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 2021. 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, 2021. 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, 2021. 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, 2021 has not been audited by our auditors, Haskell & White LLP. 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 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. Other Information. Reference is made to that certain consulting agreement, dated September 19, 2012, between the Company and Dr. Amit Kumar. The consulting agreement, which has been inoperative since June 2015, was formally terminated on December 30, 2021. The termination of this consulting agreement has no impact on Dr. Kumar’s employment with the Company as Dr. Kumar remains the Chief Executive Officer and President of the Company on an at-will basis. 41 PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Stockholders scheduled for March 10, 2022 which such Proxy Statement will be filed with the SEC within 120 days of October 31, 2021, and will be incorporated into this Annual Report on Form 10-K by reference. Item 11. Executive Compensation. The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Stockholders scheduled for March 10, 2022 which such Proxy Statement will be filed with the SEC within 120 days of October 31, 2021, and will be incorporated into this Annual Report on Form 10-K by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Stockholders scheduled for March 10, 2022 which such Proxy Statement will be filed with the SEC within 120 days of October 31, 2021, and will be incorporated into this Annual Report on Form 10-K by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Stockholders scheduled for March 10, 2022 which such Proxy Statement will be filed with the SEC within 120 days of October 31, 2021, and will be incorporated into this Annual Report on Form 10-K by reference. Item 14. Principal Accounting Fees and Services. The information required by this Item will be set forth in our Proxy Statement for the 2022 Annual Meeting of Stockholders scheduled for March 10, 2022 which such Proxy Statement will be filed with the SEC within 120 days of October 31, 2021, and will be incorporated into this Annual Report on Form 10-K by reference. 42 PART IV Item 15. Exhibits, Financial Statement Schedules. (a)(1)(2) Financial Statement Schedules See accompanying “Index to Consolidated Financial Statements.” (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.) 3.10 Amendment to the Amended and Restated Bylaws of the Company. (Incorporated by reference to our Form 8-K, dated April 2, 2021.) 4.1 Form of Underwriter Warrants. (Incorporated by reference to Exhibit 4.1 to our Form 8-K, dated March 24, 2021.) 4.2 Form of Warrant issued to Acorn Management Partners LLC. (Filed herewith.) 4.3 Description of the Company’s Securities Registered under Section 12 of the Exchange Act (Incorporated by reference to the description of our common stock contained in our Current Report on Form 8-K filed on March 31, 2014.) 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 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.) 10.7 Amendment to License Agreement between Certainty Therapeutics, Inc. and The Wistar Institute of Anatomy and Biology. (Incorporated by reference to Exhibit 10.1 to our Form 10-Q for the fiscal quarter ended January 31, 2021.) (Certain information has been redacted in the marked portions of the exhibit.) 43 10.8 Amended and Restated Collaboration Agreement, dated November 1, 2021, between Certainty Therapeutics, Inc. and H. Lee Moffitt Cancer Center and Research Institute, Inc. (Filed herewith.) 10.9 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.) 10.10 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.) 10.11 Amendment to Collaboration Agreement between the Company and OntoChem GmbH. (Incorporated by reference to Exhibit 10.13 to our Form 10-K, for the fiscal year ended October 31, 2020.) 10.12 Assignment Agreement dated May 1, 2021, between the Company, OntoChem GmbH and MolGenie GmbH. (Incorporated by reference to Exhibit 10.1 to our Form 10-Q for the fiscal quarter ended April 30, 2021.) 10.13 Amendment 2 to the Collaboration Agreement between the Company and MolGenie GmbH. (Incorporated by reference to Exhibit 10.2 to our Form 10-Q for the fiscal quarter ended April 30, 2021.) (Certain information has been redacted in the marked portions of the exhibit.) 10.14 Exclusive License Agreement, dated October 20, 2020, between the Company and The Cleveland Clinic Foundation. (Incorporated by reference to Exhibit 10.14 to our Form 10-K, for the fiscal year ended October 31, 2020.) (Certain information has been redacted in the marked portions of the exhibit.) 10.15 Joint Development and Option Agreement, dated January 26, 2021, between the Company and The Cleveland Clinic Foundation. (Incorporated by reference to Exhibit 10.2 to our Form 10-Q for the fiscal quarter ended January 31, 2021.) (Certain information has been redacted in the marked portions of the exhibit.) 14 Code of Conduct (Incorporated by reference to Exhibit 14 to our Form 10-K, for the fiscal year ended October 31, 2020.) 21 Subsidiaries of Anixa Biosciences, Inc. (Incorporated by reference to Exhibit 21 to our Form 10-K, for the fiscal year ended October 31, 2020.) 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 4, 2022. (Filed herewith.) 31.2 Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated January 4, 2022. (Filed herewith.) 32.1 Statement of Chief Executive Officer, pursuant to Section 1350 of Title 18 of the United States Code, dated January 4, 2022. (Filed herewith.) 32.2 Statement of Chief Financial Officer, pursuant to Section 1350 of Title 18 of the United States Code, dated January 4, 2022. (Filed herewith.) Item 16. Form 10-K Summary. The Company has elected not to include a summary pursuant to this Item 16. 