What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-16 compared with 2024-09-13 · 48 added, 25 removed, 86 unchanged (46% of the section changed)

14 unchanged sentences

You should not put undue reliance on any forward-looking statements.

We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

We assume no obligation to update forward-looking statements to reflect actual results, changes in

assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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Utilizing our TumorGraft Technology Platform (the "Platform"), a comprehensive bank of unique, well characterized models, we provide select 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.

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.

We offer Lumin Bioinformatics ("Lumin"), an oncology data-driven Software as a Service ("SaaS") program.

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Going concern matters are more fully discussed in Notes to the Consolidated Financial Statements, Note 2, Summary of Significant Accounting Policies.

No adjustments have been made to the financials statements as a result this uncertainty.

No adjustments have been made to the financial statements as a result this uncertainty.

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.

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In the past, we have also received proceeds from certain private placements and public offerings of our securities.

For the three months ended July 31, 2024, the Company had net income of approximately $1.3 million and cash provided by operations of approximately $311,000.

As of July 31, 2024, the Company had an accumulated deficit of approximately $83.3 million and cash on hand of approximately $2.9 million.

For the six months ended October 31, 2024, the Company had net income of approximately $2.0 million and cash provided by operations of approximately $28,000.

As of October 31, 2024, the Company had an accumulated deficit of approximately $82.6 million and cash on hand of approximately $2.8 million.

While we believe we have strategies to increase our revenues and reduce our costs which can be implemented without disrupting the business or completely restructuring the Company, there can be no assurances.

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The following table summarizes our operating results for the periods presented below (dollars in thousands):

For the Three Months Ended July 31,

For the Three Months Ended October 31,

Revenue 2023 % of

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Total costs and operating expenses 12,757 94.6 13,528 116.9 (5.7)

Loss from operations $ 1,329 9.5 % $ (2,552) (20.3) % (152.1) %

Income (loss) from operations $ 732 5.4 % $ (1,955) (16.9) % (137.4) %

For the Six Months Ended October 31,

Revenue 2023 % of

Oncology services revenue $ 27,550 100.0 % $ 24,134 100.0 % 14.2 %

Oncology services revenue, which is primarily derived from pharmacology studies, was $14.1 million and $12.6 million for the three months ended July 31, 2024 and 2023, respectively, an increase of $1.5 million or 11.9%.

Operational improvements and efficiencies implemented in the prior year led to an increase in our bookings to revenue conversion percentage contributing to the revenue growth.

Costs and operating expenses:

Cost of oncology services 14,500 52.6 14,302 59.3 1.4

Cost of oncology services for the three months ended July 31, 2024 and 2023 were $7.1 million and $7.7 million, respectively, a decrease of $612,000 or 8.0%.

The decrease in cost of sales was primarily from a decline in outsourced lab services.

Research and development 3,143 11.4 5,308 22.0 (40.8)

Research and development expense for the three months ended July 31, 2024 and 2023 were $1.5 million and $2.8 million, respectively, a decrease of approximately $1.3 million or 47.9%.

The decrease in the three month period was primarily due to a reduction in investment in our developmental programs including target discovery.

Sales and marketing 3,430 12.5 3,491 14.5 (1.7)

Sales and marketing expenses for the three months ended July 31, 2024 and 2023 were $1.7 million, with a slight decrease of $17,000 or 1.0%.

General and administrative 4,416 16.0 5,540 23.0 (20.3)

Total costs and operating expenses 25,489 92.5 28,641 118.7 (11.0)

Income (loss) from operations $ 2,061 7.5 $ (4,507) (18.7) % (145.7) %

Oncology Services Revenue

Oncology services revenue, which is primarily derived from pharmacology studies, was $13.5 million and $11.6 million for the three months ended October 31, 2024 and 2023, respectively, an increase of $1.9 million or 16.6%.

Oncology services

revenue was $27.6 million and $24.1 million for the six months ended October 31, 2024 and 2023, respectively, an increase of $3.4 million or 14.2%.

The increase in revenue for both the three-month and six-month periods is primarily due to a strengthening in our bookings, as customers’ budgets have expanded, leading to revenue growth;

and, operational improvements and efficiencies implemented.

The operational improvements have enabled the Company to convert bookings to revenue at a higher percentage.

Cost of Oncology Services

Cost of oncology services for the three months ended October 31, 2024 and 2023 were $7.4 million and $6.6 million, respectively, an increase of $810,000 or 12.2%.

Cost of oncology services for the six months ended October 31, 2024 and 2023 were $14.5 million and $14.3 million, respectively, an increase of $198,000 or 1.4%.

The increases in cost of sales for both periods were primarily attributable to an increase in mice and lab supply costs.

Research and Development

Research and development expense for the three months ended October 31, 2024 and 2023 were $1.7 million and $2.5 million, respectively, a decrease of approximately $826,000 or 32.8%.

Research and development expense for the six months ended October 31, 2024 and 2023 were $3.1 million and $5.3 million, respectively, a decrease of approximately $2.2 million or 40.8%.

The decreases in both the three and six month periods were primarily due to a reduction in investment in our developmental programs including target discovery.

The declines were primarily from a reduction in salary expense and research agreements.

Sales and Marketing

Sales and marketing expenses for the three months ended October 31, 2024 and 2023 were $1.8 million, with a slight decrease of $44,000 or 2.5%.

Sales and marketing expenses for the six months ended October 31, 2024 and 2023 were $3.4 million and $3.5 million, with a slight decrease of $61,000 or 1.7%.

Sales and marketing expenses are primarily comprised of compensation expenses to support business development.

General and Administrative

General and administrative expenses for the three months ended July 31, 2024 and 2023 were $2.5 million and $2.9 million, respectively, a decrease of $413,000, or 14.0%.

General and administrative expenses for the three months ended October 31, 2024 and 2023 were $1.9 million and $2.6 million, respectively, a decrease of $711,000, or 27.3%.

General and administrative expenses for the six months ended October 31, 2024 and 2023 were $4.4 million and $5.5 million, respectively, a decrease of $1,124,000, or 20.3%.

General and administrative expenses are primarily comprised of compensation, insurance, professional fees, IT and depreciation and amortization expenses.

The decrease for the three months ended July 31, 2024 was primarily from a decrease in compensation and employee recruitment expenses.

The decrease for the three and six month periods ended October 31, 2024 was primarily from a decrease in compensation and employee recruitment expenses and an adjustment to our credit loss reserve.

The following discussion relates to the major components of our cash flows:

Cash Flows from Operating Activities

For the three months ended July 31, 2024, net cash provided by operating activities was $311,000.

The cash provided by operating activities was primarily due to income from operations offset by changes in our working capital accounts in the ordinary course of business.

For the six months ended October 31, 2024, net cash provided by operating activities was $28,000.

The cash provided by operating activities was primarily due to income from operations offset by changes in our working capital accounts, including but not limited to, an increase in accounts receivable and a reduction in accounts payable in the ordinary course of business.

For the six months ended October 31, 2023, net cash used in operating activities was $3.4 million.

The cash used in operating activities was primarily due to the net operating loss during the period.

Cash Flows from Investing Activities

Net cash used in investing activities was $0 and $668,000 for the three months ended July 31, 2024 and 2023, respectively.

The cash used in investing activities for the prior year period was for the investment in additional lab and computer equipment.

Net cash used in investing activities was $94,000 and $747,000 for the six months ended October 31, 2024 and 2023, respectively.

The cash used in investing activities for the current and prior year period was for the investment in additional lab and computer equipment.

Cash Flows from Financing Activities

Net cash used in financing activities was $37,000 for the three months ended July 31, 2024 and $590,000 for the three months ended July 31, 2023.

The cash used in the current year was for financing lease payments.

The cash used in the prior year period was for the Company's stock repurchase program offset slightly by cash received from stock option exercises.

Net cash provided by financing activities was $202,000 for the six months ended October 31, 2024 .

For the six months ended October 31, 2024, the cash provided was from cash received from stock options exercises slightly offset by financing

lease payments.

Net cash used in financing activities was $456,000 for the six months ended October 31, 2023.

The cash used was due to the Company's' stock repurchase program offset by cash received from stock option exercises.

Factors That May Adversely Affect our Results of Operations

Our results of operations may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control.

Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the effects of the resurgence of COVID-19 and/or its variants or the emergence of new viruses, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East.

Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the effects of a resurgence or emergence of pandemic-like viruses, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East.

We cannot at this time fully predict the likelihood of one or more of the above events, their duration, or magnitude or the extent to which they may negatively impact our business.

11 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 2. Management’s Discussion and Analysis