(Exact name of registrant as specified in its charter)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes   X                   No ___

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).         Yes   X                   No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes _______                 No   X 

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

On September 5, 2019March 9, 2020 the registrant had outstanding 20,207,26121,007,077 shares of Common Stock, par value $.01 per share, which is the registrant’s only class of common stock.

Table of Contents

ANIXA BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.         BUSINESS AND FUNDING

Description of Business

As used herein, “we,” “us,” “our,” the “Company” or “Anixa” means Anixa Biosciences, Inc. and its consolidated subsidiaries. 

Our primary operations involve research and development of cancer therapeutics and diagnostics.  Our cancer therapeutics programs consist of development of a vaccine against triple negative breast cancer (“TNBC”) and development of chimeric endocrine receptor T-cell (“CER-T”) technology, a novel form of CAR-T technology, initially focused on treating ovarian cancer.  Our cancer diagnostics program consists of development of the artificial intelligence (AI) driven Cchek™ liquid biopsy platform for early cancer detection. 

We hold an exclusive worldwide, royalty-bearing license to use certain intellectual property owned or controlled by The Cleveland Clinic Foundation (“Cleveland Clinic”) related to certain breast cancer vaccine technology developed at Cleveland Clinic.  We are working in collaboration with Cleveland Clinic to develop a method to vaccinate women against contracting breast cancer, focused specifically on TNBC, the most lethal form of the disease.  A specific protein, alpha-lactalbumin, has been identified that is only present during lactation in healthy women, but reappears in many forms of breast cancer, especially TNBC.  Animal studiesStudies have shown that vaccinating against this protein prevents breast cancer in mice.  We are working with researchers at Cleveland Clinic to advance this vaccine toward human clinical testing, and we anticipate filingare in the process of testing the clinical grade materials and upon completion we will be prepared to file an Investigational New Drug (“IND”) application with the U.S. Food and Drug Administration (“FDA”).  We anticipate filing the IND mid-year of 2020.  The IND application, after review and approval by the end of the 2019 calendar year.FDA, will enable us to begin testing our vaccine in human subjects.

Our subsidiary, Certainty Therapeutics, Inc. (“Certainty”), is developing immuno-therapy drugs against cancer.  Certainty holds an exclusive worldwide, royalty-bearing license to use certain intellectual property owned or controlled by The Wistar Institute (“Wistar”) relating to Wistar’s CER-T technology.  We have initially focused on the development of a treatment for ovarian cancer, but we may also pursue applications of the technology for the development of treatments for additional solid tumors.  The license agreement requires Certainty to make certain cash and equity payments to Wistar.  With respect to Certainty’s equity obligations to Wistar, Certainty issued to Wistar shares of its common stock equal to five percent (5%) of the common stock of Certainty.

Certainty, in collaboration with the H. Lee Moffitt Cancer Center and Research Institute, Inc. (“Moffitt”), is advancing toward human clinical testing of its CER-T technology for treating ovarian cancer.  Certainty is working with researchers at Moffitt to complete studies necessaryClinical grade materials are currently being manufactured and upon completion will undergo extensive testing.  Once the materials have been successfully tested, we will be prepared to submit an IND application with the FDA.  We anticipate filing the IND with the FDA by the end of the 2019 calendar year, with human clinical trials commencing thereafter, in 2020.  The collaboration between CertaintyIND application, after review and Moffitt was recently extended through November 2020, soapproval by the parties may continue research on Certainty’s CER-T technology.FDA, will enable us to begin testing our therapy in ovarian cancer patients. 

6

Table of Contents

Our subsidiary, Anixa Diagnostics Corporation (“Anixa Diagnostics”), is developing Cchek™, an AI driven platform of non-invasive blood tests for the early detection of cancer which is based on the body’s immune response to the presence of a malignancy.  We have demonstrated the efficacy of Cchek™ with 20 different types of cancer, including:cancer:  breast, lung, colon, melanoma, ovarian, liver, thyroid, pancreatic, appendiceal, uterine, osteosarcoma, leiomyosarcoma, liposarcoma, vulvar, prostate, bladder, cervical, head and neck, gastric and testicular cancers.  Breast, lung, colon and prostate cancers represent the four largest categories of cancer worldwide.

We are currently developing testsBased on a number of factors, including key scientific, clinical, and commercial considerations, for the detection of multiple types ofpast year the primary commercial focus for Cchek™ has been on developing a prostate cancer and are workingconfirmatory test.  In February 2019 we formed a strategic alliance with our development and commercialization partner, ResearchDx, a CLIA-certifiedCLIA certified, CAP Accredited laboratory, to launchprepare the Cchek™ Prostate Cancer Confirmation (“Cchek™ PCC”) test for launch as a Laboratory Developed Test duringlaboratory developed test.  In December 2019, upon completion of independent validation by ResearchDx, we announced the fourth calendar quartercommercial launch of 2019.Cchek™ PCC.  We are currently conducting a number of activities to support the marketing of Cchek™ PCC, including the development of marketing materials, education of key opinion leaders in urology and development of a reimbursement path for the test. 

Over the next several quarters, we expect the development of our breast cancer vaccine, Certainty’s CER-T technology and Anixa Diagnostic’s Cchek™ to be the primary focus of the Company.  As part of our legacy operations, the Company remains engaged in limited patent licensing activities in the area of encrypted audio/video conference calling.  We do not expect these activities to be a significant part of the Company’s ongoing operations nor do we expect these activities to require material financial resources or attention of senior management.

Over the past several quarters,years, our revenue was derived from technology licensing and the sale of patented technologies, including revenue from the settlement of litigation.  We have not generated any revenue to date from our cancer therapeutics and diagnostics programs.  In addition, while we pursue our cancer therapeutics and diagnostics programs, we may also make investments in and form new companies to develop additional emerging technologies.

7

Table of Contents

Funding and Management’s Plans

Based on currently available information as of September 5, 2019,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.  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 termshort-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 ninethree months ended JulyJanuary 31, 2019,2020, we raised approximately $4,900,000$1,752,000, net of expenses, through our at-the-market equity offeringthe sale of 1,208,808490,655 shares of common stock which is currently effective (we can sell an additional 267,302 shares underin our current at-the-market equity program)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 may remain available for us to useapproximately $1,325,000, net of expenses, through the sale of 378,417 shares of common stock in the future.  Further, we have an additional at-the-market equity offering under which we may issue up to $50 million of common stock,stock.   Under our current at-the-market equity program which is currently effective and may remain available for us to ususe in the future.future, we may sell an additional approximately $48,587,000 of common stock.  We may seek to obtain working capital during our fiscal year 20192020 or thereafter through sales of our equity securities or through bank credit facilities or public or private debt from various financial institutions where possible.  We cannot be certain that additional funding will be available on acceptable terms, or at all.  If we do identify sources for additional funding, the sale of additional equity securities or convertible debt could result in dilution to our stockholders.  Additionally, the sale of equity securities or issuance of debt securities may be subject to certain security holder approvals or may result in the downward adjustment of the exercise or conversion price of our outstanding securities. We can give no assurance that we will generate sufficient cash flows in the future to satisfy our liquidity requirements or sustain future operations, or that other sources of funding, such as sales of equity or debt, would be available or would be approved by our security holders, if needed, on favorable terms or at all.  If we fail to obtain additional working capital as and when needed, such failure could have a material adverse impact on our business, results of operations and financial condition.  Furthermore, such lack of funds may inhibit our ability to respond to competitive pressures or unanticipated capital needs, or may force us to reduce operating expenses, which would significantly harm the business and development of operations.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.  Accordingly, certain information and disclosures required by generally accepted accounting principles in annual financial statements have been omitted or condensed.  These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures included in our Annual Report on Form 10-K for the year ended October 31, 2018.2019.  The accompanying October 31, 20182019 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“US GAAP”).GAAP.  The condensed consolidated financial statements include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of our financial position as of JulyJanuary 31, 2019,2020, and results of operations and cash flows for the interim periods represented.  The results of operations for the ninethree months ended JulyJanuary 31, 20192020 are not necessarily indicative of the results to be expected for the entire year.

Noncontrolling Interest

Noncontrolling interest represents Wistar’s equity ownership in Certainty and is presented as a component of equity.  The following table sets forth the changes in noncontrolling interest for the ninethree months ended JulyJanuary 31, 2019:2020:

8

Table of Contents

Table of Contents

Revenue Recognition

Since fiscal 2016 our revenue has been derived solely from technology licensing and the sale of patented technologies.  Revenue is recognized upon transfer of control of intellectual property rights and satisfaction of other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive. 

