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 submitted an Investigational New Drug (“IND”) application
to the U.S. Food and Drug Administration (“FDA”) in March 2021. In April 2021, the FDA informed us that they needed additional
information before allowing us to proceed with the clinical trial. In May 2021, the FDA provided us with the details of their information
request, and we are currently working with Moffitt to address the FDA’s request. We anticipate submitting our response to the FDA
in June 2021, after which the FDA will have approximately 30 days to respond. Assuming the FDA finds our response acceptable, we anticipate
beginning the human clinical trials in the fourth quarter 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 tested them in animal models. In these animal studies, the two compounds were compared
to Remdesivir, which is the only anti-viral drug approved by the FDA for COVID-19. The data showed that administration of the drugs to
infected hamsters did not cause any noticeable adverse effects, and monitoring of weight and general animal behavior demonstrated comparable
efficacy of both compounds as well as Remdesivir. Based on this promising data in the animal study, we are proceeding to the next stage
of drug development and have selected one of the compounds around which we have now begun performing combinatorial synthetic medicinal
chemistry to evaluate whether we can increase potency and optimize pharmacokinetics. We anticipate completing this process by early fourth
quarter of 2021.
In
May 2021, after completion of the aforementioned animal studies, OntoChem assigned its rights and obligations related to this collaboration
to MolGenie GmbH (“MolGenie”), a company spun-out from OntoChem focused on drug discovery and development.
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 expressed during lactation in a healthy woman’s
mammary tissue. This protein disappears when the woman is no longer lactating, 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
in July 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.
In
May 2021, Cleveland Clinic was granted an award for our ovarian cancer vaccine technology by the National Cancer Institute’s (“NCI”)
PREVENT program. The NCI is a part of the National Institutes of Health. The PREVENT program is a peer-reviewed agent development program
designed to support preclinical development of innovative interventions and biomarkers for cancer prevention and interception towards
clinical trials. The scientific and financial resources of the PREVENT program will be used for our ovarian cancer vaccine technology
to perform virtually all pre-clinical research and development, manufacturing and IND-enabling studies. This work will be performed at
NCI facilities, by NCI scientific staff and with NCI financial resources.
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 June 10, 2021, we believe that our existing cash, cash equivalents, short-term investments and
expected cash flows will be sufficient to fund our activities for at least 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 six months ended April 30, 2021, we raised approximately $20,292,000, net of expenses, through a public
offering in which we sold an aggregate of 4,285,715 shares of common stock and approximately $10,834,000, net of expenses, through our
at-the-market equity program in which we sold an aggregate of 2,806,410 shares 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 April 30, 2021, we may sell an additional approximately
$29.6 million 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 will 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 April 30, 2021, and results of operations and cash flows for the interim periods represented. The results of operations
for the six months ended April 30, 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 six months ended April 30, 2021:
Balance, October 31, 2020
|
|
$
|
(496,983
|
)
|
Net loss attributable
to noncontrolling interest
|
|
|
(62,124
|
)
|
Balance, April 30, 2021
|
|
$
|
(559,107
|
)
|
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
judgments and estimates 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.
PUBLIC OFFERING
On
March 25, 2021, the Company completed a public offering in which we sold an aggregate of 4,285,715 shares of its common stock, which
represented 15.8% of the Company’s outstanding shares at the time of the offering, at a public offering price of $5.25 per share.
The Company realized net proceeds of approximately $20,292,000 from the public offering, after deducting underwriting discounts and deal
expenses. In connection with the public offering, the Company issued to certain designees of the underwriter, as compensation, warrants
expiring on March 22, 2026, to purchase 300,000 shares of common stock at $6.5625 per share.
3.
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 $881,000 and $1,055,000 during the three months ended April 30, 2021
and 2020, respectively, and approximately $1,756,000 and $2,019,000 during the six months ended April 30, 2021 and 2020, respectively.
