3. SHARE-BASED COMPENSATION

The Company maintains 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) which is one to four years. We recorded share-based compensation expense related to service-based stock options granted to employees and directors of approximately $1,153,000 and $941,000 during the three months ended July 31, 2023 and 2022, respectively, and approximately $3,265,000 and $2,546,000 during the nine months ended July 31, 2023 and 2022, 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 June 1, 2021, our Chairman and Chief Executive Officer and our President, Chief Operating Officer and Chief Financial Officer were awarded market condition stock options for 2,000,000 shares and 100,000 shares of common stock, respectively, that vest in four equal installments upon the Company’s share price achieving targets ranging from $5.00 to $8.00 per share, with implied service periods of three to fifteen months. We recorded market condition stock-based compensation expense during the three months ended July 31, 2023 and 2022 of approximately $0 and $388,000, respectively, and approximately $0 and $2,381,000 during the nine months ended July 31, 2023 and 2022, respectively.

The compensation cost for service-based stock options granted to consultants 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) which is one to three years. We recorded stock-based consulting expense related to stock options granted to consultants of approximately $47,000 and $109,000 during the three months ended July 31, 2023 and 2022, respectively, and approximately $175,000 and $326,000 during the nine months ended July 31, 2023 and 2022, respectively.

For stock options granted to consultants that vest based on market conditions, such as changes in trading activity in the Company’s common stock, we use the Black-Scholes pricing model to estimate the fair value at the time which we believe the market conditions are reasonably likely to be met. On January 30, 2023, we granted market condition stock options to a consultant for 200,000 shares of common stock, that vests in full upon the achievement of certain Company stock trading activity metrics that must be met within twelve months. We did not record any market condition stock-based compensation expense on the date of grant nor in the three and nine months ended July 31, 2023, as we do not believe it is likely that the market conditions will be met.

Stock Option Plans

During the three months ended July 31, 2023, we had securities outstanding that were granted from two stock option plans: the Anixa Biosciences, Inc. 2010 Share Incentive Plan (the “2010 Share Plan”) and the Anixa Biosciences, Inc. 2018 Share Incentive Plan (the “2018 Share Plan”), which were adopted by our Board of Directors on July 14, 2010 and January 25, 2018, respectively. The 2018 Share Plan was approved by our shareholders on March 29, 2018.

Stock Option Activity

During the three months ended July 31, 2023 and 2022, we did not grant any options to purchase shares of common stock, and during the nine months ended July 31, 2023 and 2022, we granted options to purchase 1,505,000 shares and 1,430,000 shares of common stock, respectively, to employees and consultants, with exercise prices ranging from $4.19 to $4.81 per share, pursuant to the 2018 Share Plan. During the three months ended July 31, 2023 and 2022, stock options to purchase 10,446 and 321,388 shares of common stock, respectively, were exercised on a cash basis, with aggregate proceeds of approximately $3,000 and $830,000, respectively. During the three months ended July 31, 2023 and 2022, stock options to purchase 160,000 shares of common stock, of which 115,417 shares were withheld, and 680,000 shares of common stock, of which 505,340 shares were withheld, were exercised on a cashless basis, respectively. During the nine months ended July 31, 2023 and 2022, stock options to purchase 39,525 and 321,388 shares of common stock, respectively, were exercised on a cash basis, with aggregate proceeds of approximately $81,000 and $830,000, respectively. During the nine months ended July 31, 2023 and 2022, stock options to purchase 161,111 shares of common stock, of which 116,225 shares were withheld, and 780,000 shares of common stock, of which 558,431 shares were withheld, were exercised on a cashless basis, respectively.

2010 Share Plan

The 2010 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 2010 Share Plan, the plan terminated with respect to the ability to grant future awards on July 14, 2020. Information regarding the 2010 Share Plan for the nine months ended July 31, 2023 is as follows:

SCHEDULE OF OPTION ACTIVITY 

The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of July 31, 2023:

SCHEDULE OF OUTSTANDING AND EXERCISABLE  

2018 Share 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 July 31, 2023, the 2018 Share Plan had 825,000 shares available for future grants. Information regarding the 2018 Share Plan for the nine months ended July 31, 2023 is as follows:

 SCHEDULE OF OPTION ACTIVITY

The following table summarizes information about stock options outstanding and exercisable under the 2018 Share Plan as of July 31, 2023:

SCHEDULE OF OUTSTANDING AND EXERCISABLE 

Employee Stock Purchase Plan

The Company maintains the Anixa Biosciences, Inc. Employee Stock Purchase Plan (the “ESPP”) 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 nine months ended July 31, 2023 and 2022, employees purchased 1,903 and 2,389 shares, respectively, with aggregate proceeds of approximately $6,000 and $6,000, respectively.

Warrants

On October 30, 2020, we issued a warrant, expiring on October 30, 2025, to purchase 60,000 shares of common stock at $2.06 per share, vesting over five months, to a consultant for investor relations services. On November 16, 2021, the warrant was exercised on a cashless basis and 25,484 shares were withheld as payment.

On November 1, 2021, we issued a warrant, expiring on October 30, 2026, to purchase 60,000 shares of common stock at $4.77 per share, vesting over five months, to a consultant for investor relations services. We recorded consulting expense of approximately $0 and $220,000, respectively, during the three and nine months ended July 31, 2022, based on the fair value of the warrant on the date of grant recognized on a straight-line basis over the vesting period. The warrant terminated in May 2022 upon termination of the consulting agreement.

As of July 31, 2023, we also had warrants outstanding to purchase 300,000 shares of common stock at $6.56 per share, issued during fiscal year 2021 and expiring on March 22, 2026.

Information regarding the Company’s warrants for the nine months ended July 31, 2023 is as follows:

 SCHEDULE OF WARRANTS ACTIVITY

The following table summarizes information about the Company’s outstanding and exercisable warrants as of July 31, 2023:

 SCHEDULE OF OUTSTANDING AND EXERCISABLE