Anixa Biosciences Inc 10-K

Item 9A. Controls and Procedures. Disclosure Controls and Procedures We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Operating Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15 of the Exchange Act. Based upon that evaluation, our President and Chief Executive Officer and our Chief Operating Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of fiscal year 2020. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our management, including the principal executive officer and principal financial officer, does not expect that our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, cannot provide full assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, we conducted an evaluation as to the effectiveness of our internal control over financial reporting as of October 31, 2020. In making this assessment, our management used the criteria for effective internal control set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control – Integrated Framework . Based on this assessment, our management concluded that our internal control over financial reporting was effective as of October 31, 2020. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to a permanent exemption of the Commission that permits the Company to provide only management’s report in this Annual Report on Form 10-K. Accordingly, our management’s assessment of the effectiveness of our internal control over financial reporting as of October 31, 2020 has not been audited by our auditors, Haskell & White LLP. 39 Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. Other Information. On January 7, 2021, the Board of Directors of the Company confirmed its intention to hold the Company’s 2021 Annual Meeting of Shareholders (the “2021 Annual Meeting”) on Friday, May 21, 2021. The time and location of the 2021 Annual Meeting, and the matters to be considered, will be as set forth in the Company’s definitive proxy statement for the 2021 Annual Meeting to be filed in due course with the SEC. Since the date of the 2021 Annual Meeting has been changed by more than 30 days from the anniversary date of the Company’s last annual meeting of shareholders, the Company is informing shareholders of this change and the updated deadline for shareholders to submit nominations for director or proposals for consideration at the 2021 Annual Meeting in accordance with the rules and regulations of the SEC and the Company’s By-laws. Accordingly, shareholders wishing to nominate a candidate for director or to propose other business at the 2021 Annual Meeting must ensure proper notice is received by the Company at its offices no later than March 17, 2021. The notice must include all of the information required by the Company’s By-laws. PART III Item 10. Directors, Executive Officers and Corporate Governance. Our Directors and Executive Officers The following table sets forth certain information with respect to all of our directors and executive officers: Name Position with the Company and Principal Occupation Age Director and/or Executive Officer Since Dr. Amit Kumar Chairman of the Board, President and Chief Executive Officer 56 2012 Lewis H. Titterton, Jr. Lead Independent Director 76 2017 Dr. Arnold Baskies Director 71 2018 David Cavalier Director 51 2018 Emily Gottschalk Director 60 2019 Dr. John Monahan Director 74 2016 Michael J. Catelani Chief Operating Officer and Chief Financial Officer 54 2016 We believe that our Board represents a desirable mix of backgrounds, skills, and experiences. The principal occupation and business experience during the last five years for our executive officers and directors and some of the specific experiences, qualifications, attributes or skills that led to the conclusion that each person should serve as one of our directors in light of our business and structure is as follows: 40 Amit Kumar, Ph.D., 56, Chairman of the Board, President and Chief Executive Officer. Dr. Kumar has served as our President and Chief Executive Officer since July 2017, as a director of the Company since November 2012 and as Chairman of the Board since August 2016. From June 2015 until August 2016, he served as Vice Chairman of the Board. Dr. Kumar served as a strategic advisor to the Company from September 2012 until July 2017. He has been Executive Chairman of the board of directors of Anixa Diagnostics Corporation, a wholly-owned subsidiary of the Company since June 2015. Upon his appointment as Executive Chairman of Anixa Diagnostics, Dr. Kumar resigned from his position as the CEO of Geo Fossil Fuels LLC, an energy company, which he had held since December 2010. From September 2001 to June 2010, he was President and CEO of CombiMatrix Corporation, a NASDAQ listed biotechnology company and also served as director from September 2000 to June 2012. He was Vice President of Life Sciences of Acacia Research Corporation, a publicly traded investment company, from July 2000 to August 2007 and also served as a director from January 2003 to August 2007. Dr. Kumar has served as Chairman of the board of directors of Ascent Solar Technologies, Inc., a publicly-held solar energy company, since June 2007. He served as a director of Aeolus Pharmaceuticals, Inc., a publicly traded biotechnology company, from June 2004 to June 2018. Dr. Kumar is Chairman of Actym Therapeutics, a private biotechnology company. Dr. Kumar has served on the board of the American Cancer Society since 2016. Dr. Kumar holds an A.B. in Chemistry from Occidental College. After graduate studies at Stanford University and Caltech, he received his Ph.D. from Caltech and completed his post-doctoral training at Harvard University. He has experience in technology driven startups, both at the board of directors and operating levels, in a broad variety of areas including finance, acquisitions, research and development, and marketing, and, as described above, has served as a director and/or officer of various publicly traded companies. Lewis H. Titterton, Jr., 76, Director. Mr. Titterton has served as a director since July 2017, and as Lead Independent Director since July 2018. He previously served as a director of the Company from August 2010 through August 2016, as the Chairman of the Board from July 2012 through August 2016, and interim Chief Executive Officer from August 2012 until September 2012. He served on the board of directors of ParkerVision, Inc., a publicly traded wireless technology company, from September 2018 to April 2019. His background is in high technology with an emphasis on health care and he was the Chairman of the Board of Directors of NYMED, Inc., a diversified health services company, from 1989 until October 2018. Mr. Titterton founded MedE America, Inc. in 1986 and was Chief Executive Officer of Management and Planning Services, Inc. from 1978 to 1986. Mr. Titterton also served as one of our Directors from July 1999 to January 2003. He holds an MBA from the State University of New York at Albany, and a B.A. degree from Cornell University. Mr. Titterton has been involved with our Company as a director or investor for over twenty years. Mr. Titterton also has substantial experience with advising on the strategic development of technology companies and over forty years of experience in various aspects of the technology industry. 41 Arnold Baskies, MD, FACS, 71, Director. Dr. Baskies has served on our Board since September 2018. He previously served as a director of the Company from August 2016 until September 2017. Dr. Baskies is a surgical oncologist affiliated with Virtua Health Systems in southern New Jersey, where he specializes in surgical oncology and general surgery, and is Clinical Professor of Surgery at Rowan School of Medicine. He trained at Boston University Medical Center and the Surgery Branch of the National Cancer Institute where his early research involved immunotherapy. He has extensive experience in all facets of general surgical and surgical oncologic problems, with special interests in the treatment of breast cancer, gastrointestinal cancers, thyroid cancer, melanoma, and parathyroid disease, and is a co-investigator in several national studies dealing with breast cancer prevention. Dr. Baskies has served as a director of Baudax Bio, Inc., a publicly-held biotechnology company, since August 2020. He served as chairman of the New Jersey Governor’s Task Force on Early Detection, Prevention and Treatment of Cancer, having created and chaired the cancer control plan for the state from 2000-2016, and is a member of numerous societies, including the Society of Surgical Oncology, the American Society of Breast Surgeons, and the American College of Surgeons. Dr. Baskies has been involved with the American Cancer Society for 40 years. He was awarded the Society’s Silver Chalice Award in 1998 and the Society’s St. George National Award in 2009. He has held leadership positions at many levels of the organization, including service as the first board scientific officer for the American Cancer Society Board of Directors in 2015, and was the chief medical officer and Chairman of the Board of Directors of the former Eastern Division of the American Cancer Society. In 2017, he served as the Chairman of the National Board of Directors of the American Cancer Society. He helped develop the current guidelines for breast cancer screening and colon cancer screening which are used on a daily basis in the United States and internationally. He chairs the Global Cancer Control Advisory Council for the society and the St. Baldrick’s Foundation/ACS Alliance. He has helped set the standards for cancer care accreditation through his involvement with the Commission on Cancer. He received a medical degree from Boston University School of Medicine in 1975 and a bachelor of arts degree from Boston University College of Liberal Arts in 1971. David Cavalier, 51, Director . Mr. Cavalier has served on our Board since September 2018. He is a seasoned executive and investor with over 20 years of experience in the biotechnology sector. He is currently the Chief Operating Officer of Mab & Stoke, Inc., a direct-to-consumer health and wellness company. He was the Chairman, from 2004 to 2018, and Chief Financial Officer, from 2013 to 2018, of Aeolus Pharmaceuticals, Inc., a biotechnology company where in 2011 he was instrumental in winning and managing a $118 million advanced research and development contract from the U.S. Government. Prior to Aeolus, Mr. Cavalier was the founder, portfolio manager and Chief Operating Officer of Xmark Opportunity Partners, a biotechnology investment firm. Xmark was an activist fund, focused on creating positive change at the board and management level for portfolio companies. He began his biotech investment career at Brown Simpson Asset Management, where he co-managed the life sciences investment group. Mr. Cavalier previously worked for Tiger Real Estate, a private investment fund sponsored by Tiger Management Corporation. He began his career in the Investment Banking Division of Goldman, Sachs & Co. working on debt and equity offerings for public and private real estate companies. Mr. Cavalier currently serves as the Chairman of the New York Advisory Board for Enterprise Community Partners, a non-profit focused on policy, program and capital solutions for affordable housing. He received his B.A. from Yale University and his M.Phil. from Oxford University. Emily Gottschalk, 60, Director. Ms. Gottschalk has served on our Board since October 2019. She is an experienced marketer with over 30 years of developing products for the consumer marketplace. She has been the CEO of The Garr Group, Inc. since 1997, a diverse entertainment and new product development company that she founded that sells entertainment and general merchandise to the mass, specialty and on-line market. Ms. Gottschalk co-founded IdeationUSA, LLC in 2017, a product development company focused on bringing innovative electronics to the consumer market. IdeationUSA identifies “white space” opportunities in the marketplace and defines and develops products that uniquely touch consumers lives. Ideation is equally focused on brick and mortar, on-line and emerging distribution channels. Previously, she was Marketing Director of Zany Brainy, a children’s educational toy store that she launched. Since 1997, Ms. Gottschalk’s companies have produced over 150 million CD’s/DVD’s to the US retail market, developed a proprietary Android tablet called “RealPad, by AARP” with Intel and has created private label brands across the home and craft market. She is a graduate of Cornell University’s School of Hotel Administration and serves on the board of several philanthropic organizations. 42 John Monahan, Ph.D., 74, Director. Dr. Monahan has served on our Board since August 2016. He is an experienced executive and has served on a number of biotechnology company boards over the years. He is currently a director of Synthetic Biologics, Inc., a publicly traded biotechnology company, and from 2010 through 2015 he was the Senior Executive Vice President of Research & Development at Synthetic Biologics, Inc. He is also a director of Heat Biologics, Inc., a publicly traded biotechnology company, a position that he has held since 2011. In 1992 he founded Avigen, Inc., a biotechnology company that pioneered the development of gene medicines based on adeno-associated virus vectors, now an industry standard. Over a 12-year period as its Chief Executive Officer, Dr. Monahan took Avigen public through an initial public offering raising over $235 million and led the company through several IND applications. Prior to Avigen, Dr. Monahan served as Vice President - Research and Development at Somatix Therapy Corp., and Director of Molecular & Cell Biology at Triton Biosciences, Inc. He was also previously Research Group Chief, Department of Molecular Genetics at Hoffmann-LaRoche Inc., and Adjunct Assistant Professor, Department of Cell Biology at New York University. Dr. Monahan earned a Ph.D. in Biochemistry from McMaster University, Hamilton, Canada, and a B.S. in Science from University College, Dublin, Ireland. Dr. Monahan has over 50 publications in scientific literature and has made hundreds of presentations and public TV appearances, to scientific groups, investors and the general public over the years. Michael J. Catelani, 54, Chief Operating Officer and Chief Financial Officer. Mr. Catelani has served as our Chief Operating Officer since July 2017 and as Chief Financial Officer since November 2016. Mr. Catelani is a seasoned executive with over 30 years of experience in finance and operations. From October 2012 to July 2017, he served as a contract Chief Financial Officer to a number of established privately held businesses in the biotechnology field. In July 2006, he co-founded Tacere Therapeutics, Inc., a privately held biotechnology company, and served as its Chairman, President and Chief Financial Officer until its sale in October 2012. While at Tacere, Mr. Catelani was instrumental in establishing and managing a $150 million drug development collaboration with Pfizer, Inc. Prior to Tacere, he served on the Board of Directors and was the Chief Financial Officer of Benitec Biopharma Limited, an Australian Stock Exchange-listed biotechnology company. Prior to Benitec, Mr. Catelani served as Vice President and Chief Financial Officer at Axon Instruments, Inc., a U.S. corporation publicly traded on the Australian Stock Exchange that was a leading designer and manufacturer of instrumentation and software systems for biotechnology and diagnostics research. Previously, he served as the Vice President of Finance for Media Arts Group, Inc., an NYSE-listed company. Mr. Catelani has also worked with several early stage start-up companies in a variety of industries, including biotechnology, cleantech and retail, in both advisory and management roles. Mr. Catelani began his professional career at Ernst & Young and is a CPA (Inactive). He holds a B.S. degree in Business Administration, with a concentration in Accountancy, from Sacramento State University and an MBA from the University of California, Davis. Of our current directors and executive officers, Drs. Kumar, Baskies and Monahan and Messrs. Titterton and Cavalier have served as a director of another public company within the past five years. Our Significant Employees We have no significant employees other than our executive management team. Family Relationships There are no family relationships between or among the directors, executive officers or persons nominated or chosen by the Company to become directors or executive officers. 43 Involvement of Certain Legal Proceedings To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director or executive officer of the Company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; (4) being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated; (5) being subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree or finding relating to an alleged violation of the federal or state securities, commodities, banking or insurance laws or regulations or any settlement thereof or involvement in mail or wire fraud in connection with any business entity not subsequently reversed, suspended or vacated and (6) being subject of, or a party to, any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors, executive officers and ten percent stockholders to file initial reports of ownership and reports of changes in ownership of our common stock with the Commission. Directors, executive officers and ten percent stockholders are also required to furnish us with copies of all Section 16(a) forms that they file. Based upon a review of these filings, we believe that all required Section 16(a) reports were made on a timely basis during fiscal year 2020. Code of Ethics We have adopted a formal code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. We will provide a copy of our code of ethics to any person without charge, upon request. For a copy of our code of ethics write to Secretary, Anixa Biosciences, Inc., 3150 Almaden Expressway, Suite 250, San Jose, California 95118. A current copy of our code of ethics is also available on our website at http://ir.anixa.com/governance-docs. Nomination Procedures On July 9, 2015, the Board established a nominating and corporate governance committee (the “Nominating Committee”). The Nominating Committee has a charter which will be reviewed on an annual basis by members of the committee and will be at all times composed of exclusively independent directors. The principal duties and responsibilities of the Nominating Committee are to identify qualified individuals to become board members, recommend to the Board individuals to be designated as nominees for election as directors at the annual meetings of stockholders, and develop and recommend to the Board the Company’s corporate governance guidelines. In selecting directors, the Nominating Committee will consider candidates that possess qualifications and expertise that will enhance the composition of the Board, including the considerations set forth below. The considerations set forth below are not meant as minimum qualifications, but rather as guidelines in weighing all of a candidate’s qualifications and expertise. ● Candidates should be individuals of personal integrity and ethical character. ● Candidates should have background, achievements, and experience that will enhance our Board. This may come from experience in areas important to our business, substantial accomplishments or prior or current associations with institutions noted for their excellence. ● Candidates should have demonstrated leadership ability, the intelligence and ability to make independent analytical inquiries and the ability to exercise sound business judgment. 44 ● Candidates should be free from conflicts that would impair their ability to discharge the fiduciary duties owed as a director to Anixa and its stockholders, and we will consider directors’ independence from our management and stockholders. ● Candidates should have, and be prepared to devote, adequate time and energy to the Board and its committees to ensure the diligent performance of their duties, including by attending meetings of the Board and its committees. ● Due consideration will be given to the Board’s overall balance of diversity of perspectives, backgrounds and experiences, as well as age, gender and ethnicity. ● Consideration will also be given to relevant legal and regulatory requirements. We are of the view that the continuing service of qualified incumbents promotes stability and continuity in the board room, contributing to the Board’s ability to work as a collective body, while giving us the benefit of the familiarity and insight into our affairs that our directors accumulate during their tenure. Accordingly, the process of the Nominating Committee for identifying nominees for directors will reflect our practice of generally re-nominating incumbent directors who continue to satisfy the Board’s criteria for membership on the Board, whom the Nominating Committee believes continue to make important contributions and who consent to continue their service on the Board. If the Nominating Committee determines that an incumbent director consenting to re-nomination continues to be qualified and has satisfactorily performed his or her duties as director during the preceding term, and that there exist no reasons, including considerations relating to the composition and functional needs of the Board as a whole, why in the Nominating Committee’s view the incumbent should not be re-nominated, the Nominating Committee will, absent special circumstances, generally propose the incumbent director for re-election. Although we do not have a formal policy regarding the consideration of diversity in identifying and evaluating potential director candidates, the Nominating Committee will take into account the personal characteristics (gender, ethnicity and age), skills and experience, qualifications and background of current and prospective directors’ diversity as one factor in identifying and evaluating potential director candidates, so that the Board, as a whole, will possess what the nominating and corporate governance committee believes are appropriate skills, talent, expertise and backgrounds necessary to oversee our Company’s business. If the incumbent directors are not nominated for re-election or if there is otherwise a vacancy on the Board, the Nominating Committee may solicit recommendations for nominees from persons that the Nominating Committee believes are likely to be familiar with qualified candidates, including from members of the Board and management. While the Nominating Committee may also engage a professional search firm to assist in identifying qualified candidates, the Nominating Committee did not engage any third party to identify or evaluate or assist in identifying or evaluating the Director Nominees. We do not have a policy with regard to the consideration of director candidates recommended by stockholders. Due to the size of our Company and Board, the Nominating Committee does not believe that such a policy is necessary. Depending on its level of familiarity with the candidates, the Nominating Committee may choose to interview certain candidates that it believes may possess qualifications and expertise required for membership on the Board. It may also gather such other information it deems appropriate to develop a well-rounded view of the candidate. Based on reports from those interviews or from Board members with personal knowledge and experience with a candidate, and on all other available information and relevant considerations, the Nominating Committee will select and nominate candidates who, in its view, are most suited for membership on the Board. The members of the nominating committee are Dr. Arnold Baskies (Chairman), Dr. John Monahan and Lewis H. Titterton, Jr. 45 Audit Committee and Audit Committee Financial Expert On July 9, 2015, the Board established a separately-designated standing audit committee (the “Audit Committee”) established in accordance with Section 3(a)(58)(A) of the Exchange Act, and Nasdaq Listing Rules. The Audit Committee has a charter which will be reviewed on an annual basis by members of the committee and will be at all times composed of exclusively independent directors who are “financially literate,” meaning they are able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement and cash flow statement. In addition, the committee will have at least one member who qualifies as an “audit committee financial expert” as defined in rules and regulations of the SEC. The principal duties and responsibilities of the Company’s Audit Committee are to appoint the Company’s independent auditors, oversee the quality and integrity of the Company’s financial reporting and the audit of the Company’s financial statements by its independent auditors and in fulfilling its obligations, the Company’s Audit Committee will review with the Company’s management and independent auditors the scope and result of the annual audit, the auditors’ independence and the Company’s accounting policies. The Audit Committee will be required to report regularly to the Board to discuss any issues that arise with respect to the quality or integrity of the Company’s financial statements, its compliance with legal or regulatory requirements and the performance and independence of the Company’s independent auditors. The members of the Audit Committee are David Cavalier (Chairman), Lewis H. Titterton, Jr. and Dr. John Monahan. Our Board has determined that Mr. Cavalier qualifies as an Audit Committee financial expert as defined by SEC rules, based on his education, experience and background. Please see Mr. Cavalier’s biographical information above for a description of his relevant experience. Item 11. Executive Compensation. The following table sets forth certain information for the fiscal years ended October 31, 2020 and 2019, with respect to compensation awarded to, earned by or paid to our Chairman of the Board, President and Chief Executive Officer and our Chief Operating Officer and Chief Financial Officer (the “Named Executive Officers”). No other executive officer received total compensation in excess of $100,000 during fiscal year 2020. SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Bonus ($) Option Awards ($) (1) All Other Compensation ($) (2) Total Compensation ($) Dr. Amit Kumar Chairman of the Board, 2020 $ 521,625 $ 160,000 $ 1,674,400 $ 39,240 $ 2,395,265 President and Chief Executive Officer 2019 $ 476,250 $ 150,000 $ - $ 39,240 $ 665,490 Michael J. Catelani 2020 $ 287,219 $ 50,000 $ 322,000 $ - $ 659.219 Chief Operating Officer and Chief Financial Officer 2019 $ 263,021 $ 50,000 $ - $ - $ 313,021 46 (1) These amounts have been calculated in accordance with Accounting Standards Codification (“ASC”) 718. A discussion of assumptions used in valuation of option awards may be found in Note 2 to our Consolidated Financial Statements for fiscal year ended October 31, 2020, included elsewhere in this Annual Report on Form 10-K. These amounts reflect our accounting expense for these stock options and restricted stock awards and do not correspond to the actual value that may be recognized by our Named Executive Officers. (2) These amounts reflect the sum of the incremental cost to us of all perquisites and personal benefits, which consisted of compensation for use of a home office and reimbursement of medical insurance benefits for Dr. Kumar. Employment Agreements Consulting Agreement with Dr. Amit Kumar On September 19, 2012, the Company entered into a Consulting Agreement with Dr. Amit Kumar (the “Kumar Agreement”) pursuant to which Dr. Kumar agreed to provide business consulting services for an initial annual consulting fee of $120,000. On June 15, 2015, Dr. Kumar was appointed Vice Chairman of the Company and Executive Chairman of Anixa Diagnostics. As a result of this appointment, Dr. Kumar’s annual cash compensation was increased to $300,000 by the Board. On August 23, 2016, Dr. Kumar was appointed Executive Chairman of the Company, and on July 6, 2017, Dr. Kumar was appointed President and Chief Executive Officer of the Company. As of the beginning of each subsequent calendar year, Dr. Kumar’s salary has been reviewed and adjusted by the Board’s Compensation Committee. On January 1, 2021, Dr. Kumar’s annual salary was $582,085. If Dr. Kumar’s services are terminated by the Company or he terminates his services for any reason or no reason, the Company shall be obligated to pay to Dr. Kumar only any earned compensation and/or bonus due under the Kumar Agreement and any earned and unused paid time off and any unpaid reasonable and necessary expenses, due to him through the date of termination. All such payments shall be made in a lump sum immediately following termination. 47 Stock Options Outstanding Stock Option Awards The following table sets forth certain information with respect to unexercised stock options held by the Named Executive Officers outstanding on October 31, 2020: OUTSTANDING OPTION AWARDS Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Un-Exercisable Option Exercise Price ($) Option Expiration Date Time-based Option Awards Dr. Amit Kumar 320,000 $ 2.575 9/19/2022 106,667 $ 2.575 9/19/2022 213,333 $ 2.575 9/19/2022 40,000 $ 2.575 11/8/2023 200,000 $ 2.92 2/18/2026 500,000 (1) 100,000 (1) $ 3.70 5/8/2028 158,889 (2) 361,111 (2) $ 3.84 12/12/29 Michael J. Catelani 50,000 $ 4.85 11/15/2026 162,500 (3) 37,500 (3) $ 0.96 7/6/2027 416,667 (1) 83,333 (1) $ 3.70 5/8/2028 30,556 (2) 69,444 (2) $ 3.84 12/12/29 Performance-based Option Awards Dr. Amit Kumar 500,000 (4) 1,000,000 (4) $ 3.70 5/8/2028 (1) Options vest and become exercisable in 36 consecutive monthly installments, beginning May 31, 2018 and continuing through April 30, 2021. (2) Options vest and become exercisable in 36 consecutive monthly installments, beginning December 31, 2019 and continuing through November 30, 2022. (3) Options vest and become exercisable in one installment of 50,000 on July 6, 2018 and the remainder in twelve consecutive quarterly installments, beginning October 31, 2018 and continuing through July 31, 2021. (4) Options shall vest as follows: (i) 500,000 shares vest if during any 20 trading day period on or before May 31, 2021, the average closing stock price of the Company’s Common Stock is at least $5.00, (ii) 500,000 shares vest if during any 20 trading day period on or before May 31, 2021, the average closing stock price of the Company’s Common Stock is at least $7.00, and (iii) 500,000 shares vest if during any 20 trading day period on or before May 31, 2021, the average closing stock price of the Company’s Common Stock is at least $8.00. 48 Stock Option Grants The following table summarizes stock option grants during fiscal year 2020. GRANTS OF OPTION AWARDS Name Grant Date Number of Securities Underlying Options (#) Exercise Price of Option Awards ($) Grant Date Fair Value ($) (1) Amit Kumar 12/12/19 520,000 $ 3.84 $ 1,674,400 Michael J. Catelani 12/12/19 100,000 $ 3.84 $ 322,000 (1) These amounts have been calculated in accordance with ASC 718. A discussion of assumptions used in valuation of option awards may be found in Note 2 to our Consolidated Financial Statements for fiscal year ended October 31, 2020, included elsewhere in this Annual Report on Form 10-K. These amounts reflect our accounting expense for these stock options and restricted stock awards and do not correspond to the actual value that may be recognized by our Named Executive Officers. Stock Option Exercises During the year ended October 31, 2020, no stock options were exercised by Named Executive Officers. Stock Awards On May 8, 2018, a restricted stock award of 1,500,000 shares of common stock was granted under our 2018 Share Incentive Plan to Dr. Kumar. The restricted stock award vests in its entirety if during any 20 trading day period on or before May 31, 2021, the average closing stock price of the Company’s Common Stock is at least $11.00. The grant date fair value of this restricted stock award was $4,814,265. Potential Payments upon Termination or Change in Control Dr. Amit Kumar The time-based and performance-based options granted Dr. Kumar on May 8, 2018 provide for the vesting of the unvested portion of his options to be accelerated and such accelerated options to become immediately exercisable upon a change in control as defined below. The intrinsic value of options granted on May 8, 2018 would be $-0-, which was calculated by multiplying (a) 1,100,000 options (being the number of options granted to him on May 8, 2018 that would be accelerated) by (b) an amount equal to the excess of (x) our closing share price on October 31, 2020 of $2.06 and (y) the options’ exercise price of $3.70 per share. Options granted Dr. Kumar on December 12, 2019 provide for the vesting of the unvested portion of his options to be accelerated and such accelerated options to become immediately exercisable upon a change in control as defined below. The intrinsic value of options granted on December 12, 2019 would be $-0-, which was calculated by multiplying (a) 361,111 options (being the number of options granted to him on December 12, 2019 that would be accelerated) by (b) an amount equal to the excess of (x) our closing share price on October 31, 2020 of $2.06 and (y) the options’ exercise price of $3.84 per share. 49 Michael J. Catelani Options granted Mr. Catelani on July 6, 2017 provide for the vesting of the unvested portion of his options to be accelerated and such accelerated options to become immediately exercisable if Mr. Catelani is terminated without cause or upon a change in control as defined below. The intrinsic value of options granted on July 6, 2017 would be $41,250, which was calculated by multiplying (a) 37,500 options (being the number of options granted to him on July 6, 2017 that would be accelerated) by (b) an amount equal to the excess of (x) our closing share price on October 31, 2019 of $2.06 and (y) the options’ exercise price of $0.96 per share. Options granted Mr. Catelani on May 8, 2018 provide for the vesting of the unvested portion of his options to be accelerated and such accelerated options to become immediately exercisable upon a change in control as defined below. The intrinsic value of options granted on May 8, 2018 would be $-0-, which was calculated by multiplying (a) 83,333 options (being the number of options granted to him on May 8, 2018 that would be accelerated) by (b) an amount equal to the excess of (x) our closing share price on October 31, 2020 of $2.06 and (y) the options’ exercise price of $3.70 per share. Options granted Mr. Catelani on December 12, 2019 provide for the vesting of the unvested portion of his options to be accelerated and such accelerated options to become immediately exercisable upon a change in control as defined below. The intrinsic value of options granted on December 12, 2019 would be $-0-, which was calculated by multiplying (a) 69,411 options (being the number of options granted to him on December 12, 2019 that would be accelerated) by (b) an amount equal to the excess of (x) our closing share price on October 31, 2020 of $2.06 and (y) the options’ exercise price of $3.84 per share. Change in Control Under our 2010 Share Incentive Plan and our 2018 Share Incentive Plan, “change in control” means: ● Change in Ownership: A change in ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company, excluding the acquisition of additional stock by a person or more than one person acting as a group who is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company. ● Change in Effective Control: A change in effective control of the Company occurs on the date that either: ○ any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; or ○ a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; provided, that this paragraph will apply only to the Company if no other corporation is a majority shareholder. ● Change in Ownership of Substantial Assets: A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of the assets of the Company immediately before such acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. 50 It is the intent that this definition be construed consistent with the definition of “Change of Control” as defined under Code Section 409A and the applicable treasury regulations, as amended from time to time. Director Compensation On August 13, 2020, after a review of non-employee director compensation at comparable companies, the Board approved cash and equity compensation of directors. Each non-employee director shall receive cash compensation of $50,000 paid in four quarterly installments, and the grant of a 10 year nonqualified stock option to purchase 30,000 shares of common stock exercisable at $2.68, such option vesting monthly over a one year period. Our employee director, Dr. Amit Kumar, did not receive any additional compensation for services provided as a director during fiscal year 2020. The 2010 Share Incentive Plan provides that on January 1 st of each year, each non-employee director (a “Director Participant”) of the Company at that time shall automatically be granted a 10 year nonqualified stock option to purchase 12,000 shares of common stock (or 16,000 in the case of the Chairman of the Board to the extent he qualifies as a Director Participant), with an exercise price equal to the closing price on the date of grant, that will vest in four equal quarterly installments in the year of grant (the “Annual Grant”). Effective January 1, 2018 through the expiration of the 2010 Share Incentive Plan, each Director Participant waived their right to receive the Annual Grant. The following table sets forth compensation of Lewis H. Titterton, Jr., Dr. Arnold Baskies, David Cavalier, Emily Gottschalk and Dr. John Monahan, our non-employee directors, for fiscal year 2020: DIRECTORS’ COMPENSATION Name Cash ($) Option Awards ($) (1)(2) Total Compensation ($) Lewis H. Titterton, Jr. $ 12,500 $ 64,320 $ 76,820 Dr. Arnold Baskies $ 12,500 $ 64,320 $ 76,820 David Cavalier $ 12,500 $ 64,320 $ 76,820 Emily Gottschalk $ 12,500 $ 64,320 $ 76,820 Dr. John Monahan $ 12,500 $ 64,320 $ 76,820 (1) These amounts have been calculated in accordance with ASC 718. A discussion of assumptions used in valuation of option awards may be found in Note 2 to our Consolidated Financial Statements for fiscal year ended October 31, 2020, included elsewhere in this Annual Report on Form 10-K. These amounts reflect our accounting expense for these stock options and do not correspond to the actual value that may be recognized by our directors. (2) At October 31, 2020, Mr. Titterton, Dr. Baskies, Mr. Cavalier, Ms. Gosttschalk and Dr. Monahan held unexercised stock options to purchase 685,000, 158,000, 120,000, 75,000 and 188,000 shares respectively, of our common stock. 51 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth certain information with respect to our common stock beneficially owned as of January 7, 2021 (or exercisable within 60 days of such date) by (a) each person who is known by our management to be the beneficial owner of more than 5% of our outstanding common stock, (b) each of our directors and executive officers, and (c) all directors and executive officers as a group: Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership (1)(2)(3)(4)(5) Percent of Class (6) Directors and Officers of the Company Dr. Amit Kumar 3150 Almaden Expressway, Suite 250 San Jose, CA 95118 4,008,667 14.2 % Lewis H. Titterton, Jr. 3150 Almaden Expressway, Suite 250 San Jose, CA 95118 1,642,826 6.2 % Michael J. Catelani 3150 Almaden Expressway, Suite 250 San Jose, CA 95118 754,971 2.8 % Dr. John Monahan 3150 Almaden Expressway, Suite 250 San Jose, CA 95118 226,400 * % Dr. Arnold Baskies 3150 Almaden Expressway, Suite 250 San Jose, CA 95118 186,500 * % David Cavalier 3150 Almaden Expressway, Suite 250 San Jose, CA 95118 109,500 * % Emily Gottschalk 3150 Almaden Expressway, Suite 250 San Jose, CA 95118 62,500 * % All Directors and Executive Officers as a Group (7 persons) 6,991,364 23.2 % * Less than 1%. (1) A beneficial owner of a security includes any person who directly or indirectly has or shares voting power and/or investment power with respect to such security or has the right to obtain such voting power and/or investment power within sixty (60) days. Except as otherwise noted, each designated beneficial owner in this Annual Report on Form 10-K has sole voting power and investment power with respect to the shares of common stock beneficially owned by such person. (2) Includes 240,000 shares, 474,000 shares, 225,000 shares, 113,000 shares, 83,000 shares, 45,000 shares and 1,180,000 shares which Dr. Amit Kumar, Lewis H. Titterton, Jr., Michael J. Catelani, Dr. John Monahan, Dr. Arnold Baskies, David Cavalier and all directors and executive officers as a group, respectively, have the right to acquire within 60 days upon exercise of options granted pursuant to the 2010 Share Incentive Plan. (3) Includes 1,366,667 shares, 62,500 shares, 522,222 shares, 62,500 shares, 62,500 shares, 62,500 shares, 62,500 shares and 2,201,389 shares which Dr. Amit Kumar, Lewis H. Titterton, Jr., Michael J. Catelani, Dr. John Monahan, Dr. Arnold Baskies, David Cavalier, Emily Gottschalk and all directors and executive officers as a group, respectively, have the right to acquire within 60 days upon exercise of options granted pursuant to the 2018 Share Incentive Plan. 52 (4) Includes 640,000 shares, 86,000 shares and 726,000 shares which Dr. Amit Kumar, Lewis H. Titterton, Jr. and all directors and executive officers as a group, respectively, have the right to acquire within 60 days pursuant to option agreements with the Company. (5) Includes 1,500,000 restricted shares of common stock awarded to Dr. Amit Kumar pursuant to the 2018 Share Incentive Plan for which Dr. Kumar has voting rights but that vest only if during any twenty (20) trading day period on or before May 31, 2021 in which Dr. Kumar is employed by Anixa, the average closing stock price of the Company’s common stock is at least $11.00. (6) Based on 26,076,819 shares of common stock outstanding as of January 7, 2020. Change in Control We are not aware of any arrangement that might result in a change in control of the Company in the future. Equity Compensation Plan Information The following is information as of October 31, 2020 about shares of our common stock that may be issued upon the exercise of options, warrants and rights under all equity compensation plans in effect as of that date, including our our 2010 Share Incentive Plan and our 2018 Share Incentive Plan. See Note 4 to our Consolidated Financial Statements for more information on these plans. Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans not approved by security holders (1) 3,605,534 $ 2.70 - Equity compensation plans approved by security holders (2) 4,346,661 $ 3.69 2,388,339 (1) On July 14, 2010 the Board adopted the 2010 Share Incentive Plan. Officers, key employees and non-employee directors of, and consultants to, the Company or any of its subsidiaries and affiliates are eligible to participate in the 2010 Share Incentive Plan. The 2010 Share Incentive Plan provides for the grant of stock options, stock appreciation rights, stock awards, and performance awards and stock units (the “2010 Benefits”). The maximum number of shares of common stock available for issuance under the 2010 Share Incentive Plan was initially 600,000 shares. On July 6, 2011 and August 29, 2012, the 2010 Share Incentive Plan was amended by our Board to increase the maximum number of shares of common stock that may be granted to 1,080,000 and 1,200,000 shares, respectively. On November 8, 2013, the Board approved an amendment to provide that effective and following November 8, 2013, the maximum aggregate number of shares available for issuance will be 800,000 shares. Additionally, commencing on the first business day in 2014 and on the first business day of each calendar year thereafter, the maximum aggregate number of shares available for issuance shall be replenished such that, as of such first business day, the maximum aggregate number of shares available for issuance shall be 800,000 shares. Current and future non-employee directors are automatically granted a 10 year nonqualified stock option to purchase 12,000 shares of Common Stock (or 16,000 in the case of the Chairman of the Board) on January 1st of each year that will vest in four equal quarterly installments. The 2010 Share Incentive Plan was administered by the Stock Option Committee through August 2012, from August 2012 through November 2012, by the Executive Committee of the Board of Directors, from November 2012 through July 2015, by the Board of Directors and since July 2015, by the Compensation Committee, which determines the option price, term and provisions of the 2010 Benefits. The 2010 Share Incentive Plan terminated with respect to additional grants on July 14, 2020. 53 (2) The 2018 Share Incentive Plan was adopted by the Board on January 25, 2018 and approved by our shareholders on March 29, 2018. Officers, key employees and non-employee directors of, and consultants to, the Company or any of its subsidiaries and affiliates are eligible to participate in the 2018 Share Incentive Plan. The 2018 Share Incentive Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units (the “2018 Benefits”). The maximum number of shares of common stock available for issuance under the 2018 Share Incentive Plan was initially 5,000,000 shares. Additionally, commencing on the first business day in January 2019 and on the first business day of each calendar year thereafter, the maximum aggregate number of shares available for issuance shall be replenished such that, as of such first business day, the maximum aggregate number of shares available for issuance shall be 2,000,000 shares. The 2018 Share Incentive Plan is administered by the Compensation Committee, which determines the option price, term and provisions of the 2018 Benefits. The 2018 Share Incentive Plan terminates with respect to additional grants on March 28, 2028. The Board may amend, suspend or terminate the 2018 Share Incentive Plan at any time, subject in certain respects to obtaining shareholder approval. Item 13. Certain Relationships and Related Transactions, and Director Independence. Transactions with Related Persons Aside from compensation arrangements with executive officers described above, there are no other transactions entered into by the Company with related persons. Related Person Transaction Approval Policy While we have no written policy regarding approval of transactions between us and a related person, our Board, as matter of appropriate corporate governance, reviews and approves all such transactions, to the extent required by applicable rules and regulations. Generally, management would present to the Board for approval at the next regularly scheduled Board meeting any related person transactions proposed to be entered into by us. The Board may approve the transaction if it is deemed to be in the best interests of our stockholders and the Company. 54 Director Independence Our Board oversees the activities of our management in the handling of the business and affairs of our company. Our common stock trades on the NASDAQ Capital Market and we are subject to listing requirements which include the requirement that our Board be comprised of a majority of “independent” directors. Lewis H. Titterton, Jr., Dr. Arnold Baskies, David Cavalier, Emily Gottschalk and Dr. John Monahan currently meet the definition of “independent” as defined by the SEC. Dr. Amit Kumar is an employee of the Company and as such does not qualify as an “independent” director. The Board of Directors has separately designated audit, nominating and compensation committees. Item 14. Principal Accounting Fees and Services. The following table describes fees for professional audit services rendered and billed by Haskell & White LLP, our present independent registered public accounting firm and principal accountant, for the audit of our consolidated financial statements and for other services during fiscal years 2020 and 2019. Type of Fee 2020 2019 Audit Fees (1) $ 79,650 $ 79,850 Audit Related Fees (2) 1,000 6,500 Tax Fees (3) 28,000 33,000 All Other Fees (4) 7,500 8,150 Total $ 116,150 $ 127,500 (1) Audit fees for fiscal years 2020 and 2019 represent fees billed for services rendered by Haskell & White LLP for the audit of our consolidated financial statements and review of our quarterly reports on Form 10-Q. (2) Audit related fees for fiscal years 2020 and 2019 represent fees billed for services rendered by Haskell & White LLP in connection with our Registration Statements filed during fiscal years 2020 and 2019. (3) Tax Fees for fiscal years 2020 and 2019 represent fees billed for services rendered by Haskell & White LLP for the preparation of Federal and State income tax returns. (4) All other fees for fiscal years 2020 and 2019 represent fees billed for services rendered by Haskell & White LLP in connection with the preparation of comfort letters and research of various tax subjects. Procedures For Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor Our Board is ultimately responsible for reviewing and approving, in advance, any audit and any permissible non-audit engagement or relationship between us and our independent registered public accounting firm. On July 9, 2015, the Board established an Audit Committee which was authorized to assume these responsibilities. Haskell & White LLP’s engagement to conduct all audit and permissible non-audit related activities incurred during fiscal years 2020 and 2019 were approved by our audit committee in accordance with these procedures. PART IV Item 15. Exhibits, Financial Statement Schedules. (a)(1)(2) Financial Statement Schedules See accompanying “Index to Consolidated Financial Statements.” 55 (b) Exhibits 3.1 Certificate of Incorporation, as amended. (Incorporated by reference to Form 10-Q for the fiscal quarter ended July 31, 1992 and Form S-3, dated February 11, 2014.) 3.2 Amendment to the Certificate of Incorporation. (Incorporated by reference to Exhibit 3.2 to our Form 10-K for the fiscal year ended October 31, 2013.) 3.3 Certificate of Amendment to the Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to our Form 8-K, dated September 4, 2014.) 3.4 Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock. (Incorporated by reference to Exhibit 3.1 to our Form 8-K, dated September 10, 2014.) 3.5 Certificate of Amendment to the Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to our Form 8-K, dated June 25, 2015.) 3.6 Certificate of Amendment to the Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to our Form 10-Q for the fiscal quarter ended April 30, 2018.) 3.7 Certificate of Amendment to the Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to our Form 8-K, dated October 1, 2018.) 3.8 Certificate of Amendment to the Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to our Form 8-K, dated August 13, 2020.) 3.9 Amended and Restated By-laws. (Incorporated by reference to Exhibit 3.8 to our Form 10-K for the fiscal year ended October 31, 2019.) 4.1 Form of Warrant issued to Adaptive Capital LLC. (Incorporated by reference to Exhibit 4.2 to our Form 10-K, dated December 7, 2016.). 4.2 Form of Warrant issued to Acorn Management Partners LLC. (Filed herewith.). 10.1 2010 Share Incentive Plan. (Incorporated by reference to Exhibit 10.1 to our Form 8-K, dated July 20, 2010.) 10.2 Amendment No. 1 to the 2010 Share Incentive Plan. (Incorporated by reference to Exhibit 10.1 to our Form 8-K, dated July 7, 2011.) 10.3 Amendment No. 2 to the 2010 Share Incentive Plan. (Incorporated by reference to Exhibit 10.1 to our Form 8-K, dated September 5, 2012.) 10.4 Amendment No. 3 to the 2010 Share Incentive Plan. (Incorporated by reference to Exhibit 10.1 to our Form 10-Q for the fiscal quarter ended January 31, 2014.) 10.5 2018 Share Incentive Plan. (Incorporated by reference to Exhibit 4.13 to our Form S-8 dated October 1, 2018.) 10.6 Consulting Agreement, dated as of September 19, 2012, between the Company and Amit Kumar. (Incorporated by reference to Exhibit 10.37 to our Form 10-K for the fiscal year ended October 31, 2012.) (Portions of this exhibit have been redacted pursuant to a request for confidential treatment. The redacted portions have been separately filed with the Securities and Exchange Commission.) 10.7 License Agreement, dated November 13, 2017, between Certainty Therapeutics, Inc. and The Wistar Institute of Anatomy and Biology. (Incorporated by reference to Exhibit 10.14 to our Form 10-K, dated January 9, 2018.) (Portions of this exhibit have been redacted pursuant to a request for confidential treatment. The redacted portions have been separately filed with the Securities and Exchange Commission.) 10.8 Collaboration Agreement, dated November 17, 2017, between Certainty Therapeutics, Inc. and H. Lee Moffitt Cancer Center and Research Institute, Inc. (Incorporated by reference to Exhibit 10.15 to our Form 10-K, dated January 9, 2018.) (Portions of this exhibit have been redacted pursuant to a request for confidential treatment. The redacted portions have been separately filed with the Securities and Exchange Commission.) 10.9 Amendment 1 to the Collaboration Agreement between Certainty Therapeutics, Inc. and H. Lee Moffitt Cancer Center and Research Institute, Inc. (Incorporated by reference to Exhibit 10.2 to our Form 10-Q for the fiscal quarter ended July 31, 2019.) 56 10.10 Amendment 2 to the Collaboration Agreement between Certainty Therapeutics, Inc. and H. Lee Moffitt Cancer Center and Research Institute, Inc. (Filed herewith.) (Certain information has been redacted in the marked portions of the exhibit.) 10.11 Exclusive License Agreement, dated July 8, 2019, between the Company and The Cleveland Clinic Foundation. (Incorporated by reference to Exhibit 10.1 to our Form 10-Q for the fiscal quarter ended July 31, 2019.) (Certain information has been redacted in the marked portions of the exhibit.) 10.12 Collaboration Agreement, dated April 14, 2020, between the Company and OntoChem GmbH. (Incorporated by reference to Exhibit 10.1 to our Form 10-Q for the fiscal quarter ended April 30, 2020.) (Certain information has been redacted in the marked portions of the exhibit.) 10.13 Amendement to Collaboration Agreement between the Company and OntoChem GmbH. (Filed herewith.) 10.14 Exclusive License Agreement, dated October 20, 2020, between the Company and The Cleveland Clinic Foundation. (Filed herewith.) (Certain information has been redacted in the marked portions of the exhibit.) 10.15 At Market Issuance Sales Agreement, dated June 21, 2019, between the Company and B. Riley FBR, Inc. (Incorporated by reference to Exhibit 10.1 to our Registration Statement of Form S-3 filed June 11, 2019.) 14 Code of Conduct (Filed herewith.) 21 Subsidiaries of Anixa Biosciences, Inc. (Filed herewith.) 23.1 Consent of Haskell & White LLP. (Filed herewith.) 31.1 Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated January 7, 2021. (Filed herewith.) 31.2 Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated January 7, 2021. (Filed herewith.) 32.1 Statement of Chief Executive Officer, pursuant to Section 1350 of Title 18 of the United States Code, dated January 7, 2021. (Filed herewith.) 32.2 Statement of Chief Financial Officer, pursuant to Section 1350 of Title 18 of the United States Code, dated January 7, 2021. (Filed herewith.) Item 16. Form 10-K Summary. The Company has elected not to include a summary pursuant to this Item 16. 57 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Anixa Biosciences, Inc. By: /s/ Amit Kumar Dr. Amit Kumar Chairman of the Board, President and January 7, 2021 Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. By : /s/ Amit Kumar Dr. Amit Kumar Chairman of the Board, President and Chief Executive Officer January 7, 2021 (Principal Executive Officer) By: /s/ Michael J. Catelani Michael J. Catelani Chief Operating Officer and Chief Financial Officer January 7, 2021 (Principal Financial and Accounting Officer) By: /s/ Lewis H. Titterton, Jr. Lewis H. Titterton, Jr. January 7, 2021 Director By: /s/ Arnold Baskies Dr. Arnold Baskies January 7, 2021 Director By: /s/ David Cavalier David Cavalier January 7, 2021 Director By: /s/ Emily Gottschalk Emily Gottschalk January 7, 2021 Director By: /s/ John Monahan Dr. John Monahan January 7, 2021 Director 58 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2020 Page Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets as of October 31, 2020 and 2019 F-2 Consolidated Statements of Operations for the years ended October 31, 2020 and 2019 F-3 Consolidated Statements of Equity for the years ended October 31, 2020 and 2019 F-4 Consolidated Statements of Cash Flows for the years ended October 31, 2020 and 2019 F-5 Notes to Consolidated Financial Statements F-6 Additional information required by schedules called for under Regulation S-X is either not applicable or is included in the consolidated financial statements or notes thereto. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders Anixa Biosciences, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Anixa Biosciences, Inc. (the “Company”) as of October 31, 2020 and 2019, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the two years in the period ended October 31, 2020, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of October 31, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the two years in the period ended October 31, 2020, in conformity with accounting principles generally accepted in the United States. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Haskell & White LLP HASKELL & WHITE LLP We have served as the Company’s auditor since 2013. Irvine, California January 7, 2021 F- 1 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS October 31, October 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 6,417,061 $ 3,491,625 Short–term investments in certificates of deposit 2,640,000 2,350,000 Receivables 2,231 66,527 Prepaid expenses and other current assets 309,332 184,972 Total current assets 9,368,624 6,093,124 Property and equipment, net of accumulated depreciation of $-0- and $95,015, respectively - 200,569 Operating lease right-of-use asset 54,340 - Other assets 30,000 - Total assets $ 9,452,964 $ 6,293,693 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 232,368 $ 585,817 Accrued expenses 901,025 895,498 Operating lease liability 55,198 - Total current liabilities 1,188,591 1,481,315 Commitments and contingencies (Note 6) 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 - - Common stock, par value $.01 per share; 100,000,000 and 48,000,000 shares authorized, respectively; 24,248,695 and 20,331,754 shares issued and outstanding, respectively 242,486 203,317 Additional paid-in capital 200,354,488 186,849,299 Accumulated deficit (191,835,618 ) (181,817,263 ) Total shareholders’ equity 8,761,356 5,235,353 Noncontrolling interest (Note 2) (496,983 ) (422,975 ) Total equity 8,264,373 4,812,378 Total liabilities and equity $ 9,452,964 $ 6,293,693 The accompanying notes are an integral part of these statements. F- 2 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended October 31, 2020 2019 Revenue $ - $ 250,000 Operating costs and expenses: Inventor royalties, contingent legal fees, litigation and licensing expenses - 166,250 Amortization of patents - 418,750 Research and development expenses (including non-cash share based compensation expenses of $1,484,545 and $2,825,630, respectively) 4,381,205 5,473,427 General and administrative expenses (including non-cash share based compensation expenses of $2,652,915 and $2,888,115, respectively) 5,596,997 5,662,828 Impairment in carrying amount of patent assets (Note 2) - 418,750 Total operating costs and expenses 9,978,202 12,140,005 Loss from operations (9,978,202 ) (11,890,005 ) Loss on disposal of property and equipment (148,084 ) - Interest income 33,923 71,353 Net loss (10,092,363 ) (11,818,652 ) Less: Net loss attributable to noncontrolling interest (74,008 ) (171,598 ) Net loss attributable to common stockholders $ (10,018,355 ) $ (11,647,054 ) Net loss per share: Basic and diluted $ (0.45 ) $ (0.59 ) Weighted average common shares outstanding: Basic and diluted 22,229,042 19,789,795 The accompanying notes are an integral part of these statements. F- 3 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEARS ENDED OCTOBER 31, 2020 and 2019 Additional Total Non- Common Stock Paid-in Accumulated Shareholders controlling Total Shares Par Value Capital Deficit Equity Interest Equity BALANCE, October 31, 2018 18,908,632 $ 189,086 $ 175,415,931 $ (170,170,209 ) $ 5,434,808 $ (251,377 ) $ 5,183,431 Stock option compensation to employees and directors - - 3,560,883 - 3,560,883 - 3,560,883 Stock options and warrants issued to consultants - - 198,421 - 198,421 - 198,421 Common stock issued upon exercise of stock options 47,600 476 121,594 - 122,070 - 122,070 Restricted stock award compensation to employee pursuant to stock incentive plan - - 1,954,441 - 1,954,441 - 1,954,441 Common stock issued pursuant to employee stock purchase plan 11,650 116 38,970 - 39,086 - 39,086 Common stock issued in at-the-market offering 1,363,872 13,639 5,513,789 - 5,527,428 - 5,527,428 Shareholder derivative complaint settlement - - 45,270 - 45,270 - 45,270 Net Loss - - - (11,647,054 ) (11,647,054 ) (171,598 ) (11,818,652 ) BALANCE, October 31, 2019 20,331,754 $ 203,317 $ 186,849,299 $ (181,817,263 ) $ 5,235,353 $ (422,975 ) $ 4,812,378 Stock option compensation to employees and directors - - 3,922,719 - 3,922,719 - 3,922,719 Stock options issued to consultants - - 214,741 - 214,741 - 214,741 Common stock issued upon exercise of stock options 51,100 511 121,759 - 122,270 - 122,270 Common stock issued pursuant to employee stock purchase plan 11,536 115 18,336 - 18,451 - 18,451 Common stock issued in at-the-market offering 3,854,305 38,543 9,227,634 - 9,266,177 - 9,266,177 Net Loss - - - (10,018,355 ) (10,018,355 ) (74,008 ) (10,092,363 ) BALANCE, October 31, 2020 24,248,695 $ 242,486 $ 200,354,488 $ (191,835,618 ) $ 8,761,356 $ (496,983 ) $ 8,264,373 The accompanying notes are an integral part of these statements. F- 4 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended October 31, 2020 2019 Cash flows from operating activities: Reconciliation of net loss to net cash used in operating activities: Net loss $ (10,092,363 ) $ (11,818,652 ) Stock option compensation to employees and directors 3,922,719 3,560,883 Stock options and warrants issued to consultants 214,741 198,421 Restricted stock award compensation to employee pursuant to stock incentive plan - 1,954,441 Amortization of patents - 418,750 Depreciation of property and equipment 38,276 47,558 Loss on disposal of property and equipment 148,084 - Amortization of operating lease right-of-use asset 51,881 - Impairment in carrying amount of patent assets - 418,750 Change in operating assets and liabilities: Receivables 64,296 271,700 Prepaid expenses and other current assets (124,360 ) (9,481 ) Accounts payable (353,449 ) 3,805 Accrued expenses 5,527 212,399 Operating lease liability (51,023 ) - Net cash used in operating activities (6,175,671 ) (4,741,426 ) Cash flows from investing activities: Disbursements to acquire short-term investments in certificates of deposit (5,010,000 ) (3,850,000 ) Proceeds from maturities of short-term investments in certificates of deposit 4,720,000 3,500,000 Purchase of property and equipment (15,791 ) (175,457 ) Net cash used in investing activities (305,791 ) (525,457 ) Cash flows from financing activities: Proceeds from sale of common stock in at-the-market offering 9,266,177 5,527,428 Proceeds from sale of common stock pursuant to employee stock purchase plan 18,451 39,086 Proceeds from settlement of shareholder derivative complaint - 14,034 Proceeds from exercise of stock options and warrants 122,270 122,070 Net cash provided by financing activities 9,406,898 5,702,618 Net increase in cash and cash equivalents 2,925,436 435,735 Cash and cash equivalents at beginning of year 3,491,625 3,055,890 Cash and cash equivalents at end of year $ 6,417,061 $ 3,491,625 Supplemental cash flow information: Cash proceeds from interest income $ 39,890 $ 55,729 Supplemental disclosure of non-cash investing activity: Disposal of fully depreciated property and equipment $ - $ (6,343 ) Supplemental disclosure of non-cash financing activity: Note receivable issued for settlement of shareholder derivative complaint $ - $ 31,236 The accompanying notes are an integral part of these statements. F- 5 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 the development of a chimeric endocrine receptor T-cell technology, a novel form of CAR-T technology, initially focused on treating ovarian cancer, and the discovery and ultimately development of anti-viral drug candidates for the treatment of COVID-19 focused on inhibiting certain viral protein functions of the virus. Our vaccine programs include the development of a vaccine against triple negative breast cancer (“TNBC”), the most lethal form of breast cancer, and a vaccine against ovarian cancer. Our subsidiary, Certainty Therapeutics, Inc. (“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”) relating to Wistar’s CAR-T technology. We have initially focused on the development of a treatment for ovarian cancer, but we may also 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. 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 its CAR-T technology for treating ovarian cancer. In April 2020, in collaboration with OntoChem GmbH (“OntoChem”), we commenced a project 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. We are working with researchers at OntoChem and other collaboration partners to advance the compounds discovered through this screening process toward human clinical testing. 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. We are working in collaboration with Cleveland Clinic to develop a method to vaccinate women against contracting breast cancer, focused specifically on TNBC. A specific protein, alpha-lactalbumin, has been identified that is only present during lactation in healthy women, but reappears in many forms of breast cancer, especially TNBC. Studies have shown that vaccinating against this protein prevents breast cancer in mice. We are working with researchers and clinicians at Cleveland Clinic to prepare for treatment of patients in a Phase 1a clinical trial. 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 the use of vaccines for the treatment or prevention of ovarian cancers which express the extracellular domain of anti-Mullerian hormone receptor II (“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, AMHR2-ED is expressed at high levels in the ovaries of postmenopausal women with ovarian cancer. Researchers at Cleveland Clinic believe that a vaccination targeting AMHR2-ED could prevent the occurrence of ovarian cancer. F- 6 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On July 2, 2020, we implemented a strategic realignment of our business and redirected resources to exclusively focus on the development of therapeutics and vaccines. Accordingly, we suspended operations of our subsidiary, Anixa Diagnostics Corporation, and the development of the Cchek™ artificial intelligence driven platform of non-invasive blood tests for the early detection of cancer. 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 the Cchek™ 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, and may depend on positive results from human clinical trials. Funding Based on currently available information as of January 7, 2021, we believe that our existing cash, cash equivalents, short-term investments and expected cash flows will be sufficient to fund our activities for 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. During fiscal year 2020, we raised approximately $9,266,000, net of expenses, through at-the-market equity offerings of 3,854,305 shares of common stock. This included approximately $427,000, net of expenses, through the sale of 112,238 shares of common stock in an at-the market equity offering which expired in November 2019 and approximately $8,839,000, net of expenses, through the sale of 3,742,067 shares of common stock in an at-the-market equity offering under which we may issue up to $50 million of common stock. Under our current at-the-market equity program which is currently effective and may remain available for us to use in the future, we may sell an additional approximately $40,811,000 of common stock. We may seek to obtain working capital during our fiscal year 2021 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 could 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. F- 7 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2020: Balance October 31, 2018 $ (251,377 ) Net loss attributable to noncontrolling interest (171,598 ) Balance October 31, 2019 (422,975 ) Net loss attributable to noncontrolling interest (74,008 ) Balance October 31, 2020 $ (496,983 ) 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. F- 8 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, development of our breast cancer vaccine, development of our ovarian cancer vaccine and development of anti-viral drug candidates for COVID-19, 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 U.S. generally accepted accounting principles (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. F- 9 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of October 31, 2020: Level 1 Level 2 Level 3 Total Money market funds: Cash and cash equivalents $ 3,902,292 $ - $ - $ 3,902,292 Certificates of deposit: Cash and cash equivalents 2,250,000 - - 2,250,000 Short term investments - 2,640,000 - 2,640,000 Total financial assets $ 6,152,292 $ 2,640,000 $ - $ 8,792,292 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 Our non-financial assets that are measured on a non-recurring basis include our 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 accounts receivable, 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 are stated at carrying value which approximates fair value. 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, 2020 and 2019, we had certificates of deposit with maturities greater than 90 days and less than 12 months when acquired of $2,640,000 and $2,350,000, 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, 2020 and 2019. We recorded patent amortization expense of $-0- and approximately $419,000, respectively, during the years ended October 31, 2020 and 2019. 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-down was based on estimated undiscounted future cash flows of the capitalized patents compared to the carrying value. F- 10 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our estimates of future cash flows was 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, 2020 and 2019, we could not reasonably determine an estimate of any such future cash flows. The carrying value of capitalized patents is $-0- as of October 31, 2020 and 2019. Property and equipment We capitalized computers and test equipment used in our cancer diagnostics and therapeutics programs and charged depreciation on a straight-line basis over 60 months. Equipment purchases during the years ended October 31, 2020 and 2019 were approximately $16,000 and $175,000, respectively. We recorded depreciation expense of approximately $38,000 and 48,000, respectively, during the years ended October 31, 2020 and 2019. As a result of the suspension of operations of our subsidiary, Anixa Diagnostics Corporation, as discussed in Note 1, we recorded a loss on disposal of property and equipment of approximately $148,000 during the year ended October 31, 2020. 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 awards and 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 $3,923,000 and $3,185,000, during the years ended October 31, 2020 and 2019, respectively. Included in stock-based compensation cost for service-based options granted to employees and directors during the years ended October 31, 2020 and 2019 was approximately $3,011,000 and $3,166,000, respectively, related to the amortization of compensation cost for stock options granted in prior periods but not yet vested. As of October 31, 2020, there was unrecognized compensation cost related to non-vested service-based stock options granted to employees and directors of approximately $2,605,000, which will be recognized over a weighted-average period of 1.5 years. F- 11 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 $-0- and approximately $376,000 during the years ended October 31, 2020 and 2019, respectively, which included $-0- and approximately $376,000, respectively, of expense related to the amortization of compensation cost for stock options granted in prior periods but not yet vested. As of October 31, 2020, 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 U.S. 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, 2020 and 2019 of approximately $215,000 and $113,000, respectively. Included in stock-based consulting expense for the years ended October 31, 2020 and 2019 was approximately $123,000 and $99,000, respectively, related to compensation cost for stock options granted in prior periods but not yet vested. As of October 31, 2020, there was unrecognized consulting expense related to non-vested stock options granted to consultants, related to service-based options of approximately $340,000, which will be recognized over a weighted-average period of --1.9 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 each of the years ended October 31, 2020 and 2019 consisted of awards with 5-year and 10-year terms that vest over 12 to 36 months. F- 12 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following weighted average assumptions were used in estimating the fair value of stock options granted during the years ended October 31, 2020 and 2019: For the Year Ended October 31, 2020 2019 Weighted average fair value at grant date $ 2.97 $ 3.87 Valuation assumptions: Expected life (years) 5.86 5.47 Expected volatility 114.22 % 116.72 % Risk-free interest rate 1.45 % 1.61 % 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, 2020 and 2019 we recorded compensation expense related to the restricted stock award of $-0- and approximately $1,954,000, respectively. We did not issue any stock awards during the years ended October 31, 2020 and 2019. As of October 31, 2020, there was no unrecognized compensation cost related to the restricted stock awards. F- 13 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2020 and 2019 we recorded consulting expense, based on the fair value, of $-0- and approximately $85,000, 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, 2020 and 2019 were options to purchase 7,952,195 and 7,632,068 shares, respectively, and warrants to purchase 560,000 shares and 525,000 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. Effect of Recently Issued Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02 (“ASU 2016-02”) Accounting Standards Codification Topic 842, Leases (“ASC 842”), which supersedes Topic 840, Leases, and which requires lessees to recognize most leases on the balance sheet. The new lease standard does not substantially change lessor accounting. For public companies, the standard was effective for the first interim reporting period within annual periods beginning after December 15, 2018, although early adoption was permitted. Lessees and lessors were 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. In July 2018, FASB issued ASU 2018-11, Leases, which provides an additional transition option for an entity to apply the provisions of ASC 842 by recognizing a cumulative effect adjustment at the effective date of adoption without adjusting the prior comparative periods presented. The requirements of this standard include a significant increase in required disclosures. The Company adopted ASU 2016-02 on November 1, 2019. The adoption of this standard did not have a material impact on our consolidated financial statements. See Note 5 regarding the accounting and disclosures related to our office lease. 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. F- 14 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. ACCRUED EXPENSES Accrued liabilities consist of the following as of: October 31, 2020 2019 Payroll and related expenses 415,331 72,850 Accrued royalty and contingent legal fees 449,691 449,691 Accrued collaborative research and license expense 30,000 371,710 Accrued other 6,003 1,247 $ 901,025 $ 895,498 4. SHAREHOLDERS’ EQUITY Stock Option Plans During the year ended October 31, 2020, we had three stock option plans: the Anixa Biosciences, Inc. 2003 Share Incentive Plan (the “2003 Share Plan”), 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 April 21, 2003, July 14, 2010 and January 25, 2018, respectively. The 2018 Share Plan was approved by our shareholders on March 29, 2018 During the years ended October 31, 2020 and 2019, stock options to purchase 51,100 and 47,600 shares of common stock, respectively, were exercised with aggregate proceeds of approximately $122,000 and $122,000, respectively. 2003 Plan The 2003 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. The exercise price with respect to all of the options granted under the 2003 Share Plan since its inception was equal to the fair market value of the underlying common stock at the grant date. In accordance with the provisions of the 2003 Share Plan, the plan terminated with respect to the grant of future options on April 21, 2013. Information regarding the 2003 Share Plan for the two years ended October 31, 2020 is as follows: Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value Options Outstanding at October 31, 2018 12,000 $ 2.77 Exercised (11,600 ) $ 2.94 Options Outstanding at October 31, 2019 400 $ 17.00 Forfeited/Expired (400 ) $ 17.00 Options Outstanding and Exercisable at October 31, 2020 - $ -0- $ -0- F- 15 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2010 Plan The 2010 Share Plan provides for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to employees, directors and consultants. On the first business day of each calendar year the maximum aggregate number of shares available for future issuance is replenished such that 800,000 shares are available. The exercise price with respect to all of the options granted under the 2010 Share Plan was equal to the fair market value of the underlying common stock at the grant date. In accordance with the provisions of the 2010 Share Plan, the plan terminated with respect to the grant of future options on July 14, 2020. Information regarding the 2010 Share Plan for the two years ended October 31, 2020 is as follows: Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value Options Outstanding at October 31, 2018 2,131,868 $ 2.11 Granted 10,000 $ 3.64 Exercised (32,000 ) $ 2.27 Forfeited (111,200 ) $ 3.89 Options Outstanding at October 31, 2019 1,998,668 $ 2.80 Exercised (51,100 ) $ 2.39 Forfeited/Expired (40,034 ) $ 2.34 Options Outstanding at October 31, 2020 1,907,534 $ 2.82 $ 327,340 Options Exercisable at October 31, 2020 1,791,284 $ 2.84 $ 280,878 The following table summarizes information about stock options outstanding under the 2010 Share Plan as of October 31, 2020: Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 0.67 - $2.30 549,000 5.45 $ 1.57 507,750 5.35 $ 1.62 $ 2.58 - $3.13 834,000 2.84 $ 2.79 834,000 3.13 $ 2.79 $ 3.46 - $5.75 524,534 7.25 $ 4.17 449,534 7.17 $ 4.49 F- 16 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2018 Plan The 2018 Share Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to employees, directors and consultants. On the first business day of each calendar year the maximum aggregate number of shares available for future issuance is replenished such that 2,000,000 shares are available. The exercise price with respect to all of the options granted under the 2018 Share Plan was equal to the fair market value of the underlying common stock at the grant date. As of October 31, 2020, the 2018 Share Plan had 2,388,339 shares available for future grants. Information regarding the 2018 Share Plan for the two years ended October 31, 2020 is as follows: Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value Options Outstanding at October 31, 2018 3,482,000 $ 3.73 Granted 465,000 $ 3.87 Exercised (4,000 ) $ 3.84 Forfeited/Expired (8,000 ) $ 3.84 Options Outstanding at October 31, 2019 3,935,000 $ 3.74 Granted 1,045,000 $ 3.56 Forfeited/Expired (633,339 ) $ 3.83 Options Outstanding at October 31, 2020 4,346,661 $ 3.69 $ -0- Options Exercisable at October 31, 2020 2,456,109 $ 3.74 $ -0- The following table summarizes information about stock options outstanding under the 2018 Share Plan as of October 31, 2020: Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 2.09 - $3.70 3,247,781 7.70 $ 3.62 1,861,948 7.58 $ 3.68 $ 3.84 - $4.61 1,098,880 8.49 $ 3.90 594,161 8.25 $ 3.92 Non-Plan Options In addition to options granted under the 2003 Share Plan, the 2010 Share Plan and the 2018 Share Plan, during the years ended October 31, 2012 and 2013, the Board of Directors approved the grant of stock options to certain employees and directors (the “Non-Plan Options”). Information regarding the Non-Plan Options for the two years ended October 31, 2020 is as follows: Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value Options Outstanding at October 31, 2018 1,780,000 $ 1.58 Forfeited (82,000 ) $ 5.32 Options Outstanding and Exercisable at October 31, 2019 and 2020 1,698,000 $ 2.58 $ -0- F- 17 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information about outstanding and exercisable Non-Plan Options as of October 31, 2020: Range of Exercise Prices Number Outstanding and Exercisable Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 2.58 1,698,000 1.75 $ 2.58 Re-Priced Stock Options On August 21, 2019, the Company entered into a settlement agreement in connection with a putative shareholder derivative complaint filed in the Court of Chancery of the State of Delaware on November 5, 2018. Pursuant to the settlement agreement the Company agreed, among other things, to reprice certain stock options that were repriced on September 6, 2017 to $0.67 to the option price immediately prior to that repricing. Accordingly, 4,000 stock options in the 2003 Share Plan with exercise prices of $2.58, 878,400 stock options in the 2010 Share Plan with exercise prices ranging from $0.96 to $5.30 and 1,046,000 Non-Plan Options with exercise prices of $2.58, were re-priced to the option price immediately prior to the September 6, 2017 repricing. In addition, certain individual defendants in the derivative complaint who had exercised stock options that were re-priced in the 2017 re-pricing and sold the underlying shares paid approximately $45,000 to the Company representing a portion of the amount received for those shares. Employee Stock Purchase Plan The Company maintains the Anixa Biosciences, Inc. Employee Stock Purchase Plan which permits eligible employees to purchase shares at not less than 85% of the market value of the Company’s common stock on the offering date or the purchase date of the applicable offering period, whichever is lower. The plan was adopted by our Board of Directors on August 13, 2018 and approved by our shareholders on September 27, 2018. During the years ended October 31, 2020 and 2019, employees purchased 11,536 and 11,650 shares, respectively, with aggregate proceeds of approximately $18,000 and $39,000, respectively. Common Stock Purchase Warrants During the year ended October 31, 2019 we issued a warrant, expiring on November 1, 2023, to purchase 25,000 shares of common stock at $4.04 per share, vesting over 12 months, to a consultant for investor relations services. On November 1, 2019 the warrant was exchanged for a stock option with the same terms as the warrant. We recorded consulting expense of approximately $85,000 during the year ended October 31, 2019, based on the fair value of the warrant recognized on a straight-line basis over the vesting period. On October 30, 2020 we issued a warrant, expiring on October 30, 2025, to purchase 60,000 shares of common stock at $2.06 per share, vesting over five months, to a consultant for investor relations services. Information regarding the Company’s warrants for the two years ended October 31, 2020 is as follows: Shares Weighted Average Exercise Price Per Share Warrants Outstanding at October 31, 2018 829,400 $ 7.04 Issued 25,000 $ 4.04 Expired (329,400 ) $ 10.09 Warrants Outstanding at October 31, 2019 525,000 $ 4.98 Issued 60,000 $ 2.06 Exchanged (25,000 ) $ 4.04 Warrants Outstanding at October 31, 2020 560,000 $ 4.71 Warrants Exercisable at October 31, 2020 510,000 $ 4.97 F- 18 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. LEASES We lease approximately 2,000 square feet of office space at 3150 Almaden Expressway, San Jose, California (our principal executive offices) from an unrelated party pursuant to an operating lease that expires September 30, 2021. Our base rent is approximately $5,000 per month and the lease provides for annual increases of approximately 3% and an escalation clause for increases in certain operating costs. Under an operating lease that expired on May 31, 2019 we also leased approximately 3,000 square feet of office space at 12100 Wilshire Boulevard, Los Angeles, California (our former executive offices) from an unrelated party. As of August 1, 2018, we had subleased these facilities. Rent expense was approximately $64,000 and $60,000, respectively, for the years ended October 31, 2020 and 2019. On November 1, 2019, the Company adopted ASC 842, which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance requires the recognition of the right-of-use (“ROU”) assets and related operating lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach on November 1, 2019. As a result, the consolidated balance sheet as of October 31, 2019 was not restated and is not comparative. The adoption of ASC 842 resulted in the recognition of ROU assets of $106,221, and lease liabilities for operating leases of $106,299 on the Company’s consolidated balance sheet as of November 1, 2019. The difference between the ROU assets and the operating lease liability represents the difference between the lease cost and the amount of rent paid in October 2019. The Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and non-lease components. The Company has also elected the short-term lease accounting policy under which Anixa would not recognize a lease liability or ROU asset for any lease that at the commencement date has a lease term of twelve months or less and does not include a purchase option that Anixa is more than reasonably certain to exercise. For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. The remaining 11-month lease term as of October 31, 2020 for the Company’s lease includes the noncancelable period of the lease. The lease does not contain a Company option to extend the lease or an option to extend the lease controlled by the lessor. All ROU assets are reviewed for impairment. Balance sheet information related to the Company’s lease is presented below: Balance Sheet Location October 31, 2020 November 1, 2019 October 31, 2019 Operating Lease: Right-of-use asset Operating lease right- of-use asset $ 54,340 $ 106,221 $ - Right-of-use liability, current Operating lease liability 55,198 51,101 - Right-of-use liability, long-term Not presented - 55,198 - F- 19 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of October 31, 2020, the annual minimum lease payments of our operating lease liability were as follows: Operating Leases Fiscal year 2021 future minimum payments, undiscounted $ 59,136 Less: Imputed interest 3,938 Present value of future minimum lease payments $ 55,198 6. COMMITMENTS AND CONTINGENCIES Litigation Matters Other than lawsuits we bring to enforce our patent rights, we are not involved in any litigation or other legal proceedings and management is not aware of any pending litigation or legal proceeding against us that would have a material adverse effect upon our results of operations or financial condition. Collaborative Research and License Commitments As of October 31, 2020, our commitments under the collaborative and license agreements with Moffitt, Wistar, Cleveland Clinic and OntoChem for the year ending October 31, 2021 were approximately $188,000. 7. INCOME TAXES Income tax provision (benefit) consists of the following: Year Ended October 31, 2020 2019 Federal: Current $ - $ - Deferred 404,000 (948,000 ) State: Current - - Deferred (800,000 ) (995,000 ) Adjustment to valuation allowance related to net deferred tax assets 396,000 1,943,000 $ - $ - The tax effects of temporary differences that give rise to significant portions of the deferred tax asset, net, at October 31, 2020 and 2019, are as follows: October 31, 2020 2019 Long-term deferred tax assets: Federal and state NOL and tax credit carryforwards $ 19,727,000 $ 19,593,000 Deferred compensation 8,009,000 7,619,000 Intangibles 828,000 943,000 Other 192,000 205,000 Subtotal 28,756,000 28,360,000 Less: valuation allowance (28,756,000 ) (28,360,000 ) Deferred tax asset, net $ - $ - F- 20 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of October 31, 2020, we had tax net operating loss and tax credit carryforwards of approximately $81,316,000 and $1,545,000, respectively, available within statutory limits (expiring at various dates between 2021 and 2040), to offset any future regular Federal corporate taxable income and taxes payable. If the tax benefits relating to deductions of option holders’ income are ultimately realized, those benefits will be credited directly to additional paid-in capital. Certain changes in stock ownership can result in a limitation on the amount of net operating loss and tax credit carryovers that can be utilized each year. As of October 31, 2020, management has not determined the extent of any such limitations, if any. We had California tax net operating loss carryforwards of approximately $26,671,000 as of October 31, 2020, available within statutory limits (expiring at various dates between 2021 and 2040), to offset future corporate taxable income and taxes payable, if any, under certain computations of such taxes. We have provided a valuation allowance against our deferred tax asset due to our current and historical pre-tax losses and the uncertainty regarding their realizability. The primary differences from the Federal statutory rate of 21% and the effective rate of 0% is attributable to expiring net operating losses and a change in the valuation allowance. The following is a reconciliation of income taxes at the Federal statutory tax rate to income tax expense (benefit): Year Ended October 31, 2020 2019 Income tax benefit at U.S. Federal statutory income tax rate $ (2,119,000 ) (21.00 )% $ (2,482,000 ) (21.00 )% State income taxes (705,000 ) (6.98 )% (1,045,000 ) (8.84 )% Permanent differences 32,000 0.32 % 30,000 0.25 % Expiring net operating losses, credits and other 2,396,000 23.74 % 1,554,000 13.15 % Change in valuation allowance 396,000 3.92 % 1,943,000 16.44 % Income tax provision $ - 0.00 % $ - 0.00 % During the two fiscal years ended October 31, 2020, we incurred no Federal and no State income taxes. We have no unrecognized tax benefits as of October 31, 2020 and 2019 and we account for interest and penalties related to income tax matters in general and administrative expenses. Tax years to which our net operating losses relate remain open to examination by Federal and California authorities to the extent which the net operating losses have yet to be utilized. F- 21 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. SEGMENT INFORMATION We follow the accounting guidance of ASC 280 “Segment Reporting” (“ASC 280”). Reportable operating segments are determined based on the management approach. The management approach, as defined by ASC 280, is based on the way that the chief operating decision-maker organizes the segments within an enterprise for making operating decisions and assessing performance. While our results of operations are primarily reviewed on a consolidated basis, the chief operating decision-maker manages the enterprise in five reportable segments, each with different operating and potential revenue generating characteristics: (i) CAR-T Therapeutics, (ii) Cancer Vaccines, (iii) Anti-Viral Therapeutics, (iv) Cancer Diagnostics and (v) our legacy Patent Licensing activities. The following represents selected financial information for our segments for the years ended October 31, 2020 and 2019: Year Ended October 31, 2020 2019 Net loss: CAR-T Therapeutics $ (2,241,443 ) $ (5,074,868 ) Cancer Vaccines (828,136 ) (677,450 ) Anti-Viral Therapeutics (1,168,969 ) - Cancer Diagnostics (5,836,594 ) (5,196,471 ) Patent Licensing (17,221 ) (869,863 ) Total $ (10,092,363 ) $ (11,818,652 ) Total operating costs and expenses $ 9,978,202 $ 12,140,005 Less non-cash share-based compensation (4,137,460 ) (5,713,746 ) Operating costs and expenses excluding non-cash share-based compensation $ 5,840,742 $ 6,426,259 Operating costs and expenses excluding non-cash share based compensation: CAR-T Therapeutics $ 1,141,542 $ 2,212,090 Cancer Vaccines 365,681 458,392 Anti-Viral Therapeutics 739,140 - Cancer Diagnostics 3,581,377 2,689,761 Patent Licensing 13,002 1,066,016 Total $ 5,840,742 $ 6,426,259 October 31, 2020 2019 Total assets: CAR-T Therapeutics $ 2,988,124 $ 2,382,460 Cancer Vaccines 946,923 489,881 Anti-Viral Therapeutics 2,464,361 - Cancer Diagnostics 2,869,529 2,921,784 Patent Licensing 184,027 499,568 Total $ 9,452,964 $ 6,293,693 Operating costs and expenses excluding non-cash share-based compensation is the measurement the chief operating decision-maker uses in managing the enterprise. The Company’s consolidated revenue of $250,000, inventor royalties, contingent legal fees, litigation and licensing expense of $166,250, amortization of patents of $418,750 and impairment in carrying amount of patent assets of $418,750 for the year ended October 31, 2019 were solely related to our patent licensing segment. All our revenue is generated domestically (United States) based on the country in which the licensee is located. F- 22 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. IMPACT OF CORONAVIRUS PANDEMIC On March 10, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The virus and actions taken to mitigate its spread have had and are expected to continue to have a broad adverse impact on the economies and financial markets of many countries, including the geographical areas in which the Company operates and conducts its business and which the Company’s partners operate and conduct their business. We are currently following the recommendations of local health authorities to minimize exposure risk for our team members and visitors. However, the scale and scope of this pandemic is unknown and the duration of the business disruption and related financial impact cannot be reasonably estimated at this time. While we have implemented specific business continuity plans to reduce the potential impact of COVID-19, there is no guarantee that our continuity plans will be successful. We have already experienced certain disruptions to our business such as temporary closure of our offices and similar disruptions have occurred for our partners. Specifically, the outbreak has caused shutdowns of the laboratories and other service providers that we rely on to develop our programs, and those laboratories and service providers that have been operating or that have begun operating recently have been doing so with more limited capacity due to social distancing requirements. As a result, our progress has been slowed and there is no assurance that we will be able to meet our previously announced timelines regarding the advancement of our programs. The extent to which COVID-19 or any other health epidemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Accordingly, COVID-19 could have a material adverse effect on our business, results of operations, financial condition and prospects. F- 23