Business context and reporting period
ITUS Corporation’s unaudited Form 10-Q covers the quarter and six months ended April 30, 2018. The filing identifies ITUS Corporation as the registrant; Anixa Diagnostics Corporation was a subsidiary focused on cancer detection. The company’s priorities were its Cchek cancer-detection platform and Certainty Therapeutics’ cancer immunotherapy program, alongside limited legacy patent-licensing activity.
Financial performance and position
| Metric | Three months ended April 30, 2018 | Six months ended April 30, 2018 |
|---|---|---|
| Revenue | $750,000 | $750,000 |
| Operating loss | $1,400,954 | $3,275,540 |
| Net loss attributable to common shareholders | $1,378,534 | $3,216,606 |
| Basic and diluted loss per share | $0.08 | $0.19 |
| Cash used in operating activities | Not separately stated | $2,082,481 |
- The $750,000 revenue came from one non-recurring patent license. No revenue was reported in the comparable 2017 periods. The filing does not provide a useful gross-margin measure.
- At April 30, 2018, cash and cash equivalents were $4.17 million and short-term certificates of deposit were $1.25 million, totaling $5.42 million in cash and short-term investments. Total assets were $7.36 million; current liabilities were $1.34 million. No debt was reported, and interest expense was zero in the current period.
- Six-month cash flows included $2.24 million provided by investing activities, mainly net proceeds from certificate-of-deposit maturities, and $677,370 provided by financing through an at-the-market equity offering. Cash plus short-term investments declined about $1.42 million from October 31, 2017.
Material changes and unusual items
- Six-month R&D expense rose to $1.44 million from $883,000, principally reflecting increased Wistar and Moffitt collaboration and licensing costs, employee costs, and consultant stock compensation. General and administrative expense increased to $1.90 million from $1.56 million, including higher legal and accounting and stock-compensation costs.
- Patent-assertion royalties, contingent legal fees, and related expenses increased to $526,023 for six months, compared with $2,346 in 2017; most of the current-period expense related to the license that generated the $750,000 revenue.
- The prior-year six-month comparison included a $1.55 million gain from extinguishing a patent-acquisition obligation, $371,026 of interest expense, and a $2.01 million deemed preferred-stock dividend. The obligation and secured debenture had been paid or settled in fiscal 2017.
- At April 30, 2018, common shares outstanding were 16,850,445; the cover reports 18,505,132 shares outstanding on June 5, 2018. The company also disclosed substantial options and warrants excluded from diluted EPS as anti-dilutive.
Outlook, risks, and other disclosures
- Management said, based on information available June 5, 2018, existing cash, short-term investments, and expected cash flows should fund activities for the next 12 months. This is an estimate; management cautioned that actual cash needs may differ and additional financing may be required.
- The company was continuing its at-the-market equity offering and could seek equity or debt financing. Additional equity or convertible debt could dilute shareholders; funding might not be available on acceptable terms or at all.
- Management expected Cchek and Certainty’s ovarian-cancer treatment program to be primary near-term focuses. Certainty was working with Moffitt toward studies needed for an IND application; the filing provides no clinical-stage timeline or commercial revenue guidance.
- The filing reported no material changes to previously disclosed risk factors, no material pending legal proceedings other than ordinary-course matters and patent-enforcement suits, and no material change in internal control over financial reporting.
Key facts investors should verify
- Confirm the issuer identity: this filing is for ITUS Corporation, while Anixa Diagnostics is described as a subsidiary; the filing does not identify Anixa Biosciences Inc. as the registrant.
- Assess whether the stated 12-month liquidity runway remains realistic given operating cash use, development spending, and possible acquisitions or additional financing.
- Verify the terms, collection, and non-recurring nature of the single $750,000 license, and the related royalty and legal expenses.
- Review subsequent equity and award activity: the filing disclosed substantial stock-option and restricted-stock grants on May 8, 2018, after the reporting date, and a higher June 5 share count.
- Evaluate progress and funding needs for Cchek and Certainty’s preclinical development, including the work required before any IND filing or clinical testing.