What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-03-17 compared with 2024-12-16 · 74 added, 50 removed, 84 unchanged (60% of the section changed)

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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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These studies include in vivo studies that rely on implanting multiple tumors from our TumorBank in mice and testing the therapy of interest on these tumors.

Studies may also include bioinformatics analysis that reveal the differences in the genetic signatures of the tumors that responded to a therapy as compared to the tumors that did not respond.

Studies may also include bioinformatics analysis that

reveal the differences in the genetic signatures of the tumors that responded to a therapy as compared to the tumors that did not respond.

Additionally, we provide computational or experimental support to identify novel therapeutic targets, select appropriate patient populations for clinical evaluation, identify potential therapeutic combination strategies, and develop biomarker hypothesis of sensitivity or resistance.

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This technology ranges from computational-based discovery platforms, unique oncology software solutions, and innovative and proprietary experimental tools such as in vivo, ex vivo and biomarker platforms.

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.

Utilizing our TumorGraft Technology Platform (the "Platform"), a comprehensive bank of unique, well characterized Patient Derived Xenograft ("PDX") 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.

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

We offer access to certain PDX model data via licensing agreements.

As our Platform has been expanded over time with the collection of models and the enhancement of their characterization, we have developed a robust multi-omic dataset with substantial potential for both drug discovery and development.

This dataset serves as a vital resource for both our pharmaceutical and biotechnology customer who gain access to model-specific data and further their research via licensed access.

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

Our Lumin software contains comprehensive information derived from our research services and clinical studies.

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We regularly evaluate strategic options to create additional value from our drug discovery business, which may include, but are not limited to, potential spin-out transactions or capital raises.

Liquidity and Capital Resources

Liquidity and Going Concern

Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued.

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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 financial statements as a result this uncertainty.

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

For the nine months ended January 31, 2025, the Company had net income of approximately $6.5 million and cash provided by operations of approximately $518,000.

As of January 31, 2025, the Company had an accumulated deficit of approximately $78.1 million and cash on hand of approximately $3.2 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.

In order to continue to fund our operations we may need to raise additional equity or debt capital in the near term and cannot provide any assurance that we will be successful in doing so, and if we can, on whether the terms will be acceptable to us.

In order to continue to

fund our operations we may need to raise additional equity or debt capital in the near term and cannot provide any assurance that we will be successful in doing so, and if we can, on whether the terms will be acceptable to us.

If we are unable to obtain additional financing in the near future, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws.

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

For the Three Months Ended October 31,

For the Three Months Ended January 31,

Revenue 2024 % of

Oncology services revenue $ 13,489 100.0 % $ 11,573 100.0 % 16.6 %

Oncology revenue $ 17,039 100.0 % $ 12,019 100.0 % 41.8 %

Costs and operating expenses:

Cost of oncology services 7,428 55.1 6,618 57.2 12.2

Cost of oncology revenue 6,617 38.8 7,849 65.3 (15.7)

Research and development 1,719 10.1 2,186 18.2 (21.4)

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Income (loss) from operations $ 4,499 26.4 % $ (2,577) (21.4) % (274.6) %

For the Six Months Ended October 31,

For the Nine Months Ended January 31,

Revenue 2024 % of

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

Oncology revenue $ 44,589 100.0 % $ 36,153 100.0 % 23.3 %

Costs and operating expenses:

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

Cost of oncology revenue 21,118 47.4 22,151 61.3 (4.7)

Research and development 4,862 10.9 7,494 20.7 (35.1)

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Income (loss) from operations $ 6,560 14.8 $ (7,085) (19.6) % (192.6) %

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.

Oncology Revenue

Oncology revenue, primarily derived from pharmacology studies, totaled $17.0 million for the three months ended January 31, 2025, compared to $12.0 million for the same period in 2024, an increase of $5.0 million or 41.8%.

For the nine months ended January 31, 2025, revenue reached $44.6 million, up from $36.2 million for the same period in 2024, reflecting growth of $8.4 million or 23.3%.

Our revenues are comprised of the following:

Three Months Ended

January 31, Nine Months Ended January 31,

(in 000s) 2025 2024 2025 2024

Pharmacology services $ 11,670 $ 11,184 $ 37,237 $ 33,919

TOS license revenue 4,500 — 4,500 —

Other TOS revenue 869 835 2,852 2,216

Personalized oncology services — — — 18

Total oncology revenue $ 17,039 $ 12,019 $ 44,589 $ 36,153

Pharmacology Services

• The increases for both the three and nine month periods ending January 31, 2025 were the result of a stronger bookings to revenue conversion rate.

