What changed in this filing

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Item 1. Financial Statements

2020-09-14 compared with 2020-03-16 · 125 added, 145 removed, 295 unchanged (48% of the section changed)

18 unchanged sentences

Total current liabilities

Deferred rent

Non-current operating lease liabilities

4 unchanged sentences

200,000,000 shares authorized;

11,823,274 and 11,619,538 shares issued and outstanding as of January 31, 2020 and April 30, 2019, respectively

12,727,888 and 12,726,728 shares issued and outstanding as of July 31, 2020 and April 30, 2020, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Nine Months Ended

Oncology services revenue

17 unchanged sentences

(Dollars in Thousands)

Treasury Stock

Stockholders'

Balance May 1, 2019

Stock-based compensation

Balance July 31, 2019

Stock-based compensation

Issuance of common stock on exercise of stock options

Balance October 31, 2019

Balance April 30, 2020

Stock-based compensation

Issuance of common stock on exercise of stock options

Balance January 31, 2020

Treasury Stock

Balance July 31, 2020

Stockholders'

Balance May 1, 2018

Balance April 30, 2019

Stock-based compensation

Issuance of common stock for services

Issuance of common stock on exercise of stock options

Balance July 31, 2019

Stock-based compensation

Issuance of common stock on exercise of stock options and warrants

Balance October 31, 2018

Stock-based compensation

Issuance of common stock on exercise of stock options and warrants

Balance January 31, 2019

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

(Dollars in Thousands)

Nine Months Ended

Three Months Ended

Operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Stock-based compensation

Issuance of common stock for services

Depreciation and amortization expense

Gain on disposal of equipment

Gain on termination of operating lease

Operating lease right-of use assets

Provision for doubtful accounts

Deferred rent

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses and other current assets

Other long term assets

Accounts payable

Accrued liabilities

Other non-current liabilities

Operating lease liabilities

Deferred revenue

Net cash provided by operating activities

Net cash used in operating activities

Investing activities:

Purchase of property and equipment

Refund of security deposit

Net cash used in investing activities

Financing activities:

Proceeds from exercise of options and warrants

Finance lease payments

Net cash provided by financing activities

Increase in cash

Net cash used in financing activities

Decrease in cash

Cash at beginning of period

1 unchanged sentence

Non-cash investing activities:

Purchase equipment under finance lease

Credit received on purchase of equipment

Unpaid portion of property and equipment purchase

Right-of-use assets obtained in exchange for operating lease liabilities

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5 unchanged sentences

The Company’s TumorGraft Technology Platform is a novel approach to personalizing cancer care based upon the implantation of human tumors in immune-deficient mice.

The Company uses this technology, in conjunction with related services, to offer solutions for two consumer groups:

Translational Oncology Solutions (“TOS”) and Personalized Oncology Solutions (“POS”).

The Company’s TOS business offers a technology platform to pharmaceutical and biotechnology companies using proprietary TumorGraft studies, which the Company believes may be predictive of how drugs may perform in clinical settings.

POS assists physicians in developing personalized treatment options for their cancer patients through tumor specific data obtained from drug panels and related personalized oncology services.

The Company provides a technology platform to pharmaceutical and biotechnology companies using proprietary TumorGraft studies, which the Company believes may be predictive of how drugs may perform in clinical settings.

Utilizing the TumorGraft Technology Platform (the "Platform"), a comprehensive Bank of unique, well characterized "Patient Derived XenoGrafts" (PDX) models, the Company offers multiple services to pharmaceutical and biotechnology companies seeking personalized approaches to drug development.

By performing studies to predict the efficacy of oncology drugs, our Platform facilitates drug discovery with lower costs and increased speed of drug development as well as increased adoption of existing drugs.

The Company has two operating subsidiaries:

Champions Oncology (Israel), Limited and Champions Biotechnology U.K., Limited.

For the three and nine months ended January 31, 2020 and 2019 , there were no revenues earned by these subsidiaries.

For the three months ended July 31, 2020 and 2019 , there were no revenues earned by these subsidiaries.

The Company’s foreign subsidiaries functional currency is the U.S.

4 unchanged sentences

Certain information related to the Company’s organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, has been condensed or omitted.

The accounting policies followed in the preparation of these unaudited condensed consolidated financial statements are consistent with those followed in the Company’s annual consolidated financial statements for the year ended April 30, 2019 , as filed on Form 10-K, except effective May 1, 2019, the Company accounts for its leases under Accounting Standards Codification (“ASC”) Topic 842, Leases.

In the opinion of management, these unaudited condensed consolidated financial statements contain all material adjustments necessary to fairly state our financial position, results of operations and cash flows for the periods presented and the presentations and disclosures herein are adequate when read in conjunction with the Company’s Annual Report on Form 10-K for the year ended April 30, 2020 .

5 unchanged sentences

The Company considers only those investments which are highly liquid, readily convertible to cash, and with original maturities of three months or less to be cash equivalents.

As of January 31, 2020 and April 30, 2019 the Company had no cash equivalents.

As of July 31, 2020 and April 30, 2020 the Company had no cash equivalents.

Our liquidity needs have typically arisen from the funding of our research and development programs and the launch of new products, working capital requirements, and other strategic initiatives.

In the past, we have met these cash requirements through our cash, working capital management, proceeds from certain private placements and public offerings of our securities, and sales of products and services.

For the nine months ended January 31, 2020 , the Company had net income of approximately $72,000 and cash flow from operations of $360,000 .

As of January 31, 2020 , the Company had an accumulated deficit of approximately $70.6 million , a working capital deficit of $0.3 million and cash of $3.3 million .

We believe that our cash on hand, together with expected net positive cash flows from operations for fiscal year 2020, are adequate to fund operations through at least 12 months from the filing of this 10-Q.

For the three months ended July 31, 2020 , the Company had net income of approximately $75,000 and cash used in operations of $715,000 .

As of July 31, 2020 , the Company had an accumulated deficit of approximately $72.6 million , working capital of $1.3 million and cash of $6.9 million .

We believe that our cash on hand, together with expected net positive cash used in operations for fiscal year 2021, are adequate to fund operations through at least 12 months from the filing of this 10-Q.

However, should our revenue expectations not materialize, we believe we have cost reduction strategies that could be implemented without disrupting the business or restructuring the Company.

Should the Company be required to raise additional capital, there can be no assurance that management would be successful in raising such capital on terms acceptable to us, if at all.

Effective May 1, 2019, the Company accounts for its leases under ASC Topic 842, Leases.

Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

Effective May 1, 2019, the Company accounts for its leases under Accounting Standards Codification ("ASC") Topic 842, Leases.

As the Company's leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

1 unchanged sentence

For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term.

The Company continues to account for leases in the prior period financial statements in accordance with ASC Topic 840.

Earnings Per Share

3 unchanged sentences

Three Months Ended

Nine Months Ended January 31,

Basic and diluted net (loss) income per share computation (dollars in thousands):

6 unchanged sentences

Weighted Average common shares

Incremental shares from assumed exercise of warrants and stock options

Incremental shares from assumed exercise of stock options

Adjusted weighted average share – diluted

Diluted net income (loss) per share

The following table reflects the total potential share-based instruments outstanding at January 31, 2020 and 2019 that could have an effect on the future computation of dilution per common share, had their effect not been anti-dilutive:

The following table reflects the total potential share-based instruments outstanding at July 31, 2020 and 2019 that could have an effect on the future computation of dilution per common share, had their effect not been anti-dilutive:

Stock options

1 unchanged sentence

Deferred income taxes have been provided to show the effect of temporary differences between the recognition of expenses for financial and income tax reporting purposes and between the tax basis of assets and liabilities, and their reported amounts in the consolidated financial statements.

In assessing the realizability of deferred tax assets, the Company assesses the likelihood that deferred tax assets will be recovered through tax planning strategies or from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, a valuation allowance is established.

In assessing the realizability of deferred tax assets, the Company assesses the likelihood that deferred tax assets will be recovered through tax planning strategies or from future taxable income, and to the extent that recovery is not likely or there is insufficient earnings history, a valuation allowance is established.

Our ability to utilize net operating losses (“NOL”) carryforwards to offset our future taxable income would be limited if we have undergone or were to undergo an “ownership change” within the meaning of Section 382 of the Internal Revenue Code (the “IRC”).

The Company performed a Section 382 study and concluded that there are adequate NOL's available to offset any net income generated during the fiscal year ending April 30, 2020.

The Company adjusts the valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will not be realized.

Changes in valuation allowances from period to period are included in the tax provision in the period of change.

As of January 31, 2020 and April 30, 2019 , the Company provided a valuation allowance for all net deferred tax assets, as recovery is not more likely than not based on an insufficient history of earnings.

As of July 31, 2020 and April 30, 2020 , the Company provided a valuation allowance for all net deferred tax assets, as recovery is not more likely than not based on an insufficient history of earnings.

Tax positions are positions taken in a previously filed tax return or positions expected to be taken in a future tax return that are reflected in measuring current or deferred income tax assets and liabilities reported in the consolidated financial statements.

4 unchanged sentences

The Company reflects tax benefits only if it is more likely than not that the Company will be able to sustain the tax position, based on its technical merits.

If a tax benefit meets this criterion, it is measured and recognized based on the largest amount of benefit that is cumulatively greater than 50% likely to be realized.

The Company recorded $151,000 of liabilities related to uncertain tax positions relative to one of its foreign operations as of January 31, 2020 and April 30, 2019 .

If a tax benefit meets this criterion, it is measured and recognized based on the largest amount of

benefit that is cumulatively greater than 50% likely to be realized.

The Company recorded $178,000 and $178,000 of liabilities related to uncertain tax positions relative to one of its foreign operations as of July 31, 2020 and April 30, 2020 , respectively.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

The Company had no accrual for interest or penalties on the Company’s balance sheets at January 31, 2020 and April 30, 2019 , and has not recognized interest and/or penalties in the statement of operations for either period.

The Company had no accrual for interest or penalties on the Company’s balance sheets at July 31, 2020 and April 30, 2020 , and has not recognized interest and/or penalties in the statement of operations for either period.

We do not anticipate any significant unrecognized tax benefits will be recorded during the next 12 months.

The provision for the income taxes for the three months ended January 31, 2020 and 2019 was $12,000 and $0 .

The provision for income taxes for the nine months ended January 31, 2020 and 2019 was $38,000 and $0 , respectively.

The provision for income taxes for the three months ended July 31, 2020 and 2019 was $13,000 and $15,000 , respectively, mainly attributable to taxable income earned in Israel.

Revenue Recognition

24 unchanged sentences

Deferred revenue consists of unearned payments received in excess of revenue recognized.

As the contracted services are subsequently performed and the associated revenue is recognized, the deferred revenue balance is reduced by the amount of the revenue recognized during the period.

As the contracted services are subsequently performed and the associated revenue is recognized, the deferred revenue balance is reduced by the amount of the

revenue recognized during the period.

Deferred revenue is classified as a current liability on the condensed consolidated balance sheet as the Company expects to recognize the associated revenue in less than one year.

Accounting Pronouncements Being Evaluated

In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-15, which amends ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software, to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement ("CCA") that is a service contract.

This update aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

The update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Early adoption of the amendments in this update is permitted, including adoption in any interim period.

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Simplifying the Accounting for Income Taxes.

The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC Topic 740 and removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods.

The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years with early adoption permitted.

We are currently assessing the impact of this update on our consolidated financial statements.

4 unchanged sentences

The new model is applicable to all financial instruments that are not accounted for at fair value through net income.

The standard is effective for fiscal years beginning after December 15, 2019 for public entities.

The standard is effective for fiscal years beginning after December 15, 2022 for public entities qualifying as small reporting companies.

Early adoption is permitted.

10 unchanged sentences

Under Topic 842, the Company determined if an arrangement is a lease at inception.

ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments of $4.1 million over the lease term.

ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term.

For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement.

In August 2018, the FASB issued ASU 2018-15, which amends ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software, to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement ("CCA") that is a service contract.

This ASU was effective for and adopted by the Company on May 1, 2020.

The adoption had no material impact on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718):

4 unchanged sentences

The new accounting guidance was effective for the Company on May 1, 2019.

The Company has adopted this new rule beginning with its financial reporting for the quarter ended January 31, 2019.

The Company adopted this new rule beginning with its financial reporting for the quarter ended January 31, 2019.

The adoption had no material impact on our consolidated financial statements.

On November 11, 2019, the FASB issued ASU 2019-08 which clarifies the accounting for share-based payments issued as consideration payable to a customer in accordance with ASC 606.

Under the ASU, entities apply the guidance in ASC 718 to measure and classify share-based payments issued to a customer that are not in exchange for a distinct good or service (i.e., share-based sales incentives).

The ASU was effective for the Company on May 1, 2020 and the adoption had no material impact on our consolidated financial statements.

Accounts Receivable, Unbilled Services and Deferred Revenue

Accounts receivable and unbilled services were as follows (in thousands):

January 31, 2020

July 31, 2020

April 30, 2020

5 unchanged sentences

Deferred revenue was as follows (in thousands):

January 31, 2020

July 31, 2020

April 30, 2020

3 unchanged sentences

Oncology Services Revenue

The Company adopted ASC 606, Revenue Recognition - Revenue from Customers ("ASC 606") on May 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption.

The reported results for both the three months ended January 31, 2020 and 2019 reflect the application of ASC 606.

In accordance with ASC 606, revenue is now recognized when, or as, a customer obtains control of promised services.

The Company recognizes revenue under ASC 606, Revenue Recognition - Revenue from Customers ("ASC 606").

In accordance with ASC 606, revenue is recognized when, or as, a customer obtains control of promised services.

The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services.

16 unchanged sentences

The Company accounts for amendments as a separate contract if they meet the criteria under ASC 606-10-25-12.

Other TOS revenue represents services provided to the pharmaceutical and biotechnology companies.

Other revenue represents services provided to the pharmaceutical and biotechnology companies.

The Company does not consider these services part of their core product offerings.

The following tables represents disaggregated revenue for the three and nine months ended January 31, 2020 and 2019 :

The following tables represents disaggregated revenue for the three months ended July 31, 2020 and 2019 :

Three Months Ended

Nine Months Ended January 31,

Pharmacology services

7 unchanged sentences

Contract assets and liabilities are presented on the balance sheet on a net contract-by-contract basis at the end of each reporting period.

There were no material contract assets or liabilities recorded on the condensed consolidated balance sheets as of January 31, 2020 and April 30, 2019.

There were no material contract assets or liabilities recorded on the condensed consolidated balance sheets as of July 31, 2020 and April 30, 2020.

Property and Equipment

Property and equipment is recorded at cost and primarily consists of laboratory equipment, furniture and fixtures, and computer equipment and software.

Depreciation and amortization is calculated on a straight-line basis over the estimated useful lives of the various assets ranging from three to seven years .

Depreciation and amortization is calculated on a straight-line basis over the estimated useful lives of the various assets ranging from three to nine years .

Property and equipment consisted of the following (table in thousands):

3 unchanged sentences

Assets in progress

Leasehold improvements

Total property and equipment

1 unchanged sentence

Property and equipment, net

Depreciation and amortization expense, excluding expense recorded under the finance lease, was $184,000 and $127,000 for the three months ended January 31, 2020 and 2019 , respectively, and $491,000 and $353,000 for the nine months ended January 31, 2020 and 2019 .

As of January 31, 2020 and April 30, 2019 , property, plant and equipment included gross assets held under finance leases of $343,000 and $366,000 , respectively.

Related depreciation expense was $35,000 and $37,000 for the three months ended January 31, 2020 and 2019 , and $88,000 and $80,000 for the nine months ended January 31, 2020 and 2019 .

During the nine months ended January 31, 2020, specifically during the quarter ended October 31, 2019, the Company traded in and disposed of a $235,000 leased asset that was previously included in the laboratory equipment category.

At the time of disposal, the accumulated depreciation related to that asset was written off in the amount of $127,000 (see also paragraph below).

As of January 31, 2020, the remaining leased asset included in the laboratory equipment category was fully depreciated resulting in a net balance of nil.

Depreciation and amortization expense, excluding expense recorded under the finance lease, was $224,000 and $145,000 for the three months ended July 31, 2020 and 2019 , respectively.

As of July 31, 2020 and April 30, 2020 , property, plant and equipment included gross assets held under finance leases of $343,000 and $366,000 , respectively.

Related depreciation expense was approximately $53,000 and $37,000 for the three months ended July 31, 2020 and 2019 .

Finance Lease

2 unchanged sentences

The final lease payment under this finance lease of $2,000 was paid during the three months ended January 31, 2020.

As of July 31, 2020 the asset has been fully depreciated and book value is nil.

In July 2018, the Company entered into a second finance lease for laboratory equipment.

The lease had total costs of approximately $266,000 , inclusive of interest and taxes, with a monthly payment of approximately $11,000 .

Although the lease was originally due to mature in July 2020, the Company decided to pay the outstanding balance on February 1, 2019.

As a result, the entire outstanding balance was nil as of October 31, 2019.

During the quarter ended October 31, 2019, the Company traded in this asset and received a $160,000 reduction in the purchase price of two newly acquired assets.

The net book value of the asset traded in at the time of trade in was $108,000 , which resulted in the gain on the disposal of the asset of $52,000 , which is included in the other income (expense) line in the Company's consolidated statement of operations for the nine months ended January 31, 2020.

The net book value of the asset was nil at October 31, 2019.

Although the lease

was originally due to mature in July 2020, the Company decided to pay the outstanding balance on February 1, 2019.

As a result, the entire outstanding balance of the lease was nil as of July 31, 2019.

In December 2019, the Company entered into a finance lease for laboratory equipment.

4 unchanged sentences

The present value of minimum future obligations is calculated based on interest rate of 4.75% .

Depreciation and amortization expense related to this finance lease was $35,400 for the three and nine months ended January 31, 2020.

Depreciation and amortization expense related to this finance lease was $53,100 for the three months ended July 31, 2020.

Share-Based Payments

4 unchanged sentences

The plans also provide for limits on the aggregate number of shares that may be granted, the term of grants and the strike price of option awards.

Stock-based compensation in the amount of $229,000 and $335,000 was recognized for the three months ended January 31, 2019 and 2019 , respectively.

Stock-based compensation in the amount of $437,000 and $498,000 was recognized for the nine months ended January 31, 2020 and 2019, respectively.

Included in 2019 stock-based compensation expense for the nine months January 31, 2019 under general and administrative line item is $7,500 for the issuance of common stock as compensation for services performed.

Stock-based compensation expense was recognized as follows (table in thousands):

Three Months Ended

Nine Months Ended

General and administrative

4 unchanged sentences

Stock Option Grants

Black-Scholes assumptions used to calculate the fair value of options granted during the three and nine months ended January 31, 2020 and 2019 were as follows:

Black-Scholes assumptions used to calculate the fair value of options granted during the three months ended July 31, 2020 and 2019 were as follows:

Three Months Ended

Nine Months Ended

Expected term in years

Risk-free interest rates

69.14%-70.99%

64.55%-84.91%

69.14%-71.11%

64.55%-84.91%

Dividend yield

The weighted average fair value of stock options granted during the three months ended January 31, 2020 and 2019 was $2.56 and $5.76 , respectively, and $3.09 and $6.03 for the nine months ended January 31, 2020 and 2019 , respectively.

The Company’s stock options activity for the nine months ended January 31, 2020 was a s follows:

Outstanding, May 1, 2019

Outstanding, January 31, 2020

Vested and expected to vest as of January 31, 2020

Exercisable as of January 31, 2020

Stock Purchase Warrants

As of January 31, 2020 and April 30, 2019 , the Company had warrants outstanding for the purchase of 1,669,773 and 1,671,440 , respectively, shares of its common stock, all of which were exercisable.

Activity related to these warrants, which expire at various dates through March 2020, is summarized as follows:

Outstanding, May 1, 2019

Outstanding, January 31, 2020

Related Party Transactions

Related party transactions include transactions between the Company and its shareholders, management, or affiliates.

The following transactions were in the normal course of operations and were measured and recorded at the exchange amount, which is the amount of consideration established and agreed to by the parties.

Consulting Services

During the nine months ended January 31, 2020 and 2019 , the Company paid an affiliate of a board member $ 54,000 for consulting services unrelated to his duty as a board member.

During the three months ended January 31, 2020 and 2019 , the Company paid this same affiliate of a board member $ 18,000 for consulting services unrelated to his duty as a board member.

During the nine months ended January 31, 2020 and 2019 , the Company paid an affiliate of another board member $ 39,100 and $53,500 , respectively, for consulting services unrelated to their duties as a board member.

During the three months

ended January 31, 2020 and 2019 , the Company paid this same affiliate $9,850 and $16,300 for the same services.

As of January 31, 2020 , $8,300 was due to these related parties.

Commitments and Contingencies

The weighted average fair value of stock options granted during the three months ended July 31, 2020 was $9.85 .

There was no stock options granted during the three months ended July 31, 2019.

The Company’s stock options activity for the three months ended July 31, 2020 was a s follows:

Outstanding, April 30, 2020

Outstanding, July 31, 2020

Vested and expected to vest as of July 31, 2020

Exercisable as of July 31, 2020

The Company accounts for its leases under ASU 2016-02, "Leases", Topic 842.

Operating Leases

In connection with the Company's adoption of ASC 842, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both an operating lease ROU asset and operating lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term.

For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term.

Variable lease expenses, if any, are recorded when incurred.

The Company has elected to apply the short-term lease exemption practical expedient for each class of underlying assets and excludes short-term leases having initial terms of 12 months or less.

The Company recognizes rent expense on a straight-line basis over the lease term for these short-term leases.

The Company has determined that no material embedded leases exist.

As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, which was 7.25% .

The weighted average remaining lease term and the weighted average discount rate at the adoption date were 7.68 years and 7.25% , respectively.

The Company continues to account for leases in the prior period financial statements in accordance with ASC Topic 840.

The Company currently leases certain office equipment and its office and laboratory facilities under non-cancelable operating leases.

Rent expense for operating leases is recognized on a straight-line basis over the lease term from the lease commencement date through the scheduled expiration date.

Rent expenses under the office and laboratory facilities totaled $717,000 and $583,000 for the nine months ended January 31, 2020 and 2019 , respectively.

Rent expenses totaled $307,000 and $239,000 for the three months ended July 31, 2020 and 2019, respectively.

The Company considers its facilities adequate for its current operational needs.

2 unchanged sentences

The lease expires in November 2021.

The Company recognized $71,000 and $68,000 of rental costs relative to this lease for the nine months ended January 31, 2020 and 2019 , respectively.

The Company recognized $20,000 and $24,000 of rental costs relative to this lease for the three months ended July 31, 2020 and 2019, respectively.

1330 Piccard Drive Suite 025, Rockville, MD 20850, which consists of laboratory and office space where the Company conducts operations related to its primary service offerings.

1 unchanged sentence

The operating commencement date was August 11, 2017.

This lease expires in August 2028 .

The Company recognized $454,000 of rental expense for both the nine months ended January 31, 2020 and 2019 .

910 Clopper Road, Suites 260S and 280S, Gaithersburg, Maryland 20878, which consists of laboratory and office space where the Company conducted operations related to its primary service offerings.

The Company executed this lease on April 1, 2018.

The operating commencement date was May 1, 2018.

The Company transitioned its activities from this location to the New Location, as defined below, and terminated this lease seven days after the commencement date of the New Location.

The Company recognized nil and $41,000 of rental expense for the nine months ended January 31, 2020 and 2019 , respectively.

1405 Research Boulevard, Suites 125, Rockville, Maryland 20850 (“New Location”), which consists of laboratory and office space where the Company conducts operations related to its primary service offerings.

This lease originally expired in August 2028.

On March 30, 2020, the Company executed the first amendment to this lease to expand the existing premises at 1330 Piccard Drive, Suite 025 ("Expansion Premises") to add on Suites 050 and 104.

This amendment also extended the current lease term by six months.

The Expansion Premises operating lease commencement date was June 1, 2020 and, under the amendment, both leases expire February 28, 2029.

In accordance with ASC 842, "Leases", the Company evaluated the first amendment and also performed a reassessment of the existing lease for Suite 025 to determine the impact of the six-month term extension.

As a result of this assessment, the Company recognized an additional operating ROU asset and related operating lease liability for Suite 025 of $118,000 and $125,000 , respectively, as well as an incremental net rent expense of $8,000 during the three months ended July 31, 2020.

The Company did not recognize the incremental rental expense under this amendment during fiscal 2020 as the Expansion Premises lease commencement date was during fiscal 2021.

Upon the Expansion Premises operating lease commencement date (June 1, 2020), the Company recognized an operating ROU asset and related operating lease liability for Suites 050 and 104 of $3.8 million , each, respectively.

