Company: ANIX
Filing Date: 2025-03-11
Form Type: 10-Q
Source: 0001493152-25-009854
Chunk: 23

Company: Anixa Biosciences Inc
Filing Date: 2025-03-11
Form: 10-Q
Item: Part I, Item 8
Chunk 23
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 Compensation

The compensation cost for service-based
stock options granted to employees, directors and consultants is measured at the grant date, based on the fair value of the award using
the Black-Scholes pricing model, and is recognized as an expense on a straight-line basis over the requisite service period (the vesting
period of the stock option) which is one to four years. For employee options vesting if the trading price of the Company’s common
stock exceeds 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.

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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).

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