44 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 4, 2022 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 4, 2022 (Principal Executive Officer) By: /s/ Michael J. Catelani Michael J. Catelani Chief Operating Officer and Chief Financial Officer January 4, 2022 (Principal Financial and Accounting Officer) By: /s/ Lewis H. Titterton, Jr. Lewis H. Titterton, Jr. January 4, 2022 Director By: /s/ Arnold Baskies Dr. Arnold Baskies January 4, 2022 Director By: /s/ Emily Gottschalk Emily Gottschalk January 4, 2022 Director 45 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2021 Page Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets as of October 31, 2021 and 2020 F-3 Consolidated Statements of Operations for the years ended October 31, 2021 and 2020 F-4 Consolidated Statements of Equity for the years ended October 31, 2021 and 2020 F-5 Consolidated Statements of Cash Flows for the years ended October 31, 2021 and 2020 F-6 Notes to Consolidated Financial Statements F-7 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, 2021 and 2020, and the related consolidated statements of operations, equity, and cash flows for each of the two years in the period ended October 31, 2021, 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, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the years in the two year period ended October 31, 2021, in conformity with accounting principles generally accepted in the United States of America. 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 audits, 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. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) Fair Value of Stock Options – Refer to Note 5 to the Consolidated Financial Statements Critical Audit Matter Description: The Company uses the Black-Scholes option-pricing model to estimate the fair value of its time-based stock options. The Black-Scholes option-pricing model involves the use of significant estimates, including the following: ● Expected dividend yield; ● Risk-free interest rate; ● Expected share price volatility; and ● Expected life of the award. Additionally, the Company uses the Monte-Carlo simulation option-pricing model to estimate the fair value of its market condition stock options. The Monte Carlo simulation option-pricing model calculates multiple potential outcomes for an award and establishes a fair value based on the most likely outcome. Key assumptions for the Monte-Carlo simulation option-pricing model include: ● Risk-free interest rate; ● Expected share price volatility; ● Expected dividends; and ● Cost of equity. Given the significant estimates involved in estimating the fair value of stock options, the related audit effort in evaluating management’s estimates in determining the inputs to fair value stock option models was extensive and required a high degree of auditor judgment. How the Critical Audit Matter was Addressed in the Audit: We obtained an understanding over management’s process to estimate the fair value of stock options, including how each of the estimates required are developed to utilize the Black-Scholes and Monte-Carlo simulation option-pricing models. We applied the following audit procedures related to testing management’s estimates utilized in the option-pricing models: ● We performed a look-back at the Company’s previously issued dividends, noting there were none. We inquired with management who informed us that no future dividends were currently anticipated. ● We compared the Company’s risk-free interest rate used to the comparable United States treasury yield for a term comparable to the stock options’ expected term. ● We recalculated the Company’s historical share price volatility for a term comparable to the stock options’ expected term. ● We recalculated the expected term of stock options granted to employees and non-employee directors using the simplified method, whereby, the expected term equals the average of the vesting term and the original contractual term of the option. ● We performed inquiries with the independent third-party valuation specialist assisting the Company with the Monte-Carlo simulation to ensure the inputs used in the calculation, the fair value of the awards, and the expected vesting periods, were reasonable. HASKELL & WHITE LLP We have served as the Company’s auditor since 2013 Irvine, California January 4, 2022 F- 2 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS October 31, October 31, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 29,128,298 $ 6,417,061 Short–term investments 6,599,595 2,640,000 Prepaid expenses and other current assets 275,556 311,563 Total current assets 36,003,449 9,368,624 Operating lease right-of-use asset 253,955 54,340 Other assets - 30,000 Total assets $ 36,257,404 $ 9,452,964 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 136,196 $ 232,368 Accrued expenses 1,094,935 901,025 Operating lease liability 39,397 55,198 Total current liabilities 1,270,528 1,188,591 Operating lease liability, non-current 220,082 - Total liabilities 1,490,610 1,188,591 Commitments and contingencies (Note 7) - - 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 shares authorized; 30,050,894 and 24,248,695 shares issued and outstanding, respectively 300,509 242,486 Additional paid-in capital 239,926,809 200,354,488 Accumulated deficit ( 204,790,018 ) ( 191,835,618 ) Total shareholders’ equity 35,437,300 8,761,356 Noncontrolling interest (Note 2) ( 670,506 ) ( 496,983 ) Total equity 34,766,794 8,264,373 Total liabilities and equity $ 36,257,404 $ 9,452,964 The accompanying notes are an integral part of these statements. F- 3 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS 2021 2020 For the years ended October 31, 2021 2020 Revenue $ 512,500 $ - Operating costs and expenses: Inventor royalties, contingent legal fees, litigation and licensing expenses 385,002 - Research and development expenses (including non-cash share based compensation expenses of $ 4,165,668 and $ 1,484,545 , respectively) 6,189,692 4,381,205 General and administrative expenses (including non-cash share based compensation expenses of $ 3,892,410 and $ 2,652,915 , respectively) 7,073,498 5,596,997 Total operating costs and expenses 13,648,192 9,978,202 Loss from operations ( 13,135,692 ) ( 9,978,202 ) Gain (loss) on disposal of property and equipment 5,447 ( 148,084 ) Interest income 2,322 33,923 Net loss ( 13,127,923 ) ( 10,092,363 ) Less: Net loss attributable to noncontrolling interest ( 173,523 ) ( 74,008 ) Net loss attributable to common stockholders $ ( 12,954,400 ) $ ( 10,018,355 ) Net loss per share: Basic and diluted $ ( 0.45 ) $ ( 0.45 ) Weighted average common shares outstanding: Basic and diluted 28,578,892 22,229,042 The accompanying notes are an integral