XML 56 R9.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
--- | ---
Oct. 31, 2019
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 and majority 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 two years ended October 31, 2019:
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)
Net loss attributable to noncontrolling interest |  | (171,598)
Balance October 31, 2019 | $ | (422,975)
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 using the modified retrospective method. 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. Accordingly, the performance obligations from these agreements were satisfied and 100% of the revenue was recognized upon the execution of the agreements. The adoption of ASU 2014-09 had no impact on revenue recognized. 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 consolidated statements of operations. Research and Development Expenses Research and development expenses, consisting primarily of employee compensation, payments to third parties for research and development activities and other direct costs associated with developing a platform for non-invasive blood tests for early detection of cancer, developing immuno-therapy drugs against cancer and development of our breast cancer vaccine, 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, 2019:
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Money market funds – Cash and cash equivalents | $ | 2,706,944 |  | $ | - |  | $ | - |  | $ | 2,706,944
Certificates of deposit – Cash and cash equivalents |  | 500,000 |  |  | - |  |  | - |  |  | 500,000
Short term investments |  | - |  |  | 2,350,000 |  |  | - |  |  | 2,350,000
Total financial assets | $ | 3,206,944 |  | $ | 2,350,000 |  | $ | - |  | $ | 5,556,944
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
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, 2019 and 2018, we had certificates of deposit with maturities greater than 90 days and less than 12 months when acquired of $2,350,000 and $2,000,000, 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, 2019 and 2018. We recorded patent amortization expense of approximately $419,000 and $325,000, respectively, during the years ended October 31, 2019 and 2018. In evaluating the carrying amount of capitalized patents at October 31, 2018, we determined that a write-down of the carrying amount of approximately $583,000, to a carrying value of approximately $838,000, should be recorded as of October 31, 2018. In evaluating the carrying amount of capitalized patents at January 31, 2019, we determined that 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 write-downs were based on estimated undiscounted future cash flows of the capitalized patents compared to the carrying value. 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 October 31, 2019, we cannot reasonably determine an estimate of any such future cash flows. The carrying value of capitalized patents has been amortized to $-0- as of October 31, 2019. Property and equipment We capitalize computers and test equipment used in our cancer diagnostics and therapeutics programs and charge depreciation on a straight-line basis over 60 months. Equipment purchases during the years ended October 31, 2019 and 2018 were approximately $175,000 and $38,000, respectively. We recorded depreciation expense of approximately $48,000 and 18,000, respectively, during the years ended October 31, 2019 and 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 $3,185,000 and $1,959,000, during the years ended October 31, 2019 and 2018, respectively. Included in stock-based compensation cost for service-based options granted to employees and directors during the years ended October 31, 2019 and 2018 was approximately $3,166,000 and $785,000, respectively, related to the amortization of compensation cost for stock options granted in prior periods but not yet vested. As of October 31, 2019, there was unrecognized compensation cost related to non-vested service-based stock options granted to employees and directors of approximately $5,122,000, which will be recognized over a weighted-average period of 1.6 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 $376,000 and $3,759,000 during the years ended October 31, 2019 and 2018, respectively. Included in stock-based compensation cost related to market condition stock options granted to employees during the years ended October 31, 2019 and 2018 was approximately $376,000 and $-0-, respectively, related to the amortization of compensation cost for stock options granted in prior periods but not yet vested. As of October 31, 2019, there was no unrecognized compensation cost related to market condition stock options. 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 consulting expense, related to service based and performance-based stock options granted to consultants, during the years ended October 31, 2019 and 2018 of approximately $113,000 and $261,000, respectively. Included in stock-based consulting expense for the years ended October 31, 2019 and 2018 was approximately $99,000 and $47,000, respectively, related to compensation cost for stock options granted in prior periods but not yet vested. As of October 31, 2019, there was unrecognized consulting expense related to non-vested stock options granted to consultants, related to service-based options of approximately $274,000, which will be recognized over a weighted-average period of 2.1 years. Fair Value Determination We use the Black-Scholes pricing model in estimating the fair value of stock options granted to employees, directors and consultants which vest over a specific period of time. The stock options we granted during the year ended October 31, 2019 consisted of awards with 5-year and 10-year terms that vest over 12 to 36 months. 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 following weighted average assumptions were used in estimating the fair value of stock options granted during the years ended October 31, 2019 and 2018:
| For the Year Ended October 31,
| 2019 |  | 2018
Weighted average fair value at grant date | $3.87 |  | $3.31
Valuation assumptions: |  |  |
Expected life (years) | 5.47 |  | 5.74
Expected volatility | 116.72% |  | 124.94%
Risk-free interest rate | 1.61% |  | 2.80%
Expected dividend yield | 0% |  | 0%
The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. For employees and directors, 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. 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 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. 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 years ended October 31, 2019 and 2018 we recorded compensation expense related to the restricted stock award of approximately $1,954,000 and $2,860,000. We did not issue any restricted stock awards during fiscal year 2019. As of October 31, 2019, there was no unrecognized compensation cost related to the restricted stock awards. During the year ended October 31, 2018, we issued 5,347 shares of common stock vested at date of grant to consultants for services rendered. We accounted for the stock awards in accordance with ASC 505-50 and recognized expense based on the grant date market price of the underlying common stock. We recorded consulting expense for the year ended October 31, 2018 of approximately $15,000 for the shares of common stock issued to consultants. We did not issue any stock awards to consultants during fiscal year 2019. Warrants For warrants granted to consultants for services rendered we estimate the fair value using the Black-Scholes pricing model on the date of grant. During the years ended October 31, 2019 and 2018 we recorded consulting expense, based on the fair value, of approximately $85,000 and $57,000, respectively, for warrants granted 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, 2019 and 2018, were options to purchase 7,632,068 and 7,405,868 shares, respectively, and warrants to purchase 525,000 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 other than the discharge of a disputed trade payable. The Company discharged the approximately $337,000 disputed liability upon the expiration of the vendor's statutory right to pursue collection of the disputed liability. 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. The adoption of ASU 2014-09 did not have a material impact on our consolidated financial statements, other than required additional disclosure of accounting policies See disclosure above of our revenue recognition policy. 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. The adoption of this guidance will not have a material impact on our consolidated financial statements, other than additional 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 fiscal year 2019. Two licensees accounted for 67% and 33%, respectively, of revenues from patent licensing during fiscal year 2018.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration