutic vaccines for the treatment of malignant
melanoma and other cancers (the Invention).
In
December 1996, the Company entered into a license agreement with Rutgers
University (Rutgers) to develop, commercially manufacture and sell products
embodying a series of compounds for the treatment of cancer and infectious
diseases. During 2004 the Company and Rutgers agreed to cancel the
license agreement and all of the Company’s obligations associated with the
license agreement.
In
February 1997, the Company entered into a license agreement with Texas A&M
to develop, commercially manufacture and sell products embodying a series of
compounds for the treatment of cancer (the Texas A&M Compounds)
(see Note 2
).
In
November 1999, the Company entered into a definitive joint venture agreement
with Australia Vaccine Technologies (AVT) (formerly Neptunus International
Holdings Limited), a pharmaceutical group in Australia, under the subsidiary
name, AVAX Holdings Australia Pty Limited (“AVAX Holdings”). Under
the joint venture agreement, AVAX Holdings, through its affiliated entities AVAX
Australia Pty Limited and AVAX Australia Manufacturing Pty Limited (the “Joint
Venture Companies”), was organized for the purpose of manufacturing and
marketing M-Vax, an immunotherapy for the post-surgical treatment of Stage 3 and
4 melanoma, in Australia and New Zealand. In January 2002, the Joint
Venture Companies repurchased 90% of AVT’s interest in the two joint venture
companies resulting in AVAX owning a 95% interest in the net equity of both
joint venture companies. The Company was seeking but was unable to
obtain a timely governmental reimbursement for the costs of treatment with the
M-Vax in Australia, and determined to discontinue operations in Australia in
order to focus the cash resources of the Company on its U.S. and European
operations. In September 2002, the Company announced that it would be
discontinuing its operations in Australia and in December 2002 the Company
completed the liquidation of its Australian subsidiary.
In August
2000, the Company completed its acquisition of GPH, S.A. (“Holdings”) and
Genopoietic S.A. (“Genopoietic”) each a French societe anonyme based in Paris,
France with principal its operating facility in Lyon,
France. Holdings and Genopoietic were organized in 1993 to develop
gene therapy applications and market gene therapy treatments for
cancer. In addition, the Company performed contract manufacturing and
research activities at its facilities located in Lyon. The Company’s
December 31, 2009 consolidated balance sheet includes a deficit of liabilities
in excess of assets of $807,378 related to these subsidiaries.
The
Company’s business is subject to significant risks consistent with biotechnology
companies that are developing products for human therapeutic
use. These risks include, but are not limited to, uncertainties
regarding research and development, access to capital, obtaining and enforcing
patents, receiving regulatory approval, and competition with other biotechnology
and pharmaceutical companies. The Company plans to continue to
finance its operations with a combination of equity and debt financing and, in
the longer term, revenues from product sales, if any. However, there
can be no assurance that it will successfully develop any product or, if it
does, that the product will generate any or sufficient
revenues.
Basis
of Presentation
The
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern which contemplates, among other things, the
realization of assets and satisfaction of liabilities in the normal course of
business. For the year ended December 31, 2009, the Company incurred
a net loss of $19,424,459 and a deficit accumulated during the development stage
of $110,294,060 and has incurred an accumulated operating cash flow deficit of
$80,002,851 since incorporation. The Company’s recent cash
requirements were satisfied through the issuance of convertible debt securities
in 2008 and 2009 and the subsequent extension of due dates on these securities
(see Note 5)
,
maintaining balances in accounts payable and accrued expenses on terms in excess
of those afforded in commercial practice and customer agreements and through the
use of available cash. However, the Company does not have sufficient
resources to maintain its existing plan of operations throughout
2011. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern. Management anticipates that
additional debt or equity financing will be required to fund ongoing operations
and product development in 2011. The Company is currently negotiating
with potential investors to raise additional capital or secure revenue sources
to fund current operations. However, there is no assurance that the
Company will successfully obtain the required capital or revenues or, if
obtained, the amounts will be sufficient to fund ongoing operations in 2011 and
beyond. The inability to secure additional capital could have a
material adverse effect on the Company, including the possibility that the
Company could have to cease operations. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of AVAX
Technologies, Inc., and its subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Development
Stage Company
The
accompanying consolidated financial statements have been prepared in accordance
with the provisions of ASC Topic 915, “Development Stage Entities”.
Foreign
Currency Translation
Holdings
and Genopoietic use the Euro as their functional currency as required by the
European Union. The Australian Joint Venture Companies and AVAX
Holdings used the Australian Dollar as their functional currency prior to the
discontinuance of operations discussed above.
In
accordance with Financial Accounting Standards Board Accounting Standards
Codification (“FASB ASC”) 810, the financial statements of these entities have
been translated into United States dollars, the functional currency of the
Company and its other wholly-owned subsidiaries and the reporting currency
herein, for purposes of consolidation.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates include, but are
not limited to, the recoverability of plant and equipment, collectability of
receivables, fair value of derivative liabilities, valuation of tax asset and
accrued expenses. Actual results could differ from those
estimates.
At
December 31, 2009, the Company estimates that the value of it derivative
liabilities approximated $15,419,000. Changes in the valuation of the
derivative liabilities are reported in other income (expense) in the Statement
of Operations.
Revenue
Recognition
The
Company’s revenues are related to the provision of contract services and the
sale of its product, the AC Vaccine Technology, for the treatment of
melanoma. Contract service revenue is recognized in installments
based upon the contractual agreement entered into with
clients. Product revenues represent fees received or payable to the
Company related to the manufacture and sale of the vaccine. Product
revenue is recognized when the vaccine is received by the hospital administering
the vaccine.
The
Company records as deferred revenue amounts received in advance of the provision
of services in accordance with contracts or grants. Deferred revenue
at December 31, 2008 consisted of $400,000 received pursuant to a clinical
development and manufacturing agreement for which the activities needed to be
completed to earn the funds had not been completed as of December 31,
2008. Pursuant to a modification of the agreement, relating to the
advance, with Cancer Treatment Centers of America (“CTCA”) dated April 27, 2009
(see Note 5), the amount of deferred revenue was transferred to a note payable
to CTCA.
Accounts
Receivable
Accounts
receivable are stated at the amount management expects to collect from
outstanding balances. Management provides for probable uncollectible
accounts through a charge to earnings and a credit to a valuation allowance
based on its assessment of the current status of individual
accounts. Balances that are still outstanding after management has
used reasonable collection efforts are written off through a charge to the
valuation allowance and a credit to accounts receivable. There was no
valuation allowance at December 31, 2009 and 2008. The Company
generally does not charge interest on accounts receivable.
Concentrations
of Credit Risk
Financial
instruments that potentially subject the Company to credit risk are principally
cash and accounts receivable. At December, 31, 2009, cash consisted
of funds maintained in the Company’s checking accounts. At December
31, 2008, cash consisted of funds maintained in the Company’s checking accounts
and a money market account. The Company places its cash in
a limited number of financial institutions Credit limits,
ongoing credit evaluations, and account monitoring procedures are utilized to
minimize the risk of loss from accounts receivable. Collateral is
generally not required.
Fair
Value of Financial Instruments
As of
December 31, 2009 and 2008, the Company’s financial instruments consisted of
cash, accounts receivable, accounts payable and accrued expenses, convertible
notes payable, notes payable and derivative liability. The Company
believes that the carrying values of cash, accounts receivable and accounts
payable and accrued expenses at December 31, 2009 and 2008 approximated fair
value due to their short-term maturity. Based on the borrowing rates
and terms currently available to the Company for loans of similar terms, the
Company has determined that the carrying value of convertible notes payable and
notes payable approximates fair value. The Company has determined
that the carrying value of the derivative liabilities approximates fair value
based on the intrinsic value method and binomial pricing models.
Inventories
Inventories
are stated at the lower of cost, determined using the first-in, first-out
method, or market. The Company’s inventories include raw materials
and supplies used in research and development activities. Due to
cessation of its research activities and departure of its research employees at
the Company’s Lyon facility, all inventory on hand was charged to materials and
supplies during 2009.
Accrued
Expenses
The
Company provides a provision for accrued expenses based upon its contractual
obligation, as calculated by the Company, for all claims made for payment to the
Company.
Plant
and Equipment
The
Company records plant and equipment at cost. Costs of maintenance and
repairs of plant and equipment are charged to costs and expenses.
Depreciation
is computed using the straight-line method over the estimated useful lives of
furniture and equipment, which range from three to ten
years. Depreciation for the Company’s manufacturing facility and
related equipment are computed using the straight-line method over estimated
useful lives of 5 to 10 years. Leasehold improvements related to the
building are being amortized using the straight-line method over the actual life
of the lease. Due to the cessation of manufacturing and research at
the Company’s Lyon facility and the departure of its manufacturing and research
employees during 2009 the Company recognized as depreciation during 2009 the
remaining unamortized balance of assets capitalized for the Lyon
facility. As of December 31, 2008 the remaining unamortized balance
of fixed assets in the Lyon facility was $263,153. This full amount
was expensed to Research and Development expense during 2009.
Income
Taxes
The
Company and its domestic subsidiaries file a consolidated federal and separate
company income tax returns. Income taxes are accounted for under the
asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
financial statement carrying amounts of assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences or operating loss and tax credit carryforwards are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period that
includes the enactment date. The Company has recorded a valuation
allowance against its deferred tax assets based on the history of losses
incurred.
Goodwill
The
Company adopted ASC 350 “Intangibles – Goodwill and Other” on January 1,
2002. This accounting standard requires that goodwill and indefinite
lived assets no longer be amortized but instead be tested at least annually for
impairment and expensed against earnings when the implied fair value of a
reporting unit, including goodwill, is less than its carrying
amount. With the departure of manufacturing and research employee’s
at the Company’s facility in Lyon the Company recognized as expense the
remaining unamortized balance of capitalized goodwill during
2008. The amount of Goodwill impairment loss recognized on the income
statement as of December 31, 2008 was $188,387.
Prior to
the adoption of ASC 350, the Company had recorded cumulative amortization of
$113,032. If ASC 350 had been applied to earlier periods the adjusted
loss from continuing operations from inception would be $111,577,183 and the
adjusted net loss would be $111,581,028.
Derivative
liabilities
The
Company’s derivative warrant instruments are measured at fair value using a
binomial or intrinsic valuation method which takes into account, as of the
valuation date, factors including the current exercise price, the expected life
of the warrant, the current price of the underlying stock and its expected
volatility, expected dividends on the stock and the risk-free interest rate for
the term of the warrant. The Company recognizes all of its warrants
with price protection in its consolidated balance sheet as liabilities depending
on the rights or obligations under the contracts. The liability is
revalued at each reporting period and changes in fair value are recognized
currently in the consolidated statements of operations under the caption “Change
in fair value of derivative liabilities.” See note 5.
Licenses
and Patents
Licenses
and patent costs are expensed as incurred as the Company does not feel there is
an alternate future use for the costs. Licenses are classified as
research and development and patents are classified as administrative expenses
in the statement of operations.
Research
and Development Costs
Research
and development costs, including payments related to research and license
agreements, are expensed when incurred. Contractual research expenses
are recorded pursuant to the provisions of the contract under which the
obligations originate. Research and development costs include all
costs incurred related to the research and development, including manufacturing
costs incurred, related to the Company’s research programs. The
Company is required to produce its products in compliance with current Good
Manufacturing Practices (“cGMP”), which requires a minimum level of staffing,
personnel and facilities testing and maintenance. Based upon its
current staffing level required to be in compliance with cGMP, the Company has
excess capacity. Utilizing this excess capacity, revenue is generated
through contract manufacturing engagements. Costs for production of
products will be capitalized and charged to cost of goods sold only after the
Company has received approval to market the drug by a Regulatory
Authority.
Stock-Based
Compensation
Effective
January 1, 2006, the Company has adopted ASC 718 “Compensation – Stock
Compensation.” ASC 718 requires that the compensation cost relating
to share-based payment transactions be recognized in financial statements,
measured by the fair value of the equity or liability instruments issued,
adjusted for estimated forfeitures. The Company transitioned to ASC
718 using the modified-prospective method, under which prior periods have not
been revised for comparative purposes. The valuation provisions of
ASC 718 applied to new grants and to grants that were outstanding as of the
effective date and were subsequently modified. Estimated compensation
for grants that were outstanding as of the effective date will be recognized
over the remaining service period using the compensation cost previously
estimated for our pro forma disclosures. Recognized stock-based
compensation expense for the year ended December 31, 2009 includes compensation
expense for share-based payment awards granted prior to, but not yet vested as
of December 31, 2005, based on the grant date fair value estimated in
accordance with the pro forma provisions of accounting for stock based
compensation and compensation expense for the share-based payment awards granted
subsequent to December 31, 2005 based on the grant date fair value
estimated in accordance with the provisions of ASC 718.
Prior to
the adoption of ASC 718, the Company applied the intrinsic-value-based method of
accounting prescribed by Accounting for Stock Issued to Employees and related
interpretations, to account for its fixed-plan stock options to
employees. Under this method, compensation cost was recorded only if
the market price of the underlying stock on the date of grant exceeded the
exercise price. The accounting principles for stock-based compensation
established accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation plans. As
permitted by ASC 718, the Company elected to continue to apply the
intrinsic-value-based method of accounting described above, and adopted only the
disclosure requirements of Accounting for Stock-Based Compensation, Transition
and Disclosure. The fair-value-based method used to determine
historical pro forma amounts under accounting for stock based compensation was
similar in most respects to the method used to determine stock-based
compensation expense under ASC 718. However, in its pro forma
disclosures, the Company accounted for option forfeitures as they occurred,
rather than based on estimates of future forfeitures.
Earnings
Per Share
Net loss
per share is based on net loss divided by the weighted average number of shares
of common stock outstanding during the respective periods. Diluted
earnings per share information is not presented, as the effects of stock
options, warrants and other convertible securities would be anti-dilutive for
the periods presented. Potentially dilutive securities not included
in dilutive loss per common share consisted of outstanding stock options and
warrants to acquire approximately 280,802,000 and 126,532,000 shares of common
stock as of December 31, 2009 and 2008, respectively. In addition
there were 272,100,000 and 14,678,000 shares of common stock issuable as of
December 31, 2009 and 2008 related to conversion features of notes payable
outstanding at the end of each period.
Recently
Issued Accounting Standards
On
January 1, 2009, the Company adopted ASC 808-10, “Collaborative
Arrangements
”
(“ASC
808-10”), which requires a certain presentation of transactions with third
parties and of payments between parties to a collaborative arrangement in our
statement of operations, along with disclosure about the nature and purpose of
the arrangement. The adoption of ASC 808-10 did not have any impact on our
results of operations, cash flows or financial position.
On
January 1, 2009, the Company adopted ASC 815-40-15, “Derivatives and
Hedging — Contracts in Entity’s Own Equity (Scope and Scope Exceptions)”
(“ASC 815-40-15”), which requires that the Company apply a two-step approach in
evaluating whether an equity-linked financial instrument (or embedded feature)
is indexed to our own stock, including evaluating the instrument’s contingent
exercise and settlement provisions. The adoption of ASC 815-40-15 resulted
in us adjusting our beginning balance of retained earnings down by $132,100 as
of January 1, 2009 and resulted in us recording a change in fair value of our
derivative liability on the statement of operations for the twelve months ended
December 31, 2009 of $13,886,900 and a cumulative derivative liability on our
balance sheet at December 31, 2009 of $15,419,000.
During
the quarter ended June 30, 2009, the Company adopted ASC 855-10,
“Subsequent Events” (“ASC 855-10”) that establishes general standards of
accounting and disclosure for events that occur after the balance sheet date but
before financial statements are issued. The adoption of ASC 855-10 did not have
any impact on our results of operations, cash flows or financial
position.
Effective
during the quarter ended September 30, 2009, the Financial Accounting
Standards Board (the “FASB”) issued Accounting Standards Codification (“ASC”)
105-10, “Generally Accepted Accounting Principles” that mandated that the FASB
Accounting Standards Codification become the single official source of
authoritative US Generally Accepted Accounting Principles (“GAAP”) other than
guidance issued by the Securities and Exchange Commission (the “SEC”),
superseding existing FASB, American Institute of Certified Public Accountants,
Emerging Issues Task Force (“EITF”), and related literature. The adoption of ASC
105-10 did not have any substantive impact on our consolidated financial
statements or related footnotes.
In April
2010, the FASB issued Accounting Standards Update 2010-17 (ASU 2010-17), Revenue
Recognition – Milestone Method (Topic 605): Milestone Method of Revenue
Recognition. The amendments in this Update are effective on a
prospective basis for milestones achieved in fiscal years, and interim periods
within those years, beginning on or after June 15, 2010. Early
adoption is permitted. If a vendor elects early adoption and the
period of adoption is not the beginning of the entity’s fiscal year, the entity
should apply the amendments retrospectively from the beginning of the year of
adoption. The Company does not expect the provisions of ASU 2010-17
to have a material effect on the financial position, results of operations or
cash flows of the Company.
In May
2010, the FASB issued Accounting Standards Update 2010-19 (ASU 2010-19), Foreign
Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency
Exchange Rates (SEC Update). The amendments in this Update discuss
the translation of foreign currency for consolidation in US GAAP financial
statements. This Update is effective March 18, 2010. The
Company does not expect the provisions of ASU 2010-19 to have a material effect
on the financial position, results of operations or cash flows of the
Company.
In July
2010, the FASB issued Accounting Standards Update 2010-20 (ASU 2010-20),
Receivables (Topic 310): Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses. The amendments in
this update require disclosures about the nature of credit risk in an entity’s
financing receivables, how that risk is incorporated into the allowance for
credit losses and the reasons for any changes in the allowance. This
Update is effective for interim and annual reporting periods ending on or after
December 15, 2010. The Company does not expect the provisions of ASU
2010-20 to have a material effect on the financial position, results of
operations or cash flows of the Company.
|
2.
|
License
and Research Agreements
|
In
November 1995, the Company entered into an agreement with TJU for the exclusive
worldwide license to develop, manufacture and sell the Invention
(see Note 1)
. In
consideration for the license agreement, the Company paid cash of $10,000 and
issued an aggregate of 458,242 shares of common stock to TJU and the scientific
founder (the Scientist).
Under the
terms of the license agreement the Company is obligated to (i) pay certain
milestone payments as follows: $10,000 upon initiation of the first clinical
trial that is approved by the Food and Drug Administration (“FDA”) or comparable
international agency, $10,000 upon the first filing of a New Drug Application
(“NDA”) with the FDA or comparable international agency, and $25,000 upon
receipt by the Company of approval from the FDA or comparable international
agency to market products, (ii) enter into a research agreement to fund a study
to be performed by TJU for the development of the technology related to the
Invention (the Study) at approximately $220,000 per annum for the first three
years, and (iii) following the third year, spend an aggregate of $500,000 per
year (which includes costs incurred pursuant to the research agreement plus
other internal and external costs) on the development of the Invention until
commercialized in the United States. If following the third year, the
Company files for United States marketing approval through a Company sponsored
NDA, the Company may elect to spend less than $500,000 per year on the
development of the Invention during the period of time the NDA is under review
by the FDA. During 2000, a payment of $25,000 was made to TJU
pursuant to the license agreement. In addition, the Company is
obligated to pay royalties on its worldwide net revenue derived from the
Invention and a percentage of all revenues received from sub-licensees of the
Invention. The research agreement with TJU was terminated by the
Company during 2004.
In
February 1997, the Company licensed from The Texas A&M University System an
issued U.S. patent and certain U.S. and foreign patent applications relating to
a series of novel cancer-fighting anti-estrogen compounds that may be especially
effective against hormone-dependent tumors. The development of the
anti-estrogren compounds is no longer a part of the Company‘s plan of
operation. The Company has been notified by Texas A&M that Texas
A&M considers the Company to be in violation of the license agreement and
that the Company’s rights under the license agreement have been
revoked. The Company disputes the contention by Texas A&M and the
Company is attempting to return the technology to the
University. Texas A&M has filed a lawsuit against the Company
seeking reimbursement from AVAX for certain patent expenses incurred by the
University from AVAX. In October 2008, the Company settled the suit for
$25,000 plus interest on the unpaid balance, payable over four months beginning
in November 2008.
Common
and Preferred Stock
In May
1996, the Company’s authorized capital was increased to 50,000,000 shares of
common stock, par value $.004, and 5,000,000 shares (of which 2,500,000 shares
were designated as Series A preferred stock, 300,000 shares were designated as
Series B preferred stock and 120,000 shares were designated as Series C
preferred stock) of preferred stock, par value $.01. In June 1998,
the Company’s authorized common stock, par value $.004, was decreased to
30,000,000 shares. In January 2004, the Company’s authorized common
stock, par value $.004, was increased to 150,000,000 shares. In January 2007,
the Company’s authorized common stock, par value $0.04, was increased to
500,000,000 shares. As of June 2006, no shares of the Series B preferred stock
were issued or outstanding, and the Certificate of Designation for the Series B
preferred stock was cancelled.
At the
second closing of the private placement on June 11, 1996, the 1,287,500 shares
of Series A preferred stock were automatically converted to 321,875 shares of
common stock. Notwithstanding such conversion, holders of the Series
A preferred stock have received pro rata 95.85% of shares of common stock of IPI
associated with the sale of the Product (
see Note 1
).
In March
2000, the Company announced the conversion of all outstanding shares of Series B
Convertible preferred stock into fully paid non-assessable shares of common
stock. As of the conversion date there were 73,884 shares of Series B
Convertible Preferred Stock outstanding that were convertible into 1,724,152
shares of Common Stock.
On March
1, 1999, the Company authorized and consummated an offering of Series C
Convertible Preferred Stock (the “Series C Offering”) pursuant to which the
Company raised aggregate gross proceeds of approximately
$10,130,000. In the Series C Offering, the Company sold an aggregate
of 101,300 shares of Series C Preferred Stock combined with Class A Warrants to
purchase an aggregate of 311,692 shares of Common Stock at an exercise price of
$4.00 per share and Class B Warrants to purchase an aggregate of 311,692 shares
of Common Stock at an exercise price of $4.50 per share. During 2000
2,462 of these Class A and Class B warrants were exercised. The
Series C Preferred Stock, the Class A Warrants and the Class B Warrants were
sold as a unit in the Series C Offering. The Class A Warrants and
Class B Warrants were exercisable until March 1, 2004.
The
Series C preferred stockholders are entitled to voting rights equivalent to the
number of common shares into which their preferred shares are
convertible. The Series C preferred stockholders are also entitled to
receive, in preference to the holders of common stock, an amount per preferred
share of $100 plus any declared but unpaid dividends.
Pursuant
to the terms of the private placement, each share of Series C preferred stock
was convertible at any time, in whole or in part, at the discretion of the
holders, into common stock at $3.25 per share.
In
connection with the private placement, the Company paid $845,261 in finder’s
fees and non-accountable expenses. Of this amount $709,100 was paid
to Paramount Capital Partners in the form of a finders fee.
During
2000 holders of 14,550 shares the Series C Preferred stock converted these
shares into 650,931 fully paid non-assessable shares of common
stock. During 2003 holders of 50,000 shares of the Series C Preferred
stock converted these shares into 1,538,450 fully paid non-assessable shares of
common stock. During 2007 holders of 3,250 shares of the Series C
Preferred stock converted those shares into 99,999 fully paid non-assessable
shares of common stock. The 33,500 shares of Series C preferred
stock, outstanding at December 31, 2009, is convertible into 1,030,756 shares of
common stock excluding the effect of any fractional shares.
In March
2000, the Company completed a $25,137,000 private placement with institutional
investors. The Company sold an aggregate of 2,259,494 newly issued
shares of common stock, and issued warrants to purchase an additional 225,951
shares of common stock at an exercise price of $12.79 per share, for an
aggregate warrant exercise price of $2,890,817. The warrants expired
on March 10, 2005.
In
connection with services rendered in connection with the private placement, the
Company paid Gruntal & Co., L.L.C., who acted as the placement agent, a cash
fee of approximately $747,000. Other share issuance expenses amounted
to approximately $54,000.
Pursuant
to a prior agreement, Paramount was paid a fee due to the participation in the
private placement of certain investors previously introduced to the Company by
Paramount. As a result of this agreement, the Company paid Paramount
a cash fee of approximately $140,000.
On August
24, 2000, the Company completed its acquisition of GPH, S.A. (“Holdings”) and
Genopoietic S.A. (“Genopoietic”), each a French societe anonyme based in Paris,
France. In this transaction, 100% of the outstanding shares of both
Holdings, which is the majority shareholder of Genopoietic, and Genopoietic have
been contributed to the Company by the shareholders of those two entities in
exchange for an aggregate of 800,000 shares of the Company's common stock valued
at $7,600,000 as of the acquisition date and $5,000 in notes
payable. Of the 800,000 shares issued to Professors David R.
Klatzmann and Jean-Loup Salzmann (the primary shareholders), 659,756 shares have
been placed in escrow to secure their indemnification obligations under the
Contribution Agreement. In addition, the Company incurred $621,397 in
acquisition costs, which were capitalized as part of the purchase price and
allocated to the net assets acquired.
The
Company has notified Professors Klatzmann and Salzmann that they are in default
of their obligations under the Contribution Agreement and has put them on notice
that the escrow shares are being cancelled and will revert back to the Company
as treasury shares. As of December 31, 2009, the shares have not been
formally cancelled.
On May
21, 2004, the Company closed the private placement of 10,166,167 shares of the
Company’s common stock plus warrants to purchase 1,525,000 shares of common
stock at $0.35 per share (Series A Warrants) and warrants to purchase 1,525,000
shares of common stock at $0.39 per share (Series B Warrants). Net
proceeds to the Company, after offering costs, amounted to approximately
$2,893,000.
On May
21, 2004, in compliance with the Note Purchase Agreements entered into in
December, 2003, the Company converted the principal ($950,000) and interest
($23,275) on the notes into common stock at an exercise price of $0.13 per share
resulting in the issuance of 7,486,430 shares of the Company’s common
stock.
On April
5, 2005, the Company closed a private placement of 25,343,430 shares of common
stock at a purchase price of $0.34 per share with 12 accredited or institutional
investors. The Company received gross proceeds of approximately
$8,616,000. In connection with the private placement, the Company
also issued to the investors warrants to purchase 3,801,515 shares of common
stock at a warrant exercise price of $0.41 per share, and warrants to purchase
3,801,515 shares of common stock at a warrant exercise price of $0.48 per
share. Net proceeds to the Company, after offering costs, amounted to
approximately $7,986,000.
On April
13, 2007, the Company closed a private placement of 80,060,000 shares of common
stock at a purchase price of $0.125 per share with 25 accredited and
institutional investors. In connection with the private placement,
the Company also issued to the investors warrants to purchase 80,060,000 shares
of common stock at a warrant exercise price of $0.15 per share. All
warrants issued in this private placement expire on April 13,
2012. Net proceeds to the Company, after offering costs, amounted to
approximately $9,318,000.
|
4.
|
Stock
Based Compensation
|
The
Company maintains two employee stock option plans, a director stock option plan
and has issued non-qualified stock options to an executive officer and a
director outside of the existing stock option plans, which non-plan option
grants have been approved by the Board of Directors and the stockholders of the
Company. These plans are discussed in more details
below. In addition, the Company issues warrants to consultants at the
discretion of the Board of Directors of the Company. The Company
accounts for warrants granted to consultants in accordance with ASC topic
550-50, equity based payments to non-employee’s, “Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services.” The Company determines
the value of stock warrants utilizing the Black-Scholes option-pricing
model.
Compensation
costs for fixed awards with pro rata vesting are allocated to periods on the
straight-line basis. The estimated weighted average fair value of options
granted was calculated based on the following range of assumptions for periods
during which options were issued:
|
|
|
Year Ended
December 31, 2008
|
|
Expected
term (in years)
|
|
5.00
– 5.00
|
|
Volatility
|
|
88.9
- 92.9%
|
|
Risk-free
interest rate
|
|
2.32%
- 3.10%
|
|
Expected
dividends
|
|
0.00
|
For the
year ended December 31, 2009, compensation expense of $47,612 was charged to
administrative expenses and $12,483 was charged to research and development
expenses related to stock options outstanding. For the year ended
December 31, 2008, compensation expense of $274,621 was charged to
administrative expenses and $28,844 was charged to research and development
expenses related to stock options outstanding.
The fair
value of option grants is estimated at the date of grant using the Black-Scholes
model.
The
following table shows the options and warrants outstanding by strike price with
the average expected remaining term of the instruments, in years, as of December
31, 2009.
|
Exercise Price Range
|
|
Options & Warrants
Outstanding
|
|
|
Weighted-Average
Remaining Term
|
|
|
Vested and
Exercisable Options
& Warrants
|
|
|
Weighted-Average
Remaining Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.015
- $0.125
|
|
|
181,650,000
|
|
|
|
4.29
|
|
|
|
181,650,000
|
|
|
|
4.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.150
- $0.190
|
|
|
88,120,400
|
|
|
|
2.36
|
|
|
|
87,801,650
|
|
|
|
2.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.285
- $0.300
|
|
|
507,000
|
|
|
|
3.28
|
|
|
|
507,000
|
|
|
|
3.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.340
- $0.370
|
|
|
2,557,293
|
|
|
|
0.42
|
|
|
|
2,557,293
|
|
|
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.410
- $0.470
|
|
|
7,603,030
|
|
|
|
0.26
|
|
|
|
7,603,030
|
|
|
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$2.938
|
|
|
240,000
|
|
|
|
0.99
|
|
|
|
240,000
|
|
|
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$8.240
|
|
|
125,000
|
|
|
|
1.83
|
|
|
|
125,000
|
|
|
|
1.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280,802,723
|
|
|
|
|
|
|
|
280,483,973
|
|
|
|
|
|
The
intrinsic value is calculated as the difference between the market value as of
December 31, 2009 and 2008 and the exercise prices of the shares on the
respective dates. The aggregate intrinsic value of options and
warrants outstanding as of December 31, 2009 was $1,199,220. The
aggregate intrinsic value of exercisable options and warrants as of December 31,
2008 was $1,130,845.
Stock
Options – 1992 Stock Option Plan
In April
1992, the Board of Directors approved the 1992 Stock Option Plan (the “1992
Plan”), which, as amended, authorized up to 437,500 shares of common stock for
granting both incentive and nonqualified stock options to employees, directors,
consultants and members of the scientific advisory board of the
Company. The 1992 Plan was amended in June 1999, to increase the
number of shares issuable to 1,500,000. The 1992 Plan was further
amended in June 2000, to increase the number of shares issuable to
2,500,000. The exercise price and vesting period of the options are
determined by the Board of Directors at the date of grant. Options
may be granted up to 10 years after the 1992 Plan’s adoption date and generally
expire 7 years from the date of grant. The following summarizes the
activity in the 1992 Plan:
|
|
|
|
|
|
Weighted Average Exercise
Price per Share
|
|
|
Balance
at December 31, 2007
|
|
|
155,394
|
|
|
|
0.89
|
|
|
Expired
|
|
|
(155,394
|
)
|
|
|
0.89
|
|
|
Balance
at December 31, 2008 and 2009
|
|
|
-
|
|
|
|
-
|
|
Stock
Options – 2001 Stock Option Plan
In
November 2001 the Board of Directors approved the 2001 Stock Option Plan (the
“2001 Plan”), subject to shareholder approval, authorizing up to 2,500,000
shares of common stock for granting both incentive and nonqualified stock
options to employees, directors, consultants and members of the scientific
advisory board of the Company. The exercise price and vesting period
of the options are determined by the Board of Directors at the date of
grant. Options may be granted up to 10 years after the 2001 Plan’s
adoption date and generally expire 10 years from the date of
grant. With the adoption of the 2006 Equity Incentive Plan this plan
was terminated and no new issues from the plan were authorized.
The
following summarizes activity in the 2001 Plan:
|
|
|
Options
|
|
|
Weighted Average Exercise
Price per Share
|
|
|
Balance
at December 31, 2007
|
|
|
2,080,731
|
|
|
|
0.23
|
|
|
Expired
|
|
|
(24,606
|
)
|
|
|
0.89
|
|
|
Forfeited
|
|
|
(896,000
|
)
|
|
|
0.24
|
|
|
Balance
at December 31, 2008
|
|
|
1,160,125
|
|
|
|
0.21
|
|
|
Expired
|
|
|
(325,000
|
)
|
|
|
0.18
|
|
|
Forfeited
|
|
|
(248,125
|
)
|
|
|
0.27
|
|
|
Balance
at December 31, 2009
|
|
|
587,000
|
|
|
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
and expected to vest at December 31, 2009
|
|
|
587,000
|
|
|
|
0.20
|
|
|
Exercisable
at December 31, 2009
|
|
|
587,000
|
|
|
|
0.20
|
|
The
587,000 outstanding options at December 31, 2009 had a weighted average
remaining contractual term of 2.63 years.
Stock
Options – 2006 Equity Incentive Plan
On June
12, 2006 the Board of Directors approved the 2006 Equity Incentive Plan (the
“2006 Plan”), subject to shareholder approval, authorizing up to 10,000,000
shares of common stock for granting both incentive and nonqualified stock
options as well as stock appreciation rights and restricted stock to employees,
directors, consultants and members of the scientific advisory board of the
Company. The exercise price and vesting period of the options are
determined by the Board of Directors at the date of grant. Options
may be granted up to 10 years after the 2001 Plan’s adoption date and generally
expire 10 years from the date of grant. This plan replaces the 2001
Stock Option Plan and the Directors Option Plan as of the date of enactment of
the plan.
The
following summarized the activity in the 2006 plan:
|
|
|
Number of Options
|
|
|
Weighted Average Exercise
Price per Share
|
|
|
Balance
at December 31, 2007
|
|
|
4,900,000
|
|
|
|
0.17
|
|
|
Issued
|
|
|
800,000
|
|
|
|
0.11
|
|
|
Forfeited
|
|
|
(1,425,000
|
)
|
|
|
0.17
|
|
|
Balance
at December 31, 2008
|
|
|
4,275,000
|
|
|
|
0.16
|
|
|
Expired
|
|
|
(1,000,000
|
)
|
|
|
0.19
|
|
|
Forfeited
|
|
|
(1,800,000
|
)
|
|
|
0.12
|
|
|
Balance
at December 31, 2009
|
|
|
1,475,000
|
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
and expected to vest at December 31, 2009
|
|
|
1,156,250
|
|
|
|
0.18
|
|
|
Exercisable
at December 31, 2009
|
|
|
1,156,250
|
|
|
|
0.18
|
|
The
1,475,000 outstanding options at December 31, 2009 had a weighted average
remaining contractual term of 6.42 years. Approximately $43,500 of
unrecognized compensation expense is expected to be recognized over the
remaining vesting period.
The
following is a summary of the non-vested common stock options granted, vested
and forfeited under the Plan:
|
|
|
Number of Options
|
|
|
Weighted Average Exercise
Price per Share
|
|
|
Outstanding
– January 1, 2009
|
|
|
787,500
|
|
|
|
0.18
|
|
|
Forfeited
|
|
|
(75,000
|
)
|
|
|
0.18
|
|
|
Vested
|
|
|
(393,750
|
)
|
|
|
0.18
|
|
|
Balance
at December 31, 2009
|
|
|
318,750
|
|
|
|
0.18
|
|
Director
Option Plan
In June
2000, the Company adopted the 2000 Director Stock Option plan and authorized the
plan to issue up to 480,000 shares of common stock as compensation to the
outside directors of the Company for services to be received from the
Directors. During 2000, each of the Company’s six outside directors
received options to purchase 40,000 shares of common stock, which vest quarterly
at the rate 2,500 shares, with the first vesting period being January 1,
2000. Pursuant to the plan documents an additional 40,000 options per
director were issued as of January 1, 2004, vesting over a four-year
period. Pursuant to a change in the plan an additional 30,000 options
per director were issued on January 1, 2006, vesting over a one-year
period. The Company will obtain shareholder approval to increase the
authorized number of shares under the option plan.
The following summarizes activity in
the Director Option Plan:
|
|
|
Number of Options
|
|
|
Weighted Average
Exercise Price per Share
|
|
|
Balance
at December 31, 2007, 2008 and 2009
|
|
|
400,000
|
|
|
|
1.83
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
and expected to vest at December 31, 2009
|
|
|
400,000
|
|
|
|
1.83
|
|
|
Exercisable
at December 31, 2009
|
|
|
400,000
|
|
|
|
1.83
|
|
The
400,000 outstanding options at December 31, 2009 had a weighted average
remaining contractual term of 2.19 years.
Stock
Options – Other
The
Company, with the authorization of the board of directors, issues nonqualified
stock options to employees, directors, advisors, consultants and members of the
scientific advisory board of the Company. The exercise price,
expiration date and vesting period of the options are determined by the Board of
Directors at the date of grant. The following summarizes other stock
option grants:
|
|
|
Number of Options
|
|
|
Weighted Average
Exercise Price per Share
|
|
|
Balance
at December 31, 2007
|
|
|
7,005,128
|
|
|
|
0.12
|
|
|
Expired
|
|
|
(100,000
|
)
|
|
|
0.89
|
|
|
Balance
at December 31, 2008
|
|
|
6,905,128
|
|
|
|
0.11
|
|
|
Expired
|
|
|
(500,000
|
)
|
|
|
0.30
|
|
|
Forfeited
|
|
|
(6,130,128
|
)
|
|
|
0.09
|
|
|
Balance
at December 31, 2009
|
|
|
275,000
|
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
and expected to vest at December 31, 2009
|
|
|
275,000
|
|
|
|
0.30
|
|
Warrants
The
Company, with the authorization of the board of directors issues warrants for
the purchase of common stock in conjunction with equity and debt offerings as
well as to consultants that assist the Company in various financial or
commercial transactions. The exercise price, expiration date and
vesting period of the options are determined by the Board of Directors at the
date of grant. Vesting periods typically range between 5 to 7 years,
however, each warrant is different and the vesting periods can vary on each
warrant issued.
The
following summarizes warrant grants:
|
Balance
at December 31, 2007
|
|
|
107,790,440
|
|
|
Granted
|
|
|
88,116,667
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(7,258,050
|
)
|
|
Balance
at December 31, 2008
|
|
|
188,649,057
|
|
|
Issued
|
|
|
93,333,333
|
|
|
Expired
|
|
|
(3,916,667
|
)
|
|
Balance
at December 31, 2009
|
|
|
278,065,723
|
|
Summary
authorized but unissued shares of common stock were reserved for issuance at
December 31, 2009 as follows:
|
Series
C convertible preferred stock
|
|
|
1,030,756
|
|
|
2001
Stock option plan
|
|
|
587,000
|
|
|
2000
Directors option plan
|
|
|
400,000
|
|
|
2006
Equity Incentive Plan
|
|
|
10,000,000
|
|
|
Non
plan options
|
|
|
250,000
|
|
|
Warrants
to purchase common stock
|
|
|
8,877,693
|
|
|
2005
Series A Warrants
|
|
|
3,801,515
|
|
|
2005
Series B Warrants
|
|
|
3,801,515
|
|
|
2007
Series A Warrants
|
|
|
80,060,000
|
|
|
2008
Note – Conversion Feature
|
|
|
150,000,000
|
|
|
2008
Note Warrants
|
|
|
88,066,667
|
|
|
2009
Note – Conversion Feature
|
|
|
141,772,100
|
|
|
2009
Note – Warrants
|
|
|
93,333,333
|
|
|
|
|
|
581,980,579
|
|
Included
in the 581,980,579 unissued shares of common stock are
453,500,000 shares related to warrants valued as derivative
liabilities.
On April
1, 2010, the Company, with the approval of the board of directors, amended its
articles of incorporation to increase the number of authorized
shares. Refer to note 12, Subsequent Events, for more information on
this transaction.
A summary
of applicable stock option and warrant activity and related information for the
years ended December 31, 2009 and 2008 is as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
|
Options and
Warrants
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Options and
Warrants
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Outstanding
at beginning of year
|
|
|
201,389,310
|
|
|
$
|
0.11
|
|
|
|
122,331,693
|
|
|
$
|
0.19
|
|
|
Granted
|
|
|
93,333,333
|
|
|
|
0.02
|
|
|
|
88,916,667
|
|
|
|
0.02
|
|
|
Expired
|
|
|
(5,741,667
|
)
|
|
|
0.31
|
|
|
|
(7,538,050
|
)
|
|
|
0.17
|
|
|
Forfeited
|
|
|
(8,178,253
|
)
|
|
|
0.10
|
|
|
|
(2,321,000
|
)
|
|
|
0.20
|
|
|
Outstanding
at end of year
|
|
|
280,802,723
|
|
|
$
|
0.08
|
|
|
|
201,389,310
|
|
|
$
|
0.11
|
|
|
Exercisable
at end of year
|
|
|
280,483,973
|
|
|
$
|
0.08
|
|
|
|
194,657,948
|
|
|
$
|
0.12
|
|
Exercise
prices for options and warrants outstanding range from $0.015 to
$8.24. The option and warrant contracts expire at various times
through July 2017. The weighted-average grant date fair value of
options granted during the years 2009 and 2008 were $0.015 and $0.016,
respectively.
|
5.
|
Loans,
Convertible Notes Payable and
Derivatives
|
CTCA
Loan Agreement
On April
27, 2009 the Company entered into a Services, Loan and Security agreement with
CTCA which amended the original production agreement for biological vaccines
entered into in 2007. Pursuant to the new agreement all funds
advanced to date under the terms of the production agreement ($400,000) plus
funds advanced for the payment of certain operating expenditures related to the
operation of the AVAX facility are to be accounted for as loan payable with
interest at a rate of 6%. Through December 31, 2009 a total of
$1,352,282, including accrued interest totaling $37,297, is the balance owed to
CTCA related to this agreement. All of the operating assets included
in the AVAX facility are pledged as collateral related to the loan.
Although
CTCA currently has the right to seek acceleration of our obligations because we
did not obtain sufficient financing within a required time period, CTCA has
agreed not to exercise such right as long as all conditions set forth in CTCA's
intercreditor agreement with Firebird are satisfied.
2008
Convertible Notes Payables
In
October 2008 the Company issued a convertible promissory note (“Note One”)
in the amount of $1,321,000 of which $821,000 was to certain accredited
investors, Issue 1, and $500,000 was to Firebird Global Master Fund, Ltd.,
Issue 2. The notes bear interest at the rate of 6% and mature
December 31, 2008. The notes are convertible into shares of the
Company’s common stock at a rate of $0.09 per share for each dollar of unpaid
principal and interest on the note. In addition the note holders were
issued warrants to purchase 13,210,000 shares of the Company’s common stock at a
price of $0.10 per share. The balance of accrued principal plus
interest as of December 31, 2008 was $1,336,825.
At the
time Note One was issued, the Company recorded a debt discount relating to the
detached warrants in the amount of $264,200. The Company amortized the debt
discount over the original term of the Note One which was scheduled to mature on
December 31, 2008.
On
December 31, 2008, the Company amended Note One to extend the due date through
March 31, 2009.
During
October 2009 in connection with a second convertible promissory note agreement
discussed below, an additional amendment to Note One was entered into which
adjusted the conversion price for the common stock to a rate of $0.01 per share
and extended the due date of Note One through June 1, 2010. In
addition, the conversion price was adjusted down and the number of warrants was
increased to reflect these adjustments. The note holder’s warrants
were increased to allow them to purchase 88,066,667 shares of the Company’s
common stock at a price of $0.015 per share.
As of
December 31, 2009 the Note had a balance of $1,417,035 (including accrued
interest of $96,035 at December 31, 2009). Amortization expense for the years
ended December 31, 2009 and 2008 amounted to $0 and $264,200,
respectively.
Subsequent
to December 31, 2009, certain of the investors converted the notes to common
stock and the terms of the remaining balance of Note One were
modified. See note 12.
2009
Convertible Notes Payables
In
October 2009 the Company issued a convertible secured promissory note
(“Note Two”) in the amount of $1,400,000 to Firebird Global Master Fund,
Ltd.. The note bears interest at the rate of 6% and matures on
June 1, 2010. The note is convertible into shares of the Company’s
common stock at a rate of $0.01 per share for each dollar of unpaid principal
and interest on the note. In addition the note holder was issued
warrants to purchase 93,333,333 shares of the Company’s common stock at a price
of $0.015 per share. The note holder was also provided a security
interest in certain intellectual property maintained by the Company pursuant to
its license agreement with Thomas Jefferson University.
Upon the
issuance of the note and detachable warrants a debt discount was calculated
which is limited to the amount of the notes issued. At the time Note
Two was issued, the Company recorded a debt discount (beneficial conversion)
relating to the conversion feature and detached warrants in the amount of
$1,400,000. The aggregate intrinsic value of the difference between the adjusted
market price of the Company’s share of stock on October 14, 2009 and the
conversion price of the Note Two was in excess of the face value of the
$1,400,000 value of the notes, and a full debt discount was recorded in an
amount equal to the face value of the debt. The Company is amortizing the debt
discount, to interest expense, over the term of the Note Two through June 01,
2010. As of December 31, 2009 the balance of the loan plus
accrued interest was $1,417,721 less unamortized loan discount of
$933,333. Amortization expense for the year ended December 31, 2009
amounted to $466,667.
Subsequent
to December 31, 2009, the exercise price for 93,333,333 warrants was
adjusted. See note 12.
Derivative
Liabilities
The 2008
and 2009 Convertible Notes Payable have down-round price protection provisions
written into the Note agreements that adjusts the conversion price feature down
to match any future offerings while the notes are still
outstanding. This price protection is considered to be a derivative
instrument and must be valued and recognized at the instruments current adjusted
fair market value as of the date of issuance and adjusted each period the
financial statements are presented. To calculate the adjusted fair
market value of the derivative instrument we employed the Intrinsic Value method
to calculate the value of the conversion feature and compared this price to the
adjusted discounted note conversion price to calculate the current derivative
liability related to the note conversion features. Inputs were
adjusted each period to reflect changes in the Company’s trading
price.
The fair
value of the conversion feature for the 2008 and 2009 conversion provisions were
calculated as follows:
|
2008
Notes:
|
|
12/31/2009
|
|
|
Note
issuance amount
|
|
$
|
1,321,000
|
|
|
Current
shares issuable
|
|
|
132,100,000
|
|
|
Effective
conversion price per share
|
|
|
0.01
|
|
|
Adjusted
Market Price
|
|
|
0.04
|
|
|
Calculated
derivative liability
|
|
$
|
3,963,000
|
|
|
2009
Notes:
|
|
12/31/2009
|
|
|
Note
issuance amount
|
|
$
|
1,400,000
|
|
|
Current
shares issuable
|
|
|
140,000,000
|
|
|
Effective
conversion price per share
|
|
|
0.01
|
|
|
Adjusted
Market Price
|
|
|
0.04
|
|
|
Calculated
derivative liability
|
|
$
|
4,200,000
|
|
|
Combined
conversion derivative liability
|
|
$
|
8,163,000
|
|
Effective
January 1, 2009, the Company adopted the provisions of FASB ASC 815 –
Derivatives and Hedging (“ASC 815”) (formerly EITF 07-5, “Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own
Stock”). The Company has recorded the adoption of this as a change in
accounting principle with an adjustment to deficit at December 31, 2008 in the
amount of $132,100. This amount was computed using a binomial model
and inputs including: common stock issuable upon conversion, adjusted market
value on measurement date (calculated as the average daily trading price over
the preceding year), exercise price per share, risk-free interest rate, term,
expected volatility and expected dividends.
In
accordance with the agreements for the issuance of the convertible promissory
notes for 2008 and 2009, the Company also issued to the Investors warrants to
purchase common stock which are based upon a conversion price agreed to in the
note agreements. These warrants contain down round price protection
in the event that the Company issues common stock at a price which is lower than
the exercise price of the warrant. This price protection is
considered to be a derivative instrument and must be valued and recognized at
the instruments’ current fair market value as of the date of issuance and
adjusted each period the financial statements are presented. To
calculate the fair market value of the derivative instrument we employed the a
binomial pricing model to calculate the value of the warrant and recorded the
value of conversion feature as the full value of the warrants. Inputs
are adjusted each period to reflect changes in the Company’s estimate of the
value of the underlying common stock.
The fair
value of the warrants and conversion options were estimated with the following
assumptions for the years ended December 31, 2009 and 2008:
|
|
|
|
|
|
2008 Notes
|
|
|
|
|
|
2009 Notes
|
|
|
Detached Warrants:
|
|
2009 Issue 1
|
|
|
2009 Issue 2
|
|
|
2008 Issue 1
|
|
|
2008 Issue 2
|
|
|
2009
|
|
|
Binomial
Method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Market value per share on measurement date
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
$
|
0.04
|
|
|
Exercise
price per share
|
|
$
|
0.015
|
|
|
$
|
0.015
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.015
|
|
|
Risk
free interest rate
|
|
|
0.47
|
%
|
|
|
1.47
|
%
|
|
|
0.76
|
%
|
|
|
0.76
|
%
|
|
|
2.64
|
%
|
|
Term,
in years
|
|
|
0.833
|
|
|
|
3.833
|
|
|
|
1.75
|
|
|
|
1.75
|
|
|
|
4.88
|
|
|
Expected
volatility
|
|
|
3.00612
|
|
|
|
2.07412
|
|
|
|
1.603
|
|
|
|
1.603
|
|
|
|
1.917
|
|
|
Expected
dividends
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
2008 Notes
|
|
|
2009 Notes
|
|
|
Conversion Option Note:
|
|
2009
|
|
|
2009
|
|
|
Intrinsic
Value Method
|
|
|
|
|
|
|
|
Effective
conversion price per share
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
Adjusted
Market price per share
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
Fair
value is the estimated price that would be received upon the sale of an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The Company is required
by accounting standards to provide the disclosure framework for measuring
fair value and expands disclosure about fair value
measurements. Fair value measurements are classified and disclosed in
one of the following categories:
|
Level 1:
|
Unadjusted quoted prices in
active markets that are accessible at the measurement date for
identical, unrestricted assets or liabilities. The Company considers
active markets as those in which transactions for the assets or
liabilities occur in sufficient frequency and volume to provide pricing
information on an ongoing
basis.
|
|
Level 2:
|
Quoted prices in markets that are
not active, or inputs which are observable, either directly or indirectly,
for substantially the full term of the asset or liability. This
category includes those derivative instruments that the Company
values using observable market data. Substantially all of these inputs are
observable in the marketplace throughout the term of the derivative
instruments, can be derived from observable data, or supported by
observable levels at which transactions are executed in the
marketplace.
|
|
Level 3:
|
Measured based on prices or
valuation models that require inputs that are both significant to the fair
value measurement and less observable from objective sources (i.e.
supported by little or no market activity). The Company’s valuation
models are primarily industry standard models. Level 3 instruments include
derivative warrant instruments. The Company does not have sufficient
corroborating evidence to support classifying these assets and
liabilities as Level 1 or Level
2.
|
Financial
assets and liabilities are classified based on the lowest level of input
that is significant to the fair value measurement. The Company’s assessment of
the significance of a particular input to the fair value measurement
requires judgment, and may affect the valuation of the fair value of assets
and liabilities and their placement within the fair value hierarchy
levels.
The
following table sets forth by level within the fair value hierarchy, the
company’s financial assets and liabilities that were accounted for at fair value
on a recurring basis for the years ended December 31, 2009 and
2008:
|
|
|
Fair value measurement as of December 31, 2009
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Derivative
liability – conversion option of note
|
|
|
-
|
|
|
|
-
|
|
|
|
8,163,000
|
|
|
|
8,163,000
|
|
|
Derivative
liability – detached warrant
|
|
|
-
|
|
|
|
-
|
|
|
|
7,256,000
|
|
|
|
7,256,000
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,419,000
|
|
|
|
15,419,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement as of December 31,
2008
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Derivative
liability – conversion option of note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Derivative
liability – detached warrant
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
The
following table sets forth a summary of changes in the fair value of the
Company’s Level 3 assets for the year ended December 31, 2009:
|
|
|
Conversion Option
|
|
|
Detached Warrants
|
|
|
Derivative liability
balance, beginning of year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Adoption
of FASB ASC 815, “Derivatives and Hedging”
|
|
|
-
|
|
|
|
132,100
|
|
|
Fair
value of instruments issued during the year
|
|
|
3,963,000
|
|
|
|
3,733,333
|
|
|
Increase
in fair value of previously issued instruments
|
|
|
4,200,000
|
|
|
|
3,390,567
|
|
|
Derivative
liability balance, end of year
|
|
$
|
8,163,000
|
|
|
$
|
7,256,000
|
|
The
Company’s French subsidiary receives financial support from a French
governmental agency (ANVAR). These advances, which are subject to
conditions specifying that non-compliance with such conditions could result in
the forfeiture of all or a portion of the future amounts to be received, as well
as the repayment of all or a portion of amounts received to date. If
certain products are commercialized, the December 31, 2009 balance of $393,309
(274,408 Euros) is repayable based on an annual royalty equal to 47% of the
revenue related to the project. As such, the total amount of advances
received were recorded as a liability in the accompanying consolidated balance
sheet. In case of failure or partial success, as defined in the
agreement, $85,044 (60,980 Euros) is payable. The due date for the
obligation has passed, but the grantor agency has not demanded repayment of the
obligation. Due to the uncertainty regarding the amount that will be
required to be returned to ANVAR, the Company maintains the full amount of the
obligation as a current liability.
During
2008, to increase liquidity to certain developmental organizations working in
innovate industries, the French Government, in conjunction with a private group
named OSEO, offered organizations an opportunity to receive advanced funds
related to Research and Development tax credits due to the
organization. Typically a Company receives their tax refund related
to research spending five years after incurring the
expenditures. OSEO provides to organizations an opportunity to
receive those funds in advance. In 2008 OSEO advanced to the
Company’s French subsidiary $347,574 related to the anticipated receipt of
research tax refunds from 2005, 2006 and 2007. The Company recorded
the amount received as a Governmental advance payable. During 2009
funds related to the 2005 tax credit were received by OSEO on account of the
Company’s French Subsidiary. The related balance payable and research
and development tax credit receivable were reduced accordingly. The
balance payable at December 31, 2009 is $270,277.
The
Company’s French subsidiary also had a tax refund receivable in the amounts of
$616,742 and $1,047,590, respectively, at December 31, 2009 and
2008. There is a provision in the French tax system which
allows for certain companies working in the development of products or services
for sale to receive a reimbursement from the Government for research
expenditures incurred. The tax credit calculated based on increasing
research expenditures incurred. The credit is first used to offset
any income taxes that the business may incur during the conduct of its
operations. Any unused credits are then refundable to the
organization generally five years after the expenditures are
incurred. For accounting purposes we credit the amounts receivable
against research expenses in the year incurred.
At
December 31, 2009, the Company has net operating loss carryforwards of
approximately $92,835,000 for income tax purposes. U. S. and state
tax losses of approximately $80,216,000 expire in varying amounts between 2010
and 2029, if not utilized. Foreign losses of approximately
$12,619,000 continue indefinitely and may be applied against future
income.
Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
Significant
components of the Company’s deferred tax assets and liabilities for federal
income tax purposes are as follows:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
Net
operating losses
|
|
$
|
35,469,000
|
|
|
$
|
33,949,000
|
|
|
Deferred
compensation
|
|
|
413,000
|
|
|
|
413,000
|
|
|
Depreciation
|
|
|
347,000
|
|
|
|
329,000
|
|
|
Other
|
|
|
1,000
|
|
|
|
1,000
|
|
|
Total
deferred tax assets
|
|
$
|
36,230,000
|
|
|
$
|
34,692,000
|
|
|
Valuation
allowance
|
|
|
(36,230,000
|
)
|
|
|
(34,692,000
|
)
|
|
Net
deferred tax assets
|
|
$
|
–
|
|
|
$
|
–
|
|
The
valuation allowance at December 31, 2007 was $32,308,000.
Under
Section 382 of the Tax Reform Act of 1986, the Company’s net operating loss
carry-forward could be subject to an annual limitation if it should be
determined that a change in ownership of more than 50% of the value of the
Company’s stock occurred over a three-year period.
The
following summary reconciles the income tax benefit at the federal statutory
rate with the actual income tax provision (benefit):
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Income
taxes (benefit) at statutory rate
|
|
$
|
(7,080,000
|
)
|
|
$
|
(2,204,000
|
)
|
|
Change
in derivative liability
|
|
|
5,242,000
|
|
|
|
–
|
|
|
State
income taxes, net of federal benefit
|
|
|
(916,000
|
)
|
|
|
(285,000
|
)
|
|
Other
|
|
|
1,216,000
|
|
|
|
105,000
|
|
|
Change
in the valuation allowance
|
|
|
1,538,000
|
|
|
|
2,384,000
|
|
|
Income
tax provision (benefit)
|
|
$
|
–
|
|
|
$
|
–
|
|
Accounting
for uncertainty in income taxes requires uncertain tax positions to be
classified as non-current income tax liabilities unless expected to be paid
within one year. The Company has concluded that there are no
uncertain tax positions requiring recognition in its consolidated financial
statements as of December 31, 2009 and 2008, respectively.
The
Company classified accrued interest on unrecognized tax benefits with interest
expense. Penalties accrued on unrecognized tax benefits are
classified with operating expenses. During 2009 and 2008 the Company
did not recognize any interest or penalties.
The
Company and its subsidiaries file a U.S. federal consolidated income tax
return. The U.S. federal statute of limitations remains open for the
years 2006 and thereafter. State income tax returns are generally
subject to examination for a period of 3 to 5 years after filing of the
respective return. The impact of any federal changes on state returns
remains subject to examination by the relevant states for a period of up to one
year after formal notification to the states.
|
8.
|
Commitments
and Contingencies
|
Leases
In
December 1997, the Company entered into a 10-year lease agreement for
manufacturing facility space. The first month’s rent was payable upon
signing of the lease along with a security deposit equivalent to two months
rental. This lease is secured by a one-year irrevocable standby
letter of credit whereby the lessor is the named beneficiary that expired with
the culmination of the first lease term of ten years on January 31,
2008. The Company executed a first lease amendment in accordance with
the existing lease agreement to extend the term of the lease by a period of five
years from February 1, 2008 through January 31, 2013.
In July
2000, the Company entered into a 9-year lease agreement for manufacturing and
research space in Lyon, France that expired in July 2009. The Company
has been operating on a month-to-month lease at the facility.
Rent
expense under these agreements was approximately $451,863 and $477,645 for the
years ended December 31, 2009 and 2008, respectively. Future
minimum rental payments required under non-cancelable operating leases with
initial or recurring terms of more than one year as of December 31, 2009 are
$199,500 for each of the years ended 2010 through 2012 and $16,625
in 2013.
Other
In May
2007, the Company completed a private placement of securities to various
institutional and accredited investors. The Company had previously entered into
an engagement letter, as subsequently amended, with MDB Capital Group LLC in
connection with the proposed capital raising engagement. MDB Capital has made a
demand that the Company pay MDB Capital $195,000 in cash and issue MDB Capital
warrants to purchase 2,080,000 shares of common stock of the company at an
exercise price of $0.15 per share, all as compensation to MDB Capital under the
engagement letter. The Company has conceded that they owe MDB Capital $15,000 in
placement agent fees and a placement agent warrant to purchase 160,000 shares of
common stock of the company at $0.15 per share under the engagement letter. The
Company believes that MDB Capital had no role in identifying the other investors
in the offering for which MDB Capital claims compensation, and thus have denied
that the Company owes MDB Capital any additional cash compensation or placement
agent warrants under the engagement letter. MDB Capital has indicated its
intention to pursue binding arbitration of this dispute in accordance with the
terms of the engagement letter, but has to date made no effort to pursue any
arbitration of this matter.
Francois Martelet v. Avax et.
al.
is a breach of contract claim filed by Dr. Martelet, the
Company’s former Chief Executive Officer, against the Company
and the Board of Directors. The case was filed on June 30, 2009 in
the federal court in the Eastern District of Pennsylvania under civil docket
number 09-2925. Dr. Martelet is suing the Company and the
Board of Directors personally for nonpayment of wages and for nonpayment of
severance. The exposure on the wage claim is less than two
hundred and fifty thousand ($250,000) dollars. Dr. Martelet
has demanded approximately six hundred and fifty thousand
($650,000) dollars on the severance claim. However, the Company
believes that their exposure on the severance claim is minimal as Dr.
Martelet was terminated for cause and is not entitled to
severance. Dr. Martelet has also demanded punitive damages via
N.J.S.A. 34:11-4.1
et
seq.
Procedurally, the Court has set deadlines for
establishing a trial date for this matter sometime during the summer of
2011. The Company is in the process of trying to settle this matter
without further litigation but the Company expects to file a
counterclaim against Dr. Martelet for a breach of contract and a
breach of fiduciary duties, if necessary.
The
Company is subject to various legal proceedings and claims that arise in the
ordinary course of its business. Management believes, based in part
upon the opinions of counsel, that the ultimate liability with respect to these
actions will not have a material adverse effect on the Company’s financial
position.
|
9.
|
Prepaid
expenses and other current assets
|
The
following shows the composition of prepaid expenses and other current assets as
of December 31, 2009 and 2008:
|
|
|
2009
|
|
|
2008
|
|
|
Security
deposits
|
|
$
|
59,519
|
|
|
$
|
58,880
|
|
|
Prepaid
expenses
|
|
|
24,419
|
|
|
|
4,500
|
|
|
Insurance
deposits
|
|
|
86,050
|
|
|
|
170,291
|
|
|
Deposit
for services
|
|
|
49,339
|
|
|
|
49,864
|
|
|
Other
deposits
|
|
|
8,400
|
|
|
|
-
|
|
|
Totals
|
|
$
|
227,727
|
|
|
$
|
283,535
|
|
The
following shows the composition of the assets included in plant and equipment at
December 31, 2009 and 2008:
|
2009:
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
furniture and equipment
|
|
$
|
328,009
|
|
|
$
|
297,613
|
|
|
$
|
30,396
|
|
|
Manufacturing
facility and related equipment
|
|
|
3,965,433
|
|
|
|
3,881,002
|
|
|
|
84,431
|
|
|
Total
|
|
$
|
4,293,442
|
|
|
$
|
4,178,615
|
|
|
$
|
114,827
|
|
|
2008:
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
furniture and equipment
|
|
$
|
328,009
|
|
|
$
|
283,577
|
|
|
$
|
44,432
|
|
|
Manufacturing
facility and related equipment
|
|
|
3,969,287
|
|
|
|
3,469,733
|
|
|
|
499,554
|
|
|
Total
|
|
$
|
4,297,296
|
|
|
$
|
3,753,310
|
|
|
$
|
543,986
|
|
Depreciation
expense was $425,305 and $248,259 for the years ended December 31, 2009 and
2008, respectively.
|
10.
|
Employee
Benefit Plan
|
The
Company has a discretionary 401(k) plan for all U.S. employees over the age of
21. Employee contributions are subject to normal 401(k) plan
limitations. The Company did not make any matching contributions on
employee deferrals for the years ended December 31, 2009 and 2008.
|
11.
|
Related
Party Transactions
|
The
Company has an agreement with one of its Board Members whereby he earns
additional cash compensation for his services to the Company. This
agreement was in place for both 2008 and 2009 and was voted upon and approved by
the Compensation Committee of the Board of Directors. In 2009, this
Board Member took a more active role in the Company and his monthly cash
compensation was increased effective October 1, 2009. This increase
in compensation was approved by the Compensation Committee of the Board of
Directors. It is anticipated that his role will continue until such
time as additional management personnel are hired. During 2009 and
2008 the Company incurred additional compensation expense of $160,500 (of which
$63,000 is recorded in accounts payable and accrued expenses at December 31,
2009) and $105,000 (of which $21,000 was converted by the Company for
participation in the Note One (See note 5), respectively to this board
member.
In
connection with Note One (See note 5), two members of the Company’s board of
directors also participated by contributing $10,000 each. The key
terms of the Note for these two participants is identical to that of the other
participants. The balances payable at December 31, 2009 and 2008 to
these board members amounted to $21,726 (including accrued interest of $1,726)
and $20,496 (including accrued interest of $496), respectively.
During
2009 a Board member advanced expenses of approximately $29,400 to satisfy
certain obligations of the Company. These funds were repaid to the
Board member during 2009 with no interest.
The
Company has evaluated subsequent events occurring after the balance sheet
date. Based on this evaluation, the Company has determined that no
subsequent events, except for the matters discussed below, have occurred which
would require disclosure in the consolidated financial statements.
On
February 16, 2010 the Company entered into a convertible promissory note in the
amount of $231,000 with certain accredited investors similar to the terms of the
notes entered into in Note one above. The notes bear interest at the
rate of 6% and mature June 01, 2010. The notes are convertible into
shares of the Company’s common stock at a rate of $0.01 per share for each
dollar of unpaid principal and interest on the note. In addition the
note holders were issued warrants to purchase 15,466,667 shares of the Company’s
common stock at a price of $0.015 per share. These notes and warrants
were converted to shares of our common stock in connection with our October 2010
financing.
