Quarterly report pursuant to Section 13 or 15(d)

STOCK BASED COMPENSATION

v3.19.2
STOCK BASED COMPENSATION
6 Months Ended
Apr. 30, 2019
Share-based Payment Arrangement [Abstract]  
Share-based Payment Arrangement [Text Block]

2.         STOCK BASED COMPENSATION


The Company maintains stock equity incentive plans under which the Company grants 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 expensed on a straight-line basis over the requisite service period (the vesting period of the stock option).  We recorded stock-based compensation expense related to service-based stock options granted to employees and directors of approximately $1,649,000 and $473,000 during the six months ended April 30, 2019 and 2018, respectively, and approximately $805,000 and $258,000 during the three months ended April 30, 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 of approximately $376,000 during both the six months and three months ended April 30, 2019.   We did not have any market condition stock options during the six months ended April 30, 2018.


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 are 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 $50,000 and $148,000 during the six months ended April 30, 2019 and 2018, respectively, and approximately $25,000 and $96,000 during the three months ended April 30, 2019 and 2018, respectively.


Stock Option Activity


During the six months ended April 30, 2018, we granted options to purchase 497,000 shares of common stock to employees, directors and consultants, with exercise prices ranging from $2.30 to $3.84 per share, pursuant to the Anixa Biosciences, Inc. 2010 Share Incentive Plan (the "2010 Share Plan”) and the Anixa Biosciences, Inc. 2018 Share Plan (the “2018 Share Plan”).  We did not grant any options during the six months ended April 30, 2019.  During the six months ended April 30, 2019 and 2018, stock options to purchase 30,000 and 48,600 shares of common stock, respectively, were exercised with aggregate proceeds of approximately $80,000 and $-0-, respectively.  Under certain circumstances, stock options may be exercised on a cashless basis.  During the six months ended April 30, 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 April 30, 2019, we have three stock option plans:  the Anixa Biosciences, Inc. 2003 Share Incentive Plan (the "2003 Share 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


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.  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 six months ended April 30, 2019 is as follows:


 

Shares

 

Weighted
Average Exercise Price Per Share

 

Aggregate Intrinsic Value

Options outstanding at October 31, 2018

12,000

 

$ 2.77

   

Exercised

(4,000)

 

$ 3.63

   

Options outstanding and exercisable at
    April 30, 2019

8,000

 

$ 2.34

 

$ 19,666


The following table summarizes information about stock options outstanding and exercisable under the 2003 Share Plan as of April 30, 2019:


Range of

Exercise Prices

 

Number

Outstanding

and

Exercisable

 

Weighted Average

Remaining

Contractual Life

(in years)

 

Weighted

Average

Exercise
Price

     
     
     

$ 0.67 - $17.00

 

8,000

 

0.45

 

$ 2.34


Information regarding the 2003 Share Plan for the six months ended April 30, 2018 is as follows:


 

Shares

 

Weighted

Average Exercise

Price Per Share

 

Aggregate
Intrinsic
Value

   
   

Options outstanding at October 31, 2017

30,600

 

$ 3.16

   

Exercised

(10,600)

 

$ 0.67

   

Forfeited

(5,600)

 

$ 3.63

   

Options outstanding and exercisable at
    April 30, 2018

14,400

 

$ 4.81

 

$ 17,280


The following table summarizes information about stock options outstanding and exercisable under the 2003 Share Plan as of April 30, 2018:


Range of

Exercise Prices

 

Number

Outstanding

and

Exercisable

 

Weighted Average

Remaining

Contractual Life

(in years)

 

Weighted

Average

Exercise Price

     
     
     

   $ 0.67 - $17.50

 

14,400

 

1.06

 

$ 4.81


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 April 30, 2019, the 2010 Share Plan had 887,200 shares available for future grants.  Information regarding the 2010 Share Plan for the six months ended April 30, 2019 is as follows:


 

 

Shares

 

Weighted

Average Exercise

Price Per Share

 

Aggregate

Intrinsic

Value

     
     

Options outstanding at October 31, 2018

2,131,868

 

$ 2.11

   

Exercised

(22,000)

 

$ 2.27

   

Forfeited

(87,200)

 

$ 3.34

 

 

Options outstanding at April 30, 2019

2,022,668

 

$ 2.06

 

$ 4,452,704

Options exercisable at April 30, 2019

1,580,168

 

$ 1.88

 

$ 3,732,441


The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of April 30, 2019:


Options Outstanding

 

Options Exercisable

 
   

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

             

Range of

Exercise Prices

           
           

 

 

 

 

 

 

$ 0.67

 

938,000

 

6.19

 

$ 0.67

 

776,750

 

5.78

 

$ 0.67

$ 2.27 -$ 3.01

 

610,134

 

4.07

 

$ 2.58

 

610,134

 

4.07

 

$ 2.58

$ 3.46 -$ 7.00

 

474,534

 

8.62

 

$ 4.13

 

193,284

 

7.64

 

$ 4.57


Information regarding the 2010 Share Plan for the six months ended April 30, 2018 is as follows:


 

Shares

 

Weighted

Average Exercise

Price Per Share

 

Aggregate

Intrinsic

Value

     
     

Options outstanding at October 31, 2017

1,637,246

 

$ 1.50

   

Granted

175,000

 

$ 2.81

   

Exercised

(38,000)

 

$ 0.67

   

Forfeited

(49,800)

 

$ 2.15

   

Options outstanding at April 30, 2018

1,724,446

 

$ 1.63

 

$ 3,702,296

Options exercisable at April 30, 2018

1,122,259

 

$ 1.77

 

$ 2,276,255


The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of April 30, 2018:


 

Options Outstanding

 

Options Exercisable

   

  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

             
             

Range of

Exercise Prices

           
           
 

 

 

 

 

 

$ 0.67

 

943,000

 

7.09

 

$ 0.67

 

556,059

 

5.96

 

$ 0.67

$ 2.27-$ 7.00

 

781,446

 

5.13

 

$ 2.79

 

556,200

 

4.78

 

$ 2.90


            2018 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.  As of April 30, 2019, the 2018 Share Plan had 2,008,000 shares available for future grants.  Information regarding options outstanding under the 2018 Share Plan for the six months ended April 30, 2019 is as follows:


 

Shares

 

Weighted

Average Exercise

Price Per Share

 

Aggregate
Intrinsic
 Value

   
     

Options outstanding at October 31, 2018

3,482,000

 

$ 3.73

   

Exercised

(4,000)

 

$ 3.84

   

Forfeited

(8,000)

 

$ 3.84

   

Options outstanding at April 30, 2019

3,470,000

 

$ 3.73

 

$ 1,525,200

Options exercisable at April 30, 2019

1,156,947

 

$ 3.72

 

$ 511,156


The following table summarizes information about stock options outstanding and exercisable under the 2018 Share Plan as of April 30, 2019:


 

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

           
           
           
           
           

 $ 3.70 -$ 4.61

 

3,470,000

 

9.03

 

$ 3.73

 

1,156,947

 

9.02

 

$ 3.72


Information regarding the 2018 Share Plan for the six months ended April 30, 2018 is as follows:


 

Shares

 

Weighted

Average Exercise

Price Per Share

 

Aggregate
Intrinsic 
Value

     
     

Options outstanding at October 31, 2017

           -0-

 

 

   

Granted

322,000

 

$ 3.84

   

Options outstanding at April 30 2018

322,000

 

$ 3.84

 

    $ -0-

Options exercisable at April 30, 2018

8,608

 

$ 3.84

 

    $ -0-


The following table summarizes information about stock options outstanding and exercisable under the 2018 Share Plan as of April 30, 2018:


 

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

           
           
           
           
 

 

 

 

 

 

$ 3.84

 

322,000

 

9.92

 

$ 3.84

 

8,608

 

9.92

 

$ 3.84


Outside of Share Plans


In addition to options granted under the 2003 Share Plan, the 2010 Share Plan and the 2018 Share Plan, the Board of Directors approved the grant of stock options to purchase 1,780,000 shares to employees and directors outside of Share Plans.  Information regarding stock options outstanding that were granted outside of Share Plans for the six months ended April, 2019 is as follows:


 

Shares

 

Weighted

Average Exercise

Price Per Share

 

Aggregate

Intrinsic

Value

     
     

Options outstanding at October 31, 2018

1,780,000

 

$1.58

   

Options outstanding and exercisable at April 30, 2019  

1,780,000

 

$1.58

 

$ 4,683,960


The following table summarizes information about stock options outstanding and exercisable that were granted outside of Share Plans as of April 30, 2019:


Range of

Exercise Prices

 

Number

Outstanding

and

Exercisable

 

Weighted Average

Remaining

Contractual Life

(in years)

 

Weighted

Average

Exercise Price

     
     
     

$ 0.67

 

1,046,000

 

3.30

 

$ 0.67

$ 2.58-$ 5.56

 

734,000

 

2.85

 

$ 2.88


Information regarding stock options outstanding that were granted outside of Share Plans for the six months ended April 30, 2018 is as follows:


 

Shares

 

Weighted

Average Exercise

Price Per Share

 

Aggregate

Intrinsic

Value

     
     

Options outstanding at October 31, 2017

1,780,000

 

$ 1.58

   

Options outstanding and exercisable at April 30, 2018 

1,780,000

 

$ 1.58

 

$ 3,953,820


The following table summarizes information about stock options outstanding and exercisable that were granted outside of Share Plans as of April 30 31, 2018:


Range of

Exercise Prices

 

Number

Outstanding

and

Exercisable

 

Weighted Average

Remaining

Contractual Life

(in years)

 

Weighted

Average

Exercise Price

     
     
     
     

$ 0.67

 

1,046,000

 

4.41

 

$ 0.67

$ 2.58-$ 5.56

 

734,000

 

3.87

 

$ 2.88


Stock Awards


For stock awards granted to employees, directors and consultants that vest upon grant we recognize expense at the date of grant based on the grant date market price of the underlying common stock.  During the six months ended April 30, 2018, we issued 5,347 shares of common stock that vested upon grant to consultants for services rendered.  We recorded consulting expense for the shares of common stock issued to consultants of $15,000 for the six months ended April 30, 2018 and $-0- for the three months ended April 30, 2018.  We did not grant any stock awards that vested upon grant during the six months ended April 30, 2019.


On May 8, 2018, a restricted stock award of 1,500,000 shares of common stock was granted under the 2018 Share Plan to our Chairman, President and Chief Executive Officer.  The restricted stock award vests 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.   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).  During the six-month and three-month periods ended April 30, 2019, we recorded compensation expense related to the restricted stock award of approximately $1,954,000 and $470,000, respectively.


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 six months ended April 30, 2019, employees purchased 5,411 shares at a purchase price of $3.43 per share pursuant to the plan.


Warrants


During the six months ended April 30, 2019 we issued a warrant, expiring on November 1, 2023, to purchase 25,000 shares of common stock at $4.04 per share, vesting over 12 months, to a consultant for investor relations services.  We recorded consulting expense of approximately $43,000 during the six months ended April 30, 2019 and approximately $21,000 during the three months ended April 30, 2019, based on the fair value of the warrant recognized on a straight-line basis over the vesting period.  No warrants were issued during the six months ended April 30, 2018.


As of April 30, 2019, we also had warrants outstanding to purchase 10,000 shares and 10,000 shares of common stock at $9.25 and $13.875 per share, respectively, expiring on August 19, 2019, warrants to purchase 309,400 shares of common stock at $10.00 per share expiring on July 15, 2019 and warrants to purchase 500,000 shares of common stock at $5.03 per share expiring on November 30, 2021.