Inotiv(NOTV) - 2021 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1 - Condensed Consolidated Financial Statements Inotiv, Inc.'s unaudited condensed consolidated financial statements and notes are presented for the periods ended March 31, 2021, and September 30, 2020 Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, at specific dates Condensed Consolidated Balance Sheets (in thousands of dollars) | Metric | March 31, 2021 (Unaudited) | September 30, 2020 | | :-------------------------------- | :--------------------------- | :------------------- | | Assets | | | | Cash and cash equivalents | $2,186 | $1,406 | | Total current assets | $17,871 | $15,300 | | Total assets | $64,571 | $61,593 | | Liabilities and Shareholders' Equity | | | | Total current liabilities | $36,070 | $31,642 | | Total liabilities | $57,495 | $53,997 | | Total shareholders' equity | $7,076 | $7,596 | | Total liabilities and shareholders' equity | $64,571 | $61,593 | - Total assets increased by $2,978 (4.8%) from $61,593 at September 30, 2020, to $64,571 at March 31, 2021[10] - Total liabilities increased by $3,498 (6.5%) from $53,997 at September 30, 2020, to $57,495 at March 31, 2021[10] - Total shareholders' equity decreased by $520 (6.8%) from $7,596 at September 30, 2020, to $7,076 at March 31, 2021[10] Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net loss over specific reporting periods Condensed Consolidated Statements of Operations (in thousands of dollars) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Six Months Ended March 31, 2021 | Six Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Total revenue | $18,751 | $16,012 | $36,636 | $28,930 | | Gross profit | $6,280 | $5,193 | $12,201 | $8,670 | | Operating loss | $(521) | $(195) | $(507) | $(1,215) | | Net loss | $(723) | $(588) | $(1,089) | $(2,014) | | Basic net loss per share | $(0.06) | $(0.05) | $(0.10) | $(0.19) | | Diluted net loss per share | $(0.06) | $(0.05) | $(0.10) | $(0.19) | - Total revenue increased by 17.1% for the three months ended March 31, 2021, and by 26.6% for the six months ended March 31, 2021, compared to the respective prior periods[12] - Net loss increased for the three-month period (from $(588) to $(723)) but decreased for the six-month period (from $(2,014) to $(1,089))[12] Consolidated Statement of Shareholders' Equity Outlines changes in shareholders' equity, including common shares and accumulated deficit Consolidated Statement of Shareholders' Equity (in thousands of dollars) | Metric | September 30, 2020 | March 31, 2021 | | :-------------------------- | :------------------- | :------------- | | Preferred Shares (Amount) | $25 | $0 | | Common Shares (Amount) | $2,706 | $2,756 | | Additional paid-in capital | $26,775 | $27,319 | | Accumulated deficit | $(21,910) | $(22,999) | | Total shareholders' equity | $7,596 | $7,076 | - Total shareholders' equity decreased from $7,596 at September 30, 2020, to $7,076 at March 31, 2021, primarily due to net losses[15] - Preferred shares were converted, resulting in a decrease from $25 to $0, while common shares increased due to stock option exercises and stock-based compensation[15] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands of dollars) | Metric | Six Months Ended March 31, 2021 | Six Months Ended March 31, 2020 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $4,526 | $346 | | Net cash used in investing activities | $(2,425) | $(7,351) | | Net cash used/provided by financing activities | $(1,321) | $6,597 | | Net increase in cash and cash equivalents | $780 | $(408) | | Cash, cash equivalents, and restricted cash at end of period | $2,186 | $198 | - Net cash provided by operating activities significantly increased to $4,526 in the six months ended March 31, 2021, from $346 in the prior year, driven by noncash charges and increased customer advances[17][154] - Net cash used in investing activities decreased to $2,425 from $7,351, primarily due to lower capital expenditures and no cash paid in acquisitions during the current period[17][157] - Net cash used in financing activities was $1,321, a shift from $6,597 provided in the prior year, mainly due to payments on long-term debt and finance leases, partially offset by stock option exercises[17][158] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Description of the Business and Basis of Presentation Describes Inotiv, Inc.'s business operations and the basis for financial statement presentation - Inotiv, Inc. is a contract research organization specializing in nonclinical and analytical drug discovery and development services, also manufacturing scientific instruments for life sciences research[20] - The company changed its corporate name from Bioanalytical Systems, Inc. to Inotiv, Inc. on March 18, 2021[20] 2. Stock-Based Compensation Details the company's stock-based compensation plans and related expenses Stock-Based Compensation Expense (in thousands of dollars) | Metric | Three Months Ended March 31, 2021 | Six Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Six Months Ended March 31, 2020 | | :-------------------------- | :-------------------------------- | :------------------------------ | :-------------------------------- | :------------------------------ | | Stock based compensation expense | $278 | $460 | $123 | $204 | - The Company's Equity Plan aims to attract and retain officers, directors, and key employees, with 663 shares available for grants as of March 31, 2021[24] - Effective October 1, 2020, the Company prospectively changed its accounting policy for forfeitures, adjusting expense in the period a forfeiture occurs rather than reducing for estimated forfeitures[25] - As of March 31, 2021, total unrecognized compensation cost for non-vested stock options was $592 (over 2.1 years) and for non-vested restricted shares was $1,193 (over 1.9 years)[28][30] 3. Income (Loss) Per Share Presents the calculation of basic and diluted net loss per share for common shareholders Income (Loss) Per Share Data (in dollars, except shares) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Six Months Ended March 31, 2021 | Six Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net loss applicable to common shareholders | $(723) | $(588) | $(1,089) | $(2,014) | | Weighted average common shares outstanding | 11,151 | 10,843 | 11,083 | 10,756 | | Basic net loss per share | $(0.06) | $(0.05) | $(0.10) | $(0.19) | - Diluted net loss per share was the same as basic net loss per share for both periods, as potential common shares (stock options and preferred shares) were anti-dilutive[31][32] 4. Inventories Provides a breakdown of inventory components and changes over the reporting periods Inventories, Net (in thousands of dollars) | Inventory Type | March 31, 2021 | September 30, 2020 | | :--------------- | :------------- | :----------------- | | Raw materials | $545 | $577 | | Work in progress | $69 | $70 | | Finished goods | $421 | $230 | | Obsolescence reserve | $(163) | $(177) | | Total Inventories, net | $872 | $700 | - Net inventories increased by $172 (24.6%) from $700 at September 30, 2020, to $872 at March 31, 2021, primarily due to an increase in finished goods[33] 5. Segment Information Reports financial performance and operating results for the company's distinct business segments - The Company operates in two segments: Research Services (contract research and development support) and Research Products (scientific instruments and related software)[34] Segment Revenue and Operating Income (Loss) (in thousands of dollars) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Six Months Ended March 31, 2021 | Six Months Ended March 31, 2020 | | :------------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Revenue | | | | | | Service | $17,902 | $15,191 | $34,934 | $27,333 | | Product | $849 | $821 | $1,702 | $1,597 | | Operating Income (Loss) | | | | | | Service | $3,794 | $2,575 | $6,905 | $3,933 | | Product | $(26) | $(200) | $141 | $(470) | | Corporate | $(4,289) | $(2,570) | $(7,553) | $(4,678) | | Total Operating Loss | $(521) | $(195) | $(507) | $(1,215) | - Service segment revenue increased by 17.8% and 27.8% for the three and six months ended March 31, 2021, respectively, driving overall revenue growth[35] - The Service segment's operating income significantly improved, while the Product segment moved from an operating loss to a profit for the six-month period[35] 6. Income Taxes Explains the company's accounting policies for income taxes and deferred tax assets/liabilities - The Company uses the asset and liability method for income taxes and recognizes deferred tax assets/liabilities for temporary differences and carry-forwards[36] - The effective tax rate for the six months ended March 31, 2021, was (4.58%), primarily due to changes in the valuation allowance on net deferred tax assets[37] - The Company reversed a $1,276 deferred tax asset related to PPP loan expenses as of December 31, 2020, following clarification in the Consolidated Appropriations Act, 2021, allowing full deduction of these expenses[41][42] 7. Debt Details the company's various debt instruments, credit agreements, and financial covenants - As of March 31, 2021, the Company's Credit Agreement with First Internet Bank included five term loans, a revolving line of credit, a construction draw loan, an equipment draw loan, and two capital expenditure instruments[44] Long-term Debt (in thousands of dollars) | Loan Type | March 31, 2021 | September 30, 2020 | | :-------------------------------- | :------------- | :----------------- | | Initial Term Loan | $3,622 | $3,748 | | Second Term Loan | $3,634 | $4,004 | | Third Term Loan | $1,018 | $1,115 | | Fourth Term Loan | $1,286 | $1,425 | | Fifth Term Loan | $1,858 | $1,891 | | Initial Capex Line | $826 | $920 | | Second Capex Line | $2,865 | $0 | | Construction and Equipment loans | $5,119 | $5,496 | | Seller Note – Smithers Avanza | $480 | $650 | | Seller Note – Preclinical Research Services | $719 | $752 | | Paycheck protection program loan | $5,051 | $5,051 | | Total Long-term debt (net of current portion and debt issuance costs) | $17,925 | $18,826 | - The Company is subject to financial covenants, including Fixed Charge Coverage Ratio and Cash Flow Leverage Ratio, which become more stringent over time[56] - The Company has a $5,051 PPP loan, for which it has applied for forgiveness of $4,851[59] 8. Accrued Expenses Discusses changes and releases related to the company's accrued expenses and liabilities - During the three and six months ended March 31, 2021, the Company released all of the remaining $168 reserve for lease-related liabilities from a fiscal 2012 restructuring[62] 9. New Accounting Pronouncements Outlines the adoption and impact of recently issued accounting standards on financial reporting - The Company adopted ASU 2016-13 "Financial Instruments (Topic 326) Measurement of Credit Losses on Financial Instrument" (CECL) effective October 1, 2020, which did not have a material impact on its consolidated financial statements[63][64] 10. Business Combinations Describes the accounting for significant business acquisitions and their pro forma financial impact PCRS Acquisition Details the acquisition of Pre-Clinical Research Services, Inc. (PCRS) and its financial terms - On December 1, 2019, Inotiv indirectly acquired substantially all assets of Pre-Clinical Research Services, Inc. (PCRS) for $5,857, including cash, common shares, and a promissory note[66] - The acquisition included real property in Fort Collins, Colorado, for $2,500, funded by cash on hand and debt refinancing[66] Accounting for the Transaction Explains the allocation of acquired assets and assumed liabilities for the PCRS acquisition PCRS Acquisition: Assets Acquired and Liabilities Assumed (as of Dec 1, 2019) (in thousands of dollars) | Assets Acquired and Liabilities Assumed (as of Dec 1, 2019) | Allocation as of March 31, 2021 | | :------------------------------------------------ | :------------------------------ | | Receivables | $578 | | Property and equipment | $2,836 | | Unbilled receivables | $162 | | Prepaid expenses | $27 | | Intangible assets | $2,081 | | Goodwill | $751 | | Accounts payable | $(109) | | Accrued expenses | $(118) | | Customer advances | $(351) | | Total | $5,857 | - Goodwill of $751 was recorded, reflecting enhanced scientific expertise, expanded client base, and broader service solutions, allocated to the Services segment[68] - PCRS Purchaser recorded revenues of $3,813 and net income of $711 for the six-month period ending March 31, 2021[68] Pro Forma Results Presents hypothetical financial results assuming the PCRS acquisition occurred earlier PCRS Acquisition: Pro Forma Results (in thousands of dollars) | Metric | Six Months Ended March 31, 2020 (Pro Forma) | | :-------------------------- | :---------------------------------------- | | Total revenues | $29,847 | | Net loss | $(1,887) | | Pro forma basic net loss per share | $(0.17) | | Pro forma diluted net loss per share | $(0.17) | - Pro forma results for the six months ended March 31, 2020, assuming the PCRS Acquisition occurred on October 1, 2019, show total revenues of $29,847 and a net loss of $1,887[71] 11. Revenue Recognition Explains the company's policies for recognizing revenue across its service and product streams - The Company disaggregates revenue into three streams: service revenue, product revenue, and royalties, recognizing revenue over time for services and at a point in time for products[73][77] - Service revenue, including nonclinical research, bioanalytical, pharmaceutical method development, and archive services, is recognized over time based on costs incurred or services performed[75][76] Contract Balances (in thousands of dollars) | Contract Item | Balance at September 30, 2020 | Additions | Deductions | Balance at March 31, 2021 | | :-------------------------- | :---------------------------- | :-------- | :--------- | :------------------------ | | Contract Assets: Unbilled receivables | $1,879 | $1,371 | $(857) | $2,393 | | Contract liabilities: Customer advances | $11,392 | $77,700 | $(73,906) | $15,186 | - Customer advances, a contract liability, increased from $11,392 to $15,186, reflecting significant additions of $77,700 and deductions of $73,906 during the six-month period[80] 12. Leases Details the company's accounting for operating and finance leases, including ROU assets and liabilities - The Company records right-of-use (ROU) assets and lease liabilities for most leases, recognizing lease expense on a straight-line basis over the lease term[81] Lease Balances (in thousands of dollars) | Lease Type | March 31, 2021 | September 30, 2020 | | :------------------------------ | :------------- | :----------------- | | Operating right-of-use assets, net | $4,105 | $4,001 | | Total operating lease liabilities | $4,282 | $4,210 | | Finance right-of-use assets, net | $4,710 | $4,778 | | Total finance lease liabilities | $4,706 | $4,772 | Lease Costs (in thousands of dollars) | Lease Cost Component | Three months Ended March 31, 2021 | Six months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :------------------------------ | | Fixed operating lease costs | $242 | $474 | | Short-term lease costs | $42 | $52 | | Lease income | $(159) | $(318) | | Amortization of right-of-use asset expense (Finance) | $35 | $72 | | Interest on finance lease liability | $68 | $137 | | Total lease cost | $228 | $417 | - The weighted-average remaining lease term for operating leases is 4.49 years with a discount rate of 5.24%, while for finance leases it is 0.37 years with a discount rate of 5.82%[87] 13. Subsequent Events Reports significant events occurring after the balance sheet date, including acquisitions and financing - On April 30, 2021, the Company acquired HistoTox Labs, Inc. for $22.0 million in cash and completed a merger with Bolder BioPATH, Inc. for $18.5 million in cash, 1,588,235 common shares, and $1.5 million in seller notes[89][90][91] - On April 23, 2021, the Company closed a public offering of 3,044,117 common shares, generating approximately $49.0 million in net proceeds, used in part to fund the HistoTox Labs Acquisition and the Merger[92] - On April 30, 2021, the Company refinanced its credit arrangements with First Internet Bank, securing additional debt financing to fund acquisitions and other corporate initiatives, including new financial covenants[93][94][96] - The refinanced credit agreement includes eleven term loans, an equipment draw loan of up to $3.0 million, and a revolving line of credit of up to $5.0 million[93][97][98][99] Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, highlighting recent growth initiatives, significant accomplishments, and a detailed comparison of financial performance for the three and six months ended March 31, 2021, versus the prior year Recent Developments and Executive Summary Summarizes key strategic initiatives, acquisitions, and operational improvements undertaken by the company - Inotiv has undertaken significant internal and external growth initiatives, including acquisitions (Seventh Wave, Smithers Avanza, PCRS) and facility expansions (Evansville)[106] - Subsequent to March 31, 2021, the Company acquired two additional businesses (HistoTox Labs and Bolder BioPATH), completed a public offering, and refinanced credit arrangements to fund these initiatives[107] - Infrastructure improvements include a new corporate name (Inotiv, Inc.), new accounting software, IT platform investments, and enhanced program management and client services[108] Significant Accomplishments during three months ended March 31, 2021 Highlights major achievements and strategic advancements during the first fiscal quarter of 2021 - Announced initiatives to broaden clinical pathology service offerings and expand cardiovascular safety pharmacology[110] - Appointed Greg Beattie as Chief Operating Officer[110] - Made investments in laboratory infrastructure, data and study management technologies, and internal expertise for SEND capabilities[110] - Announced investments in additional vivarium capacity at the West Lafayette, IN facility[110] - Corporate name change to Inotiv, Inc[110] Events subsequent to March 31, 2021 Details critical financial and operational events that occurred after the reporting period end - Financial results for Q1 2021 were positively impacted by increased sales and gross margins in the Service business, but operating expenses rose due to recruiting, compensation, new systems, and acquisition-related transaction costs[112] - The Company maintained operations during the COVID-19 pandemic as an "essential critical infrastructure" industry, supporting drug discovery and development, including COVID-19 related therapies[113] - The Company received a $5,051 PPP loan in April 2020 and applied for forgiveness of $4,851, with the debt recorded as a liability[114] - Subsequent events include the HistoTox Labs Acquisition, the Merger with Bolder BioPATH, a public offering of common shares ($49.0 million net proceeds), and debt refinancing with First Internet Bank[115][117] Business Overview Provides an overview of Inotiv's business model, services, products, and market positioning - Inotiv provides drug discovery and development services and sells analytical instruments to pharmaceutical, chemical, and medical device industries, aiming to accelerate safe and effective drug/product development[116] - The Company serves clients from small biotechnology startups to large global pharmaceutical companies, offering expertise in various scientific disciplines[119] - The CRO industry benefits from large pharmaceutical companies outsourcing R&D to reduce costs and speed time-to-market, and from smaller, venture-capital-funded drug discovery companies lacking internal resources[120][122] Results of Operations Analyzes the company's financial performance, including revenue, expenses, and net loss, over periods Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020 Compares financial results for the three-month periods, highlighting key performance drivers and changes Comparative Results of Operations (Three Months Ended March 31) (in thousands of dollars) | Metric | March 31, 2021 | March 31, 2020 | Change | % Change | | :------------------------ | :------------- | :------------- | :----- | :------- | | Total Revenue | $18,751 | $16,012 | $2,739 | 17.1% | | Service Revenue | $17,902 | $15,191 | $2,711 | 17.8% | | Product Revenue | $849 | $821 | $28 | 3.4% | | Cost of Service Revenue (% of Service Revenue) | 66.7% | 67.2% | -0.5% | | | Cost of Product Revenue (% of Product Revenue) | 61.5% | 74.6% | -13.1% | | | Selling Expenses | $1,175 | $1,447 | $(272) | -18.8% | | Research and Development Expenses | $203 | $162 | $41 | 25.3% | | General and Administrative Expenses | $5,423 | $3,779 | $1,644 | 43.5% | | Interest Expense | $366 | $392 | $(26) | -6.6% | | Net Loss | $(723) | $(588) | $(135) | 22.9% | - Service revenue growth was driven by an increase in the number of studies and expanded capacity, while product revenue saw a modest increase from analytical and other instruments[129][130] - Gross profit margins improved due to greater utilization of expanded capacity in services and expense reductions in products[132][133] - General and administrative expenses significantly increased due to strategic investments in corporate infrastructure, including recruiting, compensation, new systems, and acquisition-related transaction costs[137] Six Months Ended March 31, 2021 Compared to Six Months Ended March 31, 2020 Compares financial results for the six-month periods, detailing revenue growth and loss reduction Comparative Results of Operations (Six Months Ended March 31) (in thousands of dollars) | Metric | March 31, 2021 | March 31, 2020 | Change | % Change | | :------------------------ | :------------- | :------------- | :----- | :------- | | Total Revenue | $36,636 | $28,930 | $7,706 | 26.6% | | Service Revenue | $34,934 | $27,333 | $7,601 | 27.8% | | Product Revenue | $1,702 | $1,597 | $105 | 6.6% | | Cost of Service Revenue (% of Service Revenue) | 67.3% | 69.9% | -2.6% | | | Cost of Product Revenue (% of Product Revenue) | 54.8% | 71.5% | -16.7% | | | Selling Expenses | $2,138 | $2,665 | $(527) | -19.8% | | Research and Development Expenses | $399 | $324 | $75 | 23.1% | | General and Administrative Expenses | $10,171 | $6,896 | $3,275 | 47.5% | | Interest Expense | $713 | $703 | $10 | 1.4% | | Net Loss | $(1,089) | $(2,014) | $925 | -45.9% | - Service revenue increased due to incremental revenue from Fort Collins, CO operations and organic growth[142] - Net loss significantly decreased by 45.9% due to higher revenues and improved gross margins, despite increased operating expenses[152] Liquidity and Capital Resources Assesses the company's ability to meet short-term obligations and fund long-term growth initiatives Comparative Cash Flow Analysis Analyzes cash flows from operating, investing, and financing activities across reporting periods Comparative Cash Flow Analysis (in thousands of dollars) | Cash Flow Activity | Six Months Ended March 31, 2021 | Six Months Ended March 31, 2020 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $4,526 | $346 | | Net cash used in investing activities | $(2,425) | $(7,351) | | Net cash used/provided by financing activities | $(1,321) | $6,597 | | Cash and cash equivalents at period end | $2,186 | $198 | - Operating cash flow significantly improved due to noncash charges (depreciation, amortization, stock compensation) and a $3,831 increase in customer advances, partially offset by a $1,927 increase in accounts receivable[154] - Investing activities primarily consisted of $2,427 in capital expenditures for laboratory equipment and facility improvements[157] - Financing activities shifted from a net cash provider to a net cash user, mainly due to long-term debt and finance lease payments[158] Capital Resources Examines the company's sources of funding, including credit facilities and equity offerings Credit Facility Details the company's credit arrangements, debt obligations, and associated financial covenants - The Company refinanced its credit arrangements with First Internet Bank on April 30, 2021, to secure additional debt financing for acquisitions and other corporate initiatives[159] - As of March 31, 2021, the Credit Agreement included five term loans, a revolving line of credit, construction and equipment draw loans, and two capital expenditure lines[160] - The Company's obligations under the Credit Agreement are guaranteed by its wholly-owned subsidiaries and secured by first priority security interests in substantially all assets[171] - The Company is required to maintain specific financial covenants, including Fixed Charge Coverage Ratio and Cash Flow Leverage Ratio, with increasing requirements over time[172] - Additional debt includes unsecured promissory notes from the Smithers Avanza and PCRS acquisitions, and seller notes from the Merger[174] - Management believes current liquidity sources (operations, cash on-hand, credit facilities, public offering proceeds) are sufficient for operations, capital expenditures, and working capital for the next twelve months[177] Item 3 - Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Inotiv, Inc. is not required to provide the information typically mandated for Quantitative and Qualitative Disclosures about Market Risk - The Company is exempt from providing market risk disclosures as it qualifies as a smaller reporting company[178] Item 4 - Controls and Procedures This section details the Company's disclosure controls and procedures, confirming their effectiveness as of March 31, 2021, and stating that there were no material changes in internal control over financial reporting during the second fiscal quarter Disclosure Controls and Procedures Evaluates the effectiveness of the company's controls for timely and accurate financial reporting - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2021, and determined them to be effective[180] - Disclosure controls are designed to provide reasonable assurance that required information is accumulated and communicated timely to management[179] Changes in Internal Controls Reports on any material changes to the company's internal control over financial reporting - There were no material changes in internal control over financial reporting during the second quarter of fiscal 2021[181] PART II - OTHER INFORMATION Item 1 - Legal Proceedings This section states that there were no material changes to the Company's legal proceedings disclosure during the second quarter of fiscal 2021 - No material changes to legal proceedings were reported during the second quarter of fiscal 2021[182] Item 1A - Risk Factors This section outlines various risks that could materially affect the Company's business, financial condition, and operating results, including those related to recent acquisitions, potential dilution from future stock sales, increased indebtedness, and the need for additional capital - The HistoTox Labs Acquisition and the Merger may present risks, including failure to realize expected benefits, difficulties in managing new services or retaining key personnel, and unanticipated adverse impacts on business or operating results[185][189] - Future sales of common shares by the Company or existing shareholders, including those from recent acquisitions and stock options, could depress the market price of common shares[185][186][187] - Significant additional indebtedness incurred recently may impair the Company's ability to raise further capital, service its debt, and comply with financial covenants[188][190] - The Company may need additional capital, which might not be available on reasonable terms or at all, potentially forcing a reduction in operating expenses and impacting long-term strategic growth[191][192][193] Item 6 - Exhibits Lists all supplementary documents and data files filed as exhibits to the report - Exhibits include the Second Amended and Restated Articles of Incorporation and Bylaws, an offer letter to John Gregory Beattie, certifications from principal officers, and XBRL data files[195] Signatures Contains the official certifications and signatures of the company's principal executive and financial officers - The report is signed by Robert W. Leasure, President and Chief Executive Officer, and Beth A. Taylor, Chief Financial Officer and Vice President of Finance, on May 14, 2021[196]