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 January 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______

Commission file number 001-37492

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 ☒ 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 such files).

Yes ☒ 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 ☒		Smaller reporting company ☒		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 ☒

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

On March 11, 2022 the registrant had outstanding 30,152,319 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.		1

	Condensed Consolidated Balance Sheets as of January 31, 2022 (Unaudited) and October 31, 2021	1

	Condensed Consolidated Statements of Operations (Unaudited) for the three months ended January 31, 2022 and 2021	2

	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the three months ended January 31, 2022 and 2021	3

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended January 31, 2022 and 2021	4

	Notes to Condensed Consolidated Financial Statements (Unaudited)	5

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	19

	Item 3. Quantitative and Qualitative Disclosures About Market Risk.	23

	Item 4. Controls and Procedures.	23

PART II. OTHER INFORMATION

	Item 1. Legal Proceedings.	24

	Item 1A. Risk Factors.	24

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	24

	Item 3. Defaults Upon Senior Securities.	24

	Item 4. Mine Safety Disclosures.	24

	Item 5. Other Information.	24

	Item 6. Exhibits	24

SIGNATURES		25

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	(Unaudited)
	January 31, 2022			October 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	29,781		$	29,128
Short-term investments		4,749			6,599
Prepaid expenses and other current assets		464			276
Total current assets		34,994			36,003

Operating lease right-of-use asset		244			254
Total assets	$	35,238		$	36,257

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	504		$	136
Accrued expenses		1,242			1,095
Operating lease liability		41			39
Total current liabilities		1,787			1,270

Operating lease liability, non-current		209			220
Total liabilities		1,996			1,490

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		-			-
Preferred stock		-			-
Common stock, par value $.01 per share; 100,000,000 shares authorized; 30,132,319 and 30,050,894 shares issued and outstanding as of January 31, 2022 and October 31, 2021, respectively		301			301
Additional paid-in capital		242,281			239,927
Accumulated deficit		(208,619	)		(204,790	)
Total shareholders’ equity		33,963			35,438
Noncontrolling interest (Note 1)		(721	)		(671	)
Total equity		33,242			34,767
Total liabilities and equity	$	35,238		$	36,257

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

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


	For the Three Months Ended January 31,
	2022			2021

Revenue	$	-		$	513

Operating costs and expenses:
Inventor royalties, contingent legal fees, litigation and licensing expenses		-			385
Research and development expenses (including non-cash share-based compensation expenses of $1,276 and $290, respectively)		1,838			828
General and administrative expenses (including non-cash share-based compensation expenses of $1,078 and $696, respectively)		2,042			1,533
Total operating costs and expenses		3,880			2,746

Loss from operations		(3,880	)		(2,233	)

Interest income		1			1

Net loss		(3,879	)		(2,232	)

Less: Net loss attributable to noncontrolling interest		(50	)		(24	)

Net loss attributable to common shareholders		(3,829	)		(2,208	)

Net loss per common share attributable to common shareholders:
Basic and diluted	$	(0.13	)	$	(0.09	)

Weighted average common shares outstanding:
Basic and diluted		30,125			25,165

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

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

FOR THE THREE MONTHS ENDED JANUARY 31, 2022 (UNAUDITED)


					Additional					Total			Non-
	Common Stock				Paid-in		Accumulated			Shareholders’			controlling			Total
	Shares		Par Value		Capital		Deficit			Equity			Interest			Equity

Balance, October 31, 2021		30,051	$	301	$	239,927	$	(204,790	)	$	35,438		$	(671	)	$	34,767
Stock option compensation to employees and directors		-		-		2,135		-			2,135			-			2,135
Stock options and warrants issued to consultants		-		-		219		-			219			-			219
Common stock issued upon exercise of stock options and warrants		81		-		-		-			-			-			-
Common stock issued upon exercise of stock options
Common stock issued upon exercise of stock options, shares
Common stock issued in at-the-market offering, net of offering expenses
Common stock issued in at-the-market offering, net of offering expenses, shares
Net loss		-		-		-		(3,829	)		(3,829	)		(50	)		(3,879	)

Balance, January 31, 2022		30,132	$	301	$	242,281	$	(208,619	)	$	33,963		$	(721	)	$	33,242

FOR THE THREE MONTHS ENDED JANUARY 31, 2021 (UNAUDITED)

					Additional					Total			Non-
	Common Stock				Paid-in		Accumulated			Shareholders’			controlling			Total
	Shares		Par Value		Capital		Deficit			Equity			Interest			Equity

Balance, October 31, 2020		24,249	$	242	$	200,355	$	(191,836	)	$	8,761		$	(497	)	$	8,264
Stock option compensation to employees and directors		-		-		875		-			875			-			875
Stock options and warrants issued to consultants		-		-		111		-			111			-			111
Common stock issued upon exercise of stock options		30		-		104		-			104			-			104
Common stock issued in at-the-market offering, net of offering expenses of $185		1,900		20		5,937		-			5,957			-			5,957
Net loss		-		-		-		(2,208	)		(2,208	)		(24	)		(2,232	)

Balance, January 31, 2021		26,179	$	262	$	207,382	$	(194,044	)	$	13,600		$	(521	)	$	13,079

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

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	For the three months ended January 31,
	2022			2021
Cash flows from operating activities:
Reconciliation of net loss to net cash used in operating activities:
Net loss	$	(3,879	)	$	(2,232	)
Stock option compensation to employees and directors		2,135			875
Stock options and warrants issued to consultants		219			111
Gain on sale of equipment		-			(5	)
Amortization of operating lease right-to-use asset		10			14
Change in operating assets and liabilities:
Prepaid expenses and other current assets		(188	)		(270	)
Accounts payable		368			279
Accrued expenses		147			72
Operating lease liability		(9	)		(14	)
Net cash used in operating activities		(1,197	)		(1,170	)

Cash flows from investing activities:
Disbursements to acquire short-term investments		(3,499	)		(1,000	)
Proceeds from maturities of short-term investments		5,349			1,640
Proceeds from sale of equipment		-			35
Net cash provided by investing activities		1,850			675

Cash flows from financing activities:
Net proceeds from sale of common stock in an at-the-market offering		-			5,957
Proceeds from exercise of stock options		-			104
Net cash provided by financing activities		-			6,061

Net increase in cash and cash equivalents		653			5,566
Cash and cash equivalents at beginning of period		29,128			6,417
Cash and cash equivalents at end of period		29,781			11,983

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

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 developing therapies and vaccines that are focused on critical unmet needs in oncology and infectious disease. Our therapeutics programs include (i) the development of a chimeric endocrine receptor T-cell therapy, a novel form of chimeric antigen receptor T-cell (“CAR-T”) technology, initially focused on treating ovarian cancer, which is being developed at our subsidiary, Certainty Therapeutics, Inc. (“Certainty”), and (ii) the discovery and ultimately development of anti-viral drug candidates for the treatment of COVID-19 focused on inhibiting certain protein functions of the virus. Our vaccine programs include (i) the development of a preventative vaccine against triple negative breast cancer (“TNBC”), the most lethal form of breast cancer, as well other forms of breast cancer and (ii) a preventative vaccine against ovarian cancer.

Our subsidiary, 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”), the nation’s first independent biomedical research institute and a leading National Cancer Institute designated cancer research center, relating to Wistar’s chimeric endocrine receptor targeted therapy technology. We have initially focused on the development of a treatment for ovarian cancer, but we also may pursue applications of the technology for the development of treatments for additional solid tumors. The license agreement requires Certainty to make certain cash and equity payments to Wistar upon achievement of specific development milestones. With respect to Certainty’s equity obligations to Wistar, Certainty issued to Wistar shares of its common stock equal to five percent (5%) of the common stock of Certainty.

Certainty, in collaboration with the H. Lee Moffitt Cancer Center and Research Institute, Inc. (“Moffitt”), is advancing toward human clinical testing of the CAR-T technology licensed by Certainty from Wistar aimed initially at treating ovarian cancer. We submitted an Investigational New Drug (“IND”) application to the U.S. Food and Drug Administration (“FDA”) in March 2021 and in August 2021, we received authorization from the FDA to commence enrollment and treatment of patients in a Phase 1 clinical trial. We are performing the activities necessary to prepare for treatment of patients in the Phase 1 clinical trial, and we anticipate initiating the trial in the first calendar quarter of 2022. This study is a dose-escalation trial with two arms based on injection method—intraperitoneal or intravenous—to determine the maximum tolerated dose in patients with recurrent epithelial ovarian cancer and to assess persistence, expansion and efficacy of the modified T-cells. The study is being conducted at Moffitt and will consist of 24 to 48 patients who have received at least two prior lines of chemotherapy. The study is estimated to be completed in two to four years depending on multiple factors including when maximum tolerated dose is reached and the rate of patient recruitment.

