Management's Discussion and Analysis of Financial Condition and Results of Operations
General
In reviewing Management's Discussion and Analysis of Financial Condition and Results of Operations, you should refer to our Consolidated Financial Statements and the notes related thereto.
Results of Operations
Fiscal Year ended October 31, 2025 compared with Fiscal Year ended October 31, 2024
Revenue
We did not have any revenue in fiscal years 2025 and 2024. Over the past several years, our revenue, if any, was derived from technology licensing and the sale of patented technologies, including revenue from the settlement of litigation. As part of our legacy operations, the Company remains engaged in limited patent licensing activities in the area of encrypted audio/video conference calling. We do not expect these activities to be a significant part of the Company's ongoing operations, nor do we expect these activities to require material financial resources or attention of senior management.
We have not generated any revenue to date from our therapeutics or vaccine programs. In addition, while we pursue our therapeutics and vaccine programs, we may also make investments in and form new companies to develop additional emerging technologies. We do not expect to begin generating revenue with respect to any of our current therapy or vaccine programs in the near term. Our plan is to achieve a profitable outcome by eventually licensing our technologies to large pharmaceutical companies that have the resources and infrastructure in place to manufacture, market and sell our technologies as therapeutics or vaccines. The eventual licensing of any of our technologies may take several years, if it is to occur at all, and may depend on positive results from human clinical trials.
Research and Development Expenses
Our research and development expenses are related to the development of our cancer vaccines and CAR-T therapeutics programs and in fiscal year 2025, the expenses incurred consisted of approximately $3,121,000 and $1,950,000 for cancer vaccines and CAR-T therapeutics, respectively. In fiscal year 2024, research and development expenses for our cancer vaccines and CAR-T therapeutics were approximately $3,748,000 and $2,648,000, respectively.
Research and development expenses decreased by approximately $1,325,000 to approximately $5,071,000 in fiscal year 2025, from approximately $6,396,000 in fiscal year 2024. The decrease in research and development expenses was primarily due to a decrease in research and development expenses related to our breast cancer vaccine development program as a result of fluctuations in the timing of certain materials manufacturing activities of approximately $674,000, a decrease in research and development expenses related to our CAR-T development program as a result of fluctuations in the timing of certain materials manufacturing activities of approximately $406,000, a decrease in employee stock option expense as a result of decreases in the calculated fair market value of stock options granted during the year and allocations of headcount to research and development activities of approximately $274,000, and a decrease in employee compensation expense other than stock-based compensation as a result of changes in allocations of headcount to research and development activities of approximately $61,000, offset by an increase in research and development expenses related to our new vaccine discovery program due to a full year of activity compared to the prior year of approximately $113,000.
General and Administrative Expenses
General and administrative expenses decreased by approximately $805,000 to approximately $6,630,000 in fiscal year 2025, from approximately $7,435,000 in fiscal year 2024. The decrease in general and administrative expenses was principally due to a decrease in investor and public relations firm expenses as a result of changes in firms used during the year of approximately $454,000, a decrease in director stock option compensation expense as a result of decreases in the calculated fair market value of stock options granted during the year of approximately $359,000, a decrease in stock compensation for investor and public relations firms as a result of changes in firms used during the year of approximately $219,000, a decrease in employee stock option compensation expense as a result of decreases in the calculated fair market value of stock options granted during the year of approximately $106,000, and a decrease in employee compensation expense other than stock-based compensation as a result of changes in allocations of headcount between research and development and general and administrative activities as well as changes in employee compensation of approximately $54,000, offset by an increase in expenses related to a change in clinical materials manufacturing vendors of approximately $244,000, an increase in shareholder relations expenses of approximately $74,000, and an increase in patent prosecution expenses of approximately $73,000.
Interest Income
Interest income decreased to approximately $673,000 in fiscal year 2025 compared to approximately $1,133,000 in fiscal year 2024, due to a decrease in the amount of short-term investments held and a decrease in interest rates.
Net Loss Attributable to Noncontrolling Interest
The net loss attributable to noncontrolling interest, representing Wistar's ownership interest in Certainty's net loss, decreased by approximately $43,000 to approximately $101,000 in fiscal year 2025, from approximately $144,000 in fiscal year 2024, as Certainty's net loss decreased.
Liquidity and Capital Resources
Our primary sources of liquidity are cash, cash equivalents and short-term investments.
Based on currently available information as of January 12, 2026, we believe that our existing cash, cash equivalents, short-term investments and expected cash flows will be sufficient to fund our activities for at least the next twelve months. We have implemented a business model that conserves funds by collaborating with third parties to develop our technologies. However, our projections of future cash needs and cash flows may differ from actual results. If current cash on hand, cash equivalents, short-term investments and cash that may be generated from our business operations are insufficient to continue to operate our business, or if we elect to invest in or acquire a company or companies or new technology or technologies that are synergistic with or complementary to our technologies, we may be required to obtain more working capital. During the year ended October 31, 2025, we raised approximately $2,378,000, net of expenses, through an at-the-market equity offering of 772,001 shares of common stock. Under our at-the-market equity program, which is currently effective and may remain available for us to use in the future, as of October 31, 2025, we may sell up to $100 million of common stock. We may seek to obtain working capital during our fiscal year 2026 or thereafter through sales of our equity securities or through bank credit facilities or public or private debt from various financial institutions where possible. We cannot be certain that additional funding will be available on acceptable terms, or at all. If we do identify sources for additional funding, the sale of additional equity securities or convertible debt will result in dilution to our stockholders. We can give no assurance that we will generate sufficient cash flows in the future to satisfy our liquidity requirements or sustain future operations, or that other sources of funding, such as sales of equity or debt, would be available or would be approved by our security holders, if needed, on favorable terms or at all. If we fail to obtain additional working capital as and when needed, such failure could have a material adverse impact on our business, results of operations and financial condition. Furthermore, such lack of funds may inhibit our ability to respond to competitive pressures or unanticipated capital needs, or may force us to reduce operating expenses, which could significantly harm the business and development of operations.
During the fiscal year ended October 31, 2025, cash used in operating activities was approximately $7,173,000. Cash provided by investing activities was approximately $4,866,000, resulting from the proceeds on maturities of short-term investments of approximately $49,226,000, which was offset by the purchase of short-term investments of approximately $44,360,000. Cash provided by financing activities was approximately $2,280,000, resulting from the sale of 772,001 shares of common stock in an at-the-market equity offering of approximately $2,378,000 net of expenses and proceeds from the sale of common stock pursuant to an employee stock purchase plan of approximately $7,000, offset by net costs from the exercise of stock options of approximately $105,000. As a result, our cash, cash equivalents, and short-term investments at October 31, 2025 decreased approximately $4,750,000 to approximately $15,174,000 from approximately $19,924,000 at the end of fiscal year 2024.
We have expected future cash obligations related to the lease of our offices through 2029, inclusive of extension periods, estimated at approximately $256,000.
Off-Balance Sheet Arrangements
We have no variable interest entities or other significant off-balance sheet obligation arrangements.
Critical Accounting Policies
The Company's consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing these financial statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported in our consolidated financial statements. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates and make changes accordingly.
We believe that, of the significant accounting policies discussed in Note 2 to our Consolidated Financial Statements, the following accounting policies require our most difficult, subjective, or complex judgments:
| ● | Revenue Recognition; | |
| ● | Stock-Based Compensation; and | |
| ● | Research and Development Expense. |
Revenue Recognition
Our revenue has been derived solely from technology licensing and the sale of patented technologies. Revenue is recognized upon transfer of control of intellectual property rights and satisfaction of other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive.
Our revenue recognition policy requires us to make certain judgments and estimates in connection with the accounting for revenue. Such areas may include determining the existence of a contract and identifying each party's rights and obligations to transfer goods and services, identifying the performance obligations in the contract, determining the transaction price and allocating the transaction price to separate performance obligations, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct from other promised goods or services and evaluating whether a license transfers to a customer at a point in time or over time.
Our revenue arrangements provide for the payment, within 30 days of execution of the agreement, of contractually determined, one-time, paid-up license fees in settlement of litigation and in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company. These arrangements typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by the Company, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. In such instances, the intellectual property rights granted have been perpetual in nature, extending until the expiration of the related patents. Pursuant to the terms of these agreements, we have no further obligations with respect to the granted intellectual property rights, including no obligation to maintain or upgrade the technology, or provide future support or services. Licensees obtained control of the intellectual property rights they have acquired upon execution of the agreement. Accordingly, the performance obligations from these agreements were satisfied and 100% of the revenue was recognized upon the execution of the agreements.
Stock-Based 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. For stock-based awards that vest upon the achievement of a performance metric, the Company recognizes the estimated fair value of the award when achievement becomes probable.
For restricted 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 we have sufficient historical exercise data on which to base our own estimate. 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 Expense
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 our behalf. Fees for such services are recognized based on management's estimates after considering the activities and tasks completed by each service provider in a given period, the time period over which services are expected to be performed, and the level of effort expended in each reporting period.
At each balance sheet date, management estimates prepaid and accrued research and development costs by discussing progress or stage of completion of activities with internal personnel and external service providers, and comparing this information to payments made, invoices received, and the agreed-upon contractual fee to be paid for such services in the applicable contract or statements of work.
In addition, we allocate certain internal compensation costs to research and development expenses based on management's estimates of each employee's time and effort expended.
Effect of Recent Accounting Pronouncements
We discuss the potential expected impacts of recently issued pronouncements in Note 2 to the Consolidated Financial Statements.