NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
BUSINESS AND FUNDING
Description
of Business
As
used herein, “we,” “us,” “our,” the “Company” or “Anixa” means Anixa
Biosciences, Inc. and its consolidated subsidiaries. Our primary operations involve developing therapies and vaccines that are
focused on critical unmet needs in oncology and infectious disease. Our therapeutics programs include the development of a chimeric
endocrine receptor T-cell technology, a novel form of chimeric antigen receptor T-cell (“CAR-T”) technology, initially
focused on treating ovarian cancer, and discovery and ultimately development of anti-viral drug candidates for the treatment of
COVID-19 focused on inhibiting certain protein functions of the virus. Our vaccine programs include the development of a vaccine
against breast cancer, specifically triple negative breast cancer (“TNBC”), the most lethal form of the disease, and
a vaccine against ovarian cancer.
Our
subsidiary, Certainty Therapeutics, Inc. (“Certainty”), is developing immuno-therapy drugs against cancer. Certainty
holds an exclusive worldwide, royalty-bearing license to use certain intellectual property owned or controlled by The Wistar Institute
(“Wistar”) relating to Wistar’s CAR-T technology. We have initially focused on the development of a treatment
for ovarian cancer, but we may also pursue applications of the technology for the development of treatments for additional solid
tumors. The license agreement requires Certainty to make certain cash and equity payments to Wistar upon achievement of specific
development milestones. With respect to Certainty’s equity obligations to Wistar, Certainty issued to Wistar shares of its
common stock equal to five percent (5%) of the common stock of Certainty.
Certainty, in collaboration
with the H. Lee Moffitt Cancer Center and Research Institute, Inc. (“Moffitt”), is advancing toward human clinical
testing its CAR-T technology for treating ovarian cancer. We are currently testing the clinical grade vector and preparing an
Investigational New Drug (“IND”) application for submission to the U.S. Food and Drug Administration (“FDA”).
We anticipate filing the IND in the first calendar quarter of 2021. Assuming the FDA approves our IND application, we anticipate
beginning the human clinical trials during the second half of 2021.
In April 2020, we entered
into a collaboration with OntoChem GmbH (“OntoChem”), to discover and ultimately develop anti-viral drug candidates
against COVID-19. Through this collaboration, we utilized advanced computational methods, machine learning, and molecular modeling
techniques to perform in silico screening of over 1.2 billion compounds in chemical libraries (including publicly available
compounds and OntoChem’s proprietary libraries) to evaluate if any of these compounds could disrupt one of two key enzymes
of SARS-CoV-2, the virus that causes the disease COVID-19.
The screening process
resulted in the identification of multiple compounds that could potentially disrupt critical enzymes of the virus. Several of
these compounds were synthesized and tested in in vitro biological assays. Upon completion of these biological assays,
we identified two of the most promising compounds and have begun testing them in animal models. In these animal studies, the
two compounds are being compared to Remdesivir, which is the only anti-viral drug authorized by the FDA for
COVID-19. We anticipate this proof-of-concept animal study to be completed by the end of the first calendar quarter of 2021.
We
hold an exclusive worldwide, royalty-bearing license to use certain intellectual property owned or controlled by The Cleveland
Clinic Foundation (“Cleveland Clinic”) relating to certain breast cancer vaccine technology developed at Cleveland
Clinic. We are working in collaboration with Cleveland Clinic to develop a method to vaccinate women against contracting breast
cancer, focused specifically on TNBC. A specific protein, alpha-lactalbumin, has been identified that is only present during lactation
in healthy women, but reappears in many forms of breast cancer, especially TNBC. Studies have shown that vaccinating against this
protein prevents breast cancer in mice. In December 2020, we received authorization from the FDA to commence enrollment and treatment
of patients in a Phase 1a clinical trial. We are performing the activities necessary to prepare for treatment of patients in the
Phase 1a clinical trial, and we anticipate being prepared to treat the first enrolled patient by mid-year 2021.
In
November 2020, we executed a license agreement with Cleveland Clinic pursuant to which the Company was granted an exclusive worldwide,
royalty-bearing license to use certain intellectual property owned or controlled by Cleveland Clinic relating to certain ovarian
cancer vaccine technology. This technology pertains to the use of vaccines for the treatment or prevention of ovarian cancers
which express the anti-Mullerian hormone receptor II protein containing an extracellular domain (“AMHR2-ED”). In healthy
tissue, this protein regulates growth and development of egg-containing follicles in the ovary. While expression of AMHR2-ED naturally
and markedly declines after menopause, this protein is expressed at high levels in the ovaries of postmenopausal women with ovarian
cancer. Researchers at Cleveland Clinic believe that a vaccine targeting AMHR2-ED could prevent the occurrence of ovarian cancer.
