What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-06-09 compared with 2020-03-09 · 58 added, 21 removed, 73 unchanged (52% of the section changed)

9 unchanged sentences

RESULTS OF OPERATIONS

Three months ended January 31, 2020 compared with three months ended January 31, 2019

We had no revenue during the three-month periods ended January 31, 2020 and 2019.

Six months ended April 30, 2020 compared with six months ended April 30, 2019

We did not record any revenue for the six months ended April 20, 2020.

For the six months ended April 30, 2019, we recorded revenue of $250,000 from one license agreement.

The license agreement provided for a one-time, non-recurring, lump sum payment in exchange for a non-exclusive retroactive and future license, and covenant not to sue.

Pursuant to the terms of the agreement, 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.

Accordingly, the earnings process from the license was complete and 100% of the revenue was recognized upon execution of the license agreement.

As discussed in Note 1 to our condensed consolidated financial statements, as part of our legacy operations, the Company remains engaged in limited patent licensing activities which we do not expect to be a significant part of our ongoing operations or revenue.

Inventor Royalties, Contingent Legal Fees, Litigation and Licensing Expenses Related to Patent Assertion

Inventor royalties, contingent legal fees, litigation and licensing expenses related to patent assertion activities decreased from approximately $166,000 in the six months ended April 30, 2019 to $ -0- in the six months ended April 20, 2020.

The decrease was primarily due to the decrease in related revenues.

Inventor royalties and contingent legal fees are expensed in the period that the related revenues are recognized.

Litigation and licensing expenses related to patent assertion, other than contingent legal fees, are expensed in the period incurred.

Amortization of Patents

Amortization of patents was $-0- in the three months ended January 31, 2020 compared to approximately $251,000 in the comparable prior year.

Amortization of patents was $-0- in the six months ended April 30, 2020 compared to approximately $377,000 in the comparable prior year.

We capitalize patent and patent rights acquisition costs and amortize the cost over the estimated economic useful life.

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Research and Development Expenses

Research and development expenses are related to the development of our e arly cancer detection and cancer immuno-therapy platforms and decreased by approximately $756,000 to approximately $1,491,000 in the three months ended January 31, 2020, from approximately $2,247,000 in the three months ended January 31, 2019.

The decrease in research and development expenses was primarily due to a decrease in employee stock award compensation expense of approximately $950,000, a decrease in employee stock option compensation expense of approximately $231,000, offset by an increase of approximately $363,000 in outside research and development expenses primarily related Anixa Diagnostics agreements with its CLIA certified commercialization partner, ResearchDx, Inc.

and an increased supply of blood samples provided by its urology practice partners.

Research and development expenses are related to the development of our cancer diagnostics and therapeutics programs and our anti-viral drug program, and de creased by approximately $798,000 to approximately $2,719,000 in the six months ended April 30, 2020, from approximately $3,517,000 in the six months ended April 30, 2019 .

The decrease in research and development expenses was primarily due to a decrease in employee stock award compensation expense of approximately $1,251,000, a decrease in employee stock option compensation expense of approximately $129,000, offset by an increase in outside research and development expense, excluding license expense, of approximately $414,000 primarily related to the development of Cchek, our non-invasive blood tests for early detection of cancer, and an increase in license expense related to our collaborative agreement with OntoChem concerning discovery and development of anti-viral drugs for COVID-19 of approximately $111,000.

Research and development expenses incurred in the six months ended April 30, 2020 associated with each of our development programs consisted of approximately $1,827,000 for cancer diagnostics, approximately $565,000 for CAR-T therapeutics, approximately $171,000 for cancer vaccines, and approximately $156,000 for anti-viral therapeutics.

General and Administrative Expenses

General and administrative expenses decreased by approximately $927,000 to approximately $1,139,000 in the three months ended January 31, 2020, from approximately $2,066,000 in the three months ended January 31, 2019.

The decrease in general and administrative expenses was principally due to a decrease in employee stock award compensation expense of approximately $534,000, a decrease in expense resulting from the discharge in January 2020 of a disputed liability of approximately $337,000 upon the expiration of the vendors statutory right to pursue collection of the disputed liability, a decrease in legal and accounting fees of approximately $283,000 primarily related to fees incurred in fiscal year 2019 in connection with a putative shareholder derivative complaint, offset by an increase in employee compensation and related costs, other than stock option compensation expense and stock award compensation expense, of approximately $170,000.

General and administrative expenses decreased by approximately $767,000 to approximately $2,581,000 in the six months ended April 30, 2020, from approximately $3,348,000 in the six months ended April 30, 2019.

