SEC Company Response from Anixa Biosciences Inc (ANIX) (CIK 0000715446) (ANIX) — May 13, 2010
Anixa Biosciences Inc (ANIX) (CIK 0000715446)
Date: May 13, 2010 · CIK: 0000715446 · Accession: 0001157523-10-003142
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-11254
Referenced dates: April 27, 2010
Letter
Via EDGAR & Federal Express United States Securities and Exchange Commission CopyTele, Inc. Form 10-K/A for Fiscal Year Ended October 31, 2009 Filed March 10, 2010 File No. 000-11254
Dear Mr. Shuman:
This letter sets forth the responses of CopyTele, Inc. (“CopyTele” or the "Company") to the additional comments of the staff (the "Staff") of the Securities and Exchange Commission (the "Commission") set forth in its comment letter dated April 27, 2010 (the "Comment Letter") with respect to the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 31, 2009 (the “Form 10-K/A”). In addition, this letter also contains the Company’s proposed changes to the Form 10-K/A. For the convenience of the Staff, we are providing under separate cover a the hard copy of this letter in which the proposed changes to the Form 10-K/A have been marked to show changes from the applicable sections of the current Form 10-K/A.
We have reproduced below in italics each of the Staff's comments set forth in the Comment Letter. Immediately following each such comment is the Company's response in regular font. The Company's responses in this letter correspond to the numbers in the Staff's comments in the Comment Letter.
General
1.
Comment: We note your response to our prior comment 1. Please delete North Korea from the proposed disclosure to describe the U.S. economic sanctions and export control regulations that affect your business. Currently, the four countries designated by the State Department as state sponsors of terrorism are Cuba, Iran, Sudan, and Syria.
Response: The disclosure on page 14 will be revised as follows to delete North Korea from the list of countries designated by the U.S as state sponsors or terrorism.
“Our international sales of our encryption devices, technology and software solutions are subject to U.S. and foreign regulations such as
Securities and Exchange Commission
May 13, 2010
Page 2
the International Traffic in Arms Regulations (“ITAR”) and Export Administration Regulations and may require licenses (including export licenses) from U.S. government agencies or require the payment of certain tariffs. In addition, in accordance with applicable regulations, we file the requisite semiannually reports on exports of these products with the applicable U.S. government agencies. Our ability to export in the future is dependent upon our ability to obtain the export authorization from the appropriate U.S. government agency. In addition, in accordance with Export Administration Regulations, without a valid export license, we are prohibited from exporting these products to any country that the U.S. State Department has identified as state sponsors of terrorism and are subject to U.S. economic sanctions and export controls, which includes Cuba, Iran, North Korea, Sudan and Syria. However, neither we nor any of our subsidiaries have ever exported, or currently anticipate exporting, any goods or services to any such countries either directly or to our knowledge, indirectly through any distributor or licensee, nor have we ever had, or anticipate in the future having, any direct or indirect arrangements or other contacts with the governments of those countries or entities controlled by those governments. Furthermore, before we make any domestic or international shipments of encryption equipment, software or technology, we confirm that the recipient is not on any denied person or similar list maintained by the U.S. Department of Commerce, Bureau of Industry and Security.”
Form 10-K for the Fiscal Year Ended October 31, 2009
Part I
Item 1. Business, page 4
2.
Comment: Your proposed disclosure in response to prior comment 2 continues to refer to modified payments to your agreement with Video con, without clarifying why or how those modifications occurred. Please expand your disclosure to discuss how and why these payments were modified to be "more closely aligned with progress being made." Clarify Copytele's limited performance requirements under the agreement and explain in greater detail the technical support that has and will be provided to Videocon's technical team. Given that the license fees account for a significant portion of your revenues and that future modifications of the timing of the payments and delays in the payments beyond the 27 month period could materially impact your results of operations, please ensure that you describe the provisions of the license agreement that allow for modifications or adjustments to the payments. Further, you state that Videocon did not become a related party until it purchased the equity interest in November 2007. Please note that Item 404(a) of Regulation S-K requires disclosure of any transaction since the beginning of the last fiscal year in which a person identified in Item 404(a) of Regulation S-K was or is to be a participant and the amount involved exceeds $120,000, irrespective of when the contract was originally formed.