We entered into a joint development agreement with Cleveland Clinic, to advance this vaccine technology toward human clinical
testing.
Over
the next several quarters, we expect the development of our breast and ovarian cancer vaccines, our COVID-19 therapeutic program
and Certainty’s CAR-T technology to be the primary focus of the Company. As part of our legacy operations, the Company remains
engaged in limited patent licensing activities regarding the Cchek™ liquid biopsy platform (operations for which were suspended
in July 2020), as well as in the area of encrypted audio/video conference calling. We do not expect these activities to be a significant
part of the Company’s ongoing operations nor do we expect these activities to require material financial resources or attention
of senior management.
Over
the past several years, our revenue was derived from technology licensing and the sale of patented technologies, including revenue
from the settlement of litigation. We have not generated any revenue to date from our therapeutics or vaccine programs. In addition,
while we pursue our therapeutics and vaccine programs, we may also make investments in and form new companies to develop additional
emerging technologies. We do not expect to begin generating revenue with respect to any of our current therapy or vaccine programs
in the near term. We hope to achieve a profitable outcome by eventually licensing our technologies to large pharmaceutical companies
that have the resources and infrastructure in place to manufacture, market and sell our technologies as therapeutics or vaccines.
The eventual licensing of any of our technologies may take several years, if it is to occur at all, and may depend on positive
results from human clinical trials.
Funding
and Management’s Plans
Based
on currently available information as of March 11, 2021, we believe that our existing cash, cash equivalents, short-term investments
and expected cash flows will be sufficient to fund our activities for the next twelve months. We have implemented a business model
that conserves funds by collaborating with third parties to develop our technologies. However, our projections of future cash
needs and cash flows may differ from actual results. If current cash on hand, cash equivalents, short-term investments and cash
that may be generated from our business operations are insufficient to continue to operate our business, or if we elect to invest
in or acquire a company or companies or new technology or technologies that are synergistic with or complementary to our technologies,
we may be required to obtain more working capital. During the three months ended January 31, 2021, we raised approximately $5,957,000,
net of expenses, through an at-the-market equity offering of 1,900,547 shares of common stock, under which offering we may issue
up to $50 million of common stock. Under our at-the-market equity program which is currently effective and may remain available
for us to use in the future, as of January 31, 2021, we may sell an additional approximately $34,670,000 of common stock. We may
seek to obtain working capital during our fiscal year 2021 or thereafter through sales of our equity securities or through bank
credit facilities or public or private debt from various financial institutions where possible. We cannot be certain that additional
funding will be available on acceptable terms, or at all. If we do identify sources for additional funding, the sale of additional
equity securities or convertible debt could result in dilution to our stockholders. We can give no assurance that we will generate
sufficient cash flows in the future to satisfy our liquidity requirements or sustain future operations, or that other sources
of funding, such as sales of equity or debt, would be available or would be approved by our security holders, if needed, on favorable
terms or at all. If we fail to obtain additional working capital as and when needed, such failure could have a material adverse
impact on our business, results of operations and financial condition. Furthermore, such lack of funds may inhibit our ability
to respond to competitive pressures or unanticipated capital needs, or may force us to reduce operating expenses, which would
significantly harm the business and development of operations.
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in the United States of America (“US GAAP”) for interim financial information and with the instructions
to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and disclosures required by generally accepted
accounting principles in annual financial statements have been omitted or condensed. These interim condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial statements and related disclosures included in
our Annual Report on Form 10-K for the year ended October 31, 2020. The accompanying October 31, 2020 condensed consolidated balance
sheet data was derived from the audited financial statements but does not include all disclosures required by US GAAP. The condensed
consolidated financial statements include all adjustments of a normal recurring nature which, in the opinion of management, are
necessary for a fair statement of our financial position as of January 31, 2021, and results of operations and cash flows for
the interim periods represented. The results of operations for the three months ended January 31, 2021 are not necessarily indicative
of the results to be expected for the entire year.
Noncontrolling
Interest
Noncontrolling
interest represents Wistar’s equity ownership in Certainty and is presented as a component of equity. The following table
sets forth the changes in noncontrolling interest for the three months ended January 31, 2021:
Balance, October 31, 2020
|
|
$
|
(496,983
|
)
|
Net loss attributable to noncontrolling interest
|
|
|
(24,086
|
)
|
Balance, January 31, 2021
|
|
$
|
(521,069
|
)
|
Revenue
Recognition
Our
revenue has been derived solely from technology licensing and the sale of patented technologies. Revenue is recognized upon transfer
of control of intellectual property rights and satisfaction of other contractual performance obligations to licensees in an amount
that reflects the consideration we expect to receive.
We
follow the accounting guidance of Accounting Standards Codification 606 (“ASC 606”), Revenue from Contracts with Customers.
In accordance with ASC 606 we are required to make certain judgments and estimates in connection with the accounting for revenue.
Such areas may include determining the existence of a contract and identifying each party’s rights and obligations to transfer
goods and services, identifying the performance obligations in the contract, determining the transaction price and allocating
the transaction price to separate performance obligations, estimating the timing of satisfaction of performance obligations, determining
whether a promise to grant a license is distinct from other promised goods or services and evaluating whether a license transfers
to a customer at a point in time or over time.
Our
revenue arrangements provide for the payment, within 30 days of execution of the agreement, of contractually determined, one-time,
paid-up license fees in settlement of litigation and in consideration for the grant of certain intellectual property rights for
patented technologies owned or controlled by the Company. These arrangements typically include some combination of the following:
(i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies
owned or controlled by the Company, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv)
the dismissal of any pending litigation. In such instances, the intellectual property rights granted have been perpetual in nature,
extending until the expiration of the related patents. Pursuant to the terms of these agreements, we have no further obligations
with respect to the granted intellectual property rights, including no obligation to maintain or upgrade the technology, or provide
future support or services. Licensees obtained control of the intellectual property rights they have acquired upon execution of
the agreement. Accordingly, the performance obligations from these agreements were satisfied and 100% of the revenue was recognized
upon the execution of the agreements.
Cost
of Revenues
Cost
of revenues include the costs and expenses incurred in connection with our patent licensing and enforcement activities, including
inventor royalties paid to original patent owners, contingent legal fees paid to external counsel, other patent-related legal
expenses paid to external counsel and licensing and enforcement related research, consulting and other expenses paid to third-parties.
These costs are included under the caption “Operating costs and expenses” in the accompanying condensed consolidated
statements of operations.
Research
and Development Expenses
Research
and development expenses, consisting primarily of employee compensation, payments to third parties for research and development
activities and other direct costs associated with developing immuno-therapy drugs against cancer, preventative cancer vaccines
and anti-viral drug candidates for COVID-19, are expensed in the accompanying condensed consolidated financial statements in the
period incurred.
2.
STOCK BASED COMPENSATION
The
Company maintains stock equity incentive plans under which the Company grants incentive stock options, non-qualified stock options,
stock appreciation rights, stock awards, performance awards, or stock units to employees, directors and consultants.
Stock
Option Compensation Expense
The
compensation cost for service-based stock options granted to employees and directors is measured at the grant date, based on the
fair value of the award using the Black-Scholes pricing model, and is expensed on a straight-line basis over the requisite service
period (the vesting period of the stock option) which is one to four years. We recorded stock-based compensation expense related
to service-based stock options granted to employees and directors of approximately $875,000 and $964,000 during the three months
ended January 31, 2021 and 2020.
For
stock options granted to employees and directors that vest based on market conditions, such as the trading price of the Company’s
common stock exceeding certain price targets, we use a Monte Carlo Simulation in estimating the fair value at grant date and recognize
compensation cost over the implied service period (median time to vest). On May 8, 2018, we issued market condition options to
purchase 1,500,000 shares of common stock, to our Chairman, President and Chief Executive Officer, vesting at target trading prices
of $5.00 to $8.00 per share before May 31, 2021, with implied service periods of three to seven months. In October 2018, the first
tranche of 500,000 shares of market condition options became exercisable upon achieving an average closing price above $5.00 per
share for twenty consecutive trading days. We did not record any market condition stock-based compensation expense during the
three months ended January 31, 2021 and 2020.
The
compensation cost for service-based stock options granted to consultants is measured at the grant date, based on the fair value
of the award using the Black-Scholes pricing model, and is expensed on a straight-line basis over the requisite service period
(the vesting period of the stock option) which is one to three years. We recorded stock-based consulting expense related to stock
options granted to consultants of approximately $54,000 and $57,000 during the three months ended January 31, 2021 and 2020, respectively.
Stock
Option Plans
During
the three months ended January 31, 2021, we had two stock option plans: the Anixa Biosciences, Inc. 2010 Share Incentive Plan
(the “2010 Share Plan”) and the Anixa Biosciences, Inc. 2018 Share Incentive Plan (the “2018 Share Plan”),
which were adopted by our Board of Directors on July 14, 2010 and January 25, 2018, respectively. The 2018 Share Plan was approved
by our shareholders on March 29, 2018.
During
the three months ended January 31, 2020, the remaining outstanding options under the Anixa Biosciences, Inc. 2003 Share Incentive
Plan (the “2003 Plan”) expired.
Stock
Option Activity
During
the three months ended January 31, 2021 and 2020, we granted options to purchase 1,130,000 shares and 800,000 shares of common
stock, respectively, to employees and consultants, with exercise prices ranging from $2.83 to $4.04 per share, pursuant to the
2018 Share Plan. During the three months ended January 31, 2021 and 2020, stock options to purchase 29,880 and 18,900 shares of
common stock, respectively, were exercised with aggregate proceeds of approximately $104,000 and $28,000, respectively.
