What changed in this filing

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Item 1A. Risk Factors

2021-07-26 compared with 2020-07-28 · 75 added, 33 removed, 182 unchanged (37% of the section changed)

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We historically incurred losses from operating activities, may require significant capital and may never achieve sustained profitability.

For the years ended April 30, 2020 and 2019 , the Company had a net loss of approximately $2.0 million and net income of approximately $128,000 , respectively.

For the years ended April 30, 2021 and 2020, the Company had net income of approximately $362,000 and a net loss of approximately $2,093,000, respectively.

As of April 30, 2021, the Company has an accumulated deficit of approximately $72.5 million.

As of April 30, 2021, we had working capital of $1.4 million and cash of $4.7 million.

We believe that our cash on hand, together with continued improved cash flows from operations, are adequate to fund our operations through at least August 2021.

The amount of our losses and liquidity requirements may vary significantly from year-to-year and quarter-to-quarter and will depend on, among other factors:

the cost of continuing to build out our TumorGraft Technology Platform;

the cost and rate of progress toward growing our TOS businesses;

the cost and rate of progress toward building our sales forces;

We believe that our cash on hand, together with future improved cash flows from operations, are adequate to fund our operations through at least August 2022.

The amount of our income or losses and liquidity requirements may vary significantly from year-to-year and quarter-to-quarter and will depend on, among other factors:

• the cost of continuing to build out our TumorGraft bank;

• the cost and rate of progress toward growing our technology platforms;

• the cost and rate of progress toward building our business units;

• the cost of increasing our research and development;

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• the cost incurred in hiring and maintaining qualified personnel.

Currently, the Company derives revenue from TOS products and POS products, while pursuing efforts to further develop bioinformatics from its TumorBank and its TumorGraft Technology Platform.

In addition, we are building our sales and marketing operations to further grow the sales of our TOS products.

Our POS products have not been the focus of our growth since fiscal 2016.

Currently, the Company derives revenue primarily from research services, while pursuing efforts to further develop its SaaS and drug discovery business units.

We are investing resources to further grow our sales of all of our business units.

To become sustainably profitable, we will need to generate revenues to offset our operating costs, including our research and development and general and administrative expenses.

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If our losses increase in the future and we are unable to obtain sufficient capital either from operations or externals sources, ultimately, we may have to cease operations.

In order to grow revenues, we must invest capital to implement our sales and marketing efforts and to successfully develop our bioinformatics from our TumorBank and our TumorGraft Technology Platform.

Because we do not have sufficient history of commercial efforts, our sales and marketing efforts may never generate significant increases in revenues or achieve profitability and it is likely that we will be required to raise additional capital to continue our operations as currently contemplated.

In order to grow revenues, we must invest capital to implement our sales and marketing efforts and to successfully develop our technology platforms.

Our sales and marketing efforts may never generate significant increases in revenues or achieve profitability and it is possible that we will be required to raise additional capital to continue our operations.

If we must devote a substantial amount of time to raising capital, it will delay our ability to achieve our business goals within the time frames that we now expect, which could increase the amount of capital we need.

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This draft oversight framework includes pre-market review for higher-risk LDTs, like those used to guide treatment decisions, including the many companion diagnostics that have entered the market as LDTs.

In addition, under the draft framework, the FDA would continue to exercise enforcement discretion for low-risk LDTs and LDTs for rare diseases, among others.

In addition, under the draft framework, the FDA would continue

to exercise enforcement discretion for low-risk LDTs and LDTs for rare diseases, among others.

The framework would be phased in over many years.

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we may face substantial penalties, and our business activities may be impacted, if we fail to comply.

Our TumorGraft products are performed in laboratories that are subject to state regulation and licensure requirements.

Our research services are performed in laboratories that are subject to state regulation and licensure requirements.

Such regulation and requirements are subject to change, and may result in additional costs or delays in providing our products to our customers.

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If our laboratory facilities are damaged or destroyed, or we have a dispute with one of our landlords, our business would be negatively affected.

We currently utilize two laboratories in Rockville, Maryland.

We moved into one of the labs in August, 2017 and the other in January, 2019.

If either facility was to be significantly damaged or destroyed, we could suffer a loss of our ongoing and future drug studies, as well as our TumorBank.

We currently utilize several office suites where our laboratories are located within one facility in Rockville, Maryland.

If this facility was to be significantly damaged or destroyed, we could suffer a loss of our ongoing and future drug studies, as well as our TumorBank.

In addition, we lease the laboratories from a third party.

If we had a dispute with our landlord or otherwise could not utilize these spaces, it would take time to find and move to a new facility, which could negatively affect our results of operations.

If we had a dispute with our landlord or otherwise could not utilize our space, it would take time to find and move to a new facility, which could negatively affect our results of operations.

Any health crisis impacting our colony of laboratory mice could have a negative impact on our business.

Our TumorGraft operations depend on having a colony of live mice available.

If this population experienced a health crisis, such as a virus or other pathogen, such crisis would affect the success of our existing and future TOS business, as we would have to rebuild the population and repeat current TumorGrafts.

Our research services operations depend on having a colony of live mice available.

If this population experienced a health crisis, such as a virus or other pathogen, such crisis would affect the success of our existing and future business, as we would have to rebuild the population and repeat current studies.

We have limited experience marketing and selling our products and may need to rely on third parties to successfully market and sell our products and generate revenues.

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Our success, currently, is dependent upon the efforts of several full-time key employees, the loss of the services of one or more of which would have a material adverse effect on our business and financial condition.

We intend to continue to develop our

management team and attract and retain qualified personnel in all functional areas to expand and grow our business.

We intend to continue to develop our management team and attract and retain qualified personnel in all functional areas to expand and grow our business.

This may be difficult in the healthcare industry where competition for skilled personnel is intense.

We have identified that there is a material weaknesses in our internal control over financial reporting, which if not remediated, could materially adversely affect our ability to timely and accurately report our results of operations and financial condition.

This material weakness has not been fully remediated as of the filing date of this Form 10-K.

fail to maintain an effective system of internal controls, the accuracy and timing of our financial reporting may be adversely affected.

As described in “Part II, Item 9A - Controls and Procedures,” of this Form 10-K we have concluded that there is a material weakness in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

It is necessary for us to maintain effective internal control over financial reporting to prevent fraud and errors and to maintain effective disclosure controls and procedures so that we can provide timely and reliable financial and other information.

Specifically, our risk assessment procedures over certain of our contractual arrangements requiring the payment of royalties for the licensing of technology from third-parties did not adequately identify the risks and consider the Company's obligations based on the recognition of oncology services revenue.

As a result, the Company had missing process level controls over the review of royalty arrangements and the timely determination and recognition of related liabilities.

As further described in Part II, Item 9A in this Annual Report on Form 10-K, while we are in the process of implementing a remediation plan to remediate this material weakness, there can be no assurance that this will not occur in future reports.

We may identify additional material weaknesses in our internal control over financial reporting in the future.

If we are unable to remediate this material weakness or we identify additional material weaknesses in our internal control over financial reporting in the future, our ability to analyze, record and report financial information accurately, to prepare our financial statements within the time periods specified by the rules.

Because our industry is very competitive and many of our competitors have substantially greater capital resources and more experience in research and development, we may not succeed in selling or increasing sales of our products and technologies.

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We rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position.

We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties.

collaborators, contract manufacturers, consultants, advisors and other third parties.

We also seek to enter into confidentiality and invention assignment agreements with our employees and consultants.

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and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of health care services and drugs, as well as legislative proposals to reform health care or reduce government insurance programs, may all result in lower prices for or rejection of our services.

TOS studies are subject to cancellation based on changes in customer’s development plans.

Research service studies are subject to cancellation based on changes in customer’s development plans.

Our revenue is primarily derived from studies performed for pharmaceutical and biotechnology companies to assist in the development of oncology drugs.

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This would have a negative impact on the Company’s revenue growth and profit margin.

We face competition in the life science market for computational software and for bioinformatics products.

The market for our computational software platform for the life science market is competitive.

We currently face competition from other scientific software providers, larger technology and solutions companies, in-house development by our customers and academic and government institutions, and the open-source community.

Some of our competitors and potential competitors have longer operating histories in certain segments of our industry than we do and could have greater financial, technical, marketing, research and development, and other resources.

We could also face competition from open-source software initiatives, in which developers provide software and intellectual property free over the Internet.

In addition, some of our

customers spend significant internal resources in order to develop their own software.

There can be no assurance that our current or potential competitors will not develop products, services, or technologies that are comparable to, superior to, or render obsolete, the products, services, and technologies we offer.

There can be no assurance that our competitors will not adapt more quickly than we do to technological advances and customer demands, thereby increasing such competitors' market share relative to ours.

Any material decrease in demand for our technologies or services may have a material adverse effect on our business, financial condition, and results of operations.

Drug development programs, particularly those in early stages of development, may never be commercialized.

Our future success depends, in part, on our ability to select successful product candidates, complete preclinical development of these product candidates and advance them to and through clinical trials.

Early-stage product candidates in particular require significant investment in development, preclinical studies and clinical trials, regulatory clearances and substantial additional investment before they can be commercialized, if at all.

Our research and development programs may not lead to commercially viable products for several reasons, and are subject to the risks and uncertainties associated with drug development.

For example, we may fail to identify promising product candidates, our product candidates may fail to be safe and effective in preclinical tests or clinical trials, or we may have inadequate financial or other resources to pursue discovery and development efforts for new product candidates.

From time to time, we may establish and announce certain development goals for our product candidates and programs, including.

However, given the complex nature of the drug discovery and development process, it is difficult to predict accurately if and when we will achieve these goals.

If we are unsuccessful in advancing our research and development programs into clinical testing or in obtaining regulatory approval, our long-term business prospects will be harmed.

Drug discovery programs, particularly those in early stages of development, may never be commercialized.

Our future success in drug discovery depends,, in part, on our ability to select successful product candidates, complete preclinical development of these product candidates and advance them to and through clinical trials.

Our research and development programs related to drug discovery may not lead to commercially viable products for several reasons, and are subject to the risks and uncertainties associated with drug development.

From time to time, we may establish and announce certain development goals for our product candidates and programs.

However, given the complex nature of the drug discovery and development process, it is difficult to predict accurately if and when we will achieve these goals.

If we are unsuccessful in advancing our research and development programs into clinical testing or in obtaining regulatory approval, our long-term business prospects will be harmed.

Impairment of goodwill or other long term assets may adversely impact future results of operations

We have intangible assets, including goodwill, and capitalized software development costs on our balance sheet.

If the future growth and operating results of our business are not as strong as anticipated and/or our market capitalization declines, this could impact the assumptions used in calculating the fair value of goodwill or recoverability of our capitalized software development costs.

To the extent impairment occurs, the carrying value of our assets will be written down to an implied fair value and an impairment charge will be made to our income from continuing operations.

Such an impairment charge could materially and adversely affect our operating results.

Our ability to use our net operating loss carry-forwards and certain other tax attributes may be limited.

Under Section 382 of the Internal Revenue Code of 1986, as amended, referred to as the Internal Revenue Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carry-forwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited.

We believe that our 2016 public offering, taken together with our private placements and other transactions that have occurred over the past three years, we may have triggered an “ownership change” limitation.

We believe that our 2016 public offering, taken together with our private placements and other transactions that have occurred over the past five years, may have triggered an “ownership change” limitation.

We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership.

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• the other key facts described in this “Risk Factors” section.

Certain provisions of our charter and bylaws and of our contractual agreements contain provisions that could delay and discourage takeover attempts and any attempts to replace our current management by shareholders.

Certain provisions of our certificate of incorporation and bylaws, and our contractual agreements could make it difficult for or prevent a third party from acquiring control of us or changing our board of directors and management.

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If any analyst who may cover us was to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our common stock or trading volume to decline.

A pandemic, epidemic, or outbreak of an infectious disease in the United States or elsewhere may adversely affect our business.

A pandemic, epidemic, or outbreak of an infectious disease in the United States or elsewhere may adversely affect our business and we are unable to predict the potential impact.

We are subject to risks related to public health crises such as the global pandemic associated with 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.

The global spread of COVID-19 from China resulted in the World Health Organization declaring the outbreak a “pandemic,” or a worldwide spread of a new disease, in early 2020.

This virus eventually spread world wide to most countries, and to all 50 states within the United States.

In response, most countries around the world imposed quarantines and restrictions on travel and mass gatherings in an effort to contain the spread of the virus.

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

More recently, many of the restrictions and travel bans have been eased or lifted completely as global society as a whole works to return to pre-pandemic business and personal practices.

Although, to date, these restrictions have not materially 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, once again, worsen over time and we are unable to predict the potential impact on our business.

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

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and, currently, 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.

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 the COVID-19 virus, the actions to contain COVID-19, or treat its impact.

Unresolved Staff Comments

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-K

Item 1A. Risk Factors