Company Quick10K Filing
ITUS
Price4.87 EPS-0
Shares20 P/E-10
MCap98 P/FCF-29
Net Debt-4 EBIT-10
TEV94 TEV/EBIT-10
TTM 2019-07-31, in MM, except price, ratios
10-Q 2019-07-31 Filed 2019-09-06
10-Q 2019-04-30 Filed 2019-06-12
10-Q 2019-01-31 Filed 2019-03-13
10-K 2018-10-31 Filed 2019-01-11
10-Q 2018-07-31 Filed 2018-09-07
10-Q 2018-04-30 Filed 2018-06-11
10-Q 2017-12-01 Filed 2018-03-09
10-K 2017-10-31 Filed 2018-01-09
10-Q 2017-07-31 Filed 2017-09-08
10-Q 2017-04-30 Filed 2017-05-26
10-Q 2017-01-31 Filed 2017-03-16
10-K 2016-10-31 Filed 2016-12-07
10-Q 2016-07-31 Filed 2016-08-19
10-Q 2016-04-30 Filed 2016-05-20
10-K 2015-10-31 Filed 2015-12-23
10-Q 2015-07-31 Filed 2015-08-18
10-Q 2015-04-30 Filed 2015-05-22
10-Q 2015-01-31 Filed 2015-03-09
10-K 2014-10-31 Filed 2015-01-29
10-Q 2014-07-31 Filed 2014-09-15
10-Q 2014-04-30 Filed 2014-06-16
10-Q 2014-01-31 Filed 2014-03-17
10-K 2013-10-31 Filed 2014-01-16
10-Q 2013-07-31 Filed 2013-09-16
10-Q 2013-04-30 Filed 2013-06-14
10-Q 2013-01-31 Filed 2013-03-18
10-K 2012-10-31 Filed 2013-01-29
10-Q 2012-07-31 Filed 2012-09-14
10-Q 2012-04-30 Filed 2012-06-14
10-Q 2012-01-31 Filed 2012-03-16
10-K 2011-10-31 Filed 2012-01-30
10-Q 2011-07-31 Filed 2011-09-14
10-Q 2011-04-30 Filed 2011-06-14
10-Q 2011-01-31 Filed 2011-03-17
10-K 2010-10-31 Filed 2011-02-14
10-Q 2010-07-31 Filed 2010-09-14
10-Q 2010-04-30 Filed 2010-06-14
10-Q 2010-01-31 Filed 2010-03-17
10-K 2009-10-31 Filed 2010-01-29
8-K 2020-04-14 Enter Agreement
8-K 2019-10-23 Shareholder Vote, Regulation FD, Exhibits
8-K 2019-08-21 Regulation FD, Exhibits
8-K 2019-08-21 Other Events, Exhibits
8-K 2019-07-12 Enter Agreement
8-K 2019-05-23 Regulation FD, Exhibits
8-K 2019-01-25 Other Events, Exhibits
8-K 2018-09-27 Amend Bylaw, Shareholder Vote, Other Events, Exhibits
8-K 2018-09-27 Regulation FD, Exhibits
8-K 2018-07-26 Other Events
8-K 2018-05-08 Officers
8-K 2018-03-29 Shareholder Vote
8-K 2018-03-27 Enter Agreement, Exhibits
8-K 2018-03-05 Other Events, Exhibits
8-K 2018-01-17 Officers

ITUS 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Mine Safety Disclosures. Not Applicable.
Item 5. Other Information. None.
Item 6. Exhibits.
EX-10.1 exhibit10_1.htm
EX-10.2 exhibit10_2.htm
EX-31.1 exhibit31_1.htm
EX-31.2 exhibit31_2.htm
EX-32.1 exhibit32_1.htm
EX-32.2 exhibit32_2.htm

ITUS Earnings 2019-07-31

Balance SheetIncome StatementCash Flow
151050-5-102012201420172020
Assets, Equity
10.06.02.0-2.0-6.0-10.02012201420172020
Rev, G Profit, Net Income
4.73.31.80.4-1.1-2.52012201420172020
Ops, Inv, Fin

10-Q 1 form10q.htm FORM 10-Q Form 10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended July 31, 2019

 

Commission file number 0-11254

 

ANIXA BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)

Delaware

11-2622630

(State or other jurisdiction of               

(I.R.S. Employer

incorporation or organization)                

Identification No.)

 

3150 Almaden Expressway, Suite 250

San Jose, CA

 

95118

(Address of principal executive offices)

 (Zip Code)

(408) 708-9808

(Registrant's telephone number, including area code)

 

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

 

Title of each class

Trading symbol

Name of exchange on which registered

Common Stock, par value $.01 per share

ANIX

NASDAQ Capital Market

 

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

 

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

 

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

 

Large accelerated filer [   ]

Accelerated filer [   ]

Non-accelerated filer [X]

Smaller reporting company [X]

Emerging growth company [   ]

 

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

 

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

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

On September 5, 2019 the registrant had outstanding 20,207,261 shares of Common Stock, par value $.01 per share, which is the registrant’s only class of common stock.

 


 


TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.

 Financial Statements.

Condensed Consolidated Balance Sheets as of July 31, 2019 (Unaudited) and October 31, 2018

1

Condensed Consolidated Statements of Operations (Unaudited) for the nine months ended July 31, 2019 and 2018

2

  

Condensed Consolidated Statements of Operations (Unaudited) for the three months ended July 31, 2019 and 2018

3

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the nine months ended July 31, 2019

4

 

 

 

 

 

 

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the three months ended July 31, 2019

5

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the nine months ended July 31, 2018

6

 

 

 

 

 

 

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the three months ended July 31, 2018

7

Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended July 31, 2019 and 2018

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

32

Item 4.

Controls and Procedures.

32

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

33

Item 1A.

Risk Factors.

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

33

Item 3.

Defaults Upon Senior Securities.

33

Item 4.

Mine Safety Disclosures.

33

Item 5.

Other Information.

33

Item 6.

Exhibits.

34

SIGNATURES                   

35

 


Table of Contents

 

PART I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements.

 

 

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

July 31,

2019

October 31,

2018

ASSETS

Current assets:

Cash and cash equivalents

$

4,396,853

$

3,055,890

Short-term investments in certificates of deposit

2,100,000

2,000,000

Receivables

1,072

306,991

Prepaid expenses and other current assets

 

129,644

 

175,491

Total current assets

6,627,569

5,538,372

Patents, net of impairment of $1,001,729 and $582,979, respectively, and

    accumulated amortization of $2,034,382 and $1,615,632, respectively

            

-

   

837,500

Property and equipment, net of accumulated depreciation of $86,789 and

    $53,799, respectively

 

    

215,137

 

 

72,670

Total assets

$

6,842,706

$

6,448,542

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

567,778

$

582,012

Accrued expenses

 

875,771

 

683,099

Total current liabilities

 

1,443,549

 

1,265,111

Commitments and contingencies (Note 9)

               

              

Equity:

Shareholders’ equity:

Preferred stock, par value $100 per share; 19,860 shares authorized; no

     

    shares issued or outstanding

-

-

Series A convertible preferred stock, par value $100 per share; 140 shares

    authorized; no shares issued or outstanding

-

-

Common stock, par value $.01 per share; 48,000,000 shares authorized;

   20,162,851 and 18,908,632 shares issued and outstanding, respectively

201,628

189,086

Additional paid-in capital

185,326,706

175,415,931

Accumulated deficit

 

(179,729,770)

 

(170,170,209)

Total shareholders’ equity

5,798,564

5,434,808

Noncontrolling interest (Note 1)

 

(399,407)

 

(251,377)

Total equity

 

5,399,157

 

5,183,431

 

Total liabilities and equity

$

6,842,706

$

6,448,542

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


Table of Contents

 

 

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the Nine Months Ended

July 31,

2019

2018

Revenue

$

250,000

$

1,112,500

Operating costs and expenses:

Inventor royalties, contingent legal fees, litigation and licensing

  expenses related to patent assertion

166,250

767,180

Amortization of patents

418,750

243,972

Research and development expenses (including non-cash share-based

  compensation expenses of $2,567,294 and $2,668,315, respectively)

4,602,239

4,380,137

General and administrative expenses (including non-cash share-based

  compensation expenses of $2,335,218 and $2,558,701, respectively)

4,405,385

4,602,555

Impairment in carrying amount of patent asset (Note 1)

 

418,750

 

 -

Total operating costs and expenses

 

10,011,374

 

9,993,844

Loss from operations

(9,761,374)

(8,881,344)

Interest income 

 

53,783

 

29,780

Loss before income taxes

(9,707,591)

(8,851,564)

Provision for income taxes

 

-

 

-

    

Net loss

(9,707,591)

(8,851,564)

                   

Less: Net loss attributable to noncontrolling interest

 

(148,030)

 

(158,032)

 

 

 

 

 

 

Net loss attributable to common shareholders

$

(9,559,561)

$

(8,693,532)

Net loss per common share attributable to common shareholders:

 

Basic and diluted

$

(0.49)

$

(0.50)

Weighted average common shares outstanding:

Basic and diluted

19,638,833

17,257,546

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2


Table of Contents

 

 

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the Three Months Ended

July 31,

2019

2018

Revenue

$

-

$

362,500

Operating costs and expenses:

Inventor royalties, contingent legal fees, litigation and licensing

  expenses related to patent assertion

-

241,157

Amortization of patents

41,875

81,324

Research and development expenses (including non-cash share-based

  compensation expenses of $338,449 and $2,472,489, respectively)

1,085,574

2,942,071

General and administrative expenses (including non-cash share-based
  compensation expenses of $492,449 and $2,155,844 respectively)

1,056,963

2,703,752

Total operating costs and expenses

 

2,184,412

 

5,968,304

Loss from operations

(2,184,412)

(5,605,804)

Interest income 

 

18,364

 

12,228

Loss before income taxes

(2,166,048)

(5,593,576)

Provision for income taxes

 

-

 

-

    

Net loss

(2,166,048)

(5,593,576)

                   

Less: Net loss attributable to noncontrolling interest

 

(26,020)

 

(116,650)

Net loss attributable to common shareholders

$

(2,140,028)

$

(5,476,926)

Net loss per common share attributable to common shareholders:

 

Basic and diluted

$

(0.11)

$

(0.30)

Weighted average common shares outstanding:

Basic and diluted

     20,100,915

18,431,025

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


Table of Contents


 

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED JULY 31, 2019 (UNAUDITED)

 

Additional

Paid-in

Capital

Total

Shareholders’

Equity

Non-

controlling

Interest

Common Stock

Accumulated

Deficit

Total

Equity

Shares

Par Value

Balance, October 31, 2018

18,908,632

$

189,086

$

175,415,931

$

(170,170,209)

$

5,434,808

$

(251,377)

$

5,183,431

Stock option compensation to employees and  

    directors

-

-

2,808,910

-

2,808,910

-

2,808,910

Stock options and warrants issued to consultants

-

-

139,161

-

139,161

-

139,161

Common stock issued upon exercise of stock

    options

40,000

400

102,100

-

102,500

-

102,500

               

                 

Restricted stock award compensation to employee

    pursuant to stock incentive plan

-

-

1,954,441

-

1,954,441

-

1,954,441

Common stock issued pursuant to employee

    stock purchase plan

5,411

54

18,506

-

18,560

-

18,560

      

       

      

                      

      

                 

   

Common stock issued in at-the-market offering,

    net of offering expenses of $264,186

  1,208,808

       12,088

4,887,657

-

4,899,745

-

4,899,745

Net loss

-

 

-

 

-

 

(9,559,561)

 

(9,559,561)

 

(148,030)

 

(9,707,591)

Balance, July 31, 2019

20,162,851

$

201,628

$

185,326,706

$

(179,729,770)

$

5,798,564

$

(399,407)

$

5,399,157

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


Table of Contents

 

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 31, 2019 (UNAUDITED)

 

Additional

Paid-in

Capital

Total

Shareholders’

Equity

Non-

controlling

Interest

Common Stock

Accumulated

Deficit

Total

Equity

Shares

Par Value

Balance, April 30, 2019

20,005,075

$

200,050

$

183,932,744

$

 (177,589,742)

$

6,543,052

$

(373,387)

$

6,169,665

 

 

 

 

 

 

 

 

Stock option compensation to employees and
    directors

-

-

784,246

-

784,246

-

784,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and warrants issued to consultants

-

-

46,652

-

46,652

-

46,652

 

 

 

 

 

 

 

 

Common stock issued upon exercise of stock
    options

10,000

100

22,600

-

22,700

-

22,700

 

 

 

 

 

 

 

 

Common stock issued in at-the-market offering,
    net of offering expenses of $111,275

147,776

1,478

540,464

-

541,942

-

541,942

 

 

 

 

 

 

 

 

Net loss

-

-

-

(2,140,028)

(2,140,028)

(26,020)

(2,166,048)

 

 

 

 

 

 

 

 

Balance, July 31, 2019

20,162,851

$

201,628

$

185,326,706

$

(179,729,770)

$

5,798,564

$

(399,407)

$

5,399,157

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


Table of Contents

 

 

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED JULY 31, 2018 (UNAUDITED)

 

Additional

Paid-in

Capital

Total

Shareholders’

Equity

Non-

controlling

Interest

Common Stock

Accumulated

Deficit

Total

Equity

Shares

Par Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, October 31, 2017

16,602,759

$

166,028

$

163,931,079

$

 (156,174,184)

$

7,922,923

$

-

$

7,922,923

Stock option compensation to employees and  

    directors

-

-

3,598,986

-

3,598,986

-

3,598,986

Stock options and warrants issued to consultants

-

-

254,090

-

254,090

-

254,090

Common stock issued upon exercise of stock

    options

39,816

398

(398)

-

-

-

-

Restricted stock award compensation to employee

    pursuant to stock incentive plan

1,500,000

 

 

15,000

 

 

1,358,940

 

 

-

 

 

1,373,940

 

 

-

 

 

1,373,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to consultants

5,347

53

14,949

-

15,002

-

15,002

Common stock issued in at-the-market offering,

    net of offering expenses of $141,140

548,224

5,482

1,780,547

-

1,786,029

-

1,786,029

 

         

      

   

               

       

     

   

Issuance of noncontrolling interest in Certainty

    Therapeutics, Inc

-

-

68,974

-

68,974

(4,318)

64,656

Net loss

-

 

-

 

-

 

(8,693,532)

 

(8,693,532)

 

(158,032)

 

(8,851,564)

Balance, July 31, 2018

18,696,146

$

186,961

$

171,007,167

$

(164,867,716)

$

6,326,412

$

(162,350)

$

6,164,062

The accompanying notes are an integral part of these condensed consolidated financial statements. 

 

6


Table of Contents

 

 

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 31, 2018 (UNAUDITED)

 

Additional

Paid-in

Capital

Total

Shareholders’

Equity

Non-

controlling

Interest

Common Stock

Accumulated

Deficit

Total

Equity

Shares

Par Value

Balance, April 30, 2018

16,850,445

 

$

168,504

$

165,288,632

$

 (159,390,790)

$

6,066,346

$

(45,700)

$

6,020,646

 

 

 

 

 

 

 

 

Stock option compensation to employees and
    directors

-

-

3,126,454

-

3,126,454

-

3,126,454

 

 

 

 

 

 

 

 

Stock options and warrants issued to consultants

-

-

127,939

-

127,939

-

127,939

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock award compensation to employee
    pursuant to stock incentive plan

1,500,000

15,000

1,358,940

-

1,373,940

-

1,373,940

 

 

 

 

 

 

 

 

Common stock issued in at-the-market offering,
    net of offering expenses of $58,198

345,701

3,457

1,105,202

-

1,108,659

-

1,108,659

 

 

 

 

 

 

 

 

Net loss

-

-

-

(5,476,926)

(5,476,926)

(116,650)

(5,593,576)

 

 

 

 

 

 

 

 

Balance, July 31, 2018

18,696,146

$

186,961

$

171,007,167

$

(164,867,716)

$

6,326,412

$

(162,350)

$

6,164,062

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


Table of Contents

 


ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the nine months ended

 July 31,

2019

2018

Cash flows from operating activities:

Reconciliation of net loss to net cash used in operating activities:

Net loss

$

(9,707,591)

$

(8,851,564)

Stock option compensation to employees and directors

2,808,910

3,598,986

Stock options and warrants issued to consultants

139,161

254,090

Restricted stock award compensation to employee pursuant to stock   
    incentive plan

    

1,954,441

                

1,373,940

Common stock issued to consultants

-

15,002

Depreciation of property and equipment

32,990

12,414

Amortization of patents

418,750

243,972

Impairment in carrying amount of patent assets

418,750

-

Issuance of noncontrolling interest in Certainty Therapeutics, Inc. expensed

   as a license fee

           

-

     

64,656

Change in operating assets and liabilities:

Receivables

305,919

(40,710)

Prepaid expenses and other current assets

45,847

(163,211)

Accounts payable

(14,234)

(60,914)

Accrued expenses

 

192,672

 

300,888

Net cash used in operating activities

 

(3,404,385)

 

(3,252,451)

Cash flows from investing activities:

Disbursements to acquire short-term investments in certificates of deposit                                                             

(2,350,000)

(4,000,000)

Proceeds from maturities of short-term investments in certificates of deposit             

2,250,000

4,750,000

Purchase of property and equipment

 

(175,457)

 

(31,853)

Net cash (used in) provided by investing activities

 

(275,457)

 

718,147

Cash flows from financing activities:

Net proceeds from sale of common stock in at-the-market offering

4,899,745

1,786,029

Proceeds from sale of common stock pursuant to employee stock purchase

       plan

18,560

-

Proceeds from exercise of employee stock options

 

102,500

 

-

Net cash provided by financing activities

 

5,020,805

 

1,786,029

Net increase (decrease) in cash and cash equivalents

1,340,963

(748,275)

Cash and cash equivalents at beginning of period

 

3,055,890

 

3,339,374

Cash and cash equivalents at end of period

$

4,396,853

$

2,591,099

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

8


Table of Contents

 

 

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

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 research and development of cancer therapeutics and diagnostics.  Our cancer therapeutics programs consist of development of a vaccine against triple negative breast cancer (“TNBC”) and development of chimeric endocrine receptor T-cell (“CER-T”) technology, a novel form of CAR-T technology, initially focused on treating ovarian cancer.  Our cancer diagnostics program consists of development of the artificial intelligence (AI) driven Cchek™ liquid biopsy platform for early cancer detection. 

 

We hold an exclusive worldwide, royalty-bearing license to use certain intellectual property owned or controlled by The Cleveland Clinic Foundation (“Cleveland Clinic”) related 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, the most lethal form of the disease.  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.  Animal studies have shown that vaccinating against this protein prevents breast cancer in mice.  We are working with researchers at Cleveland Clinic to advance this vaccine toward human clinical testing, and we anticipate filing an Investigational New Drug (“IND”) application with the U.S. Food and Drug Administration (“FDA”) by the end of the 2019 calendar year.

 

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 CER-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.  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 of its CER-T technology for treating ovarian cancer.  Certainty is working with researchers at Moffitt to complete studies necessary to submit an IND application with the FDA.  We anticipate filing the IND with the FDA by the end of the 2019 calendar year, with human clinical trials commencing thereafter, in 2020.  The collaboration between Certainty and Moffitt was recently extended through November 2020, so the parties may continue research on Certainty’s CER-T technology.

 

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Our subsidiary, Anixa Diagnostics Corporation (“Anixa Diagnostics”), is developing Cchek™, an AI driven platform of non-invasive blood tests for the early detection of cancer which is based on the body’s immune response to the presence of a malignancy.  We have demonstrated the efficacy of Cchek™ with 20 different types of cancer, including:  breast, lung, colon, melanoma, ovarian, liver, thyroid, pancreatic, appendiceal, uterine, osteosarcoma, leiomyosarcoma, liposarcoma, vulvar, prostate, bladder, cervical, head and neck, gastric and testicular cancers.  Breast, lung, colon and prostate cancers represent the four largest categories of cancer worldwide.

 

We are currently developing tests for the detection of multiple types of cancer and are working with our development and commercialization partner, ResearchDx, a CLIA-certified laboratory, to launch Cchek™ Prostate Cancer Confirmation as a Laboratory Developed Test during the fourth calendar quarter of 2019. 

 

Over the next several quarters, we expect the development of our breast cancer vaccine, Certainty’s CER-T technology and Anixa Diagnostic’s Cchek™ to be the primary focus of the Company.  As part of our legacy operations, the Company remains engaged in limited patent licensing activities 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 quarters, 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 cancer therapeutics and diagnostics programs. In addition, while we pursue our cancer therapeutics and diagnostics programs, we may also make investments in and form new companies to develop additional emerging technologies.

 

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Funding and Management’s Plans

 

Based on currently available information as of September 5, 2019, 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.  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 nine months ended July 31, 2019, we raised approximately $4,900,000 through our at-the-market equity offering of 1,208,808 shares of common stock which is currently effective (we can sell an additional 267,302 shares under our current at-the-market equity program) and may remain available for us to use in the future.  Further, we have an additional at-the-market equity offering under which we may issue up to $50 million of common stock, which is currently effective and may remain available to us in the future.  We may seek to obtain working capital during our fiscal year 2019 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.  Additionally, the sale of equity securities or issuance of debt securities may be subject to certain security holder approvals or may result in the downward adjustment of the exercise or conversion price of our outstanding securities.  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 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, 2018.  The accompanying October 31, 2018 consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“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 July 31, 2019, and results of operations and cash flows for the interim periods represented.  The results of operations for the nine months ended July 31, 2019 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 nine months ended July 31, 2019:

 

Balance at October 31, 2018

$

(251,377)

Net loss attributable to noncontrolling interest

 

(148,030)

Balance at July 31, 2019

$

(399,407)

 

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Revenue Recognition

 

Since fiscal 2016 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. 

 

On November 1, 2018 we adopted Accounting Standards Update 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers.  Upon adoption of ASU 2014-09 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 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.  As such, the earnings process is complete and revenue is recognized upon the execution of the agreement, when collectability is probable and all other revenue recognition criteria have been met.

 

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, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs.  These costs are included under the caption “Operating costs and expenses” in the accompanying condensed consolidated statements of operations.

 

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Patents

 

Our only identifiable intangible assets are patents and patent rights related to our legacy patent licensing operations.  We capitalize patent and patent rights acquisition costs and amortize the cost over the estimated economic useful life.  No patent acquisition costs were capitalized during the nine months ended July 31, 2019 and 2018.  We recorded patent amortization expense of approximately $419,000 and $244,000 during the nine-month periods ended July 31, 2019 and 2018, respectively.  In evaluating the carrying amount of capitalized patents at January 31, 2019, we determined that based on estimated undiscounted future cash flows a write-down of the carrying amount of approximately $419,000, to a carrying value of approximately $168,000, should be recorded as of January 31, 2019. The carrying value of capitalized patents has been amortized to $-0- as of July 31, 2019. Our estimates of future cash flows were based on our most recent assessment of the market for potential licensees, as well as the status of ongoing negotiations with potential licensees. While we may be able to generate future cash flows from this patent portfolio, as of July 31, 2019, we cannot reasonably determine an estimate of any such future cash flows.

 

2.         SUBSEQUENT EVENT

            On August 21, 2019, the Company entered into a settlement agreement in connection with a putative shareholder derivative complaint filed in the Court of Chancery of the State of Delaware on November 5, 2018. See Note 9 to these condensed consolidation financial statements for additional information.  Management reviewed for subsequent events through the date of filing of this Quarterly Report on Form 10-Q and noted no other items requiring disclosure.

3.         STOCK BASED COMPENSATION AND WARRANTS

 

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).  We recorded stock-based compensation expense related to service-based stock options granted to employees and directors of approximately $2,433,000 and $1,153,000 during the nine months ended July 31, 2019 and 2018, respectively, and approximately $784,000 and $702,000 during the three months ended July 31, 2019 and 2018, 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.  We recorded stock-based compensation expense related to market condition stock options granted to employees of approximately $376,000 and $2,446,000 during the nine months ended July 31, 2019 and 2018, respectively, and approximately $-0- and $2,446,000 during the three months ended July 31, 2019 and 2018, respectively.  

 

On November 1, 2018 we adopted Accounting Standards Update 2018-07 (“ASU 2018-07”) for stock options granted to consultants.  Upon adoption of ASU 2018-07 we estimated the fair value of unvested service-based and performance-based stock options at the date of adoption, using the Black-Scholes pricing model.  Subsequent to adoption of ASU 2018-07, future grants to consultants are measured at the grant date, based on the fair value of the award using the Black-Scholes pricing model, consistent with our policy for grants to employees and directors.  In prior periods, in accordance with US GAAP, we estimated the fair value of service-based and performance-based stock options granted to consultants at each reporting period using the Black-Scholes pricing model.  We recognize the fair value of stock options granted to consultants as consulting expense over the requisite or implied service period of the grant.  We recorded stock-based consulting expense related to stock options granted to consultants of approximately $75,000 and $197,000 during the nine months ended July 31, 2019 and 2018, respectively, and approximately $25,000 and $49,000 during the three months ended July 31, 2019 and 2018, respectively.

 

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Stock Option Activity

 

During the nine months ended July 31, 2019 and 2018, we granted options to purchase 10,000 shares and 3,897,000 shares of common stock, respectively,  to employees, directors and consultants, with exercise prices ranging from $2.30 to $3.84 per share, pursuant to the Anixa Biosciences, Inc. 2010 Share Incentive Plan (the "2010 Share Plan”) and the Anixa Biosciences, Inc. 2018 Share Plan (the “2018 Share Plan”).    During the nine months ended July 31, 2019 and 2018, stock options to purchase 40,000 and 48,600 shares of common stock, respectively, were exercised with aggregate proceeds of approximately $103,000 and $-0-, respectively.  Under certain circumstances, stock options may be exercised on a cashless basis.  During the nine months ended July 31, 2019 and 2018, -0- and 8,784 shares of common stock, respectively, were withheld in connection with cashless exercises of stock options.

 

Stock Option Plans

 

As of July 31, 2019, we have three stock option plans:  the Anixa Biosciences, Inc. 2003 Share Incentive Plan (the "2003 Share Plan"), the 2010 Share Plan and the 2018 Share Plan, which were adopted by our Board of Directors on April 21, 2003, July 14, 2010 and January 25, 2018, respectively.  The 2018 Share Plan was approved by our shareholders on March 29, 2018.

 

2003 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 options on April 21, 2013.  Information regarding the 2003 Share Plan for the nine months ended July 31, 2019 is as follows:

 

Shares

Weighted
Average Exercise Price Per Share

Aggregate Intrinsic Value

Options outstanding at October 31, 2018

12,000

$ 2.77

Exercised

(4,000)

$ 3.63

Options outstanding and exercisable at
   July 31, 2019

8,000

$ 2.34

$     23,694

 

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The following table summarizes information about stock options outstanding and exercisable under the 2003 Share Plan as of July 31, 2019:

 

 

Range of

Exercise Prices

Number

Outstanding

and

Exercisable

Weighted Average

Remaining

Contractual Life

(in years)

Weighted

Average

Exercise
Price

$ 0.67 - $17.00

8,000

0.19

$ 2.34

 

 

Information regarding the 2003 Share Plan for the nine months ended July 31, 2018 is as follows:

 

 

Shares

Weighted

Average Exercise

Price Per Share

Aggregate
Intrinsic
Value

Options outstanding at October 31, 2017

30,600

$ 3.16

Exercised

(10,600)

$ 0.67

Forfeited

(8,000)

$ 7.04

Options outstanding and exercisable at
   July 31, 2018

12,000

$ 2.77

$        13,054

 

 

The following table summarizes information about stock options outstanding and exercisable under the 2003 Share Plan as of July 31, 2018:

 

 

Range of

Exercise Prices

Number

Outstanding

and

Exercisable

Weighted Average

Remaining

Contractual Life

(in years)

Weighted

Average

Exercise Price

   $ 0.67 - $17.00

12,000

.99

$ 2.77

 

2010 Plan

 

The 2010 Share Plan provides for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to employees, directors and consultants.  As of July 31, 2019, the 2010 Share Plan had 889,200 shares available for future grants.  Information regarding the 2010 Share Plan for the nine months ended July 31, 2019 is as follows:

 

Shares

Weighted

Average Exercise

Price Per Share

Aggregate

Intrinsic

Value

Options outstanding at October 31, 2018

2,131,868

$ 2.11

Granted

10,000

$ 3.64

Exercised

(32,000)

$ 2.27

Forfeited

(99,200)

$ 3.78

Options outstanding at July 31, 2019

2,010,668

$ 2.03

$    5,422,886

Options exercisable at July 31, 2019

1,639,556

$ 1.92

$    4,609,165

 

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The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of July 31, 2019:

 

 

Options Outstanding

Options Exercisable

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

Range of

Exercise Prices

 

 

 

 

 

$ 0.67

938,000

5.94

$ 0.67

799,388

5.59

$ 0.67

$ 2.27 -$ 3.01

600,134

3.81

$ 2.58

600,134

3.81

$ 2.58

$ 3.46 -$ 5.75

472,534

8.51

$ 4.05

240,034

8.19

$ 4.43

 

Information regarding the 2010 Share Plan for the nine months ended July 31, 2018 is as follows:

 

 

Shares

Weighted

Average Exercise

Price Per Share

Aggregate

Intrinsic

Value

Options outstanding at October 31, 2017

1,637,246

$ 1.50

Granted

475,000

$ 3.22

Exercised

(38,000)

$ 0.67

Forfeited

(49,800)

$ 2.15

Options outstanding at July 31, 2018

2,024,446

$ 1.90

$    2,965,764

Options exercisable at July 31, 2018

1,284,190

$ 1.73

$    2,108,817

 

 

The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of July 31, 2018:

 

Options Outstanding

Options Exercisable

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

Range of

Exercise Prices

 

 

 

 

 

$ 0.67

943,000

6.94

$ 0.67

653,142

6.18

$ 0.67

$ 2.27 -$ 3.01

729,712

5.21

$ 2.61

579,314

5.28

$ 2.60

$ 3.46 -$ 7.00

351,734

8.74

$ 3.73

51,734

1.46

$ 5.27

       

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            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 July 31, 2019, the 2018 Share Plan had 2,008,000 shares available for future grants.  Information regarding options outstanding under the 2018 Share Plan for the nine months ended July 31, 2019 is as follows:

 

 

 

Shares

Weighted

Average Exercise

Price Per Share

Aggregate

Intrinsic

Value

Options outstanding at October 31, 2018

3,482,000

$ 3.73

Exercised

(4,000)

$ 3.84

Forfeited

(8,000)

$ 3.84

 

Options outstanding at July 31, 2019

3,470,000

$ 3.73

$    3,337,300

Options exercisable at July 31, 2019

1,321,111

$ 3.73

$    1,273,443

 

 

The following table summarizes information about stock options outstanding and exercisable under the 2018 Share Plan as of July 31, 2019:

 

 

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 -$ 4.61

3,470,000

8.78

$ 3.73

1,321,111

8.77

$ 3.73

 

 

Information regarding the 2018 Share Plan for the nine months ended July 31, 2018 is as follows:

 

Shares

Weighted

Average Exercise

Price Per Share

Aggregate
Intrinsic 
Value

Options outstanding at October 31, 2017

           -0-

 

Granted

3,422,000

$ 3.71

Options outstanding at July 31, 2018

3,422,000

$ 3.71

$               -0-

Options exercisable at July 31, 2018

167,779

$ 3.73

$               -0-

 

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The following table summarizes information about stock options outstanding and exercisable under the 2018 Share Plan as of July 31, 2018:

 

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 -$ 3.84

3,422,000

9.77

$ 3.71

167,779

9.76

$ 3.73

 

Outside of Share Plans

 

