Business context and reporting period
This is ITUS Corporation’s unaudited Form 10-Q for the three months ended January 31, 2018 (its fiscal first quarter), not a filing under the name Anixa Biosciences Inc. Anixa Diagnostics was a subsidiary focused on Cchek, a blood-based cancer detection platform; the company also formed Certainty Therapeutics to develop cancer immunotherapies. Management said Cchek and Certainty’s ovarian cancer program would be primary company priorities over the coming quarters.
Financial results and position
- Revenue: $0 in both Q1 2018 and Q1 2017. Gross margin is not applicable.
- Operating expenses and loss: Expenses were $1.875 million, up from $1.395 million. Operating loss was $1.875 million versus $1.395 million; net loss was $1.865 million versus $1.589 million.
- Common-shareholder results: Net loss attributable to common shareholders was $1.838 million, or $0.11 per share, compared with $3.598 million, or $0.41 per share. The prior-year figure included a $2.009 million deemed dividend related to preferred-stock redemption.
- Cash flow: Operating cash use was $1.340 million, compared with $0.730 million. Investing activities provided $0.847 million, largely reflecting net certificate-of-deposit maturities and purchases. Cash and cash equivalents declined $0.493 million to $2.847 million.
- Liquidity and balance sheet: Cash, cash equivalents and short-term certificates of deposit totaled $5.497 million, down from $6.839 million at October 31, 2017. Current assets were $5.775 million, current liabilities $1.087 million, and total assets $7.491 million. Shareholders’ equity was $6.436 million; total equity, including noncontrolling interest, was $6.404 million.
- Debt: The filing reports no current debt balance. The secured debenture and patent acquisition obligation were paid in fiscal 2017; accordingly, Q1 2018 interest expense was $0, versus $195,000 a year earlier.
Material changes versus the prior comparable period
- Research and development expense rose to $778,000 from $452,000, principally due to Wistar collaboration and license costs and the Moffitt collaboration.
- General and administrative expense increased to $990,000 from $860,000, mainly from legal and accounting costs, consultant option expense and consultant fees, partly offset by lower employee compensation.
- Patent assertion-related expenses increased to $25,000 from $2,000. Patent amortization remained approximately $81,000.
- Operating loss widened despite the absence of prior-year interest expense. The reported common-shareholder loss per share improved primarily because the prior-year period included the deemed dividend.
Outlook, risks and other matters
Management stated, based on information available March 8, 2018, that existing cash, short-term investments and expected cash flows should fund activities for the next 12 months. It cautioned that actual cash needs may differ and that additional capital could be needed. Equity or convertible-debt financing could dilute shareholders; financing may not be available on acceptable terms or at all.
The company reported that a January 2018 study expanded its reported Cchek evaluation to 20 solid-tumor cancer types. Certainty and Moffitt planned studies toward an FDA Investigational New Drug application for the ovarian cancer program; the filing does not report an IND submission or clinical results. Patent litigation and licensing activity continued. Management believed other ordinary-course legal matters were not expected to have a material adverse effect. No material risk-factor changes were reported from the prior annual filing.
Management concluded disclosure controls were effective as of quarter-end and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether Cchek’s reported research results translate into independently validated performance, clinical utility and a viable commercial product.
- Certainty’s development milestones, funding requirements and progress toward an IND and human clinical testing.
- The cash runway under actual operating spending, particularly given the $1.340 million quarterly operating cash outflow and no quarterly revenue.
- Potential financing needs, dilution and any obligations under the Wistar and Moffitt arrangements.
- Developments in patent litigation and licensing, and whether any revenue-generating agreements emerge.