2003
Plan
The
2003 Plan provided for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and
stock units to employees, directors and consultants. In accordance with the provisions of the 2003 Plan, the plan terminated with
respect to the ability to grant future awards on April 21, 2013. Information regarding the 2003 Plan for the three months ended
January 31, 2020 is as follows:
|
|
Shares
|
|
|
Weighted
Average Exercise
Price Per Share
|
|
|
Aggregate Intrinsic
Value
|
|
Options outstanding at October 31, 2019
|
|
|
400
|
|
|
$
|
17.00
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(400
|
)
|
|
$
|
17.00
|
|
|
|
|
|
Options outstanding and exercisable at January 31, 2020
|
|
|
-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
2010
Plan
The
2010 Share Plan provided for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards
and stock units to employees, directors and consultants. In accordance with the provisions of the 2010 Share Plan, the plan terminated
with respect to the ability to grant future awards on July 14, 2020. Information regarding the 2010 Share Plan for the three months
ended January 31, 2021 is as follows:
|
|
Shares
|
|
|
Weighted
Average Exercise
Price Per Share
|
|
|
Aggregate
Intrinsic
Value
|
|
Options outstanding at October 31, 2020
|
|
|
1,
1,907,534
|
|
|
$
|
2.82
|
|
|
|
|
|
Exercised
|
|
|
(6,000
|
)
|
|
$
|
2.32
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(400
|
)
|
|
$
|
5.75
|
|
|
|
|
|
Options outstanding
at January 31, 2021
|
|
|
1
1,901,134
|
|
|
$
|
2.82
|
|
|
$
|
1,906,253
|
|
Options exercisable
at January 31, 2021
|
|
|
1,
1,823,634
|
|
|
$
|
2.83
|
|
|
$
|
1,822,053
|
|
The
following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of January
31, 2021:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of
Exercise Prices
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
$ 0.67 - $ 2.30
|
|
|
544,000
|
|
|
|
5.22
|
|
|
$
|
1.56
|
|
|
|
516,500
|
|
|
|
5.15
|
|
|
$
|
1.60
|
|
$ 2.58 - $ 3.13
|
|
|
833,000
|
|
|
|
3.11
|
|
|
$
|
2.79
|
|
|
|
833,000
|
|
|
|
3.54
|
|
|
$
|
2.79
|
|
$ 3.46 - $ 5.30
|
|
|
524,134
|
|
|
|
7.11
|
|
|
$
|
4.17
|
|
|
|
474,134
|
|
|
|
7.07
|
|
|
$
|
4.25
|
|
Information
regarding the 2010 Share Plan for the three months ended January 31, 2020 is as follows:
|
|
Shares
|
|
|
Weighted
Average Exercise
Price Per Share
|
|
|
Aggregate
Intrinsic
Value
|
|
Options Outstanding at October 31, 2019
|
|
|
1,998,668
|
|
|
$
|
2.80
|
|
|
|
|
|
Exercised
|
|
|
(18,900
|
)
|
|
$
|
1.51
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(5,534
|
)
|
|
$
|
2.58
|
|
|
|
|
|
Options Outstanding at January 31, 2020
|
|
|
1,974,234
|
|
|
$
|
2.81
|
|
|
$
|
1,810,395
|
|
Options Exercisable at January 31, 2020
|
|
|
1,721,734
|
|
|
$
|
2.86
|
|
|
$
|
1,542,195
|
|
The
following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of January
31, 2020:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of
Exercise Prices
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
$ 0.67 - $2.30
|
|
|
561,500
|
|
|
|
6.28
|
|
|
$
|
1.56
|
|
|
|
464,000
|
|
|
|
6.03
|
|
|
$
|
1.69
|
|
$ 2.58 - $ 3.13
|
|
|
878,200
|
|
|
|
3.43
|
|
|
$
|
2.79
|
|
|
|
878,200
|
|
|
|
3.97
|
|
|
$
|
2.79
|
|
$ 3.46 - $ 5.75
|
|
|
534,534
|
|
|
|
7.94
|
|
|
$
|
4.16
|
|
|
|
379,534
|
|
|
|
7.76
|
|
|
$
|
4.45
|
|
2018
Plan
The
2018 Share Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, stock
awards, performance awards and stock units to employees, directors and consultants. As of January 31, 2021, the 2018 Share Plan
had 2,000,000 shares available for future grants. Information regarding the 2018 Share Plan for the three months ended January
31, 2021 is as follows:
|
|
Shares
|
|
|
Weighted
Average Exercise
Price Per Share
|
|
|
Aggregate Intrinsic Value
|
|
Options outstanding at October 31, 2020
|
|
|
4,346,661
|
|
|
$
|
3.69
|
|
|
|
|
|
Granted
|
|
|
1,130,000
|
|
|
$
|
2.83
|
|
|
|
|
|
Exercised
|
|
|
(23,880
|
)
|
|
$
|
3.78
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(392,781
|
)
|
|
$
|
3.70
|
|
|
|
|
|
Options outstanding at January 31, 2021
|
|
|
5,060,000
|
|
|
$
|
3.49
|
|
|
$
|
1,184,900
|
|
Options exercisable at January 31, 2021
|
|
|
2,312,640
|
|
|
$
|
3.69
|
|
|
$
|
147,579
|
|
The
following table summarizes information about stock options outstanding and exercisable under the 2018 Share Plan as of January
31, 2021:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of
Exercise Prices
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
$ 2.09 - $3.70
|
|
|
3,975,000
|
|
|
|
8.12
|
|
|
$
|
3.38
|
|
|
|
1,664,862
|
|
|
|
7.47
|
|
|
$
|
3.61
|
|
$ 3.84 - $4.61
|
|
|
1,085,000
|
|
|
|
7.95
|
|
|
$
|
3.90
|
|
|
|
647,778
|
|
|
|
7.66
|
|
|
$
|
3.92
|
|
Information
regarding the 2018 Share Plan for the three months ended January 31, 2020 is as follows:
|
|
Shares
|
|
|
Weighted
Average Exercise
Price Per Share
|
|
|
Aggregate Intrinsic Value
|
|
Options Outstanding at October 31, 2019
|
|
|
3,935,500
|
|
|
$
|
3.74
|
|
|
|
|
|
Granted
|
|
|
800,000
|
|
|
$
|
3.85
|
|
|
|
|
|
Options Outstanding at January 31, 2020
|
|
|
4,735,000
|
|
|
$
|
3.76
|
|
|
$
|
-0-
|
|
Options Exercisable at January 31, 2020
|
|
|
1,798,616
|
|
|
$
|
3.74
|
|
|
$
|
-0-
|
|
The
following table summarizes information about stock options outstanding and exercisable under the 2018 Share Plan as of January
31, 2020:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of
Exercise Prices
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
$ 3.70
|
|
|
3,100,000
|
|
|
|
8.27
|
|
|
$
|
3.70
|
|
|
|
1,433,334
|
|
|
|
8.27
|
|
|
$
|
3.70
|
|
$ 3.84 - $4.61
|
|
|
1,635,000
|
|
|
|
9.17
|
|
|
$
|
3.88
|
|
|
|
365,282
|
|
|
|
8.32
|
|
|
$
|
3.92
|
|
Outside
of Share Plans
In
addition to options granted under stock option plans, during the years ended October 31, 2012 and 2013, the Board of Directors
approved the grant of stock options to certain employees and directors. Information regarding stock options that were granted
outside of share plans for the three months ended January 31, 2021 is as follows:
|
|
Shares
|
|
|
Weighted
Average Exercise Price Per Share
|
|
|
Aggregate
Intrinsic Value
|
|
Options
outstanding at October 31, 2020
|
|
|
1,698,000
|
|
|
$
|
2.58
|
|
|
|
|
|
Options
outstanding and exercisable at January 31, 2021
|
|
|
1,698,000
|
|
|
$
|
2.58
|
|
|
$
|
1,825,350
|
|
The
following table summarizes information about stock options outstanding and exercisable that were granted outside of Share Plans
as of January 31, 2021:
Range of
Exercise Prices
|
|
Number
Outstanding
and
Exercisable
|
|
|
Weighted Average Remaining Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
$ 2.58
|
|
|
1,698,000
|
|
|
|
1.56
|
|
|
$
|
2.58
|
|
Information
regarding stock options that were granted outside of Share Plans for the three months ended January 31, 2020 is as follows:
|
|
Shares
|
|
|
Weighted
Average Exercise Price Per Share
|
|
|
Aggregate
Intrinsic Value
|
|
Options
outstanding at October 31, 2019
|
|
|
1,698,000
|
|
|
$
|
2.58
|
|
|
|
|
|
Options
outstanding and exercisable at January 31, 2020
|
|
|
1,698,000
|
|
|
$
|
2.58
|
|
|
$
|
1,655,550
|
|
The
following table summarizes information about stock options outstanding and exercisable that were granted outside of Share Plans
as of January 31, 2020:
Range of
Exercise Prices
|
|
Number
Outstanding
and
Exercisable
|
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
$ 2.58
|
|
|
1,698,000
|
|
|
|
2.50
|
|
|
$
|
2.58
|
|
Stock
Awards
For
stock awards granted to employees, directors and consultants that vest upon grant we recognize expense at the date of grant based
on the grant date market price of the underlying common stock. We did not grant any stock awards that vested upon grant during
the three months ended January 31, 2021 or 2020.
On
May 8, 2018, a restricted stock award of 1,500,000 shares of common stock was granted under the 2018 Share Plan to our Chairman,
President and Chief Executive Officer. The restricted stock award vests in its entirety upon achievement of a target trading price
of $11.00 per share of the Company’s common stock before May 31, 2021. For restricted stock awards vesting upon achievement
of a price target of our common stock we use a Monte Carlo Simulation in estimating the fair value at grant date and recognize
compensation cost over the implied service period (median time to vest). We did not record any compensation expense related to
the restricted stock award during the three months ended January 31, 2021 and 2020.
Employee
Stock Purchase Plan
The
Company maintains the Anixa Biosciences, Inc. Employee Stock Purchase Plan (“ESPP”) which permits eligible employees
to purchase shares at not less than 85% of the market value of the Company’s common stock on the offering date or the purchase
date of the applicable offering period, whichever is lower. The plan was adopted by our Board of Directors on August 13, 2018
and approved by our shareholders on September 27, 2018. During the three months ended January 31, 2021 and 2020, no shares were
purchased under the ESPP.
Warrants
On
October 30, 2020 we issued a warrant, expiring on October 30, 2025, to purchase 60,000 shares of common stock at $2.06 per share,
vesting over five months, to a consultant for investor relations services. We recorded consulting expense of approximately $57,000
during the three months ended January 31, 2021, based on the fair value of the warrant on the date of grant recognized on a straight-line
basis over the vesting period. We did not record any consulting expense related to warrants during the three months ended January
31, 2020. No warrants were issued during the three-month periods ended January 31, 2021 and 2020.
As
of January 31, 2021, we also had warrants outstanding to purchase 500,000 shares of common stock at $5.03 per share, issued during
fiscal year 2017 and expiring on November 30, 2021.
3.
FAIR VALUE MEASUREMENTS
US
GAAP defines fair value and establishes a framework for measuring fair value. We have categorized our financial assets and liabilities,
based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If
the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based
on the lowest level input that is significant to the fair value measurement of the instrument.
Financial
assets and liabilities recorded in the accompanying condensed consolidated balance sheets are categorized based on the inputs
to the valuation techniques as follows:
Level
1 - Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in
an active market which we have the ability to access at the measurement date.
Level
2 - Financial assets and liabilities whose values are based on quoted market prices in markets where trading occurs infrequently
or whose values are based on quoted prices of instruments with similar attributes in active markets.
Level
3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are
both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions
about the assumptions a market participant would use in pricing the asset and liabilities.
The
following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of January 31,
2021:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Money market funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11,568,608
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,568,608
|
|
Certificates of deposit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
Short-term investments
|
|
|
-
|
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
11,818,608
|
|
|
$
|
2,000,000
|
|
|
$
|
-
|
|
|
$
|
13,818,608
|
|
The
following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of October 31,
2020:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Money market funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,902,292
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,902,292
|
|
Certificates of deposit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
2,250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,250,000
|
|
Short-term investments
|
|
|
-
|
|
|
|
2,640,000
|
|
|
|
-
|
|
|
|
2,640,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
6,152,292
|
|
|
$
|
2,640,000
|
|
|
$
|
-
|
|
|
$
|
8,792,292
|
|
Our
non-financial assets that are measured on a non-recurring basis include our other assets which are measured using fair value techniques
whenever events or changes in circumstances indicate a condition of impairment exists. The estimated fair value of prepaid expenses
and other current assets, accounts payable and accrued expenses approximates their individual carrying amounts due to the short-term
nature of these measurements. Cash and cash equivalents are stated at carrying value which approximates fair value.
4.
ACCRUED EXPENSES
Accrued
expenses consist of the following as of:
|
|
January 31,
|
|
|
October 31,
|
|
|
|
2021
|
|
|
2020
|
|
Payroll and related expenses
|
|
$
|
228,163
|
|
|
$
|
415,331
|
|
Accrued royalty and contingent legal fees
|
|
|
577,190
|
|
|
|
449,691
|
|
Accrued collaborative research and license expense
|
|
|
147,410
|
|
|
|
30,000
|
|
Accrued other
|
|
|
20,072
|
|
|
|
6,003
|
|
|
|
$
|
972,835
|
|
|
$
|
901,025
|
|
5.
NET LOSS PER SHARE OF COMMON STOCK
Basic
net loss per common share (“Basic EPS”) is computed by dividing net loss by the weighted average number of common
shares outstanding. Diluted net loss per common share (“Diluted EPS”) is computed by dividing net loss by the weighted
average number of common shares and dilutive common share equivalents and convertible securities then outstanding. Diluted EPS
for all periods presented is the same as Basic EPS, as the inclusion of the effect of common share equivalents then outstanding
would be anti-dilutive. For this reason, excluded from the calculation of Diluted EPS for the three months ended January 31, 2021
and 2020, were stock options to purchase 8,659,134 and 8,407,234 shares, respectively, and warrants to purchase 560,000 and 500,000
shares, respectively.
6.
EFFECT OF RECENTLY ADOPTED AND ISSUED PRONOUNCEMENTS
In
February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02 (“ASU 2016-02”)
Accounting Standards Codification Topic 842, Leases (ASC 842), which supersedes Topic 840, Leases, and which requires lessees
to recognize most leases on the balance sheet. The new lease standard does not substantially change lessor accounting. For public
companies, the standard was effective for the first interim reporting period within annual periods beginning after December 15,
2018, although early adoption was permitted. Lessees and lessors were required to apply the new standard at the beginning of the
earliest period presented in the financial statements in which they first apply the new guidance. In July 2018, FASB issued ASU
2018-11, Leases, which provides an additional transition option for an entity to apply the provisions of ASC 842 by recognizing
a cumulative effect adjustment at the effective date of adoption without adjusting the prior comparative periods presented. The
requirements of this standard include a significant increase in required disclosures. The Company adopted ASU 2016-02 on November
1, 2019. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. See
Note 8 regarding the accounting and disclosures related to our office lease.
7.
INCOME TAXES
We
recognize deferred tax assets and liabilities for the estimated future tax effects of events that have been recognized in our
financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. A valuation allowance is established, when necessary, to reduce deferred tax assets to
the amount expected to be realized. We have provided a full valuation allowance against our deferred tax asset due to our historical
pre-tax losses and the uncertainty regarding the realizability of these deferred tax assets.
We
have substantial net operating loss carryforwards for Federal and California income tax returns. These net operating loss carryforwards
could be subject to limitations under Internal Revenue Code section 382. We have no unrecognized income tax benefits as of January
31, 2021 and October 31, 2020 and we account for interest and penalties related to income tax matters, if any, in general and
administrative expenses.
8.
LEASES
We
lease approximately 2,000 square feet of office space at 3150 Almaden Expressway, San Jose, California (our principal executive
offices) from an unrelated party pursuant to an operating lease that expires September 30, 2021. Our base rent is approximately
$5,000 per month and the lease provides for annual increases of approximately 3% and an escalation clause for increases in certain
operating costs. Rent expense was approximately $16,000 and $16,000, respectively, for the three months ended January 31, 2021
and 2020.
On
November 1, 2019, the Company adopted ASC 842, which increases transparency and comparability by recognizing a lessee’s
rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The
new guidance requires the recognition of the right-of-use (“ROU”) assets and related operating lease liabilities on
the balance sheet. The Company adopted the new guidance using the modified retrospective approach on November 1, 2019.
The
Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing
(i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a
lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight
to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease
and non-lease components. The Company has also elected the short-term lease accounting policy under which Anixa would not recognize
a lease liability or ROU asset for any lease that at the commencement date has a lease term of twelve months or less and does
not include a purchase option that Anixa is more than reasonably certain to exercise.
For
operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments.
The remaining 8-month lease term as of January 31, 2021 for the Company’s lease includes the noncancelable period of the
lease. The lease does not contain a Company option to extend the lease or an option to extend the lease controlled by the lessor.
All ROU assets are reviewed for impairment.
Balance
sheet information related to the Company’s lease is presented below:
|
|
Balance Sheet
Location
|
|
January 31,
2021
|
|
|
October 31,
2020
|
|
Operating Lease:
|
|
|
|
|
|
|
|
|
|
|
Right-of-use asset
|
|
Operating lease right-of-use asset
|
|
$
|
40,212
|
|
|
$
|
54,340
|
|
Right-of-use liability, current
|
|
Operating lease liability
|
|
|
40,836
|
|
|
|
55,198
|
|
As
of January 31, 2021, the annual minimum lease payments of our operating lease liabilities were as follows:
|
|
Operating Leases
|
|
2021 future minimum payments, undiscounted
|
|
$
|
43,008
|
|
Less: Imputed interest
|
|
|
(2,172
|
)
|
Present value of future minimum lease payments
|
|
$
|
40,836
|
|
9.
COMMITMENTS AND CONTINGENCES
Litigation
Matters
We
are not involved in any litigation or other legal proceedings and management is not aware of any pending litigation or legal proceeding
against us that would have a material adverse effect upon our results of operations or financial condition.
