# Anixa Biosciences Inc: Form 10-Q for the period ended Jul 31, 2022 - Company: [Anixa Biosciences Inc](/companies/anix.md) (CIK 715446) - Form: 10-Q - Filed: 2022-09-09 - Accepted by EDGAR: Sep 9, 2022, 16:15 ET - Period: 2022-07-31 - Accession: 0001493152-22-025490 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/715446/000149315222025490/form10-q.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/715446/000149315222025490/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2022-07-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Research and development | 3 months, 2022-05-01 to 2022-07-31 | $1.4m | us-gaap:ResearchAndDevelopmentExpense | | Research and development | 9 months, 2021-11-01 to 2022-07-31 | $5.0m | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 3 months, 2022-05-01 to 2022-07-31 | −$2.8m | us-gaap:OperatingIncomeLoss | | Operating income | 9 months, 2021-11-01 to 2022-07-31 | −$10.3m | us-gaap:OperatingIncomeLoss | | Net income | 3 months, 2022-05-01 to 2022-07-31 | −$2.7m | us-gaap:NetIncomeLoss | | Net income | 9 months, 2021-11-01 to 2022-07-31 | −$10.1m | us-gaap:NetIncomeLoss | | Basic EPS | 3 months, 2022-05-01 to 2022-07-31 | −$0.09 | us-gaap:EarningsPerShareBasic | | Basic EPS | 9 months, 2021-11-01 to 2022-07-31 | −$0.33 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 3 months, 2022-05-01 to 2022-07-31 | 30,451 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Diluted shares (weighted) | 9 months, 2021-11-01 to 2022-07-31 | 30,244 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 9 months, 2021-11-01 to 2022-07-31 | −$4.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Cash and equivalents | at 2022-07-31 | $24.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2022-07-31 | $32.3m | us-gaap:AssetsCurrent | | Total assets | at 2022-07-31 | $32.6m | us-gaap:Assets | | Current liabilities | at 2022-07-31 | $1.5m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2022-07-31 | $1.7m | us-gaap:Liabilities | | Shareholders' equity | at 2022-07-31 | $31.7m | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 20,478 characters. Information included in this Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results. We generally use the words “believes,” “expects,” “intends,” “plans,” “anticipates,” “likely,” “will” and similar expressions to identify forward-looking statements. Such forward-looking statements, including those concerning our expectations, involve risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and factors include, but are not limited to, those factors set forth in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021 and the condensed consolidated financial statements included in this Report. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this Report. ### GENERAL We discuss the description of our business in the Notes to our Condensed Consolidated Financial Statements. #### RESULTS OF OPERATIONS ### Three months ended July 31, 2022 compared with three months ended July 31, 2021 ### Revenue We had no revenue during the three months ended July 31, 2022 and 2021. Over the past several years, our revenue, if any, 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 intend 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. ### Inventor Royalties, Contingent Legal Fees, Litigation and Licensing Expenses We had no inventor royalties, contingent legal fees, litigation and licensing expenses during the three-month periods ended July 31, 2022 and 2021. ### Research and Development Expenses Research and development expenses are related to the development of our cancer therapeutics and vaccine programs and our anti-viral drug program, and decreased by approximately $722,000 to approximately $1,445,000 in the three months ended July 31, 2022, from approximately $2,167,000 in the three months ended July 31, 2021. The decrease in research and development expenses was primarily due to a decrease in employee stock option compensation expense of approximately $899,000, a decrease in outside research and development related to our CART-T therapeutics program of approximately $79,000, offset by an increase of approximately $139,000 in employee compensation and related costs, other than stock option compensation expense, and an increase of approximately $134,000 in outside research and development related to our anti-viral drug program. Research and development expenses incurred in the three months ended July 31, 2022 associated with each of our development programs consisted of approximately $534,000 for cancer vaccines, approximately $483,000 for anti-viral therapeutics and approximately $428,000 for CAR-T therapeutics. ### General and Administrative Expenses General and administrative expenses decreased by approximately $869,000 to approximately $1,352,000 in the three months ended July 31, 2022, from approximately $2,221,000 in the three months ended July 31, 2021. The decrease in general and administrative expenses was primarily due to a decrease in employee compensation and related costs, other than stock option compensation expense, of approximately $69,000 and a decrease in directors stock option expense of approximately $804,000. ### Interest Income Interest income increased to approximately $22,000 in the three months ended July 31, 2022 compared to approximately $0 in the three months ended July 31, 2021, due primarily to an increase in interest rates. ### Net Loss Attributable to Noncontrolling Interest The net loss attributable to noncontrolling interest, representing Wistar’s 5% ownership interest in Certainty’s net loss, was approximately $29,000 and $54,000, respectively, in the three months ended July 31, 2022 and 2021. ### Nine months ended July 31, 2022 compared with nine months ended July 31, 2021 ### Revenue We had no revenue during the nine months ended July 31, 2022. For the nine months ended July 31, 2021, we recorded revenue of approximately $513,000 from one license agreement. The license agreement provided for a one-time, non-recurring, lump sum payment in exchange for a non-exclusive retroactive and future license, and covenant not to sue. Pursuant to the terms of the agreement, 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. Accordingly, the performance obligations from this license agreement were satisfied and 100% of the revenue was recognized upon execution of the license agreement. As discussed in Note 1 to our condensed consolidated financial statements, as part of our legacy operations, the Company remains engaged in limited patent licensing activities which we do not expect to be a significant part of our ongoing operations or revenue, nor do we expect these activities to require material financial resources or attention of senior management. 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 intend 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. ### Inventor Royalties, Contingent Legal Fees, Litigation and Licensing Expenses We had no inventor royalties, contingent legal fees, litigation and licensing expenses during the nine-month period ended July 31, 2022. Inventor royalties, contingent legal fees, litigation and licensing expenses for the nine months ended July 31, 2021 were approximately $385,000. Inventor royalties and contingent legal fees are expensed in the period that the related revenues are recognized. Litigation and licensing expenses related to patent assertion, other than contingent legal fees, are expensed in the period incurred. ### Research and Development Expenses Research and development expenses are related to the development of our cancer therapeutics and vaccine programs and our anti-viral drug program, and increased by approximately $1,001,000 to approximately $5,018,000 in the nine months ended July 31, 2022, from approximately $4,017,000 in the nine months ended July 31, 2021. The increase in research and development expenses was primarily due to an increase in employee stock option compensation expense of approximately $547,000, an increase in employee compensation and related costs, other than stock option compensation expense, of approximately $479,000, an increase in outside research and development expense related to our anti-viral drug program of approximately $231,000, an increase in outside research and development expense related to our cancer vaccine programs of approximately $75,000, offset by a decrease of approximately $259,000 in outside research and development related to our CAR-T therapeutics program and a decrease in license fees of approximately $110,000. Research and development expenses incurred in the nine months ended July 31, 2022 associated with each of our development programs consisted of approximately $1,937,000 for cancer vaccines, approximately $1,880,000 for CAR-T therapeutics, and approximately $1,201,000 for anti-viral therapeutics. ### General and Administrative Expenses General and administrative expenses increased by approximately $78,000 to approximately $5,248,000 in the nine months ended July 31, 2022, from approximately $5,170,000 in the nine months ended July 31, 2021. The increase in general and administrative expenses was primarily due to an increase in employee stock option compensation expense of approximately $536,000, an increase in investor and public relations expense of approximately $419,000, an increase employee compensation and related costs, other than stock option compensation expense, of approximately $294,000, offset by a decrease in directors stock option expense of approximately $958,000, a decrease in consultant stock option and warrant expense of approximately $138,000 and, as a result of a reduction in the number of directors, a decrease in directors fees of approximately $75,000. ### Interest Income Interest income increased to approximately $24,000 in the nine months ended July 31, 2022 compared to approximately $2,000 in the nine months ended July 31, 2021, due primarily to an increase in interest rates. ### Net Loss Attributable to Noncontrolling Interest The net loss attributable to noncontrolling interest, representing Wistar’s 5% ownership interest in Certainty’s net loss, was approximately $123,000 and $116,000, respectively, in the nine months ended July 31, 2022 and 2021. ### LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are cash, cash equivalents and short-term investments. Based on currently available information as of September 9, 2022, 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 desire or be required to obtain more working capital. We may seek to obtain working capital during our fiscal year 2022 or thereafter through sales of our equity securities (including, but not limited to, sales through an at-the-market offering program under a universal shelf registration statement) 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. During the nine months ended July 31, 2022, cash used in operating activities was approximately $4,899,000. Cash used in investing activities was approximately $811,000, resulting from the purchase of short term investments totaling approximately $11,159,000, which was offset by the proceeds on maturities of short term investments of approximately $10,348,000. Cash provided by financing activities was approximately $836,000, resulting from proceeds from exercise of stock options of approximately $829,000 and proceeds from the sale of common stock pursuant to employee stock purchase plan of approximately $7,000. As a result, our cash, cash equivalents, and short-term investments at July 31, 2022 decreased approximately $4,063,000 to approximately $31,664,000 from approximately $35,727,000 at the end of fiscal year 2021. ### CRITICAL ACCOUNTING POLICIES The Company’s condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing these financial statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported in our condensed consolidated financial statements. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates and make changes accordingly. We believe that, of the significant accounting policies discussed in Note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021, the following accounting policies require our most difficult, subjective or complex judgments: - Revenue Recognition; and - Stock-Based Compensation. ### 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. Our revenue recognition policy requires us to make certain judgments and estimates in connection with the accounting for revenue. Such areas may include determining the existence of a contract and identifying each party’s rights and obligations to transfer goods and services, identifying the performance obligations in the contract, determining the transaction price and allocating the transaction price to separate performance obligations, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct from other promised goods or services and evaluating whether a license transfers to a customer at a point in time or over time. Our revenue arrangements provide for the payment, within 30 days of execution of the agreement, of contractually determined, one-time, paid-up license fees in settlement of litigation and in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company. These arrangements typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by the Company, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. In such instances, the intellectual property rights granted have been perpetual in nature, extending until the expiration of the related patents. Pursuant to the terms of these agreements, we have no further obligations with respect to the granted intellectual property rights, including no obligation to maintain or upgrade the technology, or provide future support or services. Licensees obtained control of the intellectual property rights they have acquired upon execution of the agreement. Accordingly, the performance obligations from these agreements were satisfied and 100% of the revenue was recognized upon the execution of the agreements. ### Stock-Based Compensation The compensation cost for service-based stock options granted to employees, directors and consultants is measured at the grant date, based on the fair value of the award using the Black-Scholes pricing model, and is recognized as an expense on a straight-line basis over the requisite service period (the vesting period of the stock option) which is one to four years. For employee options vesting if the trading price of the Company’s common stock exceeds 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. For stock awards granted to employees and directors that vest at date of grant, we recognize expense based on the grant date market price of the underlying common stock. 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). The Black-Scholes pricing model and the Monte Carlo Simulation we use to estimate fair value requires valuation assumptions of expected term, expected volatility, risk-free interest rates and expected dividend yield. The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. For employees, we use the simplified method, which is a weighted average of the vesting term and contractual term, to determine expected term. The simplified method was adopted since we do not believe that historical experience is representative of future performance because of the impact of the changes in our operations and the change in terms from historical options. For consultants, we use the contract term for expected term. Under the Black-Scholes pricing model, we estimated the expected volatility of our shares of common stock based upon the historical volatility of our share price over a period of time equal to the expected term of the grants. We estimated the risk-free interest rate based on the implied yield available on the applicable grant date of a U.S. Treasury note with a term equal to the expected term of the underlying grants. We made the dividend yield assumption based on our history of not paying dividends and our expectation not to pay dividends in the future. We will reconsider use of the Black-Scholes pricing model and the Monte Carlo Simulation if additional information becomes available in the future that indicates another model would be more appropriate. If factors change and we employ different assumptions in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current period. ### EFFECT OF RECENTLY ISSUED PRONOUNCEMENTS We do not believe that any of the recently issued accounting pronouncements will have a material effect on the Company’s consolidated financial statements. See Note 6 to the accompanying condensed consolidated financial statements. ## Market risk As filed, 403 characters. As of July 31, 2022, we had investments in short-term, fixed rate and highly liquid instruments that have historically been reinvested when they mature throughout the year. Although our existing instruments are not considered at risk with respect to changes in interest rates or markets for these instruments, our rate of return on these securities could be affected at the time of reinvestment, if any. ## Controls and procedures As filed, 832 characters. We carried out an evaluation, under the supervision and with the participation of our management including our Chief Executive Officer and our President, Chief Operating Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13(a)-15(b) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and our President, Chief Operating Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this Report. There was no change in our internal control over financial reporting during the third quarter of fiscal year 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ## Risk factors As filed, 154 characters. There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021. Filed Sep 9, 2022. Source: SEC EDGAR, the filing index for accession 0001493152-22-025490. Last ingested by Listed: Nov 2, 2026, 08:56 ET. No prices; not investment advice.