In April 2020, we entered into a collaboration with OntoChem GmbH (“OntoChem”) to discover and ultimately develop anti-viral drug candidates against COVID-19. Through this collaboration, we utilized advanced computational methods, machine learning, and molecular modeling techniques to perform in silico screening of over 1.2 billion compounds in chemical libraries (including publicly available compounds and OntoChem’s proprietary libraries) to evaluate if any of these compounds could disrupt one of two key enzymes of SARS-CoV-2, the virus that causes the disease COVID-19.

The screening process resulted in the identification of multiple compounds that could potentially disrupt critical enzymes of the virus, including the virus’ main protease, M^pro. Several of these compounds were synthesized and tested in in vitro biological assays. Upon completion of these biological assays, we identified two of the most promising compounds and tested them in animal models. In these animal studies, the two compounds were compared to Remdesivir, which at the time the assays were performed was the only anti-viral drug authorized by the FDA for the treatment of COVID-19. The data showed that administration of the drugs to infected hamsters did not cause any noticeable adverse effects, and monitoring of weight and general animal behavior demonstrated comparable efficacy between each of our compounds and Remdesivir. Based on this promising data in the animal study, we directed our team to proceed to the next stage of drug development and we selected one of the compounds around which our team is performing combinatorial synthetic medicinal chemistry to evaluate whether potency can be increased and pharmacokinetics optimized.

In May 2021, after completion of the aforementioned animal studies, OntoChem assigned its rights and obligations related to this collaboration to MolGenie GmbH (“MolGenie”), a company spun-out from OntoChem focused on drug discovery and development. As a result of the MolGenie spin-out, there was no change in the personnel working on our project, and the assignment caused no interruptions to the program’s development.

While use of preventative vaccines is widespread throughout much of the developed world, we believe that there is and will continue to be a need for effective treatments for COVID-19. We believe that there are a number of factors that have limited the effectiveness, both in the near and long term, of the vaccines currently in use, including, but not limited to, vaccine persistence, viral escape and perceptions of long-term safety resulting in vaccine resistance. Furthermore, there are currently two new anti-viral treatments, Pfizer’s Paxlovid, which is a combination therapy consisting of the protease-inhibitor nirmatrelvir and the antiretroviral ritonavir and Merck’s polymerase-inhibitor molnupiravir, that have recently been authorized for emergency use in the U.S. These treatments use oral formulations, while all other currently authorized or approved treatments require intravenous administration. As the main component of Pfizer’s treatment is a protease-inhibitor targeting M^pro, it is most similar to our compounds, and we therefore conducted a head-to-head analysis via a Fluorescence Resonance Energy Transfer (FRET) assay that tested the ability of the compounds to inhibit the function of M^pro. The results of this head-to-head in vitro analysis suggest that our compounds may be five times more effective at inhibiting M^prothan Pfizer’s nirmatrelvir. Whereas we believe Pfizer’s Paxlovid is a repurposed drug based on research done on other viruses and not designed specifically for SARS-CoV-2, our compounds were designed specifically against the main protease of SARS-CoV-2 and at the current time we do not anticipate the need for a combination therapy.

We hold an exclusive worldwide, royalty-bearing license to use certain intellectual property owned or controlled by The Cleveland Clinic Foundation (“Cleveland Clinic”) relating to certain breast cancer vaccine technology developed at Cleveland Clinic. Utilizing this technology, we are working in collaboration with Cleveland Clinic to develop a method to vaccinate women against contracting breast cancer, focused specifically on TNBC. The focus of this vaccine is a specific protein, α-lactalbumin, that is only expressed during lactation in a healthy mother’s mammary tissue. This protein disappears when the mother is no longer lactating, but reappears in many forms of breast cancer, especially TNBC. Studies have shown that vaccinating against this protein prevents breast cancer in mice.

Following submission of an IND application with the FDA in November 2020, and the FDA’s subsequent authorization to proceed with clinical trials in December 2020, in October 2021, we commenced dosing patients in a Phase 1 clinical trial of our breast cancer vaccine. Funded by a U.S. Department of Defense grant, this study is a multiple-ascending dose Phase 1 trial to determine the maximum tolerated dose of the vaccine in patients with early-stage, triple-negative breast cancer as well as monitor immune response. The study is being conducted at Cleveland Clinic and will consist of 18 to 24 patients who have completed treatment for early-stage, triple-negative breast cancer within the past three years and are currently tumor-free but at high risk for recurrence. During the course of the study, participants will receive three vaccinations, each two weeks apart, and will be closely monitored for side effects and immune response. The study is estimated to be completed in the third calendar quarter of 2022.

In November 2020, we executed a license agreement with Cleveland Clinic pursuant to which the Company was granted an exclusive worldwide, royalty-bearing license to use certain intellectual property owned or controlled by Cleveland Clinic relating to certain ovarian cancer vaccine technology. This technology pertains to among other things, the use of vaccines for the treatment or prevention of ovarian cancers which express the anti-Mullerian hormone receptor 2 protein containing an extracellular domain (“AMHR2-ED”). In healthy tissue, this protein regulates growth and development of egg-containing follicles in the ovary. While expression of AMHR2-ED naturally and markedly declines after menopause, this protein is expressed at high levels in the ovaries of postmenopausal women with ovarian cancer. Researchers at Cleveland Clinic believe that a vaccine targeting AMHR2-ED could prevent the occurrence of ovarian cancer. We entered into a joint development agreement with Cleveland Clinic to advance this vaccine toward human clinical testing.

In May 2021, Cleveland Clinic was granted an award for our ovarian cancer vaccine technology by the National Cancer Institute’s (“NCI”) PREVENT program. The NCI is a part of the National Institutes of Health. The PREVENT program is a peer-reviewed agent development program designed to support preclinical development of innovative interventions and biomarkers for cancer prevention and interception towards clinical trials. The scientific and financial resources of the PREVENT program will be used for our ovarian cancer vaccine technology to perform virtually all pre-clinical research and development, manufacturing and IND-enabling studies. This work will be performed at NCI facilities, by NCI scientific staff and with NCI financial resources and will require no material financial expenditures by the Company, nor the transfer of any rights to the Company’s assets.

Over the next several quarters, we expect the development of our breast and ovarian cancer vaccines, our COVID-19 therapeutic discovery program and Certainty’s CAR-T technology to be the primary focus of the Company. As part of our legacy operations, the Company remains engaged in limited patent licensing activities regarding its liquid biopsy platform, as well as in the area of encrypted audio/video conference calling. We do not expect these activities to be a significant part of the Company’s ongoing operations nor do we expect these activities to require material financial resources or attention of senior management.

Over the past several years, our revenue was derived from technology licensing and the sale of patented technologies, including revenue from the settlement of litigation. We have not generated any revenue to date from our therapeutics or vaccine programs. In addition, while we pursue our therapeutics and vaccine programs, we may also make investments in and form new companies to develop additional emerging technologies. We do not expect to begin generating revenue with respect to any of our current therapy or vaccine programs in the near term. We hope to achieve a profitable outcome by eventually licensing our technologies to large pharmaceutical companies that have the resources and infrastructure in place to manufacture, market and sell our technologies as therapeutics or vaccines. The eventual licensing of any of our technologies may take several years, if it is to occur at all, and may depend on positive results from human clinical trials.

Funding and Management’s Plans

Based on currently available information as of March 11, 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 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 or through bank credit facilities or public or private debt from various financial institutions where possible. We cannot be certain that additional funding will be available on acceptable terms, or at all. If we do identify sources for additional funding, the sale of additional equity securities or convertible debt will result in dilution to our stockholders. We can give no assurance that we will generate sufficient cash flows in the future to satisfy our liquidity requirements or sustain future operations, or that other sources of funding, such as sales of equity or debt, would be available or would be approved by our security holders, if needed, on favorable terms or at all. If we fail to obtain additional working capital as and when needed, such failure could have a material adverse impact on our business, results of operations and financial condition. Furthermore, such lack of funds may inhibit our ability to respond to competitive pressures or unanticipated capital needs, or may force us to reduce operating expenses, which would significantly harm the business and development of operations.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and disclosures required by generally accepted accounting principles in annual financial statements have been omitted or condensed. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures included in our Annual Report on Form 10-K for the year ended October 31, 2021. The accompanying October 31, 2021 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by US GAAP. The condensed consolidated financial statements include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of our financial position as of January 31, 2022, and results of operations and cash flows for the interim periods represented. The results of operations for the three months ended January 31, 2022 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 three months ended January 31, 2022 (in thousands):

Balance, October 31, 2021	$	(671	)
Net loss attributable to noncontrolling interest		(50	)
Balance, January 31, 2022	$	(721	)

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.

Cost of Revenues

Cost of revenues include the costs and expenses incurred in connection with our patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external counsel, other patent-related legal expenses paid to external counsel and licensing and enforcement related research, consulting and other expenses paid to third-parties. These costs are included under the caption “Operating costs and expenses” in the accompanying condensed consolidated statements of operations.

Research and Development Expenses

Research and development expenses, consisting primarily of employee compensation, payments to third parties for research and development activities and other direct costs associated with developing immuno-therapy drugs against cancer, developing anti-viral drug candidates for COVID-19, developing our breast cancer vaccine, and developing our ovarian cancer vaccine, are expensed in the consolidated financial statements in the period incurred.

2.	STOCK BASED COMPENSATION

The Company maintains stock equity incentive plans under which the Company grants incentive stock options, non-qualified stock options, stock appreciation rights, stock awards, performance awards, or stock units to employees, directors and consultants.

Stock Option Compensation Expense

The compensation cost for service-based stock options granted to employees and directors is measured at the grant date, based on the fair value of the award using the Black-Scholes pricing model, and is expensed on a straight-line basis over the requisite service period (the vesting period of the stock option) which is one to four years. We recorded stock-based compensation expense related to service-based stock options granted to employees and directors of approximately $730,000 and $875,000 during the three months ended January 31, 2022 and 2021.

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 June 1, 2021, our Chairman, President and Chief Executive Officer and our Chief Operating Officer and Chief Financial Officer were awarded market condition stock options for 2,000,000 shares and 100,000 shares of common stock, respectively, that vest in four equal installments upon the Company’s share price achieving targets ranging from $5.00 to $8.00 per share, with implied service periods of three to fifteen months. We recorded market condition stock-based compensation expense during the three months ended January 31, 2022 and 2021 of approximately $1,405,000 and $0, respectively.

The compensation cost for service-based stock options granted to consultants is measured at the grant date, based on the fair value of the award using the Black-Scholes pricing model, and is expensed on a straight-line basis over the requisite service period (the vesting period of the stock option) which is one to three years. We recorded stock-based consulting expense related to stock options granted to consultants of approximately $109,000 and $54,000 during the three months ended January 31, 2022 and 2021, respectively.

Stock Option Plans

During the three months ended January 31, 2022, we had two stock option plans: the Anixa Biosciences, Inc. 2010 Share Incentive Plan (the “2010 Share Plan”) and the Anixa Biosciences, Inc. 2018 Share Incentive Plan (the “2018 Share Plan”), which were adopted by our Board of Directors on July 14, 2010 and January 25, 2018, respectively. The 2018 Share Plan was approved by our shareholders on March 29, 2018.

Stock Option Activity

During the three months ended January 31, 2022 and 2021, we granted options to purchase 30,000 shares and 1,130,000 shares of common stock, respectively, to employees and consultants, with exercise prices ranging from $2.83 to $3.24 per share, pursuant to the 2018 Share Plan. During the three months ended January 31, 2022 and 2021, stock options to purchase 100,000 shares of common stock, net of 53,091 shares withheld on a cashless exercise, and 29,880 shares of common stock, respectively, were exercised with aggregate proceeds of $0 and approximately $104,000, respectively.

2010 Share Plan

The 2010 Share Plan provided for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to employees, directors and consultants. In accordance with the provisions of the 2010 Share Plan, the plan terminated with respect to the ability to grant future awards on July 14, 2020. Information regarding the 2010 Share Plan for the three months ended January 31, 2022 is as follows:

SCHEDULE OF OPTION ACTIVITY

	Shares		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value (in thousands)
Options outstanding at October 31, 2021		1,718,634	$	2.82
Granted		-	$	-

SEC Form 10-Q filed by Anixa Biosciences Inc.