Securities and Exchange Commission
May 13, 2010
Page 3
Response: The following disclosure will be added to “Item 1. Business” on page 5-6 and in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – General” and “ --Liquidity and Capital Resources” on page 20-22 and 31-32, respectively, to clarify how and why CopyTele agreed to defer the license payments and to explain in greater detail Videocon’s performance requirements under the License Agreement
“In May 2008, we received the first installment of the license fee of $2,000,000. During the quarter ended April 30, 2009, we modified the payment terms from Videocon and weIn March 2009, we agreed to defer license fee payments due from Videocon that had been schedule to be paid in the second quarter of fiscal year 2009 and we separately agreed to reimburse Videocon $250,000 for engineering services related to an advanced versionimproved versions of our display technology, which amount was offset against amounts due tofrom Videocon in lieu of a cash payment. In addition, in June 2009, we received a license fee payment from Videocon of $250,000, which was due during the quarter ended April 30, 2009 pursuant to the modified payment terms. In August 2009, we received an additional license fee payment from Videocon of $100,000, which was due during the quarter ended July 31, 2009 pursuant to the modified payment terms. As of October 31, 2009, we have received aggregate license fee payments of $2,600,000. We further modified the payment termsIn January 2010, we agreed to defer the license fee payments due from Videocon duringthat had been schedule to be paid in the first quarter of fiscal 2010 for amounts that were due during that quarter. The modifications were agreed to by CopyTeleyear 2010. In March 2010, we received an additional license fee payment from Videocon of $300,000, which was due during the quarter ended January 31, 2010 pursuant to the modified payment terms. While not contemplated or required by the terms of the License Agreement, after discussions with Videocon to allow Videocon’s payments to be more closely aligned with the progress being made towards the optimization of the performance of the, we agreed to the payment deferrals in light of our joint decision to jointly develop an advanced versionimproved versions of our display technology, although and the additional time and effort required by Videocon and us to incorporate the developmental improvements related thereto which are aimed at reducing the power consumption, improving the reliability and lowering the fabrication cost. However, the total amount of the payments did not change and Videocon’s obligation to make such payments iscontinues to be subject only to CopyTele’s limited performance requirements described below and is not dependent on any specific performance standards which must be met by completion or delivery of prototypes of CopyTele’s products in the development stage. FutureVideocon’s obligations with respect to the pre-production phase, and CopyTele’s assistance, under the License Agreement remain unaffected. As of April 30, 2010, we have received aggregate license fee payments from Videocon of $2.9 million. We presently anticipate that ongoing improvements to our display technology will likely result in future modifications of the timing of payments from Videocon could occur that mightthat would materially affect in which future periods revenues from Videocon are recognized and which couldwould delay the payment of the license fee beyond the 27 month period. Videocon’s obligations with respect to the pre-production phase, and CopyTele’s assistance, under the License Agreement remain unaffected. ending in August 2010. We cannot presently estimate specific future payments dates for the remaining $8.1 million of license fee payments.
Securities and Exchange Commission
May 13, 2010
Page 4
Videocon is the flagship company of the Videocon Group, one of India’s leading business houses. Videocon Group is a fully integrated consumer electronics and home appliances enterprise with backward integration in plasma panel, CRT glass, color picture tubes and other key components for the consumer electronics, home appliances and components industries. Videocon Group also operates in the oil & gas sector. The Videocon Group has sales and service networks throughout India and operates facilities in Europe and elsewhere in the world.