The decrease in general and administrative expenses in fiscal year 2020 was principally due to a decrease in employee stock award compensation expense of approximately $704,000, a decrease in legal and accounting fees of approximately $440,000 in fiscal year 2020 primarily related to fees incurred in fiscal year 2019 in connection with a putative shareholder derivative complaint which was settled in August 2019, a decrease in expense resulting from the discharge in January 2020 of a disputed liability of approximately $337,000 upon the expiration of the vendors statutory right to pursue collection of the disputed liability which reduced expenses in fiscal year 2020, offset by an increase in employee compensation and related costs, other than stock option compensation expense and stock award compensation expense, of approximately $327,000, an increase in consulting expense of approximately $114,000 in fiscal year 2020 primarily related to the commercialization of Cchek, our non-invasive blood test for early detection of cancer, an increase in corporate insurance expense of approximately $156,000 primarily due to an increase in directors and officers insurance premium and increase in employee stock option compensation expense of approximately $124,000.

Impairment in Carrying Amount of Patent Assets

The impairment in carrying amount of patent assets of approximately $419,000 in the three months ended January 31, 2019 resulted from the write down of the value of patent assets related to our legacy patent licensing activities to the estimated undiscounted future cash flows we anticipate receiving from the patent assets as of January 31, 2019.

Our estimates of future cash flows are based on our most recent assessment of the market for potential licensees, as well as the status of ongoing negotiations with potential licensees.

The impairment in carrying amount of patent assets related to our legacy patent licensing activities of approximately $419,000 in the six months ended April 30, 2019 resulted from the write down of the value of our patent assets to the estimated undiscounted future cash flows we anticipated receiving from the patent assets as of January 31, 2019.

Our estimates of future cash flows were based on our most recent assessment of the market for potential licensees, as well as the status of ongoing negotiations with potential licensees.

Interest Income

Interest income decreased by approximately $4,000 to approximately $13,000 in the three months ended January 31, 2020, from approximately $17,000 in the comparable prior year period as a result of a decrease of cash on hand and a decrease in interest rates.

Interest income decreased by approximately $10,000 to approximately $25,000 in the six months ended April 30, 2020, from approximately $35,000 in the comparable prior year period as a result of a decrease in interest rates.

Net Loss Attributable to Noncontrolling Interest

The net loss attributable to noncontrolling interest, representing Wistars 5% ownership interest in Certaintys net loss, decreased by approximately $61,000 to approximately $24,000 in the three months ended January 31, 2020, from approximately $85,000 in the three months ended January 31, 2019, as Certaintys net loss decreased.

The net loss attributable to noncontrolling interest, representing Wistars 5% ownership interest in Certaintys net loss, decreased by approximately $80,000 to approximately $42,000 in the six months ended April 30, 2020, from approximately $122,000 in the six months ended April 30, 2019, as Certaintys net loss decreased.

The decrease in Certaintys net loss was primarily due to decreases in employee stock option compensation expense and employee stock award compensation expense.

Three months ended April 30, 2020 compared with three months ended April 30, 2019

We did not record any revenue for the three months ended April 20, 2020.

For the three months ended April 30, 2019, we recorded revenue of $250,000 from one license agreement.

The license agreement provided for a one-time, non-recurring, lump sum payment in exchange for a non-exclusive retroactive and future license, and covenant not to sue.

Accordingly, the earnings process from the license was complete and 100% of the revenue was recognized upon execution of the license agreement.

Inventor Royalties, Contingent Legal Fees, Litigation and Licensing Expenses Related to Patent Assertion

Inventor royalties, contingent legal fees, litigation and licensing expenses related to patent assertion activities decreased from approximately $166,000 in the three months ended April 30, 2019 to $ -0- in the six months ended April 20, 2020.

The decrease was primarily due to the decrease in related revenues.

Inventor royalties and contingent legal fees are expensed in the period that the related revenues are recognized.

Litigation and licensing expenses related to patent assertion, other than contingent legal fees, are expensed in the period incurred.

Amortization of Patents

Amortization of patents was $-0- in the three months ended April 30, 2020 compared to approximately $126,000 in the comparable prior year.

We capitalize patent and patent rights acquisition costs and amortize the cost over the estimated economic useful life.

The decrease in amortization of patents was due to the patent asset being fully amortized in fiscal year 2019.

Research and Development Expenses

Research and development expenses are related to the development of our cancer diagnostics and therapeutics programs and our anti-viral drug program, and de creased by approximately $40,000 to approximately $1,229,000 in the three months ended April 30, 2020, from approximately $1,269,000 in the three months ended April 30, 2019.

The decrease in research and development expenses was primarily due to a decrease in employee stock award compensation expense of approximately $301,000, offset by an increase in license expense related to our collaborative agreement with OntoChem concerning discovery and development of anti-viral drugs for COVID-19 of approximately $111,000, an increase in employee stock option compensation expense of approximately $102,000 and an increase in outside research and development expense, excluding license expense, of approximately $51,000 primarily related to the development of Cchek, our non-invasive blood test for early detection of cancer .

