BUSINESS AND FUNDING
|9 Months Ended|
Jul. 31, 2017
|Accounting Policies [Abstract]|
|Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]||
1. BUSINESS AND FUNDING
Description of Business
As used herein, “we,” “us,” “our,” the “Company” or “ITUS” means ITUS Corporation and its wholly-owned subsidiaries. From inception through October 2012, our primary operations involved the development of patented technologies in the areas of thin-film displays and encryption. Beginning in October of 2012 under the leadership of a new management team, we recapitalized the Company, changed the Company’s name and ticker symbol, relocated the Company’s headquarters, and modernized its systems. In July of 2015, the Company’s stock was accepted for listing and began trading on the NASDAQ Capital Market.
In June of 2015, the Company announced the formation of a new subsidiary, Anixa Diagnostics Corporation (“Anixa”), to develop a platform for non-invasive blood tests for the early detection of cancer. That platform is called Cchek™. In July of 2015, ITUS announced a collaborative research agreement with The Wistar Institute (“Wistar”), the nation’s first independent biomedical research institute and a leading National Cancer Institute designated cancer research center, for the purpose of validating our cancer detection methodologies and establishing protocols for identifying certain biomarkers in the blood which we identified and which are known to be associated with malignancies. In August of 2016, ITUS announced the renewal and expansion of our relationship with Wistar. Further, in July of 2017, ITUS and Wistar announced that they renewed and expanded their relationship once more.
From October of 2015 through January of 2017, ITUS announced that we had demonstrated the efficacy of our Cchek™ early cancer detection platform with Breast Cancer, Lung Cancer Melanoma, Ovarian Cancer, Liver Cancer, Thyroid Cancer, Pancreatic Cancer, Appendiceal Cancer (cancer of the appendix), Uterine Cancer, Osteosarcoma (cancer of the bone), Leiomyosarcoma (cancer of the soft tissue), Liposarcoma (cancer of the connective tissue), Vulvar Cancer (cancer of the vulva), and Prostate Cancer, bringing the number of cancer types for which the efficacy of Cchek™ has been validated thus far to fifteen.
Over the next several quarters, we expect Cchek™ to be the primary focus of the Company. 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.
In the past, our revenue has been derived from technology licensing and the sale of patented technologies, including in connection with the settlement of litigation. In addition to Anixa, the Company may make investments in and form new companies to develop additional emerging technologies.
Funding and Management’s Plans
During the nine months ended July 31, 2017, cash used in operating activities was approximately $3,057,000. Net cash used by investing activities was approximately $3,518,000, which reflects the purchase of certificates of deposit totaling $4,251,000, offset by proceeds from the sale or maturity of certificates of deposit totaling $750,000 and the purchase of property and equipment of approximately $17,000. Cash provided by financing activities was approximately $5,921,000, representing net proceeds from the sale of shares of common stock to Company shareholders through a rights offering receiving proceeds of approximately $4,203,000, net proceeds from the sale of shares of common stock in a registered public offering receiving proceeds of approximately $3,212,000 and the exercise of stock options, offset by payments of $1,000,000 under the secured debenture and the redemption of our Series A Convertible Preferred Stock (the “Series A Preferred”) of $500,000. As a result, our cash, cash equivalents and short-term investments at July 31, 2017 increased by approximately $2,846,000 to approximately $6,085,000 from approximately $3,238,000 at the end of fiscal year 2016.
Based on currently available information as of September 8, 2017, we believe that our existing cash, cash equivalents, short-term investments and expected cash flows from operations will be sufficient to fund our activities and debt obligations for the next 12 months. However, our projections of future cash needs and cash flows may differ from actual results. To date, we have relied primarily upon cash from the public and private sale of equity and debt securities to generate the working capital needed to finance our operations. 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 and repay our indebtedness, we will be required to obtain more working capital. We may seek to obtain working capital through sales of our equity securities or through bank credit facilities or public or private debt from various financial institutions where possible and as permitted pursuant to our existing indebtedness. 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 could result in dilution to our stockholders. Additionally, the sale of equity securities or issuance of debt securities may be subject to certain security holder approvals or may result in the downward adjustment of the exercise or conversion price of our outstanding securities. 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, it 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 would significantly harm the business and development of operations.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnotes required by generally accepted accounting principles in annual financial statements have been omitted or condensed. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended October 31, 2016, as reported by us in our Annual Report on Form 10-K. The October 31, 2016 consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“US GAAP”). The condensed consolidated financial statements include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of our financial position as of July 31, 2017, and results of operations and cash flows for the interim periods represented. The results of operations for the nine and three months ended July 31, 2017 are not necessarily indicative of the results to be expected for the entire year.
Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability of amounts is reasonably assured.
In certain instances, our past revenue arrangements have provided for the payment of contractually determined 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 had no further obligations. As such, the earnings process was complete and revenue has been recognized upon the execution of the agreement, when collectability was reasonably assured, and when all other revenue recognition criteria were met.
Our only identifiable intangible assets are patents and patent rights. We capitalize patent and patent rights acquisition costs and amortize the cost over the estimated economic useful life. We did not capitalize any patent acquisition costs during the nine months ended July 31, 2017 and 2016. We recorded patent amortization expense of approximately $244,000 during each of the nine month periods ended July 31, 2017 and 2016 and approximately $81,000 during each of the three month periods ended July 31, 2017 and 2016, respectively.
The entire disclosure for the general note to the financial statements for the reporting entity which may include, descriptions of the basis of presentation, business description, significant accounting policies, consolidations, reclassifications, new pronouncements not yet adopted and changes in accounting principles.
Reference 1: http://www.xbrl.org/2003/role/presentationRef