For the leases related to Piccard Drive, the Company recognized $244,000 and $151,000 of rental expense for the three months ended July 31, 2020 and 2019.

1405 Research Boulevard, Suite 125, Rockville, Maryland 20850 (“New Location”), which consists of laboratory and office space where the Company conducted operations related to its primary service offerings.

The Company executed this lease on November 1, 2018.

The operating commencement date was January 17, 2019.

This lease expires in January 2024 .

The Company recognized $ 193,000 and $21,000 of rental expense for the nine months ended January 31, 2020 and 2019 , respectively.

This lease was set to expire in April 2024.

The Company recognized $43,000 and $64,000 of rental expense for the three months ended July 31, 2020 and 2019, respectively.

The Company terminated this lease on June 30, 2020 and transitioned its activities from this location to the Expansion Premises, as defined above, during the first quarter of fiscal 2021.

Upon lease termination, the Company recognized a decrease in the related operating ROU asset and operating lease liability of approximately $850,000 and $ 926,000 , respectively, as well as a gain on lease termination of $76,000 .

ROU assets and lease liabilities related to our current operating leases are as follows (in thousands):

July 31, 2020

July 31, 2019

Operating lease right-of-use assets, net

Current portion of operating lease liabilities

Non-current portion of operating lease liabilities

As of July 31, 2020, the weighted average remaining operating lease term and the weighted average discount rate were 8.42 years and 6.10% , respectively.

Future minimum lease payments due each fiscal year as follows (in thousands):

2020 (remaining)

The following disclosure as of April 30, 2019 continues to be stated in accordance with ASC 840.

Future minimum lease payments for operating and capital leases at April 30, 2019 were as follows:

Refer to Note 5, Property and Equipment, for more information on financing leases.

Related Party Transactions

Related party transactions include transactions between the Company and its shareholders, management, or affiliates.

Consulting Services

During the three months ended July 31, 2020 and 2019 , the Company paid an affiliate of a board member $ 18,000 for consulting services unrelated to his duty as a board member.

During the three months ended July 31, 2020 and 2019 , the Company paid an affiliate of another board member $ 5,600 and 15,200 , respectively, for consulting services unrelated to their duties as a board member.

As of July 31, 2020 , $ 7,400 was due to these related parties.

Commitments and Contingencies

Risks and uncertainties related to Covid-19

In December 2019, a novel strain of coronavirus, COVID-19, was first identified in Wuhan, China.

This virus continues to spread globally and, as of July 2020, has spread to over 200 countries, including the United States.

The spread of COVID-19 from China to other countries has resulted in the World Health Organization declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020.

Many countries around the world have imposed quarantines and restrictions

on travel and mass gatherings to slow the spread of the virus.

Employers are also required to increase, as much as possible, the capacity and arrangement for employees to work remotely.

In addition, on March 11, 2020, the President of the United States issued a proclamation to restrict travel to the United States from foreign nationals who have recently been in certain European and Latin American countries.

Although, to date, these restrictions have not impacted our operations, the effect on our business, from the spread of COVID-19 and the actions implemented by the governments of the United States and elsewhere across the globe, may worsen over time.

Any outbreak of contagious diseases, or other adverse public health developments, could have a material and adverse effect on our business operations.

These could include disruptions or restrictions on our ability to travel, pursue partnerships and other business transactions, receive shipments of biologic materials, as well as be impacted by the temporary closure of the facilities of suppliers.

The spread of an infectious disease, including COVID-19, may also result in the inability of our suppliers to deliver supplies to us on a timely basis.

In addition, health professionals may reduce staffing and reduce or postpone meetings with clients in response to the spread of an infectious disease.

Though we have not yet experienced such events, if they would occur, they could result in a period of business disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations.

However, as of the date of this Form 10-Q, we have not experienced a material adverse effect on our business nor the need for reduction in our work force;

and, currently, and we do not expect any material impact on our long-term activity.

The extent to which COVID-19 impacts our business will depend on future developments which are highly uncertain and cannot be predicted, including, but not limited to, new information which may emerge concerning the increased severity of COVID-19, the actions to contain COVID-19, or treat its impact.

Legal Matters

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements