Company: ANIX
Filing Date: 2025-09-10
Form Type: 10-Q
Source: 0001493152-25-013000
Chunk: 36

Company: Anixa Biosciences Inc
Filing Date: 2025-09-10
Form: 10-Q
Item: Part I, Item 1
Chunk 36
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 Simulation in estimating the fair value
at grant date and recognize compensation cost over the implied service period.

For
stock awards granted to employees and directors that vest at date of grant we recognize expense based on the grant date market price
of the underlying common stock. 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).

20

The
Black-Scholes pricing model and the Monte Carlo Simulation we use to estimate fair value requires valuation assumptions of expected term,
expected volatility, risk-free interest rates and expected dividend yield. The expected term of stock options represents the weighted
average period the stock options are expected to remain outstanding. For employees we use the simplified method, which is a weighted
average of the vesting term and contractual term, to determine expected term. The simplified method was adopted since we do not believe
that historical experience is representative of future performance because of the impact of the changes in our operations and the change
in terms from historical options. For consultants we use the contract term for expected term. Under the Black-Scholes pricing model,
we estimated the expected volatility of our shares of common stock based upon the historical volatility of our share price over a period
of time equal to the expected term of the grants. We estimated the risk-free interest rate based on the implied yield available on the
applicable grant date of a U.S. Treasury note with a term equal to the expected term of the underlying grants. We made the dividend yield
assumption based on our history of not paying dividends and our expectation not to pay dividends in the future.

We
will reconsider use of the Black-Scholes pricing model and the Monte Carlo Simulation if additional information becomes available in
the future that indicates another model would be more appropriate. If factors change and we employ different assumptions in future periods,
the compensation expense that we record may differ significantly from what we have recorded in the current period.

Research
and Development Expenses

We
recognize research and development expenses as incurred. Advance payments for future research and development activities are deferred
and expensed as the services are performed. We recognize our preclinical studies and clinical trial expenses based on the services performed
pursuant to contracts with research institutions, clinical research organizations (“CROs”), clinical manufacturing organizations
(“CMOs”), and other parties that conduct and manage various stages of research and development activities on