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. The second and third tranches did not vest as of May 31, 2021. We did not record any market condition stock-based compensation
expense during the six months ended April 30, 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 $132,000 and $55,000 during the three months ended April 30, 2021 and 2020, respectively, and approximately
$186,000 and $112,000 during the six months ended April 30, 2021 and 2020, respectively.
Stock
Option Plans
During
the six months ended April 30, 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. Further, we had an additional stock option plan: the Anixa Biosciences, Inc. 2003 Share Incentive Plan (the “2003
Share Plan”), under which all outstanding options expired during the six months ended April 30, 2020.
Stock
Option Activity
During
the three months ended April 30, 2021 and 2020, we granted options to purchase 250,000 shares and -0- shares of common stock, respectively,
and during the six months ended April 30, 2021 and 2020, we granted options to purchase 1,380,000 shares and 800,000 shares of common
stock, respectively, to employees and consultants, with exercise prices ranging from $2.83 to $5.30 per share, pursuant to the 2018 Share
Plan. During the three months ended April 30, 2021 and 2020, stock options to purchase 77,571 shares, net of 7,937 shares withheld on
a cashless exercise, and 25,000 shares of common stock, respectively, were exercised with aggregate proceeds of approximately $189,000
and $75,000, respectively. During the six months ended April 30, 2021 and 2020, stock options to purchase 107,451 shares, net of 7,937
shares withheld on a cashless exercise, and 43,900 shares of common stock, respectively, were exercised with aggregate proceeds of approximately
$294,000 and $104,000, respectively.
2003
Share Plan
The
2003 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 2003 Share Plan, the plan terminated with
respect to the ability to grant future awards on April 21, 2013.
Information
regarding the 2003 Plan for the six months ended April 30, 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
April 30, 2020
|
|
|
-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
2010
Share 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 six months ended April 30, 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
|
|
|
(37,500
|
)
|
|
$
|
2.40
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(10,400
|
)
|
|
$
|
4.57
|
|
|
|
|
|
Options outstanding
at April 30, 2021
|
|
|
1
1,859,634
|
|
|
$
|
2.82
|
|
|
$
|
3,899,138
|
|
Options exercisable
at April 30, 2021
|
|
|
1,
1,820,884
|
|
|
$
|
2.82
|
|
|
$
|
3,809,375
|
|
The
following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of April 30, 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
|
|
|
527,500
|
|
|
|
5.06
|
|
|
$
|
1.54
|
|
|
|
513,750
|
|
|
|
5.03
|
|
|
$
|
1.56
|
|
$ 2.58 - $ 3.13
|
|
|
818,000
|
|
|
|
2.90
|
|
|
$
|
2.80
|
|
|
|
818,000
|
|
|
|
3.27
|
|
|
$
|
2.80
|
|
$ 3.46 - $ 5.30
|
|
|
514,134
|
|
|
|
7.00
|
|
|
$
|
4.16
|
|
|
|
489,134
|
|
|
|
6.99
|
|
|
$
|
4.20
|
|
Information
regarding the 2010 Share Plan for the six months ended April 30, 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
|
|
|
|
(43,900
|
)
|
|
$
|
2.36
|
|
|
|
|
|
Forfeited/Expired
|
|
|
|
(5,534
|
)
|
|
$
|
2.58
|
|
|
|
|
|
Options
outstanding at April 30, 2020
|
|
|
|
1,949,234
|
|
|
$
|
2.81
|
|
|
$
|
291,195
|
|
Options
exercisable at April 30, 2020
|
|
|
|
1,740,484
|
|
|
$
|
2.85
|
|
|
$
|
213,820
|
|
The
following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of April 30, 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
|
|
|
|
6.03
|
|
|
$
|
1.56
|
|
|
|
480,250
|
|
|
|
5.84
|
|
|
$
|
1.66
|
|
$ 2.58 - $ 3.13
|
|
|
853,200
|
|
|
|
3.28
|
|
|
$
|
2.79
|
|
|
|
853,200
|
|
|
|
3.72
|
|
|
$
|
2.79
|
|
$ 3.46 - $ 5.75
|
|
|
534,534
|
|
|
|
7.69
|
|
|
$
|
4.16
|
|
|
|
407,034
|
|
|
|
7.54
|
|
|
$
|
4.38
|
|
2018
Share 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 April 30, 2021, the 2018 Share Plan had 1,757,937 shares
available for future grants.