On November 1, 2018 we adopted Accounting Standards Update 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers.Customers using the modified retrospective method.  Upon adoption of ASU 2014-09 we are required to make certain judgments and estimates in connection with the accounting for revenue.  Such areas may include determining the existence of a contract and identifying each party’s rights and obligations to transfer goods and services, identifying the performance obligations in the contract, determining the transaction price and allocating the transaction price to separate performance obligations, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct from other promised goods or services and evaluating whether a license transfers to a customer at a point in time or over time.

Our revenue arrangements provide for the payment of contractually determined, one-time, paid-up license fees in settlement of litigation and in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company.  These arrangements typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by the Company, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation.  In such instances, the intellectual property rights granted have been perpetual in nature, extending until the expiration of the related patents.  Pursuant to the terms of these agreements, we have no further obligations with respect to the granted intellectual property rights, including no obligation to maintain or upgrade the technology, or provide future support or services.  Licensees obtained control of the intellectual property rights they have acquired upon execution of the agreement.  As such,Accordingly, the earnings process is completeperformance obligations from these agreements were satisfied and 100% of the revenue iswas recognized upon the execution of the agreement, when collectability is probable and all otheragreements.  The adoption of ASU 2014-09 had no impact on revenue recognition criteria have been met.recognized.

Cost of Revenues

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

9

Table of Contents

PatentsResearch and Development Expenses

Our only identifiable intangible assetsResearch and development expenses, consisting primarily of employee compensation, payments to third parties for research and development activities and other direct costs associated with developing a platform for non-invasive blood tests for early detection of cancer, developing immuno-therapy drugs against cancer and development of our breast cancer vaccine, are patents and patent rights related to our legacy patent licensing operations.  We capitalize patent and patent rights acquisition costs and amortize the cost over the estimated economic useful life.  No patent acquisition costs were capitalized during the nine months ended July 31, 2019 and 2018.  We recorded patent amortization expense of approximately $419,000 and $244,000 during the nine-month periods ended July 31, 2019 and 2018, respectively.  In evaluating the carrying amount of capitalized patents at January 31, 2019, we determined that based on estimated undiscounted future cash flows a write-down of the carrying amount of approximately $419,000, to a carrying value of approximately $168,000, should be recorded as of January 31, 2019. The carrying value of capitalized patents has been amortized to $-0- as of July 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. While we may be able to generate future cash flows from this patent portfolio, as of July 31, 2019, we cannot reasonably determine an estimate of any such future cash flows.

2.         SUBSEQUENT EVENT

            On August 21, 2019, the Company entered into a settlement agreement in connection with a putative shareholder derivative complaint filedexpensed in the Court of Chancery of the State of Delaware on November 5, 2018. See Note 9 to these condensed consolidationconsolidated financial statements for additional information.  Management reviewed for subsequent events throughin the date of filing of this Quarterly Report on Form 10-Q and noted no other items requiring disclosure.year incurred.

3.2.         STOCK BASED COMPENSATION AND WARRANTS

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

Stock Option Compensation Expense

The compensation cost for service-based stock options granted to employees and directors is measured at the grant date, based on the fair value of the award using the Black-Scholes pricing model, and is expensedrecognized as an expense on a straight-line basis over the requisite service period (the vesting period of the stock option). which is one to four years.  We recorded stock-based compensation expense related to service-based stock options granted to employees and directors of approximately $2,433,000$964,000 and $1,153,000 during the nine months ended July 31, 2019 and 2018, respectively, and approximately $784,000 and $702,000$844,000 during the three months ended JulyJanuary 31, 2020 and 2019, and 2018, respectively.

For stock options granted to employees and directors that vest based on market conditions, such as the trading price of the Company’s common stock exceeding certain price targets, we use a Monte Carlo Simulation in estimating the fair value at grant date and recognize compensation cost over the implied service period (median time to vest).  On May 8, 2018, we issued market condition options to purchase 1,500,000 shares of common stock, to our Chairman, President and Chief Executive Officer, vesting at target trading prices of $5.00 to $8.00 per share before May 31, 2021, with implied service periods of three to seven months.  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.  We recorded stock-based compensation expense related to market condition stock options granted to employees and directors of approximately $376,000 and $2,446,000 during the nine months ended July 31, 2019 and 2018, respectively, and approximately $-0- and $2,446,000 during the three months ended JulyJanuary 31, 2019 and 2018, respectively.  2019.   We did not have stock-based compensation expense related to market condition stock options during the three months ended January 31, 2020.

10

Table of Contents

On November 1, 2018 we adopted Accounting Standards Update 2018-07 (“ASU 2018-07”) for stock options granted to consultants.  Upon adoption of ASU 2018-07 we estimated the fair value of unvested service-based and performance-based stock options at the date of adoption, using the Black-Scholes pricing model.  Subsequent to adoption of ASU 2018-07, future grants to consultants arewill be measured at the grant date, based on the fair value of the award using the Black-Scholes pricing model, consistent with our policy for grants to employees and directors.  In prior periods in accordance with US GAAP, we estimated the fair value of service-based and performance-based stock options granted to consultants at each reporting period using the Black-Scholes pricing model.  We recognize the fair value of stock options granted to consultants as consulting expense over the requisite or implied service period of the grant.  We recorded stock-based consulting expense related to stock options granted to consultants of approximately $75,000$57,000 and $197,000 during the nine months ended July 31, 2019 and 2018, respectively, and approximately $25,000 and $49,000 during the three months ended JulyJanuary 31, 2020 and 2019, and 2018, respectively.

Table of Contents

Stock Option Activity

During the ninethree months ended JulyJanuary 31, 2019 and 2018,2020, we granted options to purchase 10,000 shares and 3,897,000800,000 shares of common stock respectively,  to employees directors and consultants with  exercise prices ranging from $2.30$3.84 to $3.84$4.04 per share pursuant to the Anixa Biosciences, Inc. 20102018 Share Incentive Plan (the "2010"2018 Share Plan”) and.  We did not grant any options during the Anixa Biosciences, Inc. 2018 Share Plan (the “2018 Share Plan”).three months ended January 31, 2019.  During the ninethree months ended JulyJanuary 31, 20192020 and 2018,2019, stock options to purchase 40,00018,900 and 48,60010,000 shares of common stock, respectively, were exercised with aggregate proceeds of approximately $103,000$28,000 and $-0-,$23,000, respectively. Under certain circumstances, stock options may be exercised on a cashless basis.  During the nine months ended July 31, 2019 and 2018, -0- and 8,784 shares of common stock, respectively, were withheld in connection with cashless exercises of stock options.

Stock Option Plans

As of JulyJanuary 31, 2019,2020, we have three stock option plans:  the Anixa Biosciences, Inc. 2003 Share Incentive Plan (the "2003 Share Plan"), the Anixa Biosciences, Inc. 2010 Share Incentive Plan (the "2010 Share Plan”) and the 2018 Share Plan, which were adopted by our Board of Directors on April 21, 2003, July 14, 2010 and January 25, 2018, respectively.  The 2018 Share Plan was approved by our shareholders on March 29, 2018.

2003 Plan

TheDuring the three months ended January 31, 2020, the remaining outstanding options granted under 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.expired.  In accordance with the provisions of the 2003 Share Plan, the plan terminated with respect to the ability to grant future options on April 21, 2013.  Information regarding the 2003 Share Plan for the ninethree months ended JulyJanuary 31, 2020 is as follows:

11

Table of Contents

Information regarding the 2003 Share Plan for the three months ended January 31, 2019 is as follows:

Table of Contents

The following table summarizes information about stock options outstanding and exercisable under the 2003 Share Plan as of JulyJanuary 31, 2019:

Information regarding the 2003 Share Plan for the nine months ended July 31, 2018 is as follows:

The following table summarizes information about stock options outstanding and exercisable under the 2003 Share Plan as of July 31, 2018:

2010 Plan

The 2010 Share Plan provides for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to employees, directors and consultants.  As of JulyJanuary 31, 2019,2020, the 2010 Share Plan had 889,200800,000 shares available for future grants.  Information regarding the 2010 Share Plan for the ninethree months ended JulyJanuary 31, 20192020 is as follows:

Table of Contents

The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of JulyJanuary 31, 2019:2020:

12

Table of Contents