Impact
of Coronavirus Pandemic
On
March 10, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The virus and actions taken to mitigate
its spread have had and are expected to continue to have a broad adverse impact on the economies and financial markets of many
countries, including the geographical areas in which the Company operates and conducts its business and which the Company’s
partners operate and conduct their business. We are currently following the recommendations of local health authorities to minimize
exposure risk for our team members and visitors. However, the scale and scope of this pandemic is unknown and the duration of
the business disruption and related financial impact cannot be reasonably estimated at this time. While we have implemented specific
business continuity plans to reduce the potential impact of COVID-19, there is no guarantee that our continuity plans will be
successful.
We
have already experienced certain disruptions to our business such as temporary closure of our offices and similar disruptions
have occurred for our partners. Specifically, the outbreak has caused temporary shutdowns of the laboratories and other service
providers that we rely on to develop our programs, and those laboratories and service providers that have been operating or that
have begun operating recently have been doing so with more limited capacity due to social distancing requirements. As a result,
our progress has been slowed and there is no assurance that we will be able to meet our previously announced timelines regarding
the advancement of our programs.
The
extent to which COVID-19 or any other health epidemic may impact our results will depend on future developments, which are highly
uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions
to contain COVID-19 or treat its impact, among others. Accordingly, COVID-19 could have a material adverse effect on our business,
results of operations, financial condition and prospects.
10.
SEGMENT INFORMATION
We
follow the accounting guidance of ASC 280 “Segment Reporting” (“ASC 280”). Reportable operating segments
are determined based on the management approach. The management approach, as defined by ASC 280, is based on the way that the
chief operating decision-maker organizes the segments within an enterprise for making operating decisions and assessing performance.
While our results of operations are primarily reviewed on a consolidated basis, the chief operating decision-maker manages the
enterprise in five reportable segments, each with different operating and potential revenue generating characteristics: (i) CAR-T
Therapeutics, (ii) Cancer Vaccines, (iii) Anti-Viral Therapeutics, (iv) Cancer Diagnostics and (v) our legacy Patent Licensing
activities. The following represents selected financial information for our segments for the three months ended January 31, 2021
and 2020 and as of January 31, 2021 and October 31, 2020:
|
|
For the Three Months Ended
January 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net loss:
|
|
|
|
|
|
|
|
|
CAR-T Therapeutics
|
|
$
|
(960,736
|
)
|
|
$
|
(630,333
|
)
|
Cancer Vaccines
|
|
|
(906,336
|
)
|
|
|
(195,596
|
)
|
Anti-Viral Therapeutics
|
|
|
(480,806
|
)
|
|
|
-
|
|
Cancer Diagnostics
|
|
|
(8,962
|
)
|
|
|
(1,790,646
|
)
|
Patent Licensing
|
|
|
124,463
|
|
|
|
-
|
|
Total
|
|
$
|
(2,232,377
|
)
|
|
$
|
(2,616,575
|
)
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
$
|
2,745,631
|
|
|
$
|
2,629,869
|
|
Less non-cash share-based compensation
|
|
|
(986,099
|
)
|
|
|
(1,021,334
|
)
|
Operating costs and expenses excluding non-cash share-based compensation
|
|
$
|
1,759,532
|
|
|
$
|
1,608,535
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses excluding non-cash share based compensation expense:
|
|
|
|
|
|
|
|
|
CAR-T Therapeutics
|
|
$
|
557,680
|
|
|
$
|
346,341
|
|
Cancer Vaccines
|
|
|
537,988
|
|
|
|
98,270
|
|
Anti-Viral Therapeutics
|
|
|
270,256
|
|
|
|
-
|
|
Cancer Diagnostics
|
|
|
6,432
|
|
|
|
1,163,924
|
|
Patent Licensing
|
|
|
387,176
|
|
|
|
-
|
|
Total
|
|
$
|
1,759,532
|
|
|
$
|
1,608,535
|
|
|
|
January 31,
2021
|
|
|
October 31,
2020
|
|
Total assets:
|
|
|
|
|
|
|
|
|
CAR-T Therapeutics
|
|
$
|
5,849,920
|
|
|
$
|
2,988,124
|
|
Cancer Vaccines
|
|
|
5,822,106
|
|
|
|
946,923
|
|
Anti-Viral Therapeutics
|
|
|
2,775,760
|
|
|
|
2,464,361
|
|
Cancer Diagnostics
|
|
|
85,463
|
|
|
|
2,869,529
|
|
Patent Licensing
|
|
|
71,153
|
|
|
|
184,027
|
|
Total
|
|
$
|
14,604,402
|
|
|
$
|
9,452,964
|
|
Operating
costs and expenses excluding non-cash share-based compensation is the measurement the chief operating decision-maker uses in managing
the enterprise.
The
Company’s consolidated revenue of $512,500 and inventor royalties, contingent legal fees, litigation and licensing expense
of $385,002 for the three months ended January 31, 2021 were solely related to our patent licensing segment which consists of
our encrypted audio/video conference calling technology. All our revenue is generated domestically (United States) based on the
country in which the licensee is located.