Information
regarding the 2018 Share Plan for the six months ended April 30, 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
|
|
|
1,380,000
|
|
|
$
|
3.28
|
|
|
|
|
|
Exercised
|
|
|
(33,888
|
)
|
|
$
|
3.81
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(392,781
|
)
|
|
$
|
3.70
|
|
|
|
|
|
Options outstanding at April 30, 2021
|
|
|
5,299,992
|
|
|
$
|
3.58
|
|
|
$
|
7,000,292
|
|
Options exercisable at April 30, 2021
|
|
|
2,626,391
|
|
|
$
|
3.66
|
|
|
$
|
3,215,984
|
|
The
following table summarizes information about stock options outstanding and exercisable under the 2018 Share Plan as of April 30, 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
|
|
|
|
7.87
|
|
|
$
|
3.38
|
|
|
|
1,901,945
|
|
|
|
7.37
|
|
|
$
|
3.55
|
|
$
|
3.84
- $5.30
|
|
|
|
1,324,992
|
|
|
|
7.19
|
|
|
$
|
4.16
|
|
|
|
724,446
|
|
|
|
7.43
|
|
|
$
|
3.96
|
|
Information
regarding the 2018 Share Plan for the six months ended April 30, 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 April 30, 2020
|
|
|
4,735,000
|
|
|
$
|
3.76
|
|
|
$
|
-0-
|
|
Options exercisable at April 30, 2020
|
|
|
2,107,779
|
|
|
$
|
3.75
|
|
|
$
|
-0-
|
|
The
following table summarizes information about stock options outstanding and exercisable under the 2018 Share Plan as of April 30, 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
|
|
|
|
8.03
|
|
|
$
|
3.70
|
|
|
|
1,566,666
|
|
|
|
8.03
|
|
|
$
|
3.70
|
|
$
|
3.84
- $4.61
|
|
|
|
1,635,000
|
|
|
|
8.92
|
|
|
$
|
3.88
|
|
|
|
541,113
|
|
|
|
8.37
|
|
|
$
|
3.75
|
|
Non-Plan
Options
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 (the “Non-Plan Options”).
Information
regarding Non-Plan Options for the six months ended April; 30, 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
|
|
|
|
|
|
Exercised
|
|
|
(44,000
|
)
|
|
$
|
2.58
|
|
|
|
|
|
Options outstanding
and exercisable at
April 30, 2021
|
|
|
1,654,000
|
|
|
$
|
2.58
|
|
|
$
|
3,812,470
|
|
The
following table summarizes information about Non-Plan Options outstanding and exercisable as of April 30, 2021:
Range
of
Exercise Prices
|
|
|
Number
Outstanding
and
Exercisable
|
|
|
Weighted
Average Remaining Contractual Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
$
|
2.58
|
|
|
|
1,654,000
|
|
|
|
1.31
|
|
|
$
|
2.58
|
|
Information
regarding Non-Plan Options for the six months ended April 30, 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
April
30, 2020
|
|
|
1,698,000
|
|
|
$
|
2.58
|
|
|
$
|
-0-
|
|
The
following table summarizes information about Non-Plan Options outstanding and exercisable as of April 30, 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
|
|
|
|
2.25
|
|
|
$
|
2.58
|
|
On
June 1, 2021, stock options to purchase 2,990,000 shares were granted under the 2018 Share Plan. Each of our non-employee directors was
awarded options for 30,000 shares that vest over one year. Our Lead Independent Director, our Chairman, President and Chief Executive
Officer and our Chief Operating Officer and Chief Financial Officer were awarded options for 200,000 shares, 500,000 shares and 100,000
shares, respectively, that vest over three years. Further, our Chairman, President and Chief Executive Officer and our Chief Operating
Officer and Chief Financial Officer were awarded options for 2,000,000 shares and 100,000 shares, respectively, that vest in four equal
installments upon the Company’s share price achieving targets ranging from $5.00 to $8.00 per share.
Stock
Awards
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 was to vest 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. The restricted stock award did not vest as of 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 six months ended April 30, 2021 and 2020.
Employee
Stock Purchase Plan
The
Company maintains the Anixa Biosciences, Inc. Employee Stock Purchase Plan (the “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 six months ended April 30, 2021 and 2020, employees purchased 1,634 and 9,618 shares,
respectively, with aggregate proceeds of approximately $3,000 and $15,000, respectively.
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 $38,000 and $96,000,
respectively, during the three and six months ended April 30, 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 and six
months ended April 30, 2020.
As
discussed in Note 2, in connection with the March 25, 2021 public offering we issued to certain designees of the underwriter, as compensation,
warrants to purchase 300,000 shares of common stock at $6.5625 per share, expiring on March 22, 2026. No warrants were issued during
the six-month period ended April 30, 2020.
As
of April 30, 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.
4.
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 April 30, 2021:
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Money market funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
27,038,700
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
27,038,700
|
|
Certificates of deposit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
Short-term investments
|
|
|
-
|
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
2,000,000
|
|
Treasury bills and bonds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
investments
|
|
|
-
|
|
|
|
8,399,300
|
|
|
|
-
|
|
|
|
8,399,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
27,538,700
|
|
|
$
|
10,399,300
|
|
|
$
|
-
|
|
|
$
|
37,938,000
|
|
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.
5.
ACCRUED EXPENSES
Accrued
expenses consist of the following as of:
|
|
April 30,
|
|
|
October 31,
|
|
|
|
2021
|
|
|
2020
|
|
Payroll and related expenses
|
|
$
|
310,641
|
|
|
$
|
415,331
|
|
Accrued royalty and contingent legal fees
|
|
|
577,190
|
|
|
|
449,691
|
|
Accrued collaborative research and license
expense
|
|
|
61,853
|
|
|
|
30,000
|
|
Accrued other
|
|
|
29,210
|
|
|
|
6,003
|
|
|
|
$
|
978,894
|
|
|
$
|
901,025
|
|
6.
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 six months ended April 30, 2021 and 2020, were stock options to purchase
8,813,626 and 8,382,234 shares, respectively, and warrants to purchase 860,000 and 500,000 shares, respectively.
7.
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 9 regarding the accounting and disclosures related to our office
lease.
8.
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 April 30,
2021 and October 31, 2020 and we account for interest and penalties related to income tax matters, if any, in general and administrative
expenses.
9.
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 April 30, 2021 and 2020, and approximately $32,000
and $32,000, respectively, for the six months ended April 30, 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.
For
operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. The remaining
5-month lease term as of April 30, 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
|
|
April
30,
2021
|
|
|
October
31,
2020
|
|
Operating Lease:
|
|
|
|
|
|
|
|
|
|
|
Right-of-use
asset
|
|
Operating lease right-of-use asset
|
|
$
|
25,574
|
|
|
$
|
54,340
|
|
Right-of-use liability,
current
|
|
Operating lease liability
|
|
|
25,964
|
|
|
|
55,198
|
|
As
of April 30, 2021, the annual minimum lease payments of our operating lease liabilities were as follows:
|
|
Operating
Leases
|
|
2021 future minimum payments, undiscounted
|
|
$
|
26,880
|
|
Less: Imputed interest
|
|
|
(916
|
)
|
Present
value of future minimum lease payments
|
|
$
|
25,964
|
|
10.
COMMITMENTS AND CONTINGENCIES
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, while the outlook is improving, and there has been a loosening of restrictions in many of the
areas in which we and our partners operate and conduct our business, 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 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.
11.
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) Patent Licensing activities. The following represents selected financial
information for our segments for the three and six months ended April 30, 2021 and 2020 and as of April 30, 2021 and October 31, 2020:
|
|
For
the Three Months Ended
April 30,
|
|
|
For
the Six Months Ended
April 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net Income/(Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAR-T Therapeutics
|
|
$
|
(1,445,758
|
)
|
|
$
|
(495,030
|
)
|
|
$
|
(2,406,494
|
)
|
|
$
|
(1,125,363
|
)
|
Cancer Vaccines
|
|
|
(662,367
|
)
|
|
|
(170,271
|
)
|
|
|
(1,568,703
|
)
|
|
|
(365,867
|
)
|
Anti-Viral Therapeutics
|
|
|
(309,755
|
)
|
|
|
(309,504
|
)
|
|
|
(790,561
|
)
|
|
|
(309,504
|
)
|
Cancer Diagnostics
|
|
|
(13,409
|
)
|
|
|
(1,679,027
|
)
|
|
|
(22,371
|
)
|
|
|
(3,469,673
|
)
|
Patent
Licensing
|
|
|
(5,600
|
)
|
|
|
(4,158
|
)
|
|
|
118,863
|
|
|
|
(4,158
|
))
|
Total
|
|
$
|
(2,436,889)
|
|
|
$
|
(2,657,990
|
)
|
|
$
|
(4,669,266
|
)
|
|
$
|
(5,274,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
$
|
2,437,282
|
|
|
$
|
2,670,137
|
|
|
$
|
5,182,913
|
|
|
$
|
5,300,006
|
|
Less non-cash share-based
compensation
|
|
|
(1,051,272
|
)
|
|
|
(1,110,086
|
))
|
|
|
(2,037,371
|
)
|
|
|
(2,131,420
|
)
|
Operating
costs and expenses
excluding non-cash share-based
compensation
|
|
$
|
1,386,010
|
|
|
$
|
1,560,051
|
|
|
$
|
3,145,542
|
|
|
$
|
3,168,586
|
|
Operating costs and expenses excluding
non-cash
share based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAR-T Therapeutics
|
|
$
|
934,714
|
|
|
$
|
223,822
|
|
|
$
|
1,492,394
|
|
|
$
|
570,163
|
|
Cancer Vaccines
|
|
|
298,537
|
|
|
|
67,059
|
|
|
|
836,525
|
|
|
|
165,329
|
|
Anti-Viral Therapeutics
|
|
|
138,175
|
|
|
|
221,018
|
|
|
|
408,431
|
|
|
|
221,018
|
|
Cancer Diagnostics
|
|
|
10,291
|
|
|
|
1,044,889
|
|
|
|
16,723
|
|
|
|
2,208,813
|
|
Patent
Licensing
|
|
|
4,293
|
|
|
|
3,263
|
|
|
|
391,469
|
|
|
|
3,263
|
|
Total
|
|
$
|
1,386,010
|
|
|
$
|
1,560,051
|
|
|
|
3,145,542
|
|
|
$
|
3,168,586
|
|
|
|
April
30,
2021
|
|
|
October
31,
2020
|
|
Total assets:
|
|
|
|
|
|
|
|
|
CAR-T Therapeutics
|
|
$
|
25,906,018
|
|
|
$
|
2,988,124
|
|
Cancer Vaccines
|
|
|
8,265,734
|
|
|
|
946,923
|
|
Anti-Viral Therapeutics
|
|
|
3,825,876
|
|
|
|
2,464,361
|
|
Cancer Diagnostics
|
|
|
332,450
|
|
|
|
2,869,529
|
|
Patent
Licensing
|
|
|
167,444
|
|
|
|
184,027
|
|
Total
|
|
$
|
38,497,522
|
|
|
$
|
9,452,964
|
|
Operating
costs and expenses excluding non-cash share-based compensation expense is the measurement the chief operating decision-maker uses in
managing the enterprise.