Anixa Biosciences(ANIX) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarterly period ended April 30, 2019, including balance sheets, statements of operations, shareholders' equity, cash flows, and notes, showing increased assets and a widening net loss Condensed Consolidated Balance Sheets As of April 30, 2019, total assets increased to $7.77 million from $6.45 million at October 31, 2018, driven by higher cash, investments, and receivables, while total liabilities rose to $1.60 million and total equity increased to $6.17 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Metric | April 30, 2019 | October 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $7,493,532 | $5,538,372 | | Total Assets | $7,765,426 | $6,448,542 | | Total Current Liabilities | $1,595,761 | $1,265,111 | | Total Shareholders' Equity | $6,543,052 | $5,434,808 | | Total Liabilities and Equity | $7,765,426 | $6,448,542 | Condensed Consolidated Statements of Operations The company reported a net loss attributable to common shareholders of $7.42 million for the six months ended April 30, 2019, significantly higher than the $3.22 million loss in the prior-year period, primarily due to increased operating costs and a patent impairment charge Six Months Ended April 30, (Unaudited) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | $250,000 | $750,000 | | Total Operating Costs and Expenses | $7,826,962 | $4,025,540 | | Loss from Operations | ($7,576,962) | ($3,275,540) | | Net Loss Attributable to Common Shareholders | ($7,419,533) | ($3,216,606) | | Net Loss Per Share (Basic and Diluted) | ($0.38) | ($0.19) | Three Months Ended April 30, (Unaudited) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | $250,000 | $750,000 | | Total Operating Costs and Expenses | $2,843,234 | $2,150,954 | | Loss from Operations | ($2,593,234) | ($1,400,954) | | Net Loss Attributable to Common Shareholders | ($2,537,692) | ($1,378,534) | | Net Loss Per Share (Basic and Diluted) | ($0.13) | ($0.08) | Condensed Consolidated Statement of Shareholders' Equity For the six months ended April 30, 2019, total shareholders' equity increased to $6.54 million from $5.43 million, driven by $4.36 million in net proceeds from an at-the-market stock offering and over $4.0 million in non-cash stock-based compensation, partially offset by a net loss of $7.42 million - Key changes in shareholders' equity for the six months ended April 30, 2019 include a net loss of $7.42 million, stock compensation of over $4.0 million, and proceeds from an at-the-market offering of $4.36 million[8] Condensed Consolidated Statements of Cash Flows For the six months ended April 30, 2019, net cash used in operating activities was $2.76 million, investing activities used $0.93 million, and financing activities provided $4.46 million, resulting in a net increase in cash and cash equivalents of $0.77 million, ending the period at $3.82 million Cash Flow Summary for the Six Months Ended April 30, (Unaudited) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($2,764,290) | ($2,082,481) | | Net Cash (Used in) Provided by Investing Activities | ($925,457) | $2,238,187 | | Net Cash Provided by Financing Activities | $4,456,163 | $677,370 | | Net Increase in Cash and Cash Equivalents | $766,416 | $833,076 | Notes to Condensed Consolidated Financial Statements The notes detail the company's primary operations in cancer therapeutics (CER-T technology) and diagnostics (Cchek™ platform), covering funding, accounting policies, stock-based compensation, segment information, and a pending shareholder derivative lawsuit - The company's primary focus is on developing its CER-T technology for ovarian cancer and its AI-driven Cchek™ liquid biopsy platform for early cancer detection[12] - Management believes existing cash and expected cash flows are sufficient to fund activities for the next twelve months, supported by an at-the-market equity offering that raised approximately $4.36 million in the period[14] Net Loss by Segment (Six Months Ended April 30) | Segment | 2019 | 2018 | | :--- | :--- | :--- | | Cancer Diagnostics | ($3,052,355) | ($1,362,451) | | Cancer Therapeutics | ($3,517,219) | ($1,551,067) | | Patent licensing | ($971,969) | ($344,470) | | Total | ($7,541,543) | ($3,257,988) | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial results, highlighting decreased revenue from legacy patent licensing and a significant increase in operating expenses due to intensified R&D and higher non-cash stock-based compensation, while confirming sufficient liquidity for the next 12 months Results of Operations For the six months ended April 30, 2019, revenue decreased to $0.25 million from $0.75 million in the prior year, while research and development expenses surged by $2.08 million to $3.52 million, and general and administrative expenses rose by $1.45 million to $3.35 million, both primarily due to increased stock compensation, alongside a $0.42 million patent asset impairment charge - Revenue for the six months ended April 30, 2019, was $0.25 million from a single license agreement, down from $0.75 million in the same period of 2018[63] - Research and development expenses increased by approximately $2.08 million for the six-month period, mainly due to a $1.25 million increase in stock award compensation and a $0.82 million increase in stock option compensation[67] - General and administrative expenses increased by approximately $1.45 million for the six-month period, principally due to a $0.75 million increase in stock option compensation and a $0.70 million increase in stock award compensation[68] Liquidity and Capital Resources The company's liquidity position is considered sufficient for the next twelve months, with cash, cash equivalents, and short-term investments totaling approximately $6.57 million as of April 30, 2019, bolstered by $4.36 million raised through an at-the-market equity offering - The company believes its existing cash, cash equivalents, and short-term investments are sufficient to fund activities for the next twelve months[79] - During the six months ended April 30, 2019, the company raised approximately $4.36 million through its at-the-market equity offering of 1,061,032 shares of common stock[79] - Cash, cash equivalents, and short-term investments increased by approximately $1.52 million to $6.57 million at April 30, 2019, from $5.06 million at the end of fiscal year 2018[79] Critical Accounting Policies The company identifies Revenue Recognition and Stock-Based Compensation as its most critical accounting policies, requiring significant judgment in recognizing one-time license fees upon agreement execution and valuing stock-based compensation using fair value models with subjective assumptions - Revenue from one-time, paid-up license fees is recognized upon the execution of the agreement, as the company has no further performance obligations[82] - Stock-based compensation cost is measured at the grant date using fair value models like Black-Scholes or Monte Carlo Simulation, which require significant assumptions regarding expected term, volatility, and risk-free rates[84] Quantitative and Qualitative Disclosures About Market Risk The company's exposure to market risk is limited, primarily related to interest rate changes affecting returns on its short-term, fixed-rate investments upon reinvestment - The company's market risk is primarily related to interest rate changes affecting returns on its short-term, fixed-rate investments at the time of reinvestment[88] Controls and Procedures Based on management's evaluation, including the CEO and CFO, the company's disclosure controls and procedures were effective as of April 30, 2019, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures are effective as of April 30, 2019[89] PART II. OTHER INFORMATION Legal Proceedings The company is named as a nominal defendant in a putative shareholder derivative complaint filed in November 2018, alleging breach of fiduciary duty by certain current and former officers and directors, with defense costs funded by the company, and potential losses currently inestimable - A shareholder derivative complaint was filed against certain officers and directors, with the company named as a nominal defendant, and the company is indemnifying the individuals and cannot estimate potential losses at this time[90] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended October 31, 2018 - No material changes in risk factors were reported since the last Annual Report on Form 10-K[91] Unregistered Sales of Equity Securities and Use of Proceeds None - The company reported no unregistered sales of equity securities during the period[91] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act of 2002 - The report includes required CEO and CFO certifications pursuant to Section 302 and Section 1350 of the Sarbanes-Oxley Act[91]