We are working with Videocon to implement our technology into production display modules. The display modules consist of our low voltage phosphor displays, the attached associated driver circuits, and controller circuits. Under the License Agreement, Videocon, with our assistance, is to provide the design and process engineering required to produce such display modules and also provide all tooling and fixtures required for the production process. Videocon has a group of qualified and experienced personnel assigned to this program. In connection with our performance requirements under the License Agreement, we are providing technical support to Videocon’s technical team as part of our assistance to Videocon to produce such display modules, and are alsoThe display modules consist of our low voltage phosphor displays, the attached associated driver circuits, and controller circuits. Under the terms of the License Agreement, we are disclosing to Videocon the Licensed Technology, including any improvements, providing documentation and training of Videocon personnel, and cooperating with Videocon to jointly implement our technology prior to production to produce prototypes of such modules. Videocon is utilizing its display processing technology and facilities to continue to produce various configurations of our display matrix to optimize its performance. The matrix is the main component of our display, since it. In connection with our performance requirements under the License Agreement, we are providing technical information to Videocon, so they can understand the design and fabrication processes involved in our display technology. This includes providing the design and fabrication processes of the display components, such as the matrix which contains the structure to accommodate our electron emission technology and the color phosphors that are used to illuminate our display. displays. Other components and fabrication processes include the design details of the electron emission system materials and specifications, the methods, materials and processes required to obtain a vacuum for our display operation and the methods and electronics involved to operate, test, and evaluate the performance of the display. We and Videocon are improving the design and processes to optimize the displays performance and implement these improvements into display modules. We are also using the assistance of Volga and the Asian company to implement these improvements. Improvements to the technology are to be jointly owned by CopyTele and Videocon.”
Securities and Exchange Commission
May 13, 2010
Page 5
The following disclosure will be added to “Item 1. Business” on page 5 and in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – General” and “ --Liquidity and Capital Resources” on page 21 and 32_to clarify that the deferrals were not required by the terms of the License Agreement, but rather were jointly agreed to by the parties in light of the additional time and effort required to incorporate improvements into the product.
“In January 2010, we agreed to defer the license fee payments due from Videocon duringthat had been schedule to be paid in the first quarter of fiscal 2010 for amounts that were due during that quarter. The modifications were agreed to by CopyTeleyear 2010. In March 2010, we received an additional license fee payment from Videocon of $300,000, which was due during the quarter ended January 31, 2010 pursuant to the modified payment terms. While not contemplated or required by the terms of the License Agreement, after discussions with Videocon to allow Videocon’s payments to be more closely aligned with the progress being made towards the optimization of the performance of the, we agreed to the payment deferrals in light of our joint decision to jointly develop an advanced versionimproved versions of our display technology, although and the additional time and effort required by Videocon and us to incorporate the developmental improvements related thereto which are aimed at reducing the power consumption, improving the reliability and lowering the fabrication cost. However, the total amount of the payments did not change and Videocon’s obligation to make such payments iscontinues to be subject only to CopyTele’s limited performance requirements described below and is not dependent on any specific performance standards which must be met by completion or delivery of prototypes of CopyTele’s products in the development stage. FutureVideocon’s obligations with respect to the pre-production phase, and CopyTele’s assistance, under the License Agreement remain unaffected. As of April 30, 2010, we have received aggregate license fee payments from Videocon of $2.9 million. We presently anticipate that ongoing improvements to our display technology will likely result in future modifications of the timing of payments from Videocon could occur that mightthat would materially affect in which future periods revenues from Videocon are recognized and which couldwould delay the payment of the license fee beyond the 27 month period. Videocon’s obligations with respect to the pre-production phase, and CopyTele’s assistance, under the License Agreement remain unaffected. ending in August 2010. We cannot presently estimate specific future payments dates for the remaining $8.1 million of license fee payments. “
Securities and Exchange Commission
May 13, 2010
Page 6
As the Staff is aware, the Company has pending before the Commission a confidential treatment application with the Commission with respect to certain portions of the Company’s license agreement with Videocon. Accordingly, the Company has not included in “Item 1. Business” or “Item 13. Certain Relationships and Related Transactions, and Director Independence” certain of the economic terms of the license agreement for which confidential treatment is being sought.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources, page 28
3.
Comment: We note that you have received several modified payment amounts under the license agreement with Videocon, yet your disclosure does not descri
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CopyTele, Inc.
900 Walt Whitman Road
Melville, NY 11747
May 13, 2010
Via EDGAR & Federal Express
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Attn: Mark P. Shuman Branch Chief
Mail Stop 4561
Re:
CopyTele, Inc.
Form 10-K/A for Fiscal Year Ended October 31, 2009
Filed March 10, 2010
File No. 000-11254
Dear Mr. Shuman:
This letter sets forth the responses of CopyTele, Inc. (“CopyTele” or the "Company") to the additional comments of the staff (the "Staff") of the Securities and Exchange Commission (the "Commission") set forth in its comment letter dated April 27, 2010 (the "Comment Letter") with respect to the Company’s Annual Report on Form 10-K/A for the fiscal year ended October 31, 2009 (the “Form 10-K/A”). In addition, this letter also contains the Company’s proposed changes to the Form 10-K/A. For the convenience of the Staff, we are providing under separate cover a the hard copy of this letter in which the proposed changes to the Form 10-K/A have been marked to show changes from the applicable sections of the current Form 10-K/A.
We have reproduced below in italics each of the Staff's comments set forth in the Comment Letter. Immediately following each such comment is the Company's response in regular font. The Company's responses in this letter correspond to the numbers in the Staff's comments in the Comment Letter.
General
1.
Comment: We note your response to our prior comment 1. Please delete North Korea from the proposed disclosure to describe the U.S. economic sanctions and export control regulations that affect your business. Currently, the four countries designated by the State Department as state sponsors of terrorism are Cuba, Iran, Sudan, and Syria.
Response: The disclosure on page 14 will be revised as follows to delete North Korea from the list of countries designated by the U.S as state sponsors or terrorism.
“Our international sales of our encryption devices, technology and software solutions are subject to U.S. and foreign regulations such as
Securities and Exchange Commission
May 13, 2010
Page 2
the International Traffic in Arms Regulations (“ITAR”) and Export Administration Regulations and may require licenses (including export licenses) from U.S. government agencies or require the payment of certain tariffs. In addition, in accordance with applicable regulations, we file the requisite semiannually reports on exports of these products with the applicable U.S. government agencies. Our ability to export in the future is dependent upon our ability to obtain the export authorization from the appropriate U.S. government agency. In addition, in accordance with Export Administration Regulations, without a valid export license, we are prohibited from exporting these products to any country that the U.S. State Department has identified as state sponsors of terrorism and are subject to U.S. economic sanctions and export controls, which includes Cuba, Iran, North Korea, Sudan and Syria. However, neither we nor any of our subsidiaries have ever exported, or currently anticipate exporting, any goods or services to any such countries either directly or to our knowledge, indirectly through any distributor or licensee, nor have we ever had, or anticipate in the future having, any direct or indirect arrangements or other contacts with the governments of those countries or entities controlled by those governments. Furthermore, before we make any domestic or international shipments of encryption equipment, software or technology, we confirm that the recipient is not on any denied person or similar list maintained by the U.S. Department of Commerce, Bureau of Industry and Security.”
Form 10-K for the Fiscal Year Ended October 31, 2009
Part I
Item 1. Business, page 4
2.
Comment: Your proposed disclosure in response to prior comment 2 continues to refer to modified payments to your agreement with Video con, without clarifying why or how those modifications occurred. Please expand your disclosure to discuss how and why these payments were modified to be "more closely aligned with progress being made." Clarify Copytele's limited performance requirements under the agreement and explain in greater detail the technical support that has and will be provided to Videocon's technical team. Given that the license fees account for a significant portion of your revenues and that future modifications of the timing of the payments and delays in the payments beyond the 27 month period could materially impact your results of operations, please ensure that you describe the provisions of the license agreement that allow for modifications or adjustments to the payments. Further, you state that Videocon did not become a related party until it purchased the equity interest in November 2007. Please note that Item 404(a) of Regulation S-K requires disclosure of any transaction since the beginning of the last fiscal year in which a person identified in Item 404(a) of Regulation S-K was or is to be a participant and the amount involved exceeds $120,000, irrespective of when the contract was originally formed.
Securities and Exchange Commission
May 13, 2010
Page 3
Response: The following disclosure will be added to “Item 1. Business” on page 5-6 and in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – General” and “ --Liquidity and Capital Resources” on page 20-22 and 31-32, respectively, to clarify how and why CopyTele agreed to defer the license payments and to explain in greater detail Videocon’s performance requirements under the License Agreement
“In May 2008, we received the first installment of the license fee of $2,000,000. During the quarter ended April 30, 2009, we modified the payment terms from Videocon and weIn March 2009, we agreed to defer license fee payments due from Videocon that had been schedule to be paid in the second quarter of fiscal year 2009 and we separately agreed to reimburse Videocon $250,000 for engineering services related to an advanced versionimproved versions of our display technology, which amount was offset against amounts due tofrom Videocon in lieu of a cash payment. In addition, in June 2009, we received a license fee payment from Videocon of $250,000, which was due during the quarter ended April 30, 2009 pursuant to the modified payment terms. In August 2009, we received an additional license fee payment from Videocon of $100,000, which was due during the quarter ended July 31, 2009 pursuant to the modified payment terms. As of October 31, 2009, we have received aggregate license fee payments of $2,600,000. We further modified the payment termsIn January 2010, we agreed to defer the license fee payments due from Videocon duringthat had been schedule to be paid in the first quarter of fiscal 2010 for amounts that were due during that quarter. The modifications were agreed to by CopyTeleyear 2010. In March 2010, we received an additional license fee payment from Videocon of $300,000, which was due during the quarter ended January 31, 2010 pursuant to the modified payment terms. While not contemplated or required by the terms of the License Agreement, after discussions with Videocon to allow Videocon’s payments to be more closely aligned with the progress being made towards the optimization of the performance of the, we agreed to the payment deferrals in light of our joint decision to jointly develop an advanced versionimproved versions of our display technology, although and the additional time and effort required by Videocon and us to incorporate the developmental improvements related thereto which are aimed at reducing the power consumption, improving the reliability and lowering the fabrication cost. However, the total amount of the payments did not change and Videocon’s obligation to make such payments iscontinues to be subject only to CopyTele’s limited performance requirements described below and is not dependent on any specific performance standards which must be met by completion or delivery of prototypes of CopyTele’s products in the development stage. FutureVideocon’s obligations with respect to the pre-production phase, and CopyTele’s assistance, under the License Agreement remain unaffected. As of April 30, 2010, we have received aggregate license fee payments from Videocon of $2.9 million. We presently anticipate that ongoing improvements to our display technology will likely result in future modifications of the timing of payments from Videocon could occur that mightthat would materially affect in which future periods revenues from Videocon are recognized and which couldwould delay the payment of the license fee beyond the 27 month period. Videocon’s obligations with respect to the pre-production phase, and CopyTele’s assistance, under the License Agreement remain unaffected. ending in August 2010. We cannot presently estimate specific future payments dates for the remaining $8.1 million of license fee payments.
Securities and Exchange Commission
May 13, 2010
Page 4
Videocon is the flagship company of the Videocon Group, one of India’s leading business houses. Videocon Group is a fully integrated consumer electronics and home appliances enterprise with backward integration in plasma panel, CRT glass, color picture tubes and other key components for the consumer electronics, home appliances and components industries. Videocon Group also operates in the oil & gas sector. The Videocon Group has sales and service networks throughout India and operates facilities in Europe and elsewhere in the world.
We are working with Videocon to implement our technology into production display modules. The display modules consist of our low voltage phosphor displays, the attached associated driver circuits, and controller circuits. Under the License Agreement, Videocon, with our assistance, is to provide the design and process engineering required to produce such display modules and also provide all tooling and fixtures required for the production process. Videocon has a group of qualified and experienced personnel assigned to this program. In connection with our performance requirements under the License Agreement, we are providing technical support to Videocon’s technical team as part of our assistance to Videocon to produce such display modules, and are alsoThe display modules consist of our low voltage phosphor displays, the attached associated driver circuits, and controller circuits. Under the terms of the License Agreement, we are disclosing to Videocon the Licensed Technology, including any improvements, providing documentation and training of Videocon personnel, and cooperating with Videocon to jointly implement our technology prior to production to produce prototypes of such modules. Videocon is utilizing its display processing technology and facilities to continue to produce various configurations of our display matrix to optimize its performance. The matrix is the main component of our display, since it. In connection with our performance requirements under the License Agreement, we are providing technical information to Videocon, so they can understand the design and fabrication processes involved in our display technology. This includes providing the design and fabrication processes of the display components, such as the matrix which contains the structure to accommodate our electron emission technology and the color phosphors that are used to illuminate our display. displays. Other components and fabrication processes include the design details of the electron emission system materials and specifications, the methods, materials and processes required to obtain a vacuum for our display operation and the methods and electronics involved to operate, test, and evaluate the performance of the display. We and Videocon are improving the design and processes to optimize the displays performance and implement these improvements into display modules. We are also using the assistance of Volga and the Asian company to implement these improvements. Improvements to the technology are to be jointly owned by CopyTele and Videocon.”
Securities and Exchange Commission
May 13, 2010
Page 5
The following disclosure will be added to “Item 1. Business” on page 5 and in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – General” and “ --Liquidity and Capital Resources” on page 21 and 32_to clarify that the deferrals were not required by the terms of the License Agreement, but rather were jointly agreed to by the parties in light of the additional time and effort required to incorporate improvements into the product.
“In January 2010, we agreed to defer the license fee payments due from Videocon duringthat had been schedule to be paid in the first quarter of fiscal 2010 for amounts that were due during that quarter. The modifications were agreed to by CopyTeleyear 2010. In March 2010, we received an additional license fee payment from Videocon of $300,000, which was due during the quarter ended January 31, 2010 pursuant to the modified payment terms. While not contemplated or required by the terms of the License Agreement, after discussions with Videocon to allow Videocon’s payments to be more closely aligned with the progress being made towards the optimization of the performance of the, we agreed to the payment deferrals in light of our joint decision to jointly develop an advanced versionimproved versions of our display technology, although and the additional time and effort required by Videocon and us to incorporate the developmental improvements related thereto which are aimed at reducing the power consumption, improving the reliability and lowering the fabrication cost. However, the total amount of the payments did not change and Videocon’s obligation to make such payments iscontinues to be subject only to CopyTele’s limited performance requirements described below and is not dependent on any specific performance standards which must be met by completion or delivery of prototypes of CopyTele’s products in the development stage. FutureVideocon’s obligations with respect to the pre-production phase, and CopyTele’s assistance, under the License Agreement remain unaffected. As of April 30, 2010, we have received aggregate license fee payments from Videocon of $2.9 million. We presently anticipate that ongoing improvements to our display technology will likely result in future modifications of the timing of payments from Videocon could occur that mightthat would materially affect in which future periods revenues from Videocon are recognized and which couldwould delay the payment of the license fee beyond the 27 month period. Videocon’s obligations with respect to the pre-production phase, and CopyTele’s assistance, under the License Agreement remain unaffected. ending in August 2010. We cannot presently estimate specific future payments dates for the remaining $8.1 million of license fee payments. “
Securities and Exchange Commission
May 13, 2010
Page 6
As the Staff is aware, the Company has pending before the Commission a confidential treatment application with the Commission with respect to certain portions of the Company’s license agreement with Videocon. Accordingly, the Company has not included in “Item 1. Business” or “Item 13. Certain Relationships and Related Transactions, and Director Independence” certain of the economic terms of the license agreement for which confidential treatment is being sought.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources, page 28
3.
Comment: We note that you have received several modified payment amounts under the license agreement with Videocon, yet your disclosure does not descri