Bookings, which represent the total value of signed statements of work, convert to revenue over time as the Company fulfills its contractual performance obligations.

improvements implemented throughout the year have enhanced execution efficiency, contributing to the improvement in the conversion percentage.

TOS License Revenue

• Revenue for the three and nine months ending January 31, 2025 resulted from the sale of data licenses.

Other TOS Revenue

• Other TOS Revenue includes additional services provided to the Company's pharmaceutical and biotechnology customers, specifically flow cytometry and SaaS provided via Lumin.

• Our flow cytometry services revenue increased approximately $120,000 and $787,000 for the three and nine month periods ending January 31, 2025, respectively due to stronger bookings to revenue conversion rates.

• This increase in Other TOS Revenue was offset by decreases in our SaaS revenues for the three and nine month periods ending January 31, 2025 as compared with 2024 of $89,000 and $151,000, respectively.

The decreases resulted from a decrease in new and renewal subscriptions.

Cost of Oncology Revenue

For the three months ended January 31, 2025, cost of oncology revenue decreased $1.2 million or 15.7% to $6.6 million, compared to $7.8 million in the prior year period.

For the nine months ended January 31, 2025, costs declined $1.0 million or 4.7% to $21.1 million, compared to $22.2 million in the prior year.

These reductions were primarily driven by lower compensation and lab supply costs due to efficiency initiatives, along with a decrease in outsourced lab services, which fluctuate quarterly.

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.

Research and development expense for the three months ended January 31, 2025 and 2024 were $1.7 million and $2.2 million, respectively, a decrease of approximately $467,000 or 21.4%.

Research and development expense for the nine months ended January 31, 2025 and 2024 were $4.9 million and $7.5 million, respectively, a decrease of approximately $2.6 million or 35.1%.

The significant components of research and development expense are comprised of the following:

Three Months Ended

January 31, Nine Months Ended January 31,

(in 000s) 2025 2024 2025 2024

Compensation $ 700 $ 970 $ 2,000 $ 3,100

Laboratory Supplies 570 450 1,500 1,500

Mice Costs 180 150 560 480

Outside Services 43 175 143 1,000

The overall decreases in research and development expense for both the three and nine month periods were primarily the result of a reduction in investment in our developmental programs including Corellia, our wholly owned subsidiary focused on target discovery.

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 for the three months ended January 31, 2025 and 2024 were $1.8 million, with a slight increase of $9,000 or 0.5%.

Sales and marketing expenses for the nine months ended January 31, 2025 and 2024 were $5.2 million and $5.3 million, with a slight decrease of $52,000 or 1.0%.

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 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 for the three months ended January 31, 2025 and 2024 were $2.4 million and $2.8 million, respectively, a decrease of $366,000, or 13.2%.

General and administrative expenses for the nine months ended January 31, 2025 and 2024 were $6.8 million and $8.3 million, respectively, a decrease of $1.5 million, or 18.0%.

General and administrative expenses are primarily comprised of compensation, insurance, professional fees, IT and depreciation and amortization 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 decrease for the three-month period ended January 31, 2025 was primarily from a decrease in compensation and employee recruitment expenses.

The decrease for the nine-month period ended January 31, 2025 resulted from the combination of a decrease in compensation and employee recruitment expenses.

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

Cash Flows from Operating Activities

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.

For nine months ended January 31, 2025, net cash provided by operating activities was $518,000.

The cash provided by operating activities was primarily due to net income from operations offset by an increase in accounts receivable.

Excluding the increase in accounts receivable attributable to the data licensing deal, changes in our accounts receivable was in the ordinary course of business.

For the nine months ended January 31, 2024, net cash used in operating activities was $4.3 million.

The cash used in operating activities was primarily due to the net operating loss during the period offset by changes in our working capital accounts in the ordinary course of business.

Cash Flows from Investing Activities

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

Net cash used in investing activities was $136,000 and $839,000 for the nine months ended January 31, 2025 and 2024, 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 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 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.

Net cash provided by financing activities was $202,000 for the nine months ended January 31, 2025 .

For the nine months ended January 31, 2025, the cash provided was from cash received from stock option exercises slightly offset by financing lease payments.

Net cash used in financing activities was $490,000 for the nine months ended January 31, 2024.

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

Critical Accounting Estimates and Policies

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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