On April
1, 2010 the Company amended its articles of incorporation to allow for the
issuance of up to two billion five hundred and twenty five million shares
(2,525,000,000) of which five million (5,000,000) are designated as preferred
stock and the remaining two billion five hundred and twenty million
(2,520,000,000) shares are designated as common stock. This amendment
was filed and change authorized by the Delaware Secretary of State on December
31, 2010.
On April
1, 2010 the Company entered into subscription agreements with certain of its
existing stockholders’. Pursuant to the subscription agreement the
stockholders’ could acquire additional shares of the Company’s common stock
through the exercise of previously issued warrants, after which they would
receive a replacement warrant at an exercise price of $0.015 per share, or they
could purchase a unit which consists of one share of common stock and a warrant
to purchase one share of common stock at $0.015 per share. Total
proceeds received were nine hundred and sixty thousand dollars ($960,000) and
resulted in the issuance of 64,000,000 shares of common stock and new warrants
to purchase 24,483,400 of common stock at a price of $0.015 per share and
replacement warrants to purchase 39,516,600 of common stock at a price of $0.015
per share.
On April
16, 2010, the Company’s Board of Directors approved a grant of 4,200,000
warrants each to two of the Company’s directors for past services rendered and
the Company’s gratification of their involvement with the
Company. The warrants vest immediately, with cashless exercise, at a
strike price of $0.015.
Also on
April 16, 2010, the Company’s Board of Directors approved a grant of 1,400,000
warrants to another board member as an initial grant for joining the
Board. This board member was also granted an additional 250,000
warrants for her several months of service at the end of 2009. Both
grants have immediate vesting, with cashless exercise, at a strike price of
$0.015.
On the
same date, the Company’s Board of Directors also approved the granting of
1,400,000 warrants to the non-employee members of the Board of Directors for
2010 compensation. These warrants vest immediately, with cashless
exercise, at a strike price of $0.015.
Also on
April 16, 2010, the Company’s Board of Directors approved warrants to the
Company’s Chairman and Chief Executive Officer in recognition for his past
service since mid-2009: 2% of the Company’s fully diluted shares on an
as-converted basis, representing immediate grant of approximately 16,700,000
warrants; 1.5% on a financing of at least $20,000,000 through an offering or
merger and 0.5% on accrual of 50% of the patients for the melanoma pivotal
trial. For all of the above items, the warrants vest immediately,
have a cashless exercise, at an exercise price of $0.015. Pursuant to
the re-structuring described below half of these warrants were cancelled in
October, 2010.
In
connection with recent financings, on April 16, 2010, the Company’s Board of
Directors approved the following compensation to a consultant of the Company:
warrants representing 2% of the Company’s full diluted shares on an as-converted
basis, representing an immediate grant of approximately 16,700,000 warrants and
a one-time cash payment of $37,500. The warrants have immediate
vesting, with cashless exercise, at a strike price of $0.015.
In
recognition for his valued contributions and performance in both the United
States and France, the Company’s Board of Directors, on April 16, 2010, granted
the Director of Global Manufacturing, Quality Control and Regulatory Affairs the
following: 1,000,000 options according to the terms and conditions of the 2006
equity incentive plan (as described in Note 4 above) and 2,000,000
warrants. The warrants have immediate vesting, with cashless
exercise, at a strike price of $0.015
On April
16, 2010, the Board of Directors approved management for the allocation of up to
2,500,000 options to current employees under the 2006 equity incentive plan (as
described in Note 4 above).
On June
4, 2010, the Company entered into a subscription agreement of one million
dollars ($1,000,000) with Firebird Global Master Fund, Ltd., the Company’s
majority shareholder (“Firebird”), for the purchase of 20,000,000 shares of
common stock and warrants to purchase 100,000,000 shares of common stock at an
exercise price of $0.05 per share.
On
October 28, 2010, we entered into a non-binding agreement with Firebird to
invest up to $2,000,000 to meet our working capital needs. The
initial advance, in the amount of $1,300,000, was received on November 4, 2010
in consideration for the exercise of warrants, which had been issued in
connection with the June 2010 financing, the number of which was adjusted in
connection with the agreement. Firebird consummated the initial
advance by exercising warrants for 111,111,111 shares of common stock, which, as
mentioned below, were modified as part of the agreement such that they were
exercisable at $0.0117 per share. The June 2010 financing agreement
contained a provision that if Firebird exercised any or all of its warrants in
connection therewith within 12 months after their issuance, Firebird would
receive a replacement warrant for that number of warrants
exercised. Accordingly, we issued a replacement warrant to Firebird
to purchase 111,111,111 shares of common stock at an exercise price of $0.0117
per share. To the extent that Firebird exercises warrants to provide
us additional funds, and such funding is completed prior to June 4, 2011, we
will be required to issue up to an additional 316,239,316 replacement warrants
to Firebird at an exercise price of $0.0117 per share.
Concurrent
with the aforementioned transaction certain investors who participated in the
October 2008 notes and the February 16, 2010 convertible promissory notes agreed
to convert the notes to common stock resulting in the issuance of 116,801,858
shares of common stock in satisfaction for all principal and interest (with the
exception of the Firebird $500,000 balance upon which interest only was paid)
outstanding in the aggregate amount of approximately $1,083,000 and $106,994,
respectively. In addition, concurrent with this transaction, Firebird
received 8,722,192 shares of common stock in satisfaction of interest on the
2009 note through October 28, 2010. The note holders, plus the note
holders who participated in the February 16, 2010 financing noted above, agreed
to modify the terms of their warrants to require immediate exercise of the
warrants or to allow the warrants to expire upon non-exercise. All of
the note holders elected to allow the warrants to expire resulting in the
termination of 70,866,667 warrants to purchase common stock at $0.015 per
share. In addition, the Investors who participated in the April 1,
2010 unit purchase option financing agreed to modify the terms of their warrants
to require immediate exercise of the warrants or to allow the warrants to expire
upon non-exercise. All of the warrant holders elected to allow the
warrants to expire resulting in the termination of 12,480,400 warrant to
purchase common stock at $0.015 per share. Firebird agreed to allow 24,000,000
warrants to purchase common stock pursuant to a 2007 financing
expire.
On
January 5, 2011, the Company reached an agreement with Firebird to extend the
term of the 2008 notes and the 2009 notes to September 30, 2011. The
Company had been in default on these notes since their amended maturity date of
June 1, 2010. As consideration for the extension of the maturity
date, the Company agreed to increase the rate of interest on each note as of
October 28, 2010 by 200 basis points from six percent to eight percent and to
pay such interest on a quarterly rather than an annual basis. The
extension agreement also provided the Company to elect to pay interest in kind
or in common stock at the then effective conversion price rather than in cash,
provided that if cash interest is not paid, Firebird may determine whether it
will receive interest in kind or in cash.
In
addition, pursuant to the extension agreement, we were required to file this
Form 10 with the SEC prior to January 10, 2011. Because we did not
file this Form 10 by that date, Firebird received an additional 75 basis points
of interest on the 2008 and 2009 notes, respectively, and a new interest rate of
8.75% effective as of that date. The interest rate on the 2008 and 2009
Notes will increase by an additional 75 base points if we do not file a
Registration Statement under the Securities Act of 1933, as amended (the
"Registration Statement") with the SEC within five business days after the Form
10 is declared effective. The interest rate on the 2008 and 2009
Notes will increase by a further 50 basis points as of the tenth day
(or the next subsequent business day if such day is not a business day) of each
subsequent calendar month (i) if we have not filed this Form 10 by such date or
(ii) if the Form 10 has been declared effective by the SEC, but the Registration
Statement has not been filed and such date is more than five business days
after the effective date of the Form 10. The interest rate payable to
the holders of the 2008 and 2009 Notes will also increase by 50 basis points on
the 91st day after filing of the Form 10 if the Form 10 is not declared
effective by such date and will increase by an additional 50 basis points as of
the end of each 30-calendar-day period thereafter if the Form 10 has not been
declared effective by the end of such period. After the Form 10 has
been declared effective, the interest rate payable to the holders of the 2008
and 2009 Notes will be increased by (i) an additional 50 basis points if the
Registration Statement has not been declared effective as of the end of the 45th
day following the effective date of the Form 10 and (ii) an additional 50 basis
points for each 30-calendar-day period thereafter if the Registration Statement
has not been declared effective by the end of such period. Notwithstanding the
foregoing, the aggregate increases in the interest rate payable to the holders
pursuant to our agreement with Firebird will not cause the interest rate to
exceed the lesser of (i) 18 percent per year and (ii) the maximum interest rate
permissible under applicable law.
On
January 25, 2011, further to the non-binding agreement with Firebird providing
for the investment of up to an additional $2,000,000 to meet working capital
needs, Firebird invested an additional $700,000 in the Company in consideration
for the exercise of warrants received in the June 2010 financing noted above at
an exercise price of $0.0117 per share resulting in the issuance of 59,829,060
shares of common stock. The warrants that were exercised were
re-issued in the form of replacement warrants.
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
|
September 30,
2010
|
|
|
September 30,
2009
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
|
|
$
|
17,404
|
|
|
$
|
8,197
|
|
|
Value
added tax receivable
|
|
|
93,848
|
|
|
|
31,209
|
|
|
Prepaid
expenses and other current assets
|
|
|
173,435
|
|
|
|
165,408
|
|
|
Total
current assets
|
|
|
284,687
|
|
|
|
204,814
|
|
|
Property
and equipment, net
|
|
|
85,800
|
|
|
|
149,794
|
|
|
Tax
refund receivable
|
|
|
293,109
|
|
|
|
627,886
|
|
|
Total
assets
|
|
$
|
663,596
|
|
|
$
|
982,494
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ deficit
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
2,476,339
|
|
|
$
|
2,907,512
|
|
|
Accrued
and withheld payroll taxes and liabilities
|
|
|
695,382
|
|
|
|
875,285
|
|
|
Governmental
advances payable
|
|
|
637,322
|
|
|
|
683,206
|
|
|
Derivative
liabilities
|
|
|
25,708,905
|
|
|
|
182,100
|
|
|
Convertible
notes payable, net of discount of $0 at September 2010 and
2009
|
|
|
3,223,593
|
|
|
|
1,396,983
|
|
|
Loans
payable
|
|
|
1,395,555
|
|
|
|
977,355
|
|
|
Total
current liabilities
|
|
|
34,137,096
|
|
|
|
7,022,441
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value:
|
|
|
|
|
|
|
|
|
|
Authorized
shares – 5,000,000, including Series C – 120,000 shares
|
|
|
|
|
|
|
|
|
|
Series
C convertible preferred stock:
|
|
|
|
|
|
|
|
|
|
Issued
and outstanding shares –33,500 (liquidation preference –
$3,350,000)
|
|
|
335
|
|
|
|
335
|
|
|
Common
stock, $.004 par value:
|
|
|
|
|
|
|
|
|
|
500,000,000
shares authorized at September 30, 2010 and 2009; 225,574,997 and
141,574,997 shares issued and outstanding at September 30, 2010 and 2009,
respectively
|
|
|
902,300
|
|
|
|
566,300
|
|
|
Additional
paid-in capital
|
|
|
91,890,267
|
|
|
|
87,664,225
|
|
|
Subscription
receivable
|
|
|
(422
|
)
|
|
|
(422
|
)
|
|
Accumulated
other comprehensive income
|
|
|
304,970
|
|
|
|
242,887
|
|
|
Deficit
accumulated during the development stage
|
|
|
(126,570,950
|
)
|
|
|
(94,513,272
|
)
|
|
Total
stockholders’ deficit
|
|
|
(33,473,500
|
)
|
|
|
(6,039,947
|
)
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
663,596
|
|
|
$
|
982,494
|
|
See
accompanying notes to condensed consolidated financial
statements.
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Condensed
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
|
|
|
Nine months ended September 30,
|
|
|
Period from
January 12, 1990
(Incorporation)
Through
September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Gain
from sale of the product
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,951,000
|
|
|
Product
and contract service revenue
|
|
|
—
|
|
|
|
369,348
|
|
|
|
7,864,572
|
|
|
Grant
revenue
|
|
|
—
|
|
|
|
—
|
|
|
|
206,112
|
|
|
Total
revenue
|
|
|
—
|
|
|
|
369,348
|
|
|
|
10,021,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
1,479,037
|
|
|
|
2,087,672
|
|
|
|
59,455,600
|
|
|
Acquired
in process research and development
|
|
|
—
|
|
|
|
—
|
|
|
|
4,420,824
|
|
|
Write
down of acquired intellectual property and other
intangibles
|
|
|
—
|
|
|
|
—
|
|
|
|
3,604,478
|
|
|
Amortization
of acquired intangibles
|
|
|
—
|
|
|
|
—
|
|
|
|
715,872
|
|
|
Selling,
general and administrative
|
|
|
3,359,123
|
|
|
|
1,805,479
|
|
|
|
47,587,792
|
|
|
Total
costs and expenses
|
|
|
4,838,160
|
|
|
|
3,893,151
|
|
|
|
115,784,566
|
|
|
Total
operating loss
|
|
|
(4,838,160
|
)
|
|
|
(3,523,803
|
)
|
|
|
(105,762,882
|
)
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
—
|
|
|
|
342
|
|
|
|
6,259,785
|
|
|
Interest
expense
|
|
|
(1,148,825
|
)
|
|
|
(70,210
|
)
|
|
|
(2,898,296
|
)
|
|
Change
in fair value of derivative liabilities
|
|
|
(10,289,905
|
)
|
|
|
(50,000
|
)
|
|
|
(24,308,905
|
)
|
|
Other,
net
|
|
|
—
|
|
|
|
—
|
|
|
|
143,193
|
|
|
Total
other income (expense), net
|
|
|
(11,438,730
|
)
|
|
|
(119,868
|
)
|
|
|
(20,804,223
|
)
|
|
Loss)
from continuing operations
|
|
|
(16,276,890
|
)
|
|
|
(3,643,671
|
)
|
|
|
(126,567,105
|
)
|
|
Loss
from discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,845
|
)
|
|
Net
loss
|
|
|
(16,276,890
|
)
|
|
|
(3,643,671
|
)
|
|
|
(126,570,950
|
)
|
|
Amount
payable for liquidation preference
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,870,033
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to common stockholders
|
|
$
|
(16,276,890
|
)
|
|
$
|
(3,643,671
|
)
|
|
$
|
(128,440,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per common share – basic and diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
192,786,353
|
|
|
|
141,474,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(16,276,890
|
)
|
|
$
|
(3,643,671
|
)
|
|
|
|
|
|
Foreign
currency translation loss
|
|
|
(28,441
|
)
|
|
|
(85,670
|
)
|
|
|
|
|
|
Net
comprehensive loss
|
|
$
|
(16,305,331
|
)
|
|
$
|
(3,729,341
|
)
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Nine Months Ended September 30,
|
|
|
Period from January 12,
1990 (Incorporation)
Through September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(16,276,890
|
)
|
|
$
|
(3,643,671
|
)
|
|
$
|
(126,570,950
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
31,843
|
|
|
|
397,165
|
|
|
|
5,852,630
|
|
|
Amortization
of discount on convertible notes payable
|
|
|
933,333
|
|
|
|
–
|
|
|
|
1,806,701
|
|
|
Extraordinary
gain related to negative goodwill on consolidated
subsidiary
|
|
|
–
|
|
|
|
–
|
|
|
|
(902,900
|
)
|
|
Cumulative
effect of change in accounting
|
|
|
–
|
|
|
|
–
|
|
|
|
(54,195
|
)
|
|
Amortization
of deferred gain on joint venture
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,805,800
|
)
|
|
Equity
in net loss of joint venture
|
|
|
–
|
|
|
|
–
|
|
|
|
1,703,763
|
|
|
Stock
based compensation expense
|
|
|
2,469,949
|
|
|
|
439,502
|
|
|
|
3,692,705
|
|
|
Minority
interest in net loss of consolidated subsidiary
|
|
|
–
|
|
|
|
–
|
|
|
|
(80,427
|
)
|
|
Acquired
in-process research and development charge
|
|
|
–
|
|
|
|
–
|
|
|
|
4,420,824
|
|
|
Write
down of acquired intellectual property and other
intangibles
|
|
|
–
|
|
|
|
–
|
|
|
|
3,604,478
|
|
|
Change
in fair value of derivative liabilities
|
|
|
10,289,905
|
|
|
|
50,000
|
|
|
|
24,176,805
|
|
|
Compensatory
stock issue
|
|
|
–
|
|
|
|
–
|
|
|
|
25,000
|
|
|
Gain
on sale of the product
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,951,000
|
)
|
|
Gain
on sale of intellectual property
|
|
|
–
|
|
|
|
–
|
|
|
|
(787
|
)
|
|
Accretion
of interest on common stock receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
(449,000
|
)
|
|
Accretion
of interest on amount payable to preferred stockholders and Former
Officer
|
|
|
–
|
|
|
|
–
|
|
|
|
449,000
|
|
|
Loss
on sale of furniture and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
246,254
|
|
|
Issuance
of common stock or warrants for services
|
|
|
–
|
|
|
|
–
|
|
|
|
423,289
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
–
|
|
|
|
184,210
|
|
|
|
142,016
|
|
|
Inventory
|
|
|
–
|
|
|
|
10,285
|
|
|
|
41,916
|
|
|
Prepaid
expenses and other current assets
|
|
|
4,591
|
|
|
|
139,005
|
|
|
|
(28,828
|
)
|
|
Tax
refund receivable
|
|
|
316,434
|
|
|
|
441,004
|
|
|
|
(7,193
|
)
|
|
Accounts
payable and accrued expenses
|
|
|
102,533
|
|
|
|
1,005,954
|
|
|
|
2,408,084
|
|
|
Government
advances payable
|
|
|
(7,494
|
)
|
|
|
(74,377
|
)
|
|
|
278,154
|
|
|
Deferred
revenue
|
|
|
–
|
|
|
|
–
|
|
|
|
360,292
|
|
|
Amount
payable to Former Officer
|
|
|
–
|
|
|
|
–
|
|
|
|
80,522
|
|
|
Net
cash used in operating activities
|
|
$
|
(2,135,796
|
)
|
|
$
|
(1,050,923
|
)
|
|
$
|
(82,138,647
|
)
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of marketable securities
|
|
|
–
|
|
|
|
–
|
|
|
|
(351,973,210
|
)
|
|
Proceeds
from sale of marketable securities
|
|
|
–
|
|
|
|
–
|
|
|
|
344,856,738
|
|
|
Proceeds
from sale of short-term investments
|
|
|
–
|
|
|
|
–
|
|
|
|
7,116,472
|
|
|
Purchases
of furniture and equipment
|
|
|
(2,816
|
)
|
|
|
(2,973
|
)
|
|
|
(3,850,540
|
)
|
|
Proceeds
from sale of furniture and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
51,119
|
|
|
Cash
acquired in acquisition of control of joint venture
|
|
|
–
|
|
|
|
–
|
|
|
|
991,634
|
|
|
Organization
costs incurred
|
|
|
–
|
|
|
|
–
|
|
|
|
(622,755
|
)
|
|
Net
cash used in investing activities
|
|
$
|
(2,816
|
)
|
|
$
|
(2,973
|
)
|
|
$
|
(3,430,542
|
)
|
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Consolidated
Statements of Cash Flows (continued)
(Unaudited)
|
|
|
Nine Months Ended September 30,
|
|
|
Period from January 12,
1990 (Incorporation)
Through September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of notes payable to related party
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
957,557
|
|
|
Principal
payments on notes payable to related party
|
|
|
–
|
|
|
|
–
|
|
|
|
(802,000
|
)
|
|
Proceeds
from loans payable and the related issuance of warrants
|
|
|
231,744
|
|
|
|
561,530
|
|
|
|
5,266,744
|
|
|
Principal
payments on loans payable
|
|
|
(10,612
|
)
|
|
|
–
|
|
|
|
(1,399,612
|
)
|
|
Payments
for fractional shares from reverse splits and preferred stock
conversions
|
|
|
–
|
|
|
|
–
|
|
|
|
(76
|
)
|
|
Proceeds
from loans payable
|
|
|
–
|
|
|
|
–
|
|
|
|
914,884
|
|
|
Financing
costs incurred
|
|
|
–
|
|
|
|
–
|
|
|
|
(90,000
|
)
|
|
Shareholder
capital contribution
|
|
|
–
|
|
|
|
–
|
|
|
|
93,637
|
|
|
Payments
received on subscription receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
4,542
|
|
|
Proceeds
received from exercise of stock warrants
|
|
|
1,960,000
|
|
|
|
–
|
|
|
|
2,036,892
|
|
|
Elimination
of consolidated accounting treatment for joint venture
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,511,701
|
)
|
|
Capital
contribution through sale of interest in consolidated
subsidiary
|
|
|
–
|
|
|
|
–
|
|
|
|
2,624,000
|
|
|
Net
proceeds received from issuance of preferred and common
stock
|
|
|
-
|
|
|
|
–
|
|
|
|
78,170,851
|
|
|
Net
cash provided by financing activities
|
|
|
2,181,132
|
|
|
|
561,530
|
|
|
|
85,265,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(50,702
|
)
|
|
|
(50,243
|
)
|
|
|
320,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(8,182
|
)
|
|
|
(542,609
|
)
|
|
|
17,404
|
|
|
Cash
at beginning of period
|
|
|
25,586
|
|
|
|
550,806
|
|
|
|
–
|
|
|
Cash
at end of period
|
|
$
|
17,404
|
|
|
$
|
8,197
|
|
|
$
|
17,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Paid
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
Non-cash
activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of restricted stock compensation
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
25,000
|
|
|
Common
stock warrants issued with convertible notes
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
142,500
|
|
|
Conversion
of notes into common stock
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
950,000
|
|
|
Payment
of interest with common stock
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
23,275
|
|
|
Deferred
revenue converted to note payable
|
|
$
|
–
|
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
See
accompanying notes to condensed consolidated financial
statements.
AVAX
Technologies, Inc. and Subsidiaries
(a
development stage company)
Notes to
Condensed Consolidated Financial Statements
For the
Nine Months Ended September 30, 2010 and 2009
(Unaudited)
|
1.
|
Organization
and Summary of Significant Accounting
Policies
|
AVAX
Technologies, Inc., with its subsidiaries (the “Company”), is a development
stage biopharmaceutical company.
In
November 1995, the Company sold its leading product under development, an
over-the-counter nutritional, dietary, medicinal food supplement or drug and all
of the related patents and other intellectual property. The agreement
was for $2.4 million in shares of common stock of Interneuron Pharmaceuticals,
Inc. (“IPI”), a public company, the parent of the purchaser of the product (the
“Stock”). Certain common stockholders of the Company were also common
stockholders of IPI. Pursuant to the terms of the agreement, the
purchase price, payable in two equal installments in December 1996 and 1997, was
fixed, and the number of shares of the Stock would vary depending on the quoted
market price of the Stock at such time. Because the Stock was
receivable in two equal annual installments, the gain from the sale of the
product, $1,951,000, was calculated by discounting the value of the Stock
receivable using a discount rate of 15%.
Also in
November 1995, the Company entered into a license agreement with Thomas
Jefferson University (“TJU”) to develop, commercially manufacture and sell
products embodying immunotherapeutic vaccines for the treatment of malignant
melanoma and other cancers (the “Invention”) .
Since
January 1997, the Company has also entered into license agreements with other
universities to develop, commercially manufacture and sell products embodying a
series of compounds for the treatment of cancer. The Company has
since terminated each of these license and related research agreements after
determining that further development of these compounds was no longer consistent
with the strategic plan and plan of operation of the Company.
In August
2000, the Company completed its acquisition of GPH, S.A. (“Holdings”) and
Genopoietic S.A. (“Genopoietic”) each a French societe anonyme, with its
principal operating facility in Lyon, France. The Company has
designated the Lyon, France operations facility as its primary source facility
for the production of vaccines to be used in clinical trials. In
addition, the Company currently performs contract manufacturing and research
activities at its facility located in Lyon. The Company’s
September 30, 2010 consolidated balance sheet includes a deficit of liabilities
in excess of assets of $895,122 related to these subsidiaries.
The
Company’s business is subject to significant risks consistent with biotechnology
companies that are developing products for human therapeutic
use. These risks include, but are not limited to, uncertainties
regarding research and development, access to capital, obtaining and enforcing
patents, receiving regulatory approval, and competition with other biotechnology
and pharmaceutical companies. The Company plans to continue to
finance its operations with a combination of equity and debt financing and, in
the longer term, revenues from product sales, if any. However, there
can be no assurance that it will successfully develop any product or, if it
does, that the product will generate any or sufficient revenues.
Basis
of Presentation
The
accompanying unaudited interim condensed consolidated financial statements of
the Company and its subsidiaries have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles to consist of full-disclosure financial
statements. In the opinion of the Company’s management, all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
the periods then ended have been included. The results of operations
for the nine-month period ended September 30, 2010, are not necessarily
indicative of the results of operations that may be expected for the entire
year. These financial statements have been prepared assuming that the
Company will continue as a going concern which contemplates, among other things,
the realization of assets and satisfaction of liabilities in the normal course
of business.
For the
nine-months ended September 30, 2010, the Company incurred a net loss of
$16,276,890 and a deficit accumulated during the development stage of
$126,570,950 and has incurred an accumulated operating cash flow deficit of
$82,138,647 since incorporation.
The
Company’s recent cash requirements were satisfied through the issuance of
convertible debt securities, placement of equity securities, the exercise of
warrants during 2010, and the subsequent extension of due dates on debt
securities issued in 2008 and 2009, maintaining balances in accounts payable and
accrued expenses on terms in excess of those afforded in commercial practice and
customer agreements and through the use of available cash. However,
the Company does not have sufficient resources to maintain its existing plan of
operations throughout 2011. These conditions raise substantial doubt
about the Company’s ability to continue as a going
concern. Management anticipates that additional debt or equity
financing will be required to fund ongoing operations and product development in
2011. The accompanying financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The
accompanying condensed consolidated financial statements and the related notes
should be read in conjunction with the Company’s audited financial statements
for the years ended December 31, 2009 and 2008, included elsewhere in the
accompanying Form 10.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of AVAX
Technologies, Inc., and its subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates include, but are
not limited to, the recoverability of plant and equipment, collectability of
receivables, fair value of derivative liabilities, valuation of tax asset and
accrued expenses. Actual results could differ from those
estimates.
At
September 30, 2010, the Company estimates that the value of it derivative
liabilities approximated $25,708,905. Changes in the valuation of the
derivative liabilities are reported in other income (expense) in the Statement
of Operations.
Revenue
The
Company’s revenues are related to the provision of contract services and the
sale of its product, the AC Vaccine Technology, for the treatment of
melanoma. Contract service revenue is recognized in installments
based upon the contractual agreement entered into with
clients. Product revenues represent fees received or payable to the
Company related to the manufacture and sale of the vaccine. Product
revenue is recognized when the vaccine is received by the hospital administering
the vaccine.
Accounts
Receivable
Accounts
receivable are stated at the amount management expects to collect from
outstanding balances. Management provides for probable uncollectible
accounts through a charge to earnings and a credit to a valuation allowance
based on its assessment of the current status of individual
accounts. Balances that are still outstanding after management has
used reasonable collection efforts are written off through a charge to the
valuation allowance and a credit to accounts receivable. There was no
valuation allowance at September 30, 2010 and 2009. The Company
generally does not charge interest on accounts receivable.
Concentrations
of Credit Risk
Financial
instruments that potentially subject the Company to credit risk are principally
cash and accounts receivable. At September 30, 2010 and 2009, cash
consisted of funds maintained in the Company’s checking accounts. The
Company places its cash in a limited number of financial
institutions Credit limits, ongoing credit evaluations, and
account monitoring procedures are utilized to minimize the risk of loss from
accounts receivable. Collateral is generally not
required.
Fair
Value of Financial Instruments
As of
September 30, 2010 and 2009, the Company’s financial instruments consisted of
cash, accounts receivable, accounts payable and accrued expenses, convertible
notes payable, notes payable and derivative liability.
The
Company believes that the carrying values of cash, accounts receivable and
accounts payable and accrued expenses at September 30, 2010 and 2009
approximated fair value due to their short-term maturity. Based on
the borrowing rates and terms currently available to the Company for loans of
similar terms, the Company has determined that the carrying value of convertible
notes payable and notes payable approximates fair value. The Company
has determined that the carrying value of the derivative liability approximates
fair value based on the intrinsic value method and binomial pricing
models.
Accrued
Expenses
The
Company provides a provision for accrued expenses based upon its contractual
obligation, as calculated by the Company, for all claims made for payment to the
Company
Plant
and Equipment
The
Company records plant and equipment at cost. Costs of maintenance and
repairs of plant and equipment are charged to costs and expenses.
Depreciation
is computed using the straight-line method over the estimated useful lives of
furniture and equipment, which range from three to ten
years. Depreciation for the Company’s manufacturing facility and
related equipment are computed using the straight-line method over estimated
useful lives of 5 to 10 years. Leasehold improvements related to the
building are being amortized using the straight-line method over the actual life
of the lease. Due to the cessation of manufacturing and research at
the Company’s Lyon facility and the departure of its manufacturing and research
employees during 2009 the Company recognized as depreciation during 2009 the
remaining unamortized balance of assets capitalized for the Lyon
facility. As of December 31, 2008 the remaining unamortized balance
of fixed assets in the Lyon facility was $263,153. This full amount
was expensed to Research and Development expense during 2009.
Goodwill
The
Company adopted ASC 350 “Intangibles – Goodwill and Other” on January 1,
2002. This accounting standard requires that goodwill and indefinite
lived assets no longer be amortized but instead be tested at least annually for
impairment and expensed against earnings when the implied fair value of a
reporting unit, including goodwill, is less than its carrying
amount.
Prior to
the adoption of ASC 350, the Company had recorded cumulative amortization of
$113,032. If ASC 350 had been applied to earlier periods the adjusted
loss from continuing operations would be $127,854,073 and the adjusted net loss
would be $127,857,918.
Derivative
liabilities
The
Company’s derivative instruments are measured at fair value using an accepted
valuation model which takes into account, as of the valuation date, factors
including the current exercise price, the expected life of the warrant, the
current price of the underlying stock and its expected volatility, expected
dividends on the stock and the risk-free interest rate for the term of the
warrant. The Company recognizes all of its warrants with price
protection in its consolidated balance sheet as liabilities depending on the
rights or obligations under the contracts. The liability is revalued
at each reporting period and changes in fair value are recognized currently in
the consolidated statements of operations under the caption “Change in fair
value of derivative liabilities.”
Licenses
and Patents
Licenses
and patent costs are expensed as incurred as the Company does not feel there is
an alternate future use for the costs. Licenses are classified as
research and development and patents are classified as administrative expenses
in the statement of operations.
Research
and Development Costs
Research
and development costs, including payments related to research and license
agreements, are expensed when incurred. Contractual research expenses
are recorded pursuant to the provisions of the contract under which the
obligations originate. Research and development costs include all
costs incurred related to the research and development, including manufacturing
costs incurred, related to the Company’s research programs. The
Company is required to produce its products in compliance with current Good
Manufacturing Practices (“cGMP”), which requires a minimum level of staffing,
personnel and facilities testing and maintenance. Based upon its
current staffing level required to be in compliance with cGMP, the Company has
excess capacity. Utilizing this excess capacity, revenue is generated
through contract manufacturing engagements. Costs for production of
products will be capitalized and charged to cost of goods sold only after the
Company has received approval to market the drug by a regulatory
authority.
|
2.
|
Stock-Based
Compensation
|
Effective
January 1, 2006, the Company has adopted ASC 718 “Compensation – Stock
Compensation.” ASC 718 requires that the compensation cost relating
to share-based payment transactions be recognized in financial statements,
measured by the fair value of the equity or liability instruments issued,
adjusted for estimated forfeitures. The Company transitioned to ASC
718 using the modified-prospective method, under which prior periods have not
been revised for comparative purposes. The valuation provisions of
ASC 718 applied to new grants and to grants that were outstanding as of the
effective date and were subsequently modified. Estimated compensation
for grants that were outstanding as of the effective date will be recognized
over the remaining service period using the compensation cost previously
estimated for our pro forma disclosures. Recognized stock-based
compensation expense for the nine-months ended September 30, 2010 includes
compensation expense for share-based payment awards granted prior to, but not
yet vested as of December 31, 2005, based on the grant date fair value
estimated in accordance with the pro forma provisions of accounting for stock
based compensation and compensation expense for the share-based payment awards
granted subsequent to December 31, 2005 based on the grant date fair value
estimated in accordance with the provisions of ASC 718.
Prior to
the adoption of ASC 718, the Company applied the intrinsic-value-based method of
accounting prescribed by Accounting for Stock Issued to Employees and related
interpretations, to account for its fixed-plan stock options to
employees. Under this method, compensation cost was recorded only if
the market price of the underlying stock on the date of grant exceeded the
exercise price. The accounting principles for stock-based compensation
established accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation plans. As
permitted by ASC 718, the Company elected to continue to apply the
intrinsic-value-based method of accounting described above, and adopted only the
disclosure requirements of Accounting for Stock-Based Compensation, Transition
and Disclosure. The fair-value-based method used to determine
historical pro forma amounts under accounting for stock based compensation was
similar in most respects to the method used to determine stock-based
compensation expense under ASC 718. However, in its pro forma
disclosures, the Company accounted for option forfeitures as they occurred,
rather than based on estimates of future forfeitures.
Compensation
costs for fixed awards with pro rata vesting are allocated to periods on the
straight-line basis. For the nine-month period January 1, 2010, through
September 30, 2010, the estimated weighted average fair value of options granted
was calculated at $0.05 per share based on the assumptions below. For
the nine-months ended September 30, 2009 there were no options or warrants
issued.
|
|
|
Nine-Months Ended
September 30, 2010
|
|
|
Expected
term (in years)
|
|
|
4.00
|
|
|
Volatility
|
|
|
122.8
|
%
|
|
Risk-free
interest rate
|
|
|
2.49
|
%
|
|
Expected
dividends
|
|
|
0
|
|
Compensation
expense of $2,317,810 and $427,019 was charged to administrative expenses for
the nine months ended September 30, 2010 and 2009, respectively, while $152,139
and $12,483 was charged to research and development expenses related to stock
options outstanding and not vested for the same periods.
A summary
of applicable stock option and warrant activity and related information for the
nine-months ended September 30, 2010, is as follows:
|
|
|
Options and Warrants
|
|
|
Weighted-Average
Exercise
Price
|
|
|
Outstanding
at beginning of period
|
|
|
280,802,723
|
|
|
$
|
0.080
|
|
|
Granted
|
|
|
230,876,239
|
|
|
|
0.015
|
|
|
Exercised
|
|
|
(39,516,600
|
)
|
|
|
0.015
|
|
|
Expired
|
|
|
(9,890,323
|
)
|
|
|
0.424
|
|
|
Outstanding
at end of period
|
|
|
462,272,039
|
|
|
$
|
0.046
|
|
|
Exercisable
at end of period
|
|
|
459,657,820
|
|
|
$
|
0.045
|
|
The fair
value of option grants is estimated at the date of grant using the Black-Scholes
model. The option and warrant contracts expire at various times
through April 2020. The weighted-average grant date fair value of
options granted during the nine-months ended September 30, 2010 were
$0.016.
The
following table shows the options and warrants outstanding by strike price with
the average expected remaining term of the instruments at September 30,
2010.
|
|
|
Options & Warrants
|
|
|
Weighted-Average
|
|
|
Vested Options &
|
|
|
Weighted-Average
|
|
|
Exercise Price Range
|
|
Outstanding
|
|
|
Remaining Term
|
|
|
Warrants
|
|
|
Remaining Term
|
|
|
$0.015-$0.125
|
|
|
373,009,639
|
|
|
|
4.06
|
|
|
|
370,395,420
|
|
|
|
4.04
|
|
|
$0.150
- $0.190
|
|
|
88,120,400
|
|
|
|
1.61
|
|
|
|
88,120,400
|
|
|
|
1.61
|
|
|
$0.285
- $0.34
|
|
|
777,000
|
|
|
|
1.80
|
|
|
|
777,000
|
|
|
|
1.80
|
|
|
$2.938
|
|
|
240,000
|
|
|
|
0.20
|
|
|
|
240,000
|
|
|
|
0.20
|
|
|
$8.240
|
|
|
125,000
|
|
|
|
1.08
|
|
|
|
125,000
|
|
|
|
3.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462,272,039
|
|
|
|
|
|
|
|
459,657,820
|
|
|
|
|
|
|
3.
|
Derivative
Liabilities
|
The 2008
and 2009 Convertible Notes Payable have down-round price protection written into
the Note agreements that adjusts the conversion price feature down the match any
future offerings while the notes are still outstanding. This price
protection is considered to be a derivative instrument and must be valued and
recognized at the instruments current market value as of the date of issuance
and adjusted each period the financial statements are presented. To
calculate the fair market value of the derivative instrument we employed the
Intrinsic value method to calculate the value of the conversion feature and
compared this price to the adjusted discounted note conversion price to
calculate the current derivative liability related to the note conversion
features.
Inputs
were adjusted each period to reflect changes in the Company’s trading
price. The fair value of the conversion feature for the 2010 and 2009
conversion provisions were calculated as follows:
|
2008 Notes:
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
Note
issuance amount
|
|
$
|
1,321,000
|
|
|
$
|
1,321,000
|
|
|
Current
shares issuable
|
|
|
132,100,000
|
|
|
|
14,677,777
|
|
|
Effective
conversion price per share
|
|
|
0.01
|
|
|
|
0.09
|
|
|
Market
Price
|
|
|
0.05
|
|
|
|
0.02
|
|
|
Calculated
derivative liability
|
|
$
|
5,284,000
|
|
|
$
|
-
|
|
|
2009
Notes:
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
Note
issuance amount
|
|
$
|
1,400,000
|
|
|
|
n/a
|
|
|
Current
shares issuable
|
|
|
140,000,000
|
|
|
|
n/a
|
|
|
Effective
conversion price per share
|
|
|
0.01
|
|
|
|
n/a
|
|
|
Market
Price
|
|
|
0.05
|
|
|
|
n/a
|
|
|
Calculated
derivative liability
|
|
$
|
5,600,000
|
|
|
$
|
n/a
|
|
|
Combined
conversion derivative liability
|
|
$
|
10,884,000
|
|
|
$
|
n/a
|
|
Effective
January 1, 2009, the Company adopted the provisions of FASB ASC 815 –
“derivatives and hedging”. The adoption of this provision required
the Company to record an adjustment to beginning deficit accumulated during the
development stage of $132,100. This amount was computed using a
binomial model and inputs including: common stock issuable upon conversion,
market value on measurement date, exercise price per share, risk-free interest
rate, term, expected volatility and expected dividends.
In
accordance with the agreements for the issuance of the convertible promissory
notes for 2008 and 2009, the Company also issued to the Investors warrants to
purchase common stock which are based upon a conversion price agreed to in the
note agreements. These warrants contain down round price protection
in the event that the Company issues common stock at a price which is lower than
the exercise price of the warrant. This price protection is
considered to be a derivative instrument and must be valued and recognized at
the instruments current market value as of the date of issuance and adjusted
each period the financial statements are presented. To calculate the
fair market value of the derivative instrument we employed the a binomial
pricing model to calculate the value of the warrant and recorded the value of
conversion feature as the full value of the warrants. Inputs were
adjusted each period to reflect changes in the Company’s trading
price. The fair value of the conversion feature for the 2008 and 2009
conversion provisions were calculated as follows:
|
2008
Note Warrants Issue 1:
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
Common
stock issuable upon conversion
|
|
|
54,733,334
|
|
|
|
8,210,000
|
|
|
Market
Value on measurement date per share
|
|
|
0.050
|
|
|
|
0.02
|
|
|
Exercise
price per share
|
|
|
0.015
|
|
|
|
0.10
|
|
|
Risk
free interest rate
|
|
|
0.14
|
%
|
|
|
0.40
|
%
|
|
Term
in years
|
|
|
0.08
|
|
|
|
1.08
|
|
|
Expected
volatility
|
|
|
1.678
|
|
|
|
1.790
|
|
|
Expected
dividends
|
|
|
0.00
|
|
|
|
0.00
|
|
|
Calculated
derivative liability
|
|
$
|
1,915,667
|
|
|
$
|
82,100
|
|
|
2008 Note Warrants Issue 2:
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
|
|
|
|
|
|
|
|
Common
stock issuable upon conversion
|
|
|
33,333,333
|
|
|
|
5,000,000
|
|
|
Market
Value on measurement date per share
|
|
|
0.050
|
|
|
|
0.02
|
|
|
Exercise
price per share
|
|
|
0.015
|
|
|
|
0.10
|
|
|
Risk
free interest rate
|
|
|
0.64
|
%
|
|
|
2.31
|
%
|
|
Term
in years
|
|
|
3.08
|
|
|
|
4.00
|
|
|
Expected
volatility
|
|
|
2.185
|
|
|
|
1.982
|
|
|
Expected
dividends
|
|
|
0.00
|
|
|
|
0.00
|
|
|
Calculated
derivative liability
|
|
$
|
1,666,667
|
|
|
$
|
100,000
|
|
|
2009
Note Warrants:
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
Common
stock issuable upon conversion
|
|
|
93,333,333
|
|
|
|
n/a
|
|
|
Market
Value on measurement date per share
|
|
|
0.050
|
|
|
|
n/a
|
|
|
Exercise
price per share
|
|
|
0.015
|
|
|
|
n/a
|
|
|
Risk
free interest rate
|
|
|
1.27
|
%
|
|
|
n/a
|
|
|
Term
in years
|
|
|
4.00
|
|
|
|
n/a
|
|
|
Expected
volatility
|
|
|
2.056
|
|
|
|
n/a
|
|
|
Expected
dividends
|
|
|
0.00
|
|
|
|
n/a
|
|
|
Calculated
derivative liability
|
|
$
|
4,666,667
|
|
|
|
n/a
|
|
|
February
2010 Note
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
Common
stock issuable upon conversion
|
|
|
15,400,000
|
|
|
|
n/a
|
|
|
Market
Value on measurement date per share
|
|
|
0.050
|
|
|
|
n/a
|
|
|
Exercise
price per share
|
|
|
0.015
|
|
|
|
n/a
|
|
|
Risk
free interest rate
|
|
|
0.14
|
%
|
|
|
n/a
|
|
|
Term
in years
|
|
|
0.088
|
|
|
|
n/a
|
|
|
Expected
volatility
|
|
|
1.678
|
|
|
|
n/a
|
|
|
Expected
dividends
|
|
|
0.00
|
|
|
|
n/a
|
|
|
Calculated
derivative liability
|
|
$
|
539,000
|
|
|
|
n/a
|
|
|
April
2010 Financing Warrants – Issue 1:
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
Common
stock issuable upon conversion
|
|
|
12,483,400
|
|
|
|
n/a
|
|
|
Market
Value on measurement date per share
|
|
|
0.05
|
|
|
|
n/a
|
|
|
Exercise
price per share
|
|
|
0.015
|
|
|
|
n/a
|
|
|
Risk
free interest rate
|
|
|
0.14
|
%
|
|
|
n/a
|
|
|
Term
in years
|
|
|
0.08
|
|
|
|
n/a
|
|
|
Expected
volatility
|
|
|
1.678
|
|
|
|
n/a
|
|
|
Expected
dividends
|
|
|
0.00
|
|
|
|
n/a
|
|
|
Calculated
derivative liability
|
|
$
|
436,904
|
|
|
|
n/a
|
|
|
April
2010 Financing Warrants – Issue 2:
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
Common
stock issuable upon conversion
|
|
|
12,000,000
|
|
|
|
n/a
|
|
|
Market
Value on measurement date per share
|
|
|
0.050
|
|
|
|
n/a
|
|
|
Exercise
price per share
|
|
|
0.015
|
|
|
|
n/a
|
|
|
Risk
free interest rate
|
|
|
1.27
|
%
|
|
|
n/a
|
|
|
Term
in years
|
|
|
4.58
|
|
|
|
n/a
|
|
|
Expected
volatility
|
|
|
2.009
|
|
|
|
n/a
|
|
|
Expected
dividends
|
|
|
0.00
|
|
|
|
n/a
|
|
|
Calculated
derivative liability
|
|
$
|
600,000
|
|
|
|
n/a
|
|
|
June 2010 Financing Warrants
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
Common
stock issuable upon conversion
|
|
|
100,000,000
|
|
|
|
n/a
|
|
|
Market
Value on measurement date per share
|
|
|
0.050
|
|
|
|
n/a
|
|
|
Exercise
price per share
|
|
|
0.050
|
|
|
|
n/a
|
|
|
Risk
free interest rate
|
|
|
1.27
|
%
|
|
|
n/a
|
|
|
Term
in years
|
|
|
4.75
|
|
|
|
n/a
|
|
|
Expected
volatility
|
|
|
1.969
|
|
|
|
n/a
|
|
|
Expected
dividends
|
|
|
0.00
|
|
|
|
n/a
|
|
|
Calculated
derivative liability
|
|
$
|
5,000,000
|
|
|
|
n/a
|
|
|
Combined
derivative liability
|
|
$
|
14,824,905
|
|
|
$
|
182,100
|
|
The
following table sets forth by level within the fair value hierarchy, the
company’s financial assets and liabilities that were accounted for at fair value
on a recurring basis for the period ended September 30, 2010 and
2009:
|
|
|
Fair value measurement as of September 30, 2010
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Derivative
liability – conversion option of note
|
|
|
-
|
|
|
|
-
|
|
|
|
10,884,000
|
|
|
|
10,884,000
|
|
|
Derivative
liability – detached warrant
|
|
|
-
|
|
|
|
-
|
|
|
|
14,824,905
|
|
|
|
14,824,905
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,708,905
|
|
|
|
25,708,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement as of September 30,
2009
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Derivative
liability – conversion option of note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Derivative
liability – detached warrant
|
|
|
-
|
|
|
|
-
|
|
|
|
182,100
|
|
|
|
182,100
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
182,100
|
|
|
|
182,100
|
|
The
following table sets forth a summary of changes in the fair value of the
Company’s Level 3 assets for the nine-months ended September 30,
2010:
|
|
|
Conversion Option
|
|
|
Detached Warrants
|
|
|
Derivative liability
balance, December 31, 2009
|
|
$
|
8,163,000
|
|
|
$
|
7,256,000
|
|
|
Increase
to liability
|
|
|
2,721,000
|
|
|
|
7,568,905
|
|
|
Derivative
liability balance, September 30, 2010
|
|
$
|
10,884,000
|
|
|
$
|
14,824,905
|
|
|
4.
|
Shareholders
Equity Roll-Forward
|
The
changes to shareholders equity during the nine months ended September 30, 2010
are as follows:
|
|
|
Common
Shares
|
|
|
Amount
|
|
|
Additional
Paid-in Capital
|
|
|
Balance
at December 31, 2009
|
|
|
141,574,997
|
|
|
$
|
566,300
|
|
|
$
|
87,796,318
|
|
|
April
1, 2010 Financing
|
|
|
64,000,000
|
|
|
|
256,000
|
|
|
|
704,000
|
|
|
June
4, 2010 Financing
|
|
|
20,000,000
|
|
|
|
80,000
|
|
|
|
920,000
|
|
|
Stock
based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
2,469,949
|
|
|
Balance
at September 30, 2010
|
|
|
225,574,997
|
|
|
$
|
902,300
|
|
|
$
|
91,890,267
|
|
|
|
|
Accumulated other
Comprehensive
Income
|
|
|
Deficit
Accumulated
During the
Developmental
Stage
|
|
|
Balance
at December 31, 2009
|
|
$
|
333,411
|
|
|
$
|
(110,294,060
|
)
|
|
Foreign
currency translation adjustment
|
|
|
(28,441
|
)
|
|
|
–
|
|
|
Net
loss
|
|
|
–
|
|
|
|
(16,276,890
|
)
|
|
Balance
at September 30, 2010
|
|
$
|
304,970
|
|
|
$
|
(126,570,950
|
)
|
The
Company has evaluated subsequent events occurring after the balance sheet
date. Based on this evaluation, the Company has determined that no
subsequent event, except for the matters discussed below, have occurred which
would require disclosure in the consolidated financial statements.
On
October 28, 2010, we entered into a non-binding agreement with Firebird Global
Master Fund, Ltd. (“Firebird”) to invest up to $2,000,000 to meet our working
capital needs. The initial advance, in the amount of $1,300,000, was
received on November 4, 2010 in consideration for the exercise of warrants,
which had been issued in connection with the June 2010 financing, the number of
which was adjusted in connection with the agreement. Firebird
consummated the initial advance by exercising warrants for 111,111,111 shares of
common stock, which, as mentioned below, were modified as part of the agreement
such that they were exercisable at $0.0117 per share. The June 2010
financing agreement contained a provision that if Firebird exercised any or all
of its warrants in connection therewith within 12 months after their issuance,
Firebird would receive a replacement warrant for that number of warrants
exercised. Accordingly, we issued a replacement warrant to Firebird
to purchase 111,111,111 shares of common stock at an exercise price of $0.0117
per share. To the extent that Firebird exercises warrants to provide
us additional funds, and such funding is completed prior to June 4, 2011, we
will be required to issue up to an additional 316,239,316 replacement warrants
to Firebird at an exercise price of $0.0117 per share.
Concurrent
with the aforementioned transaction certain investors who participated in the
October 2008 note and the February 16, 2010 convertible promissory notes agreed
to convert the notes to common stock resulting in the issuance of 116,801,858
shares of common stock in satisfaction for all principal and interest
outstanding in the aggregate amount of approximately $1,314,000 and $106,994,
respectively. The note holders, plus the note holders who
participated in the February 16, 2010 financing noted above, agreed to modify
the terms of their warrants to require immediate exercise of the warrants or to
allow the warrants to expire upon non-exercise. All of the note
holders elected to allow the warrants to expire resulting in the termination of
83,347,067 warrants to purchase common stock at $0.015 per share.
On
January 5, 2011, the Company reached an agreement with Firebird to extend the
term of the 2008 notes and the 2009 notes to September 30, 2011. The
Company had been in default on these notes since their amended maturity date of
June 1, 2010. As consideration for the extension of the maturity
date, the Company agreed to increase the rate of interest on each note as of
October 28, 2010 by 200 basis points from six percent to eight percent and to
pay such interest on a quarterly rather than an annual basis. The
extension agreement also provided the Company to elect to pay interest in kind
or in common stock at the then effective conversion price rather than in cash,
provided that if cash interest is not paid, Firebird may determine whether it
will receive interest in kind or in cash.
In
addition, pursuant to the extension agreement, we were required to file this
Form 10 with the SEC prior to January 10, 2011. Because we did not
file this Form 10 by that date, Firebird received an additional 75 basis points
of interest on the 2008 and 2009 notes, respectively, and a new interest rate of
8.75% effective as of that date. The interest rate on the 2008 and
2009 Notes will increase by an additional 75 base points if we do not file a
Registration Statement under the Securities Act of 1933, as amended (the
"Registration Statement") with the SEC within five business days after the Form
10 is declared effective. The interest rate on the 2008 and 2009
Notes will increase by a further 50 basis points as of the tenth day
(or the next subsequent business day if such day is not a business day) of each
subsequent calendar month (i) if we have not filed this Form 10 by such date or
(ii) if the Form 10 has been declared effective by the SEC, but the Registration
Statement has not been filed and such date is more than five business days after
the effective date of the Form 10. The interest rate payable to the
holders of the 2008 and 2009 Notes will also increase by 50 basis points on the
91st day after filing of the Form 10 if the Form 10 is not declared effective by
such date and will increase by an additional 50 basis points as of the end of
each 30-calendar-day period thereafter if the Form 10 has not been declared
effective by the end of such period. After the Form 10 has been
declared effective, the interest rate payable to the holders of the 2008 and
2009 Notes will be increased by (i) an additional 50 basis points if the
Registration Statement has not been declared effective as of the end of the 45th
day following the effective date of the Form 10 and (ii) an additional 50 basis
points for each 30-calendar-day period thereafter if the Registration Statement
has not been declared effective by the end of such period. Notwithstanding the
foregoing, the aggregate increases in the interest rate payable to the holders
pursuant to our agreement with Firebird will not cause the interest rate to
exceed the lesser of (i) 18 percent per year and (ii) the maximum interest rate
permissible under applicable law.
On
January 25, 2011, further to the non-binding agreement with Firebird providing
for the investment of up to an additional $2,000,000 to meet working capital
needs, Firebird invested an additional $700,000 in the Company in consideration
for the exercise of warrants received in the June 2010 financing noted above at
an exercise price of $0.0117 per share resulting in the issuance of 59,829,060
shares of common stock. The warrants that were exercised were
re-issued in the form of replacement warrants.
SIGNATURES
Pursuant to the requirements of Section
12 of the Securities Exchange Act of 1934, the registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
Date:
February 3, 2011
|
AVAX
TECHNOLOGIES, INC.
|
|
|
|
|
|
By:
|
/s/ John K. A. Prendergast,
Ph.D.
|
|
|
|
|
John
K. A. Prendergast, Ph.D.
Chief
Executive Officer
|
EXHIBIT
INDEX
|
Exhibit
Number
|
|
EXHIBIT DESCRIPTION
|
|
|
|
|
|
|
|
3.1
|
|
Certificate
of Incorporation, as amended (excluding the Certificates of Designations
for the Series B and Series C Convertible Preferred Stock) (filed as
Exhibit 3.1 to the Company's Form 10-KSB filed with the SEC on April 1,
2002 and incorporated herein by reference).
|
|
|
|
|
|
|
3.2
|
|
Certificate
of Amendment of Certificate of Incorporation dated May 10, 2004 (filed as
Exhibit 3.1
to the Company's
Form 10-QSB filed with the SEC on May 24, 2004 and incorporated herein by
reference).
|
|
|
|
|
|
|
3.3
|
|
Certificate
of Amendment of Certificate of Incorporation dated February 20, 2007
(filed
as Exhibit 3.3
to the Company's
Form 10-KSB filed with the SEC on May 9, 2007 and incorporated herein by
reference).
|
|
|
|
|
|
|
3.4
|
|
Certificate
of Amendment of Certificate of Incorporation dated December 31,
2010.
|
|
|
|
|
|
|
3.5
|
|
Bylaws
(filed as Exhibit 3.2
to the Company's
Form SB-2 filed with the SEC on August 1, 1996 and incorporated herein by
reference).
|
|
|
|
|
|
|
4.1
|
|
Specimen
of Common Stock Certificate (filed as Exhibit 4.2
to the Company's
Form SB-2 filed with the SEC on August 1, 1996 and incorporated herein by
reference).
|
|
|
|
|
|
|
4.2
|
|
Certificate
of Designation of Series C Convertible Preferred Stock (filed as Exhibit
3.1 to the Company's Form 10-KSB filed with the SEC on March 31, 1999 and
incorporated herein by reference).
|
|
|
|
|
|
|
10.1
|
|
Clinical
Study and Research Agreement dated November 20, 1995, by and between the
Company and Thomas Jefferson University (filed as Exhibit 10.2 to the
Company's Form SB-2 filed with the SEC on August 1, 1996 and incorporated
herein by reference).
|
|
|
|
|
|
|
10.2
|
|
License
Agreement dated November 20, 1995, by and between the Company and Thomas
Jefferson University (filed as Exhibit 10.10 to the Company's Form S-3
filed with the SEC on July 3, 1997 and incorporated herein by
reference).
|
|
|
|
|
|
|
10.3
|
|
Extension
to the Clinical Study and Research Agreement dated November 20, 1995, by
and between the Company and Thomas Jefferson University (filed as Exhibit
10.17 to the Company's Form 10-KSB filed with the SEC on March 31, 1999
and incorporated herein by reference).
|
|
|
|
|
|
|
10.4
|
|
Stock
Contribution Agreement dated as of July 17, 2000, among the Company,
Professor David R. Klatzmann, Professor Jean-Loup Salzmann, GPH, S.A. and
Genopoietic, S.A. (filed as Exhibit 10.1 to the Company's Form 8-K filed
with the SEC on September 8, 2000 and incorporated herein by
reference).
|
|
|
|
|
|
|
10.5
|
|
Tax
Agreement dated as of August 24, 2000, among the Company, GPH, S.A.,
Genopoietic S.A., Professor David R. Klatzmann and Professor Jean-Loup
Salzmann (filed as Exhibit 10.2 to the Company's Form 8-K filed with the
SEC on September 8, 2000 and incorporated herein by
reference).
|
|
|
|
|
|
|
10.6
|
|
Rights
Agreement dated as of August 24, 2000, between the Company and Professor
David R. Klatzmann (an identical agreement was entered into between the
Company and Professor Jean-Loup Salzmann) (filed as Exhibit 10.3 to the
Company's Form 8-K/A filed with the SEC on November 7, 2000 and
incorporated herein by
reference).
|
|
10.7
|
|
2001
Stock Option Plan (filed as Exhibit 10.15 to the Company's Form 10-KSB
filed with the SEC on April 1, 2002 and incorporated herein by
reference).*
|
|
|
|
|
|
10.8
|
|
2000
Directors' Stock Option Plan (filed as Exhibit
10.22
to the Company's
Form 10-KSB filed with the SEC on April 2, 2001 and incorporated herein by
reference).*
|
|
|
|
|
|
10.9
|
|
2006
Equity Incentive Plan (filed as Exhibit A
to the Company's
2006 Proxy Statement filed with the SEC on June 28, 2006
and incorporated
herein by reference).*
|
|
|
|
|
|
10.10
|
|
Note
Purchase Agreement dated as of November 17, 2003 (filed as Exhibit 10.1 to
the Company's Form 8-K filed with the SEC on December 9, 2003 and
incorporated herein by reference).
|
|
|
|
|
|
10.11
|
|
Form
of Warrant in connection with the December 2003 financing (filed as
Exhibit 10.2 to the Company's Form 8-K filed with the SEC on December 9,
2003 and incorporated herein by reference).
|
|
|
|
|
|
10.12
|
|
Form
of Series 2004A Warrant to purchase common stock (filed as Exhibit 10.2 to
the Company's Form 8-K filed with the SEC on June 2, 2004 and incorporated
herein by reference).
|
|
|
|
|
|
10.13
|
|
Form
of Series 2004B Warrant to purchase common stock (filed as Exhibit 10.3 to
the Company's Form 8-K filed with the SEC on June 2, 2004 and incorporated
herein by reference).
|
|
|
|
|
|
10.14
|
|
Employment
Agreement between AVAX Technologies, Inc. and Richard P. Rainey dated as
of April 1, 2004 (filed as Exhibit 10.1 to the Company's Form 8-K filed
with the SEC on March 18, 2005 and incorporated herein by
reference).*
|
|
|
|
|
|
10.15
|
|
Letter
Agreement between AVAX Technologies, Inc. and Richard P. Rainey dated as
of October 2, 2007 (filed as Exhibit 10.1 to the Company's Form 8-K filed
with the SEC on October 18, 2007 and incorporated herein by
reference).*
|
|
|
|
|
|
10.16
|
|
Employment
Agreement between AVAX Technologies, Inc. and Richard P. Rainey dated as
of December 1, 2007 (filed as Exhibit 10.3 to the Company's Form 8-K/A
filed with the SEC on February 1, 2008 and incorporated herein by
reference).*
|
|
|
|
|
|
10.17
|
|
Employment
Agreement between AVAX Technologies, Inc. and Dr. Francois R. Martelet
dated as of December 1, 2007 (filed as Exhibit 10.1 to the Company's Form
8-K/A filed with the SEC on February 1, 2008 and incorporated herein by
reference).*
|
|
|
|
|
|
10.18
|
|
Amendment
to Employment Agreement between AVAX Technologies, Inc. and Dr. Francois
R. Martelet dated as of December 1, 2007 (filed as Exhibit 10.2 to the
Company's Form 8-K/A filed with the SEC on February 1, 2008 and
incorporated herein by reference).*
|
|
|
|
|
|
10.19
|
|
Form
of Series 2005A Warrant to purchase common stock (filed as Exhibit 10.2 to
the Company's Form 8-K filed with the SEC on April 7, 2005 and
incorporated herein by reference).
|
|
|
|
|
|
10.20
|
|
Form
of Series 2005B Warrant to purchase common stock (filed as Exhibit 10.3 to
the Company's Form 8-K filed with the SEC on April 7, 2005 and
incorporated herein by reference).
|
|
|
|
|
|
10.21
|
|
Securities
Purchase Agreement dated as of April 13, 2007 (filed as Exhibit 10.1 to
the Company's Form 8-K filed with the SEC on April 19, 2007 and
incorporated herein by
reference).
|
|
10.22
|
|
Form
of Series 2007A Warrant to purchase common stock (filed as Exhibit 10.2 to
the Company's Form 8-K filed with the SEC on April 19, 2007 and
incorporated herein by reference).
|
|
|
|
|
|
10.23
|
|
2008
Form of Warrant to purchase common stock (filed as Exhibit 4.1 to the
Company's Form 10-Q filed with the SEC on November 19, 2008 and
incorporated herein by reference).
|
|
|
|
|
|
10.24
|
|
Convertible
Note and Warrant Purchase Agreement dated as of October 24, 2008 (filed as
Exhibit 10.1 to the Company's Form 10-Q filed with the SEC on November 19,
2008 and incorporated herein by reference).
|
|
|
|
|
|
10.25
|
|
Amendment
to Convertible Note and Warrant Purchase Agreement effective as of October
24, 2008 (filed as Exhibit 10.2 to the Company's Form 10-Q filed with the
SEC on November 19, 2008 and incorporated herein by
reference).
|
|
|
|
|
|
10.26
|
|
2008
Form of Convertible Promissory Note (filed as Exhibit 10.3 to the
Company's Form 10-Q filed with the SEC on November 19, 2008 and
incorporated herein by reference).
|
|
|
|
|
|
10.27
|
|
Consulting
Agreement dated October 11, 2009 by and between the Company and HSF
Business Advisors LLC, as amended.*
|
|
|
|
|
|
10.28
|
|
Production
Agreement dated January 26, 2007 by and between the Company and Cancer
Treatment Centers of America, Inc.
|
|
|
|
|
|
10.29
|
|
Services,
Loan and Security Agreement dated April 27, 2009 by and between the
Company and Cancer Treatment Centers of America, Inc.
|
|
|
|
|
|
10.30
|
|
Patent
Sublicense Agreement dated April 27, 2009 by and between the Company and
Cancer Treatment Centers of America, Inc.
|
|
|
|
|
|
10.31
|
|
Intercreditor
Agreement dated October 15, 2009 by and between Cancer Treatment Centers
of America, Inc. and Firebird Global Master Fund Ltd., as acknowledged and
agreed to by the Company.
|
|
|
|
|
|
10.32
|
|
Intellectual
Property Security Agreement dated October 15, 2009 by and among the
Company, AVAX International IP Holdings, Inc. and Firebird Global Master
Fund, Ltd.
|
|
|
|
|
|
10.33
|
|
Convertible
Secured Promissory Note dated October 15, 2009 issued by the Company to
Firebird Global Master Fund, Ltd.
|
|
|
|
|
|
10.34
|
|
Convertible
Note and Warrant Purchase Agreement dated October 15, 2009 by and among
the Company, AVAX International IP Holdings, Inc. and Firebird Global
Master Fund, Ltd.
|
|
|
|
|
|
10.35
|
|
Warrant
for the Purchase of Shares of Common Stock dated October 15, 2009 issued
by the Company to Firebird Asset Management LLC.
|
|
|
|
|
|
10.36
|
|
Amendment
to Intercreditor Agreement effective as of May 31, 2010 by and between
Cancer Treatment Centers of America, Inc. and Firebird Global Master Fund
Ltd.
|
|
|
|
|
|
10.37
|
|
Offer
Letter from Firebird Global Master Fund, Ltd. to the Company dated as of
October 28, 2010.
|
|
|
|
|
|
10.38
|
|
Amendments
to Certain AVAX Agreements, Notes and Warrants effective as of October 28,
2010 by and between the Company and Firebird Global Master Fund,
Ltd.
|
|
|
|
|
|
10.39
|
|
Form
of Amendment No. 2 effective as of December 2008 to Convertible Note and
Warrant Purchase Agreement and Convertible Promissory
Note.
|
|
|
|
|
|
10.40
|
|
Form
of Amendment No. 3 effective as of October 15, 2009 to
2008 Convertible Note and Warrant Purchase Agreement and
2008 Convertible Promissory Note.
|
|
|
|
|
|
16.1
|
|
Letter
from BBD, LLP to the SEC regarding change in certifying
accountant.
|
|
|
|
|
|
21.1
|
|
Subsidiaries
of the Company.
|
* Indicates
a management contract or compensatory plan or arrangement.