In addition to options granted under the 2003 Share Plan, the 2010 Share Plan and the 2018 Share Plan, the Board of Directors approved the grant of stock options to purchase 1,780,000 shares to employees and directors outside of Share Plans.  Information regarding stock options outstanding that were granted outside of Share Plans for the nine months ended July 31, 2019 is as follows:

Shares

Weighted

Average Exercise

Price Per Share

Aggregate

Intrinsic

Value

Options outstanding at October 31, 2018

1,780,000

$1.58

Options outstanding and exercisable at
   July 31, 2019  

1,780,000

$1.58

$    5,583,900

 

The following table summarizes information about stock options outstanding and exercisable that were granted outside of Share Plans as of July 31, 2019:

 

 

Range of

Exercise Prices

Number

Outstanding

and

Exercisable

Weighted Average

Remaining

Contractual Life

(in years)

Weighted

Average

Exercise Price

$ 0.67

1,046,000

3.05

$ 0.67

$ 2.58-$ 5.56

734,000

2.59

$ 2.88

 

 

 

Information regarding stock options outstanding that were granted outside of Share Plans for the nine months ended July 31, 2018 is as follows:

 

Shares

Weighted

Average Exercise

Price Per Share

Aggregate

Intrinsic

Value

Options outstanding at October 31, 2017

1,780,000

$ 1.58

Options outstanding and exercisable at
   July 31, 2018 

1,780,000

$ 1.58

$    3,206,700

 

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The following table summarizes information about stock options outstanding and exercisable that were granted outside of Share Plans as of July 31, 2018:

 

Range of

Exercise Prices

Number

Outstanding

and

Exercisable

Weighted Average

Remaining

Contractual Life

(in years)

Weighted

Average

Exercise Price

$ 0.67

1,046,000

4.05

$ 0.67

$ 2.58-$ 5.56

734,000

3.59

$ 2.88

 

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.  During the nine months ended July 31, 2018, we issued 5,347 shares of common stock that vested upon grant to consultants for services rendered.  We recorded consulting expense for the shares of common stock issued to consultants of approximately $15,000 for the nine months ended July 31, 2018 and $-0- for the three months ended July 31, 2018.  We did not grant any stock awards that vested upon grant during the nine months ended July 31, 2019.

 

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 recorded stock-based compensation expense related to the restricted stock award of approximately $1,954,000 and $1,374,000 during the nine months ended July 31, 2019 and 2018, respectively, and $-0- and approximately $1,374,000 during the three months ended July 31, 2019 and 2018, respectively.

 

Employee Stock Purchase Plan

 

The Company maintains the Anixa Biosciences, Inc. Employee Stock Purchase Plan 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 nine months ended July 31, 2019, employees purchased 5,411 shares at a purchase price of $3.43 per share pursuant to the plan.

 

Warrants

 

During the nine months ended July 31, 2019 we issued a warrant, expiring on November 1, 2023, to purchase 25,000 shares of common stock at $4.04 per share, vesting over 12 months, to a consultant for investor relations services.  We recorded consulting expense of approximately $64,000 during the nine months ended July 31, 2019 and approximately $21,000 during the three months ended July 31, 2019, based on the fair value of the warrant recognized on a straight-line basis over the vesting period.  

 

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In July 2018 we issued a warrant exercisable at $3.65 per share vested upon grant to purchase 25,000 shares of common stock to a consultant for investor relations services.  We recorded consulting expense of approximately $57,000 during the three months ended July 31, 2018, based on the fair value of the warrant.  This warrant was exercised in October 2018.

 

As of July 31, 2019, we also had warrants outstanding to purchase 10,000 shares and 10,000 shares of common stock at $9.25 and $13.875 per share, respectively, expiring on August 19, 2019 and warrants to purchase 500,000 shares of common stock at $5.03 per share 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, 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 July 31, 2019:

 

Level 1

Level 2

Level 3

Total

Money market funds –  

    Cash and cash equivalents

$

 

3,370,661

$

      

-

$

      

-

$

3,370,661

Certificates of deposit –

    Cash and cash equivalents

-

750,000

-

750,000

 Short-term investments

 

-

 

2,100,000

 

-

 

 2,100,000

Total financial assets

$

3,370,661

$

2,850,000

$

-

$

6,220,661

 

20


Table of Contents

 

The following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of October 31, 2018:

 

 

 

Level 1

Level 2

Level 3

Total

Money market funds –  

    Cash and cash equivalents

$

 

2,031,331

$

      

-

$

      

-

$

2,031,331

Certificates of deposit –

    Cash and cash equivalents

-

750,000

-

750,000

 Short-term investments

 

-

 

2,000,000

 

-

 

2,000,000

Total financial assets

$

2,031,331

$

2,750,000 

$

-

$