part of these statements. F- 4 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEARS ENDED OCTOBER 31, 2021 AND 2020 Shares Par Value Capital Deficit Equity Interest Equity Additional Total Non- Common Stock Paid-in Accumulated Shareholders’ controlling Total Shares Par Value Capital Deficit Equity Interest Equity 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 Expired restricted stock award to employee Expired restricted stock award to employee, shares 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 a public offering, net of offering expenses of $2,208,150 Common stock issued in a public offering, net of offering expenses of $2,208,150, shares Common stock issued in an at-the-market offering, net of offering expenses of $ 362,918 3,854,305 38,543 9,227,634 - 9,266,177 - 9,266,177 Proceeds received on sale of common stock held by ZQX Advisors, LLC 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 Stock option compensation to employees and directors - - 7,503,037 - 7,503,037 - 7,503,037 Expired restricted stock award to employee ( 1,500,000 ) ( 15,000 ) 15,000 - - - - Stock options and warrants issued to consultants - - 555,041 - 555,041 - 555,041 Common stock issued upon exercise of stock options 207,697 2,077 432,147 - 434,224 - 434,224 Common stock issued pursuant to employee stock purchase plan 2,377 24 5,976 - 6,000 - 6,000 Common stock issued in a public offering, net of offering expenses of $ 2,208,150 4,285,715 42,858 20,248,996 - 20,291,854 - 20,291,854 Common stock issued in an at-the-market offering, net of offering expenses of $ 340,775 2,806,410 28,064 10,805,651 - 10,833,715 - 10,833,715 Proceeds received on sale of common stock held by Proceeds received on sale of common stock held by ZQX Advisors, LLC - - 6,473 - 6,473 - 6,473 Net Loss - - - ( 12,954,400 ) ( 12,954,400 ) ( 173,523 ) ( 13,127,923 ) BALANCE, October 31, 2021 30,050,894 $ 300,509 $ 239,926,809 $ ( 204,790,018 ) $ 35,437,300 $ ( 670,506 ) $ 34,766,794 The accompanying notes are an integral part of these statements. F- 5 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS 2021 2020 For the years ended October 31, 2021 2020 Cash flows from operating activities: Reconciliation of net loss to net cash used in operating activities: Net loss $ ( 13,127,923 ) $ ( 10,092,363 ) Stock option compensation to employees and directors 7,503,037 3,922,719 Stock options and warrants issued to consultants 555,041 214,741 Depreciation of property and equipment - 38,276 (Gain) loss on disposal of property and equipment ( 5,447 ) 148,084 Amortization of operating lease right-of-use asset 59,864 51,881 Change in operating assets and liabilities: Receivables - 64,296 Prepaid expenses and other current assets 36,007 ( 124,360 ) Accounts payable ( 96,172 ) ( 353,449 ) Accrued expenses 193,910 5,527 Operating lease liability ( 55,198 ) ( 51,023 ) Net cash used in operating activities ( 4,936,881 ) ( 6,175,671 ) Cash flows from investing activities: Disbursements to acquire short-term investments ( 16,498,895 ) ( 5,010,000 ) Proceeds from maturities of short-term investments 12,539,300 4,720,000 Proceeds from sale of equipment 35,447 - Proceeds received on sale of common stock by ZQX Advisors, LLC 6,473 - Purchase of property and equipment - ( 15,791 ) Net cash used in investing activities ( 3,917,675 ) ( 305,791 ) Cash flows from financing activities: Proceeds from sale of common stock in a public offering, net of expenses 20,291,854 - Proceeds from sale of common stock in an at-the-market offering, net of expenses 10,833,715 9,266,177 Proceeds from sale of common stock pursuant to employee stock purchase plan 6,000 18,451 Proceeds from exercise of stock options 434,224 122,270 Net cash provided by financing activities 31,565,793 9,406,898 Net increase in cash and cash equivalents 22,711,237 2,925,436 Cash and cash equivalents at beginning of year 6,417,061 3,491,625 Cash and cash equivalents at end of year $ 29,128,298 $ 6,417,061 Supplemental cash flow information: Cash proceeds from interest income $ 1,824 $ 39,890 Supplemental disclosure of non-cash investing activity: Operating lease right-of-use asset $ ( 259,479 ) $ - Supplemental disclosure of non-cash financing activities: Operating lease liability $ 259,479 $ - Fair value of warrants issued in connection with public offering $ 1,040,700 $ - The accompanying notes are an integral part of these statements. F- 6 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. Anixa Biosciences, Inc., incorporated on November 5, 1982 under the laws of the State of Delaware, is a biotechnology company 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 therapy, a novel form of chimeric antigen receptor T-cell (“CAR-T”) technology, initially focused on treating ovarian cancer which we are developing through a subsidiary, Certainty Therapeutics, Inc. (“Certainty”), and discovery and ultimately development of anti-viral drug candidates for the treatment of COVID-19 focused on inhibiting certain protein functions of the virus. Our vaccine programs include the development of a preventative vaccine against triple negative breast cancer (“TNBC”), the most lethal form of breast cancer, as well as other forms of breast cancer, and a preventative vaccine against ovarian cancer. In September 2017 we formed Certainty to develop 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. The license agreement requires Certainty to make certain cash and equity payments to Wistar upon achievement of specific development milestones. With respect to Certainty’s equity obligations to Wistar, Certainty issued to Wistar shares of its common stock equal to five percent ( 5 %) of the common stock of Certainty. In addition, in November 2017, we entered into a collaboration with the H. Lee Moffitt Cancer Center and Research Institute, Inc. (“Moffitt”) to advance our CAR-T therapy toward human clinical trials. In April 2020, we entered into a collaboration with OntoChem GmbH (“OntoChem”), which subsequently assigned its rights and obligations under the collaboration to MolGenie GmbH (“MolGenie”), a company spun-out from OntoChem focused on drug discovery and development, to discover and develop anti-viral drug candidates against COVID-19. In July 2019, we entered into 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, and we are working in