Research and development expenses incurred in the three months ended April 30, 2020 associated with each of our development programs consisted of approximately $761,000 for cancer diagnostics, approximately $235,000 for CAR-T therapeutics, approximately $156,000 for anti-viral therapeutics, and approximately $77,000 for cancer vaccines.

General and Administrative Expenses

General and administrative expenses increased by approximately $159,000 to approximately $1,441,000 in the three months ended April 30, 2020, from approximately $1,282,000 in the three months ended April 30, 2019.

The increase in general and administrative expenses in fiscal year 2020 was principally due to an increase in employee compensation and related costs, other than stock option compensation expense and stock award compensation expense, of approximately $158,000, an increase in employee stock option compensation expense of approximately $148,000, an increase in consulting expense of approximately $116,000 primarily related to the commercialization of Cchek, our non-invasive blood test for early detection of cancer, an increase in corporate insurance expense of approximately $78,000 primarily due to an increase in directors and officers insurance premium , offset by a decrease in employee stock award compensation expense of approximately $169,000 and a decrease in legal and accounting fees of approximately $156,000 primarily related to fees incurred in fiscal year 2019 in connection with a putative shareholder derivative complaint which was settled in August 2019.

Interest Income

Interest income decreased by approximately $6,000 to approximately $12,000 in the three months ended April 30, 2020, from approximately $18,000 in the comparable prior year period as a result of a decrease in interest rates.

Net Loss Attributable to Noncontrolling Interest

The net loss attributable to noncontrolling interest, representing Wistars 5% ownership interest in Certaintys net loss, decreased by approximately $19,000 to approximately $18,000 in the three months ended April 30, 2020, from approximately $37,000 in the three months ended April 30, 2019, as Certaintys net loss decreased.

The decrease in Certaintys net loss was primarily due to decreases in employee stock option compensation expense and employee stock award compensation expense.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash, cash equivalents and short-term investments.

We do not expect to generate material revenue from operations in the near future from any of our therapeutic or diagnostic programs

Based on currently available information as of March 9, 2020, 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.

Based on currently available information as of June 9, 2020, 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.

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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 the three months ended January 31, 2020, we raised approximately $1,752,000, net of expenses, through the sale of 490,655 shares of common stock in our at-the-market equity offerings.

We raised 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 $1,325,000, net of expenses, through the sale of 378,417 shares of common stock in an at-the-market equity offering under which we may issue up to $50 million of common stock.

During the six months ended April 30, 2020, we raised an aggregate of approximately $3,034,000, net of expenses, through the sale of 1,094,063 shares of common stock in our at-the-market equity offerings.

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 $2,607,000, net of expenses, through the sale of 981,825 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 $47,248,000 of common stock.

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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.

During the three months ended January 31, 2020, cash used in operating activities was approximately $1,914,000.

Cash used in investing activities was approximately $536,000, resulting from the purchases of certificates of deposit totaling $1,870,000 and purchases of property and equipment of approximately $16,000, which was offset by the proceeds on maturities of certificates of deposit totaling $1,350,000.

Cash provided by financing activities was approximately $1,780,000, resulting from the sale of 490,655 shares of common stock in at-the-market equity offerings of approximately $1,752,000 and the proceeds from exercise of stock options of approximately $28,000.

As a result, our cash, cash equivalents, and short-term investments at January 31, 2020 decreased approximately $150,000 to approximately $5,692,000 from approximately $5,842,000 at the end of fiscal year 2019.

During the six months ended April 30, 2020, cash used in operating activities was approximately $3,471,000.

Cash used in investing activities was approximately $286,000, resulting from the purchased of certificates of deposit totaling $2,620,000 and the purchase of property and equipment of approximately $16,000, which was offset by the proceeds on maturities of certificates of deposit totaling $2,350,000.

Cash provided by financing activities was approximately $3,153,000, resulting from the sale of 1,094,063 shares of common stock in our at-the-market equity offering over the past six months of approximately $3,034,000 (which is ongoing), the proceeds from sale of common stock pursuant to employee stock purchase plan of approximately $15,000 and the proceeds from exercise of stock options of approximately $104,000.

As a result, our cash, cash equivalents, and short-term investments at April 30, 2020 decreased approximately $334,000 to approximately $5,508,000 from approximately $5,842,000 at the end of fiscal year 2019.

CRITICAL ACCOUNTING POLICIES

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We made the dividend yield assumption based on our history of not paying dividends and our expectation not to pay dividends in the future.

We will reconsider use of the Black-Scholes pricing model and the Monte Carlo Simulation if additional information becomes available in the future that indicates another model would be more appropriate.

We will reconsider use of the Black-Scholes pricing model and Monte Carlo Simulation if additional information becomes available in the future that indicates other models would be more appropriate.

If factors change and we employ different assumptions in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current period.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis