Champions Oncology(CSBR) - 2019 Q4 - Annual Report

PART I Business Champions Oncology, Inc. develops and sells advanced technology solutions and products to personalize oncology drug development and use - The company's core business is the development and sale of advanced technology solutions and products for personalizing oncology drug development and use, primarily through its TumorGraft Technology Platform[16] - The TumorGraft Technology Platform uses Patient Derived XenoGrafts (PDX Models) to simulate human clinical trials, demonstrating approximately 90% accuracy in predicting human response with 90% lower costs and shorter timelines (6 months vs. 2-3 years for human trials)[19][20] - The company's TumorBank currently holds approximately 1,500 PDX Models, reflecting characteristics of late-stage, pretreated, and metastatic cancer patients[21][22] - Translational Oncology Solutions (TOS) Revenue Growth | Metric | 2019 (approx.) | Previous Year (approx.) | Change (%) | |:-------|:---------------|:------------------------|:-----------| | Revenue | $25.8 million | $18.8 million | 37.3% | - Personalized Oncology Solutions (POS) Revenue Change | Metric | 2019 (approx.) | Previous Year (approx.) | Change (%) | |:-------|:---------------|:------------------------|:-----------| | Revenue | $1.3 million | $1.5 million | -12.2% | - The company's growth strategy focuses on growing its TumorBank (increasing models and adding new tumor types), adding new PDX technologies (e.g., ImmunoGrafts for immune oncology drugs), and increasing the scale of studies for pharmaceutical and biotechnology customers[34] - Research and Development Expenses | Year | R&D Expense (approx.) | |:-----|:----------------------| | 2019 | $4.8 million | | 2018 | $4.4 million | - As of July 15, 2019, the company had 115 full-time employees, with 93 engaged in research and development and laboratory operations, 14 in sales and marketing, and 8 in finance and administration[40] Risk Factors The company faces significant risks including historical operating losses, potential need for substantial capital, and uncertainty in achieving sustained profitability - Financial Performance and Liquidity (as of April 30, 2019) | Metric | Amount (approx.) | |:-------|:-----------------| | Net Income (2019) | $128,000 | | Net Loss (2018) | $1.5 million | | Accumulated Deficit | $70.7 million | | Working Capital Deficit | $103,000 | | Cash and Cash Equivalents | $3.2 million | - The company believes its current cash and cash equivalents, along with improved cash flows, are sufficient to fund operations through at least August 2020, but acknowledges the need for additional capital to achieve sustained profitability and growth[44][49] - Changes in FDA regulatory oversight of laboratory-developed tests (LDTs), such as the company's POS services, could lead to increased regulatory burdens, pre-market review requirements, and higher costs, potentially impacting the business[52][53][55] - The TumorGraft Technology Platform is proprietary and requires significant know-how but is not patented, making it possible for competitors to develop similar procedures and compete in the market[67] - Patients are currently unable to obtain reimbursement from third-party payers for the company's services, which limits market acceptance and could hinder revenue growth[73][74] - The company's common stock has limited trading activity and is subject to extreme volatility, which could make it difficult for investors to dispose of shares or obtain accurate price quotations, and may lead to dilution from future equity issuances[79][80][87][88] Unresolved Staff Comments There are no unresolved staff comments from the SEC - No unresolved staff comments[99] Properties The company leases its corporate headquarters in Hackensack, New Jersey, and two laboratory and office facilities in Rockville, Maryland - The company leases its corporate headquarters in Hackensack, New Jersey (lease expires November 2021) and two primary laboratory and office spaces in Rockville, Maryland (leases expire August 2028 and January 2024)[101] - Rent Expenses for Leased Facilities | Year | Rent Expense (thousands) | |:-----|:-------------------------| | 2019 | $822 | | 2018 | $657 | Legal Proceedings The company is not currently involved in any material legal proceedings - No legal proceedings[103] Mine Safety Disclosures The company has no disclosures related to mine safety - No mine safety disclosures[104] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Capital Market under the symbol 'CSBR' and has not declared cash dividends - The company's common stock is quoted on the Nasdaq Capital Market under the symbol 'CSBR' since August 21, 2015[106] - Common Stock High and Low Bid Prices | Fiscal Year Ended April 30, 2019 | High ($) | Low ($) | |:---------------------------------|:---------|:--------| | First quarter | 9.18 | 3.97 | | Second quarter | 17.47 | 7.50 | | Third quarter | 15.11 | 7.29 | | Fourth quarter | 11.62 | 7.51 | | Fiscal Year Ended April 30, 2018 | | | | First quarter | 2.88 | 2.33 | | Second quarter | 3.97 | 2.93 | | Third quarter | 4.39 | 3.21 | | Fourth quarter | 4.49 | 3.39 | - As of July 15, 2019, there were approximately 1,900 record holders of the company's common stock[109] - The company has not declared or paid any cash dividends on its common stock and does not anticipate paying any in the foreseeable future[110] Selected Financial Data This item is not applicable for the company - Item 6. Selected Financial Data is not applicable[115] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Champions Oncology's financial performance, highlighting increased revenue, return to net income, and improved liquidity in fiscal year 2019 Overview and Recent Developments The company focuses on developing and selling advanced technology solutions for oncology drug development, leveraging its TumorGraft Technology Platform - The company focuses on developing and selling advanced technology solutions and products to personalize oncology drug development and use, leveraging its TumorGraft Technology Platform to simulate clinical trials[117][118] - The company plans to continue expanding its TumorGraft Technology Platform to grow its Translational Oncology Solutions (TOS) program, while the Personalized Oncology Solutions (POS) program will not be a focus for future growth[119] Results of Operations This section details the company's consolidated operating results, showing significant revenue growth and a shift from operating loss to income in 2019 - Consolidated Operating Results (in thousands) | Metric | 2019 ($) | % of Revenue (2019) | 2018 ($) | % of Revenue (2018) | % Change | |:-----------------------------------|:---------|:--------------------|:---------|:--------------------|:---------| | Oncology services revenue | 27,067 | 100.0% | 20,241 | 100.0% | 33.7% | | Cost of oncology services | 14,265 | 52.7% | 10,553 | 52.1% | 35.2% | | Research and development | 4,798 | 17.7% | 4,401 | 21.7% | 9.0% | | Sales and marketing | 3,056 | 11.3% | 2,570 | 12.7% | 18.9% | | General and administrative | 4,678 | 17.3% | 4,071 | 20.1% | 14.9% | | Total costs and operating expenses | 26,797 | 99.0% | 21,595 | 106.7% | 24.1% | | Income (loss) from operations | 270 | 1.0% | (1,354) | (6.7)% | (119.9)% | - Oncology services revenue increased by $6.8 million (33.7%) to $27.1 million in 2019, driven by increased sales volume and size of studies, higher demand, platform growth, and product line expansion[123] - Cost of oncology services rose by $3.7 million (35.2%) to $14.3 million in 2019, primarily due to increased salary and mice costs from higher study volume and $900,000 for repeat studies, with gross margins slightly decreasing from 47.9% to 47.3%[124] - Research and development expense increased by $397,000 (9.0%) to $4.8 million in 2019, attributed to lab and salary costs for new product development[125] - Sales and marketing expense increased by $486,000 (18.9%) to $3.1 million in 2019, due to higher commissions and an expanded sales force[126] - General and administrative expense increased by $607,000 (14.9%) to $4.7 million in 2019, mainly due to increased recruiting and salary expenses[127] - Other expense decreased from $89,000 in 2018 to $39,000 in 2019, primarily due to foreign currency transaction losses[128] Inflation Inflation does not have a meaningful impact on the company's results of operations - Inflation does not have a meaningful impact on the company's results of operations[130] Liquidity and Capital Resources The company's liquidity improved in 2019, with management believing current cash and cash flows are sufficient through August 2020 - As of April 30, 2019, the company had net income of $128,000, an accumulated deficit of $70.7 million, a negative working capital of $103,000, and cash and cash equivalents of $3.2 million[131] - Management believes current cash and improved cash flows from operations are adequate to fund operations through at least August 2020, but acknowledges the need for additional capital if required[131] - A $1.5 million line of credit agreement with a national bank, entered into in October 2017, was not renewed upon its maturity in October 2018, as the company deemed it no longer necessary for working capital needs[132] Cash Flows Cash flows from operating activities significantly improved in 2019, driven by revenue growth and increased bookings - Cash Flow Summary (in thousands) | Activity | 2019 ($) | 2018 ($) | Change ($) | |:---------|:---------|:---------|:-----------| | Operating Activities | 1,862 | (1,226) | 3,088 | | Investing Activities | (834) | (1,229) | 395 | | Financing Activities | 1,203 | 13 | 1,190 | - Net cash provided by operating activities increased by $3.1 million to $1.9 million in 2019, driven by revenue growth and increased bookings[133] - Net cash used in investing activities decreased by $395,000 to $834,000 in 2019, primarily due to lower purchases of lab equipment after the initial investment in a new vivarium facility in the prior year[134] - Net cash provided by financing activities significantly increased to $1.2 million in 2019, mainly due to exercises of stock options and warrants[135] Critical Accounting Policies The company's critical accounting policies involve significant judgment in areas like revenue recognition, goodwill valuation, and deferred tax assets - The company's critical accounting policies involve significant judgment and complexity, particularly in areas such as accounts receivable realization, revenue recognition, valuation allowance for deferred tax assets, valuation of goodwill, and stock compensation and warrant assumptions[137] - The company adopted ASC 606 (Revenue Recognition) on May 1, 2018, recognizing revenue when customers obtain control of promised services, with most contracts having a single performance obligation satisfied over time[138][139][140] - Stock-based payments are expensed based on the fair value of awards at the grant date, using the Black-Scholes option pricing model and historical information for assumptions like expected life, volatility, and risk-free interest rates[144] - Goodwill is tested annually for impairment by comparing its fair value to its carrying amount, involving significant judgment in determining fair value and assessing impairment indicators[145][147] - The company uses the asset and liability method for income taxes, requiring significant judgment in determining deferred tax assets and liabilities and establishing a full valuation allowance against net deferred tax assets due to insufficient operating history[149] Accounting Pronouncements Being Evaluated The company is assessing the impact of new accounting standards on cloud computing, credit losses, and leases, with leases expected to materially impact the balance sheet - The company is currently assessing the impact of ASU 2018-15 (Cloud Computing Arrangement implementation costs) and ASU No. 2016-13 (Financial Instruments - Credit Losses) on its consolidated financial statements, both effective for fiscal years beginning after December 15, 2019[151][152] - The adoption of ASU No. 2016-02 (Leases) on May 1, 2019, is anticipated to have a material impact on the consolidated balance sheet, with an expected record of approximately $4.1 million in additional lease liabilities and $3.2 million in right-of-use assets, but no material impact on statements of operations or cash flows[153] Recently Adopted Accounting Pronouncements The company adopted several accounting standards, including those for share-based payments, restricted cash, and revenue recognition, with no material impact on financial statements - The company early adopted ASU 2018-07 (Nonemployee Share-Based Payment Accounting) in Q3 2019, which did not have a material impact on financial statements[155] - ASU 2016-18 (Restricted Cash) and ASU No. 2016-15 (Cash Flows Classification) were adopted on May 1, 2018, with no material impact on consolidated financial statements[156][157] - ASU 2014-09 (Revenue from Contracts with Customers) was adopted on May 1, 2018, using the modified retrospective method, and did not have a material measurement impact on consolidated financial statements[158] Off-Balance Sheet Financing The company has no off-balance sheet debt, similar obligations, or un-disclosed related party transactions - The company has no off-balance sheet debt, similar obligations, or un-disclosed related party transactions, and does not guarantee any third-party debt[159] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable for the company - Item 7A. Quantitative and Qualitative Disclosures About Market Risk is not applicable[160] Financial Statements and Supplementary Data This section refers to the consolidated financial statements and the independent registered public accounting firm's report included in the 'F' pages - Consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows for the two-year period ended April 30, 2019, along with the independent auditor's report, are presented in the 'F' pages[161] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[162] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of April 30, 2019 - Management concluded that disclosure controls and procedures were effective as of April 30, 2019[164] - Management concluded that internal control over financial reporting was effective as of April 30, 2019, based on the COSO framework[165] - No material changes in internal controls over financial reporting occurred during the quarter ended April 30, 2019[166] Other Information There is no other information to report under this item - No other information to report[167] PART III Directors, Executive Officers and Corporate Governance The information required for this item is incorporated by reference from the company's definitive Proxy Statement for its 2019 Annual Meeting of Shareholders - Information regarding Directors, Executive Officers, and Corporate Governance is incorporated by reference from the Proxy Statement[169] Executive Compensation The information required for this item is incorporated by reference from the company's definitive Proxy Statement - Information regarding Executive Compensation is incorporated by reference from the Proxy Statement[171] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this item is incorporated by reference from the company's definitive Proxy Statement - Information regarding Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters is incorporated by reference from the Proxy Statement[172] Certain Relationships and Related Transactions, and Director Independence The information required for this item is incorporated by reference from the company's definitive Proxy Statement - Information regarding Certain Relationships and Related Transactions, and Director Independence is incorporated by reference from the Proxy Statement[173] Principal Accounting Fees and Services The information required for this item is incorporated by reference from the company's definitive Proxy Statement - Information regarding Principal Accounting Fees and Services is incorporated by reference from the Proxy Statement[174] PART IV Exhibits, Financial Statement Schedules. This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K - The financial statements include the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statement of Changes in Stockholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[176] - All financial statement schedules have been omitted as they are not applicable[177] - Exhibits include corporate organizational documents (Articles of Incorporation, Bylaws), employment agreements, equity incentive plans (2010 Equity Incentive Plan), various securities purchase agreements, warrants, and certifications (CEO/CFO certifications, XBRL documents)[180][182][184][185] Form 10-K Summary A Form 10-K Summary is not required for this filing - Form 10-K Summary is not required[186] Signatures The report is signed by the Chief Executive Officer (Ronnie Morris) and Chief Financial Officer (David Miller), along with other directors, on July 29, 2019 - The report was signed by Ronnie Morris (Chief Executive Officer) and David Miller (Chief Financial Officer) on July 29, 2019[191][193][194] INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm EisnerAmper LLP issued an unqualified opinion on the consolidated financial statements for 2019 and 2018, affirming fair presentation in accordance with GAAP - EisnerAmper LLP provided an unqualified opinion on the consolidated financial statements for the years ended April 30, 2019 and 2018, affirming fair presentation in accordance with GAAP[199] - The audit was conducted in accordance with PCAOB standards, including assessing risks of material misstatement and evaluating accounting principles and estimates[201][202] Consolidated Balance Sheets Total assets increased to $11.265 million in 2019, driven by cash and accounts receivable, with stockholders' equity significantly rising to $2.238 million - Consolidated Balance Sheet Highlights (in thousands) | Metric | April 30, 2019 ($) | April 30, 2018 ($) | |:--------------------------|:-------------------|:-------------------| | Cash and cash equivalents | 3,237 | 856 | | Accounts receivable, net | 4,377 | 3,917 | | Total current assets | 7,922 | 5,060 | | Property and equipment, net | 2,546 | 2,083 | | Total assets | 11,265 | 8,078 | | Accounts payable | 2,807 | 2,154 | | Accrued liabilities | 1,180 | 569 | | Deferred revenue | 4,022 | 4,704 | | Total current liabilities | 8,025 | 7,453 | | Total liabilities | 9,027 | 8,075 | | Total stockholders' equity | 2,238 | 3 | - Cash and cash equivalents significantly increased from $856,000 in 2018 to $3.237 million in 2019[206] - The company's accumulated deficit improved from $(70.826) million in 2018 to $(70.698) million in 2019[206] Consolidated Statements of Operations The company achieved net income of $128,000 in 2019, a significant improvement from a net loss of $1.476 million in 2018, driven by 33.7% revenue growth - Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Year Ended April 30, 2019 ($) | Year Ended April 30, 2018 ($) | |:-----------------------------------|:------------------------------|:------------------------------| | Oncology services revenue | 27,067 | 20,241 | | Total costs and operating expenses | 26,797 | 21,595 | | Income (loss) from operations | 270 | (1,354) | | Net income (loss) | 128 | (1,476) | | Net income (loss) per common share (basic and diluted) | 0.01 | (0.13) | | Weighted average common shares outstanding (basic) | 11,340,184 | 10,991,105 | - The company reported a net income of $128,000 in 2019, a substantial improvement from a net loss of $1.476 million in 2018[210] - Oncology services revenue increased by 33.7% from $20.241 million in 2018 to $27.067 million in 2019[210] - Income from operations turned positive at $270,000 in 2019, compared to a loss of $1.354 million in 2018[210] Consolidated Statement of Changes in Stockholders' Equity Stockholders' equity significantly increased to $2.238 million in 2019, primarily due to common stock issuance from option and warrant exercises and net income - Changes in Stockholders' Equity (in thousands) | Metric | April 30, 2018 ($) | April 30, 2019 ($) | |:-----------------------------------|:-------------------|:-------------------| | Total Stockholders' Equity (Balance) | 3 | 2,238 | | Stock-based compensation | 1,004 | 636 | | Issuance of common stock for services | 37 | 6 | | Issuance of common stock on exercise of stock options and warrants | 38 | 1,465 | | Net income (loss) | (1,476) | 128 | - Stockholders' equity increased from $3,000 at April 30, 2018, to $2.238 million at April 30, 2019[212] - The exercise of stock options and warrants contributed $1.465 million to stockholders' equity in 2019[212] Consolidated Statements of Cash Flows Cash and restricted cash increased by $2.231 million in 2019, driven by positive operating cash flow and increased financing activities - Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Year Ended April 30, 2019 ($) | Year Ended April 30, 2018 ($) | |:-----------------------------------|:------------------------------|:------------------------------| | Net income (loss) | 128 | (1,476) | | Net cash provided by (used in) operating activities | 1,862 | (1,226) | | Net cash used in investing activities | (834) | (1,229) | | Net cash provided by financing activities | 1,203 | 13 | | Increase/(decrease) in cash and restricted cash | 2,231 | (2,439) | | Cash and restricted cash, end of year | 3,237 | 1,006 | - Net cash provided by operating activities was $1.862 million in 2019, a significant increase from net cash used of $1.226 million in 2018[216] - Net cash provided by financing activities increased substantially to $1.203 million in 2019, primarily due to proceeds from the exercise of options and warrants[216] - Cash and restricted cash at the end of the year increased to $3.237 million in 2019 from $1.006 million in 2018[216] Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies, financial statement line items, and other disclosures, including revenue recognition, income taxes, and stock-based compensation Note 1. Organization and Basis of Presentation Champions Oncology, Inc. is engaged in research and development technology solutions and services for oncology drug development, operating in one segment - Champions Oncology, Inc. is engaged in research and development technology solutions and services for oncology drug development, utilizing its TumorGraft Technology Platform for Translational Oncology Solutions (TOS) and Personalized Oncology Solutions (POS)[218] - The company operates in one reportable business segment and has two foreign subsidiaries (Champions Oncology (Israel), Limited and Champions Biotechnology U.K., Limited) which generated no revenue in 2018 or 2019[219][220] Note 2. Summary of Significant Accounting Policies The consolidated financial statements are prepared in accordance with GAAP, requiring management estimates in areas like revenue recognition and deferred taxes - The consolidated financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions that affect reported amounts[223] - Cash and cash equivalents include highly liquid investments maturing within three months, with restricted cash of $150,000 in 2018 reclassified to cash in 2019 as it was no longer required as collateral[226][227] - The company's liquidity needs are met through cash on hand, working capital, and proceeds from securities sales, with management believing current resources are adequate through August 2020[228] - Property and equipment are recorded at cost and depreciated on a straight-line basis over 3 to 7 years, with capital leases recognized for laboratory equipment[232][235][236] - Goodwill is tested annually for impairment, with no impairment losses recognized in 2018 or 2019, and POS operations no longer qualify as a separate reportable segment due to revenue representing approximately 5% of total revenue[147][239][245] - Revenue is recognized under ASC 606 when control of services is transferred to the customer, typically over time for single performance obligations in fixed-fee service contracts[261][263] - Stock-based payments are expensed over the vesting period based on fair value calculated using the Black-Scholes model[254][255] - Deferred income taxes are accounted for using the asset and liability method, with a full valuation allowance established against net deferred tax assets due to insufficient earnings history[256][329] Note 3. Accounts Receivable, Unbilled Services and Deferred Revenue Total accounts receivable, net, increased to $4.377 million in 2019, while deferred revenue decreased to $4.022 million - Accounts Receivable and Deferred Revenue (in thousands) | Metric | April 30, 2019 ($) | April 30, 2018 ($) | |:-----------------------------------|:-------------------|:-------------------| | Accounts receivable | 1,982 | 1,837 | | Unbilled services | 2,417 | 2,093 | | Total accounts receivable and unbilled services | 4,399 | 3,930 | | Less allowance for doubtful accounts | (22) | (13) | | Total accounts receivable, net | 4,377 | 3,917 | | Deferred revenue | 4,022 | 4,704 | - Total accounts receivable, net, increased from $3.917 million in 2018 to $4.377 million in 2019[278] - Deferred revenue decreased from $4.704 million in 2018 to $4.022 million in 2019[278] Note 4. Property and Equipment Property and equipment, net, increased to $2.546 million in 2019, with depreciation and amortization expense rising to $606,000 - Property and Equipment, Net (in thousands) | Category | April 30, 2019 ($) | April 30, 2018 ($) | |:-----------------------------------|:-------------------|:-------------------| | Furniture and fixtures | 142 | 73 | | Computer equipment and software | 1,104 | 973 | | Laboratory equipment | 3,358 | 2,490 | | Assets in progress | 16 | 15 | | Total property and equipment | 4,620 | 3,551 | | Less: Accumulated depreciation and amortization | (2,074) | (1,468) | | Property and equipment, net | 2,546 | 2,083 | - Property and equipment, net, increased from $2.083 million in 2018 to $2.546 million in 2019[279] - Depreciation and amortization expense was $606,000 in 2019, up from $360,000 in 2018[279] Note 5. Revenue from Contracts with Customers The company adopted ASC 606 in 2018, recognizing revenue over time for pharmacology services, which significantly increased in 2019 - The company adopted ASC 606 on May 1, 2018, recognizing revenue when customers obtain control of promised services, with most contracts having a single performance obligation satisfied over time[283][284][285] - Disaggregated Revenue (in thousands) | Service Type | 2019 ($) | 2018 ($) | |:---------------------------|:---------|:---------| | Pharmacology services | 25,484 | 18,026 | | Personalized oncology services | 1,277 | 1,455 | | Other TOS revenue | 306 | 760 | | Total oncology services revenue | 27,067 | 20,241 | - Pharmacology services revenue increased significantly from $18.026 million in 2018 to $25.484 million in 2019, while Personalized oncology services revenue decreased[288] Note 6. Significant Customers In 2019, one customer accounted for 10.7% of total revenue, a change from two significant customers in 2018 - In 2019, one customer accounted for 10.7% ($2.9 million) of total revenue, compared to two customers accounting for 20.6% ($4.2 million) and 12.8% ($2.6 million) in 2018[292][293] - As of April 30, 2019, no single customer accounted for more than 10.0% of total accounts receivable, a change from 2018 where two customers represented 22.6% and 19.0% of receivables[294] Note 7. Commitments and Contingencies The company leases facilities with future minimum lease payments totaling $11.527 million and is not involved in material legal matters - The company leases office and laboratory facilities under non-cancelable operating leases, with total rent expenses of $822,000 in 2019 and $657,000 in 2018[295] - Future Minimum Lease Payments (in thousands) | Fiscal Year | Amount ($) | |:------------|:-----------| | 2020 | 1,388 | | 2021 | 1,471 | | 2022 | 1,445 | | 2023 | 1,404 | | 2024 | 1,419 | | Thereafter | 4,400 | | Total | 11,527 | - The company is not currently party to any material legal matters and has not accrued any liquidated damages related to its registration payment arrangements[300][301] - The company incurs upfront fees for licensing tumor samples and may be subject to royalty payments (2% to 5% of contract price) if licensed tumor models are used for sale in its TOS business, though no royalties have been paid or incurred as of April 30, 2019[302] Note 8. Stock-based Payments Total stock-based compensation expense decreased to $649,000 in 2019, with options granted having a weighted average fair value of $6.03 - Stock-based Compensation Expense (in thousands) | Category | 2019 ($) | 2018 ($) | |:---------------------------|:---------|:---------| | General and administrative | 458 | 689 | | Sales and marketing | 91 | 112 | | Research and development | 14 | 166 | | TOS cost of sales | 86 | 65 | | POS cost of sales | — | 2 | | Total | 649 | 1,034 | - Total stock-based compensation expense decreased from $1.034 million in 2018 to $649,000 in 2019[303] - The company has two equity incentive plans (2010 and 2008 Equity Plans) and a Director Compensation Plan for granting stock options and restricted stock awards to employees, directors, and non-employees[306][307][309] - Stock Option Grants Black-Scholes Assumptions | Assumption | 2019 | 2018 | |:-----------|:----------------|:----------------| | Expected term in years | 3 - 6 | 3 - 6 | | Risk-free interest rates | 2.6% - 3.0% | 1.8% - 2.6% | | Volatility | 65% - 85% | 84% - 88% | | Dividend yield | —% | —% | - The weighted average fair value of stock options granted was $6.03 in 2019 and $2.19 in 2018[313] - Stock Options Activity | Metric | April 30, 2019 | April 30, 2018 | |:-----------------------------------|:---------------|:---------------| | Outstanding, May 1 | 2,705,845 | 2,308,704 | | Granted | 206,790 | 455,310 | | Exercised | (363,383) | (12,500) | | Canceled | (49,766) | — | | Forfeited | (9,750) | (7,042) | | Expired | (66,110) | (38,627) | | Outstanding, April 30 | 2,423,626 | 2,705,845 | | Vested as of April 30 | 2,133,920 | 2,462,099 | Note 9. Common Stock In 2016, the company completed a public offering of 2,258,749 shares, generating $4.3 million in net proceeds, and issued shares for consulting services in 2019 - In June 2016, the company completed a public offering of 2,258,749 shares of common stock at $2.25 per share, generating net proceeds of $4.3 million for R&D, working capital, and general corporate purposes[320][321] - For the year ended April 30, 2019, the company issued 5,462 shares of common stock valued at $20,600 for consulting services[322] Note 10. Provision for Income Taxes The company has a full valuation allowance against its net deferred tax assets and estimated U.S. net operating loss carry-forwards of $43 million in 2019 - Provision for Income Taxes (in thousands) | Category | 2019 ($) | 2018 ($) | |:---------|:---------|:---------| | Current Federal | — | — | | Current State | 2 | 3 | | Current Foreign | 101 | 30 | | Total Current | 103 | 33 | - Effective Tax Rate Reconciliation | Item | 2019 (%) | 2018 (%) | |:-----------------------------------|:---------|:---------| | Federal income tax at statutory rate | 21.0 | 29.7 | | US vs. foreign tax rate difference | 1.1 | 0.1 | | State income tax, net of federal benefit | 0.9 | (0.2) | | Permanent differences | (25.4) | 0.5 | | Increase in uncertain tax position | — | (2.1) | | Change in valuation allowance | 41.0 | 498.0 | | Changes in tax rates | 6.1 | (528.4) | | Income tax expense | 44.7 | (2.4) | - The Tax Cuts and Jobs Act (2017) resulted in a one-time $7.6 million reduction to deferred tax assets, offset by a similar reduction in the valuation allowance[328] - The company has established a full valuation allowance against its net deferred tax assets ($15.0 million in 2019, $14.4 million in 2018) due to insufficient operating history[329] - Estimated U.S. net operating loss carry-forwards were approximately $43 million in 2019 and $41 million in 2018, with some subject to Section 382 limitations[330][331] - The company recognized a liability for uncertain tax positions of $151,000 in both 2019 and 2018, related to foreign operations[334] Note 11. Earnings Per Share Basic and diluted net income per share was $0.01 in 2019, a positive change from a net loss per share of $(0.13) in 2018 - Earnings Per Share Computation (dollars in thousands, except per share) | Metric | Year Ended 2019 | April 30, 2018 | |:-----------------------------------|:----------------|:---------------| | Net income (loss) attributable to common stockholders | $128 | $(1,476) | | Weighted Average common shares - basic | 11,340,184 | 10,991,105 | | Basic net income (loss) per share | $0.01 | $(0.13) | | Incremental shares from assumed exercise of warrants and stock options | 2,755,933 | — | | Adjusted weighted average share – diluted | 14,096,117 | 10,991,105 | | Diluted net income (loss) per share | $0.01 | $(0.13) | - Basic and diluted net income per share was $0.01 in 2019, a positive change from a net loss per share of $(0.13) in 2018[337] - Total potential stock-based instruments outstanding that could affect future dilution were 4,095,066 in 2019, down from 4,710,129 in 2018[337] Note 12. Related Party Transactions The company paid two board members for consulting services unrelated to their board duties in both 2019 and 2018 - The company paid two board members for consulting services unrelated to their board duties: $72,000 to one member in both 2019 and 2018, and $73,000 (2019) and $95,000 (2018) to another[339] Note 13. Line of Credit A $1.5 million line of credit was not renewed upon its October 2018 maturity, as it was no longer deemed necessary for working capital needs - A $1.5 million line of credit agreement, entered into in October 2017, was not renewed upon its October 2018 maturity, as the company determined it was no longer necessary for working capital needs[340]