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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Oct. 31, 2018
Accounting Policies [Abstract] |
Significant Accounting Policies [Text Block] | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include the accounts of Anixa Biosciences, Inc. and its wholly owned subsidiaries. All intercompany transactions have been eliminated. 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 year ended October 31, 2018:
Balance October 31, 2017 | $ | -
Issuance of noncontrolling interest in Certainty |  | (4,318)
Net loss attributable to noncontrolling interest |  | (247,059)
Balance October 31, 2018 | $ | (251,377)
Revenue Recognition Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability of amounts is reasonably assured. Patent Licensing In certain instances, our past revenue arrangements have provided for the payment of contractually determined 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 had no further obligations. As such, the earnings process was complete and revenue has been recognized upon the execution of the agreement, when collectability was reasonably assured, and when all other revenue recognition criteria were met. Inventor Royalties and Contingent Legal Fees Inventor royalties and contingent legal fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized. 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 a platform for non-invasive blood tests for early detection of cancer and developing immuno-therapy drugs against cancer, are expensed in the consolidated financial statements in the year incurred. Fair Value Measurements Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. In accordance with ASC 820, 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 consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: Level 1 – Financial instruments 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 instruments 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 instruments 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 instrument. 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 |  | 2,781,331 |  |  | 2,000,000 |  |  | - |  |  | 4,781,331
The following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of October 31, 2017:
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Money market funds – Cash and cash equivalents | $ | 3,079,282 |  | $ | - |  | $ | - |  | $ | 3,079,282
Certificates of deposit – Short term investments |  | - |  |  | 3,500,000 |  |  | - |  |  | 3,500,000
Total financial assets | $ | 3,079,282 |  | $ | 3,500,000 |  | $ | - |  | $ | 6,579,282
Our non-financial assets that are measured on a non-recurring basis include our patents and property and equipment 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, accounts payable and accrued expenses approximates their individual carrying amounts due to the short-term nature of these measurements. Cash and Cash Equivalents Cash equivalents consists of highly liquid, short-term investments with original maturities of three months or less when purchased. Short-term Investments At October 31, 2018 and 2017, we had certificates of deposit with maturities greater than 90 days and less than 12 months when acquired of $2,000,000 and $3,500,000, respectively, that were classified as short-term investments and reported at fair value. Patents Our only identifiable intangible assets are patents and patent rights. 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 years ended October 31, 2018 and 2017. We recorded patent amortization expense of approximately $325,000 during each of the years ended October 31, 2018 and 2017. As of October 31, 2018, we recorded a write-down of the carrying amount of capitalized patents of approximately $583,000. See Impairment below. Impairment Long-lived assets, including intangible assets that are amortized, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates potential impairment by comparing the carrying amount of the assets with the estimated undiscounted future cash flows associated with them. Should the analysis indicate that an asset is not recoverable, the carrying value of the asset would be reduced to fair value and a corresponding charge would be recognized. In evaluating the carrying amount of capitalized patents at October 31, 2018, we determined that based on estimated undiscounted future cash flows a write-down of the carrying amount of approximately $583,000 should be recorded as of October 31, 2018. 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. Stock-Based Compensation We maintain stock equity incentive plans under which we may grant non-qualified stock options, incentive stock options, stock appreciation rights, stock awards, performance and performance-based awards, or stock units to employees, non-employee directors and consultants. Stock Option Compensation Expense We account for stock options granted to employees and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service based options on the date of grant, using the Black-Scholes pricing model. We recognize compensation expense for stock option awards over the requisite or implied service period of the grant. We recorded stock-based compensation expense, related to service based stock options granted to employees and directors, of approximately $1,959,000 and $1,223,000, during the years ended October 31, 2018 and 2017, respectively. Included in stock-based compensation cost for service based options granted to employees and directors during the years ended October 31, 2018 and 2017 was approximately $785,000 and $967,000, respectively, related to the amortization of compensation cost for stock options granted in prior periods but not yet vested. As of October 31, 2018, there was unrecognized compensation cost related to non-vested service based stock options granted to employees and directors of approximately $6,920,000, which will be recognized over a weighted-average period of 2.4 years. For stock options granted to employees 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. The assumptions used in the Monte Carlo Simulation were stock price on date of grant and exercise price of $3.70, contract term of 10 years, expected volatility of 119.6% and risk-free interest rate of 2.97%. We recorded stock-based compensation expense related to market condition stock options granted to employees of approximately $3,759,000 during the year ended October 31, 2018. As of October 31, 2018, the unrecognized compensation cost related to market condition stock options was approximately $375,000, which will be recognized during the first quarter of fiscal year 2019. We did not have any market condition stock options in fiscal year 2017. We account for stock options granted to consultants using the accounting guidance included in ASC 505-50 “Equity-Based Payments to Non-Employees” (“ASC 505-50”). In accordance with ASC 505-50, we estimate the fair value of service based stock options and performance based options at each reporting period, using the Black-Scholes pricing model. We recognize compensation expense for service based stock options over the requisite or implied service period of the grant. For performance based awards, compensation expense is recognized over the requisite or implied service period if it is probable that the performance condition will be satisfied. We recorded consulting expense, related to service based and performance based stock options granted to consultants, during the years ended October 31, 2018 and 2017 of approximately $261,000 and $3,000, respectively. Included stock-based consulting expense for the year ended October 31, 2018 was approximately $47,000 related to compensation cost for stock options granted in prior periods but not yet vested. Stock-based consulting expense for the year ended October 31, 2017 did not include any amortization of compensation cost for stock options granted in prior periods. As of October 31, 2018, there was unrecognized consulting expense related to non-vested stock options granted to consultants, related to service based options of approximately $249,000, which will be recognized over a weighted-average period of 2.7 years. Fair Value Determination We use the Black-Scholes pricing model in estimating the fair value of stock options granted to employees and directors which vest over a specific period of time. The stock options we granted during the year ended October 31, 2018 consisted of awards with 10-year terms that vest over 12 to 36 months. The stock options we granted during the year ended October 31, 2017 consisted of awards with 10-year terms that vest over 6 to 48 months The following weighted average assumptions were used in estimating the fair value of stock options granted during the years ended October 31, 2018 and 2017:
| For the Year Ended October 31,
| 2018 |  | 2017
Weighted average fair value at grant date | $3.31 |  | $1.72
Valuation assumptions: |  |  |
Expected life (years) | 5.74 |  | 5.63
Expected volatility | 124.94% |  | 119.2%
Risk-free interest rate | 2.80% |  | 1.94%
Expected dividend yield | 0% |  | 0%
The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. 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 which vested immediately to terms including vesting periods of up to three years. 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 options. 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. Under ASC 718, the amount of stock-based compensation expense recognized is based on the portion of the awards that are ultimately expected to vest. Accordingly, if deemed necessary, we reduce the fair value of the stock option awards for expected forfeitures, which are forfeitures of the unvested portion of surrendered options. Based on our historical experience and future expectations, we have not reduced the amount of stock-based compensation expenses for anticipated forfeitures. We will reconsider use of the Black-Scholes pricing model 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 the application of ASC 718 in future periods, the compensation expense that we record under ASC 718 may differ significantly from what we have recorded in the current period. Stock Award Compensation Expense We account for stock awards granted to employees and directors in accordance with ASC 718. For stock awards vested at date of grant we recognize expense based on the grant date market price of the underlying common stock. During the year ended October 31, 2017 we issued 200,000 shares vested at date of grant to directors for services rendered and recorded an expense of $454,000. We did not issue any stock awards vested at date of grant during fiscal year 2018. On May 8, 2018, a restricted stock award of 1,500,000 shares of common stock was granted 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). The assumptions used in the Monte Carlo Simulation were stock price on date of grant of $3.70, contract term of 3.06 years, expected volatility of 128.8% and risk-free interest rate of 2.66%. During the year ended October 31, 2018 we recorded compensation expense related to the restricted stock award of approximately $2,860,000. As of October 31, 2018, the unrecognized compensation cost related to the restricted stock award was approximately $1,954,000, which will be recognized over future periods through the second quarter of fiscal 2019. We did not issue any restricted stock awards during fiscal year 2017. We account for stock awards granted to consultants in accordance with ASC 505-50. For stock awards vested at date of grant we recognize expense based on the grant date market price of the underlying common stock. During the years ended October 31, 2018 and 2017, we issued 9,463 shares and 5,347 shares, respectively, of common stock vested at date of grant to consultants for services rendered. We recorded consulting expense for the years ended October31, 2018 and 2017 of approximately $15,000 and $32,000, respectively, for the shares of common stock issued to consultants. Net Loss Per Share of Common Stock In accordance with ASC 260, “Earnings Per Share”, 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 years 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 years ended October 31, 2018 and 2017, were options to purchase 7,405,868 and 3,447,846 shares, respectively, and warrants to purchase 829,400 shares and 829,400 shares, respectively. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are used for, but not limited to, determining stock-based compensation, asset impairment evaluations, tax assets and liabilities, license fee revenue, the allowance for doubtful accounts, depreciation lives and other contingencies. Actual results could differ from those estimates. Subsequent Events We evaluated all events and transactions that occurred after the balance sheet date through the date of this filing. During this period, the Company did not have any material subsequent events that impacted its financial statements. Effect of Recently Issued Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers. This amendment updates addressing revenue from contracts with customers, which clarifies existing accounting literature relating to how and when a company recognizes revenue. Under the standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. This standard update was effective for interim and annual reporting periods beginning after December 15, 2016, and was to be applied retrospectively or the cumulative effect as of the date of adoption, with early application not permitted. In July 2015, a one-year deferral of the effective date of the new guidance was approved. The Company adopted ASU 2014-09 on November 1, 2018. We do not expect the adoption of ASU 2014-09 to have a material impact on our consolidated financial statements. Adoption of ASU 2014-09 will require additional disclosure of accounting policies. In February 2016, the FASB issued Accounting Standards Update 2016-02 (“ASU 2016-02”) which requires lessees to recognize most leases on the balance sheet. This is expected to increase both reported assets and liabilities. The new lease standard does not substantially change lessor accounting. For public companies, the standard will be effective for the first interim reporting period within annual periods beginning after December 15, 2018, although early adoption is permitted. Lessees and lessors will be 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, using a modified retrospective transition method. The requirements of this standard include a significant increase in required disclosures. The disclosure requirements of ASU 2016-02 will be effective for the Company on November 1, 2019. We began a detailed assessment of the impact that this guidance will have on our consolidated financial statements and related disclosures, and our analysis is currently ongoing. In May 2017, the FASB issued Accounting Standards Update 2017-09 (“ASU 2017-09”) that provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. This update is effective for all entities for fiscal years beginning after December 15, 2017, and interim periods within those years. The Company adopted ASU 2017-09 on November 1, 2018. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures. In June 2018, the FASB issued Accounting Standards Update 2018-07 (“ASU 2018-07”), Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This amendment expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. This standard update is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. ASU 2018-07 will be effective for the Company on November 1, 2019. We do not expect the adoption of ASU 2018-07 to have a material impact on our consolidated financial statements and related disclosures. Concentration of Credit Risks Financial instruments that potentially subject us to concentrations of credit risk are cash equivalents, short-term investments and accounts receivable. Cash equivalents are primarily highly rated money market funds. Short-term investments are certificates of deposit within federally insured limits. Where applicable, management reviews our accounts receivable and other receivables for potential doubtful accounts and maintains an allowance for estimated uncollectible amounts. Our policy is to write-off uncollectable amounts at the time it is determined that collection will not occur. One licensee accounted for 100% of revenues from patent licensing activities during each fiscal year 2018 and 2017.

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