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
Revenue
In fiscal year 2021, we recorded revenue of approximately
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 regarding the Cchek™ liquid biopsy platform, as well as 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. We hope 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.
Inventor Royalties, Contingent Legal Fees, Litigation and Licensing Expenses Related to Patent Assertion
In fiscal year 2021 inventor royalties, contingent legal fees, litigation and
licensing expenses related to patent assertion activities were approximately
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We did not have any inventor royalties, contingent legal fees, litigation and licensing expenses related to patent assertion activities in fiscal year 2020.
Research and Development Expenses
Research and development expenses incurred in fiscal year 2021 associated with
each of our development programs consisted of approximately
Research and development expenses are related to the development of our cancer
therapeutics, vaccine and diagnostics programs and our anti-viral drug program,
and increased by approximately
General and Administrative Expenses
General and administrative expenses increased by approximately
Gain (Loss) on Disposal of Property and Equipment
Gain (loss) on disposal of property and equipment was a gain of approximately
Interest Income
Interest income decreased to approximately
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Net Loss Attributable to Noncontrolling Interest
The net loss attributable to noncontrolling interest, representing Wistar's 5%
ownership interest in Certainty's net loss, increased by approximately
Liquidity and Capital Resources
Our primary sources of liquidity are cash, cash equivalents and short-term investments.
Based on currently available information as of
During the year ended
We have a future cash obligation related to the lease of our offices through
2026, estimated at approximately
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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
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; and ? Stock-Based Compensation. 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.
39 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 expensed on a straight-line basis over the requisite service period (the vesting period of the stock option). 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 awards granted to employees, directors and consultants 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 values 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. For consultants we use
the contract term for expected term. We estimate 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 estimate the
risk-free interest rate based on the implied yield available on the applicable
grant date of a
We will reconsider use of the Black-Scholes pricing model and Monte Carlo Simulation if additional information becomes available in the future that indicates other models 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. See Note 2 to the Consolidated Financial Statements for additional information.
Effect of Recent Accounting Pronouncements
We discuss the effect of recently issued pronouncements in Note 2 to the Consolidated Financial Statements.
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