collaboration with Cleveland Clinic to develop a method to vaccinate women against contracting breast cancer, focused specifically on TNBC. Further, in October 2020, we executed a license agreement with Cleveland Clinic pursuant to which we were 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. In July 2020, 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 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. F- 7 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In the 2021 fiscal year as well as the past several years, our revenue, if any, was derived from technology licensing and the sale of patented technologies, including revenue from the settlement of litigation. We have not generated any revenue to date from our therapeutics or vaccine programs. In addition, while we pursue our therapeutics and vaccine programs, we may also make investments in and form new companies to develop additional emerging technologies. We do not expect to begin generating revenue with respect to any of our current therapy or vaccine programs in the near term. We hope to achieve a profitable outcome by eventually licensing our technologies to large pharmaceutical companies that have the resources and infrastructure in place to manufacture, market and sell our technologies as therapeutics or vaccines. The eventual licensing of any of our technologies may take several years, if it is to occur at all, and may depend on positive results from human clinical trials. Funding and Management’s Plans Based on currently available information as of January 4, 2022, we believe that our existing cash, cash equivalents, short-term investments and expected cash flows will be sufficient to fund our activities for at least the next twelve months. We have implemented a business model that conserves funds by collaborating with third parties to develop our technologies. However, our projections of future cash needs and cash flows may differ from actual results. If current cash on hand, cash equivalents, short-term investments and cash that may be generated from our business operations are insufficient to continue to operate our business, or if we elect to invest in or acquire a company or companies or new technology or technologies that are synergistic with or complementary to our technologies, we may be required to obtain more working capital. During fiscal year 2021, we raised approximately $ 20,292,000 , net of expenses, through a public offering in which we sold an aggregate of 4,285,715 shares of common stock and approximately $ 10,834,000 , net of expenses, through an at-the-market equity program in which we sold an aggregate of 2,806,410 shares of common stock. Our at-the-market equity program was terminated on June 16, 2021. We may seek to obtain working capital during our fiscal year 2022 or thereafter through sales of our equity securities or through bank credit facilities or public or private debt from various financial institutions where possible. We cannot be certain that additional funding will be available on acceptable terms, or at all. If we do identify sources for additional funding, the sale of additional equity securities or convertible debt will result in dilution to our stockholders. We can give no assurance that we will generate sufficient cash flows in the future to satisfy our liquidity requirements or sustain future operations, or that other sources of funding, such as sales of equity or debt, would be available or would be approved by our security holders, if needed, on favorable terms or at all. If we fail to obtain additional working capital as and when needed, such failure could have a material adverse impact on our business, results of operations and financial condition. Furthermore, such lack of funds may inhibit our ability to respond to competitive pressures or unanticipated capital needs, or may force us to reduce operating expenses, which would significantly harm the business and development of operations. 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, 2021: SCHEDULE OF CHANGES IN NONCONTROLLING INTEREST Balance October 31, 2019 $ ( 422,975 ) Net loss attributable to noncontrolling interest ( 74,008 ) Balance October 31, 2020 ( 496,983 ) Net loss attributable to noncontrolling interest ( 173,523 ) Balance October 31, 2021 $ ( 670,506 ) F- 8 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Revenue Recognition Our revenue has been derived solely from technology licensing and the sale of patented technologies. Revenue is recognized upon transfer of control of intellectual property rights and satisfaction of other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive. Our revenue recognition policy requires us to make certain judgments and estimates in connection with the accounting for revenue. Such areas may include determining the existence of a contract and identifying each party’s rights and obligations to transfer goods and services, identifying the performance obligations in the contract, determining the transaction price and allocating the transaction price to separate performance obligations, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct from other promised goods or services and evaluating whether a license transfers to a customer at a point in time or over time. Our revenue arrangements generally provide for the payment, within 30 days of execution of the agreement, of contractually determined, one-time, paid-up license fees in settlement of litigation and in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company. These arrangements typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by the Company, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. In such instances, the intellectual property rights granted have been perpetual in nature, extending until the expiration of the related patents. Pursuant to the terms of these agreements, we have no further obligations with respect to the granted intellectual property rights, including no obligation to maintain or upgrade the technology, or provide future support or services. Licensees obtained control of the intellectual property rights they have acquired upon execution of the agreement. Accordingly, the performance obligations from these agreements were satisfied and 100% of the revenue was recognized upon the execution of the agreements. Cost of Revenues Cost of revenues include the costs and expenses incurred in connection with our patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external counsel, other patent-related legal expenses paid to external counsel, licensing and enforcement related research and consulting and other expenses paid to third-parties. 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 immuno-therapy drugs against cancer, developing anti-viral drug candidates for COVID-19, developing our breast cancer vaccine, developing our ovarian cancer vaccine, and developing a platform for non-invasive blood tests for early cancer detection (such development having been suspended in fiscal year 2020), are expensed in the consolidated financial statements in the year incurred. F- 9 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. The following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of October 31, 2021: SCHEDULE OF HIERARCHY OF FINANCIAL ASSETS Level 1 Level 2 Level 3 Total Money market funds: Cash and cash equivalents $ 28,948,976 $ - $ - $ 28,948,976 Certificates of deposit: Short term investments - 2,000,000 - 2,000,000 Cash and cash equivalents - U. S. treasury bills: Short term investments - 4,599,595 - 4,599,595 Total financial assets $ 28,948,976 $ 6,599,599 $ - $ 35,548,571 F- 10 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 Our non-financial assets that are measured on a non-recurring basis are property and equipment and other assets which are measured using fair value techniques whenever events or changes in circumstances indicate a condition of impairment exists. The estimated fair value of prepaid expenses and other current assets, 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, 2021 and 2020, we had certificates of deposit and United States treasury bills with maturities greater than 90 days and less than 12 months when acquired of $ 6,599,595 and $ 2,640,000 , respectively, that were classified as short-term investments and reported at fair value. Property and equipment As a result of the suspension of operations of our subsidiary, Anixa Diagnostics Corporation, as discussed in Note 1, we recorded a gain of approximately $ 5,000 during the year ended October 31, 2021 and a loss of approximately $ 148,000 during the year ended October 31, 2020, on disposal of property and equipment 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. F- 11 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock Option Compensation Expense We account for stock options granted to employees, directors and consultants using the accounting guidance in ASC 718, Stock Compensation (“ASC 718”). We estimate the fair value of service-based stock options on the date of grant, using the Black-Scholes pricing model, and recognize compensation expense over the requisite service period of the grant. We recorded stock-based compensation expense, related to service-based stock options granted to employees and directors, of approximately $ 3,531,000 and $ 3,923,000 , during the years ended October 31, 2021 and 2020, respectively. Included in stock-based compensation cost for service-based options granted to employees and directors during the years ended October 31, 2021 and 2020 was approximately $ 1,841,000 and $ 3,011,000 , respectively, related to the amortization of compensation cost for stock options granted in prior periods but not yet vested. As of October 31, 2021, there was unrecognized compensation cost related to non-vested service-based stock options granted to employees and directors of approximately $ 5,490,000 , which will be recognized over a weighted-average period of 2.2 years. For stock options 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 expense over the implied service period (median time to vest). On May 8, 2018, we issued market condition stock 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 for the May 18, 2018 grant 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 %. In October 2018, the first tranche of 500,000 shares of market condition options became exercisable upon achieving an average closing price above $ 5.00 per share for twenty consecutive trading days. The remaining tranches did not vest as of May 31, 2021 and expired. On June 1, 2021, our Chairman, President and Chief Executive Officer and our Chief Operating Officer and Chief Financial Officer were awarded market condition stock options for 2,000,000 shares and 100,000 shares of common stock, respectively, that vest in four equal installments upon the Company’s share price achieving targets ranging from $ 5.00 to $ 8.00 per share, with implied service periods of three to fifteen months. The assumptions used in the Monte Carlo Simulation for the June 1, 2021 grants were stock price on date of grant and exercise price of $ 4.02 , contract term of 10 years, expected volatility of 75 % and risk-free interest rate of 1.62 %. As of October 31, 2021, 500,000 shares and 25,000 shares granted to our Chairman, President and Chief Executive Officer and our Chief Operating Officer and Chief Financial Officer, respectively, have vested. We recorded stock-based compensation expense related to market condition stock options granted to employees of approximately $ 3,972,000 during the year ended October 31, 2021, which amount did not include any expense related to the amortization of compensation cost for stock options granted in prior periods. We did not record any compensation expense related to market condition stock options during the year ended October 31, 2020. As of October 31, 2021, there was unrecognized compensation cost related to market condition stock options granted to employees of approximately $ 2,537,000 , which will be recognized over a weighted-average period of 0.62 years We recorded consulting expense, related to service-based stock options granted to consultants, during the years ended October 31, 2021 and 2020 of approximately $ 460,000 and $ 215,000 , respectively. Included in stock-based consulting expense for the years ended October 31, 2021 and 2020 was approximately $ 103,000 and $ 123,000 , respectively, related to compensation cost for stock options granted in prior periods but not yet vested. As of October 31, 2021, there was unrecognized consulting expense related to non-vested service-based stock options granted to consultants of approximately $ 900,000 , which will be recognized over a weighted-average period of 2.1 years. F- 12 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2021 and 2020 consisted of awards with 5 -year and 10 -year terms that vest over 12 to 36 months. The following weighted average assumptions were used in estimating the fair value of stock options granted during the years ended October 31, 2021 and 2020: SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS USED IN ESTIMATING FAIR VALUE OF STOCK OPTIONS For the Year Ended October 31, 2021 2020 Weighted average fair value at grant date $ 2.93 $ 2.97 Valuation assumptions: Expected life (years) 5.66 5.86 Expected volatility 109.02 % 114.22 % Risk-free interest rate 0.69 % 1.45 % 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. 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. F- 13 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock Award Compensation Expense We account for stock awards granted to employees, directors and consultants 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 was to vest 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 . The restricted stock award did not vest as of May 31, 2021 and expired. 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 %. We did not record any compensation expense related to the restricted stock award during the years ended October 31, 2021 and 2020. We did not issue any stock awards during the years ended October 31, 2021 and 2020. As of October 31, 2021, there was no unrecognized compensation cost related to the restricted stock awards. 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, 2021 and 2020 we recorded consulting expense, based on the fair value, of approximately $ 96,000 and $- 0 -, 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, 2021 and 2020 were options to purchase 10,770,626 shares and 7,952,195 shares, respectively, and warrants to purchase 860,000 shares and 560,000 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 January 2020, the FASB issued Accounting Standards Update 2020-01 (“ASU 2020-01”) Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in ASU 2020-01 clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. The amendments in this update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The adoption of this standard will not have a material impact on our consolidated financial statements and related disclosures. F- 14 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In August 2020, the FASB issued Accounting Standards Update 2020-06 (“ASU 2020-06”), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in ASU 2020-06 include guidance on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. Additionally, ASU 2020-06 will require entities to use the “if-converted” method when calculating diluted earnings per share for convertible instruments. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements and related disclosures. In May 2021, the FASB issued Accounting Standards Update 2021-04 (“ASU No. 2021-04”), Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The guidance in ASU 2021-04 requires the issuer to treat a modification of an equity-classified written call option (the “option”) that does not cause the option to become liability-classified as an exchange of the original option for a new option. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the option or as termination of the original option and issuance of a new option. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements and related disclosures. In October 2021, the FASB issued Accounting Standards Update 2021-08 (“ASU No. 2021-08”), Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The amendments in this update should be applied prospectively and are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements and related disclosures. Concentration of Credit Risks Financial instruments that potentially subject us to concentrations of credit risk are cash equivalents, short-term investments and accounts receivable. Cash equivalents are primarily highly rated money market funds. Short-term investments are certificates of deposit within federally insured limits as well as U.S. treasury bills. 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 2021. 3. PUBLIC OFFERING On March 25, 2021, the Company completed a public offering in which we sold an aggregate of 4,285,715 shares of its common stock, which represented 15.8 % of the Company’s outstanding shares at the time of the offering, at a public offering price of $ 5.25 per share. The Company realized net proceeds of approximately $ 20,292,000 from the public offering, after deducting underwriting discounts and deal expenses. In connection with the public offering, the Company issued to certain designees of the underwriter, as compensation, warrants expiring on March 22, 2026 , to purchase 300,000 shares of common stock exercisable for $ 6.5625 per share. F- 15 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. ACCRUED EXPENSES Accrued liabilities consist of the following as of: SCHEDULE OF ACCRUED EXPENSES 2021 2020 October 31, 2021 2020 Payroll and related expenses 491,950 415,331 Accrued royalty and contingent legal fees 577,190 449,691 Accrued collaborative research and license expense - 30,000 Accrued other 25,795 6,003 Accrued expenses $ 1,094,935 $ 901,025 5. SHAREHOLDERS’ EQUITY Stock Option Plans During the year ended October 31, 2021, we had two stock option plans: the Anixa Biosciences, Inc. 2010 Share Incentive Plan (the “2010 Share Plan”) and the Anixa Biosciences, Inc. 2018 Share Incentive Plan (the “2018 Share Plan”) which were adopted by our Board of Directors on July 14, 2010 and January 25, 2018, respectively. The 2018 Share Plan was approved by our shareholders on March 29, 2018. Further, we had an additional stock option plan, the Anixa Biosciences, Inc. 2003 Share Incentive Plan (the “2003 Share Plan”), under which all outstanding options expired during the year ended October 31, 2020. During the years ended October 31, 2021 and 2020, stock options to purchase 207,697 shares, net of 60,691 shares withheld on cashless exercises, and 51,100 shares of common stock, respectively, were exercised with aggregate proceeds of approximately $ 434,000 and $ 122,000 , respectively. 2003 Share 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 year ended October 31, 2020 is as follows: SCHEDULE OF OPTION ACTIVITY Shares Weighted Average Exercise Price Per Share Options Outstanding at October 31, 2019 400 $ 17.00 Expired ( 400 ) $ 17.00 Options Outstanding and Exercisable at October 31, 2020 - F- 16 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2010 Share 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 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, 2021 is as follows: SCHEDULE OF OPTION ACTIVITY Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value Options Outstanding at October 31, 2019 1,998,668 $ 2.80 Exercised ( 51,100 ) $ 2.39 Forfeited ( 40,034 ) $ 3.34 Options Outstanding at October 31, 2020 1,907,534 $ 2.82 Exercised ( 178,500 ) $ 2.75 Expired ( 10,400 ) $ 4.57 Options Outstanding and Exercisable at October 31, 2021 1,718,634 $ 2.82 $ 4,839,591 The following table summarizes information about stock options outstanding under the 2010 Share Plan as of October 31, 2021: SCHEDULE OF OUTSTANDING AND EXERCISABLE Range of Exercise Prices Number Outstanding and Exercisable Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 0.67 - $ 2.30 527,500 4.55 $ 1.54 $ 2.58 - $ 3.13 677,000 2.79 $ 2.79 $ 3.46 - $ 5.30 514,134 6.49 $ 4.16 2018 Share 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, 2021, the 2018 Share Plan had 1,147,937 shares available for future grants. Information regarding the 2018 Share Plan for the two years ended October 31, 2021 is as follows: SCHEDULE OF OPTION ACTIVITY Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value Options Outstanding at October 31, 2019 3,935,000 $ 3.74 Granted 1,045,000 $ 3.56 Forfeited ( 633,339 ) $ 3.83 Options Outstanding at October 31, 2020 4,346,661 $ 3.69 Granted 4,490,000 $ 3.82 Exercised ( 33,888 ) $ 3.81 Expired ( 1,392,781 ) $ 3.70 Options Outstanding at October 31, 2021 7,409,992 $ 3.76 $ 27,893,269 Options Exercisable at October 31, 2021 3,718,334 $ 3.69 $ 13,715,371 F- 17 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information about stock options outstanding under the 2018 Share Plan as of October 31, 2021: SCHEDULE OF OUTSTANDING AND EXERCISABLE 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 - $ 3.87 3,939,992 7.69 $ 3.42 2,872,223 7.27 $ 3.55 $ 3.96 - $ 5.30 3,470,000 8.98 $ 4.16 846,111 8.23 $ 4.16 Non-Plan Options In addition to options granted under stock option plans, 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, 2021 is as follows: SCHEDULE OF OPTION ACTIVITY Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value Options Outstanding at October 31, 2019 and 2020 1,698,000 $ 2.58 Exercised ( 56,000 ) $ 2.58 Options Outstanding and Exercisable at October 31, 2021 1,642,000 $ 2.58 $ 3,604,190 The following table summarizes information about outstanding and exercisable Non-Plan Options as of October 31, 2021: SCHEDULE OF OUTSTANDING AND EXERCISABLE Range of Exercise Prices Number Outstanding and Exercisable Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 2.58 1,642,000 0.82 $ 2.58 F- 18 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2021 and 2020, employees purchased 2,377 and 11,536 shares, respectively, with aggregate proceeds of approximately $ 6,000 and $ 18,000 , respectively. Common Stock Purchase Warrants On November 1, 2019 an outstanding warrant, expiring on November 1, 2023, to purchase 25,000 shares of common stock at $ 4.04 per share, was exchanged for a stock option with the same terms as the warrant. 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. We recorded consulting expense of approximately $ 96,000 during the year ended October 31, 2021, based on the fair value of the warrant recognized on a straight-line basis over the vesting period. As discussed in Note 3, in connection with the March 25, 2021 public offering, we issued to certain designees of the underwriter, as compensation, warrants to purchase 300,000 shares of common stock at $ 6.5625 per share, expiring on March 22, 2026 . Information regarding the Company’s warrants for the two years ended October 31, 2021 is as follows: SCHEDULE OF WARRANTS ACTIVITY Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value 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 Issued 300,000 $ 6.56 Warrants Outstanding and Exercisable at October 31, 2021 860,000 $ 5.36 $ 162,600 F- 19 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information about the Company’s outstanding and exercisable warrants as of October 31 , 2021: SCHEDULE OF OUTSTANDING AND EXERCISABLE Range of Exercise Prices Number Outstanding and Exercisable Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 2.06 - $ 6.56 860,000 1.83 $ 5.36 ZQX Advisors, LLC ZQX Advisors, LLC (“ZQX”) was an inactive joint venture in which we held a 19.5 % interest, and which was dissolved during fiscal year 2021. The only assets of ZQX were shares of our common stock which were sold during fiscal year 2021, for which we received proceeds of approximately $ 6,000 . 6. 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 was set to expire on September 30, 2021 . Effective August 17, 2021, the lease was amended to extend the expiration date to September 30, 2024 , with an option to extend the lease an additional two years . 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. The amendment to the lease resulted in a right-of-use asset and lease liability of approximately $ 260,000 with a discount rate of 10 %. Rent expense was approximately $ 64,000 and $ 64,000 , respectively, for the years ended October 31, 2021 and 2020. 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. 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 59 -month lease term as of October 31, 2021 for the Company’s lease includes the noncancelable period of the lease and the additional two-year option period that the Company expects to exercise. All ROU assets are reviewed for impairment. F- 20 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Balance sheet information related to the Company’s lease is presented below: SCHEDULE OF OPERATING LEASE Balance Sheet Location October 31, 2021 October 31, 2020 Operating Lease: Right-of-use asset Operating lease right- of-use asset 253,955 54,340 Right-of-use liability, current Operating lease liability 39,397 55,198 Right-of-use liability, long-term Operating lease liability, non-current 220,082 - As of October 31, 2021, the annual minimum lease payments of our operating lease liability were as follows: SCHEDULE OF MINIMUM LEASE PAYMENTS For Years Ending October 31, Operating Leases 2022 $ 63,579 2023 65,491 2024 67,452 2025 69,473 2026 65,428 Total future minimum lease payments, undiscounted 331,423 Less: Imputed interest 71,944 Present value of future minimum lease payments $ 259,479 7. 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, 2021, our commitments under the collaborative and license agreements with Moffitt, Wistar, Cleveland Clinic and MolGenie for the year ending October 31, 2022 were approximately $ 345,000 . Impact of Coronavirus Pandemic The ongoing global outbreak of COVID-19 has resulted in significant governmental measures being implemented to control the spread of the virus and while the Company cannot predict their scope or the severity of the outbreak, these developments and measures could materially and adversely affect the Company’s business, the operations of the Company’s collaboration partners, and the Company’s results of operations and financial condition. The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and has taken steps to minimize its impact on the Company’s business. Although COVID-19 has not had a material adverse impact on the Company’s operations and its clinical and preclinical programs, the extent to which COVID-19 ultimately impacts the Company’s business, results of operations or financial condition will depend on future developments which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the occurrence of new mutations of the SARS-CoV-2 virus, new information that may emerge concerning the severity of COVID-19 or the effectiveness of actions taken to contain the pandemic or mitigate its impact, among others. Certain of the Company’s collaboration partners have experienced shutdowns or other business disruptions. As a result, the Company’s ability to conduct its business in the manner and on the timelines presently planned could be materially or negatively affected, which could have a material adverse impact on the Company’s business, results of operations and financial condition. F- 21 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. INCOME TAXES Income tax provision (benefit) consists of the following: SCHEDULE OF INCOME TAX PROVISION (BENEFIT) Year Ended October 31, 2021 2020 Federal: Current $ - $ - Deferred 604,000 404,000 State: Current - - Deferred ( 129,000 ) ( 800,000 ) Adjustment to valuation allowance related to net deferred tax assets ( 475,000 ) 396,000 $ - $ - The tax effects of temporary differences that give rise to significant portions of the deferred tax asset, net, at October 31, 2021 and 2020, are as follows: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2021 2020 October 31, 2021 2020 Long-term deferred tax assets: Federal and state NOL and tax credit carryforwards $ 20,230,000 $ 19,727,000 Deferred compensation 7,502,000 8,009,000 Intangibles 330,000 828,000 Other 219,000 192,000 Subtotal 28,281,000 28,756,000 Less: valuation allowance ( 28,281,000 ) ( 28,756,000 ) Deferred tax asset, net $ - $ - As of October 31, 2021, we had tax net operating loss and tax credit carryforwards of approximately $ 82,393,000 and $ 1,597,000 , respectively, available within statutory limits (expiring at various dates between 2022 and 2041), 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, 2021, management has not determined the extent of any such limitations, if any. We had California tax net operating loss carryforwards of approximately $ 32,714,000 as of October 31, 2021, available within statutory limits (expiring at various dates between 2022 and 2041), to offset future corporate taxable income and taxes payable, if any, under certain computations of such taxes. F- 22 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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): SCHEDULE OF RECONCILIATION OF INCOME TAXES Year Ended October 31, 2021 2020 Income tax benefit at U.S. Federal statutory income tax rate $ ( 2,757,000 ) ( 21.00 )% $ ( 2,119,000 ) ( 21.00 )% State income taxes ( 917,000 ) ( 6.98 )% ( 705,000 ) ( 6.98 )% Permanent differences 23,000 0.17 % 32,000 0.32 % Expiring net operating losses, credits and other 4,126,000 31.43 % 2,396,000 23.74 % Change in valuation allowance ( 475,000 ) ( 3.62 ) % 396,000 3.92 % Income tax provision $ - 0.00 % $ - 0.00 % During the two fiscal years ended October 31, 2021, we incurred no Federal and no State income taxes. We have no unrecognized tax benefits as of October 31, 2021 and 2020 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. 9. 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) our legacy Cancer Diagnostics activities and (v) our legacy Patent Licensing activities. The following represents selected financial information for our segments for the years ended October 31, 2021 and 2020: F- 23 ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SCHEDULE OF SEGMENT INFORMATION Year Ended October 31, 2021 2020 Net income/(loss): CAR-T Therapeutics $ ( 5,672,622 ) $ ( 2,241,443 ) Cancer Vaccines ( 4,558,811 ) ( 828,136 ) Anti-Viral Therapeutics ( 2,927,979 ) ( 1,168,969 ) Cancer Diagnostics ( 78,067 ) ( 5,836,594 ) Patent Licensing 109,556 ( 17,221 ) Total $ ( 13,127,923 ) $ ( 10,092,363 ) Total operating costs and expenses $ 13,648,192 $ 9,978,202 Less non-cash share-based compensation ( 8,058,078 ) ( 4,137,460 ) Operating costs and expenses excluding non-cash share-based compensation $ 5,590,114 $ 5,840,742 Operating costs and expenses excluding non-cash share based compensation: CAR-T Therapeutics $ 2,421,487 $ 1,141,542 Cancer Vaccines 1,641,977 365,681 Anti-Viral Therapeutics 1,080,279 739,140 Cancer Diagnostics 49,170 3,581,377 Patent Licensing 397,201 13,002 Total $ 5,590,114 $ 5,840,742 October 31, 2021 2020 Total assets: CAR-T Therapeutics $ 15,067,933 $ 2,988,124 Cancer Vaccines 13,276,518 946,923 Anti-Viral Therapeutics 7,368,214 2,464,361 Cancer Diagnostics 391,618 2,869,529 Patent Licensing 153,121 184,027 Total $ 36,257,404 $ 9,452,964 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 $ 512,500 and inventor royalties, contingent legal fees, litigation and licensing expense of $ 385,002 , for the year ended October 31, 2021 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- 24