kalv-10q_20200131.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended January 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                      to                     .

Commission File No. 001-36830

 

KALVISTA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-0915291

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

55 Cambridge Parkway

Suite 901E

Cambridge, Massachusetts

 

02142

(Address of principal executive offices)

 

(Zip Code)

857-999-0075

(Registrant’s telephone number, including area code)

 

     n/a

Former name, former address and former fiscal year, if changed since last report

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

KALV

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer

Accelerated filer

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

 

 

 


 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES      NO  

As of March 2, 2020 the registrant had 17,845,599 shares of common stock, $0.001 par value per share, issued and outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (unaudited)

1

 

 

 

 

Condensed Consolidated Balance Sheets

1

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

3

 

 

 

 

Condensed Consolidated Statements of Cash Flows

5

 

 

 

 

Notes to the Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

 

 

 

Item 4.

Controls and Procedures

20

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

21

 

 

 

Item 1A.

Risk Factors

21

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

21

 

 

 

Item 3.

Defaults Upon Senior Securities

21

 

 

 

Item 4.

Mine Safety Disclosures

21

 

 

 

Item 5.

Other Information

21

 

 

 

Item 6.

Exhibits

22

 

 

 

Signatures

23

 

 

 

 


 

PART I. FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

 

January 31,

 

 

April 30,

 

 

 

2020

 

 

2019

 

Assets

 

(Unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,615

 

 

$

32,006

 

Marketable securities

 

 

61,955

 

 

 

68,805

 

Research and development tax credit receivable

 

 

14,803

 

 

 

11,315

 

Prepaid expenses and other current assets

 

 

3,632

 

 

 

3,420

 

Total current assets

 

 

99,005

 

 

 

115,546

 

Right of use assets

 

 

1,497

 

 

 

 

Property and equipment, net

 

 

2,260

 

 

 

2,413

 

Other assets

 

 

173

 

 

 

173

 

Total assets

 

$

102,935

 

 

$

118,132

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,951

 

 

$

2,860

 

Accrued expenses

 

 

4,876

 

 

 

5,647

 

Deferred revenue - current portion

 

 

1,343

 

 

 

9,545

 

Lease liability - current portion

 

 

592

 

 

 

 

Total current liabilities

 

 

9,762

 

 

 

18,052

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Deferred revenue - net of current portion

 

 

2,500

 

 

 

3,342

 

Lease liability - net of current portion

 

 

926

 

 

 

 

Total long-term liabilities

 

 

3,426

 

 

 

3,342

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 100,000,000 authorized

 

 

 

 

 

 

 

 

Shares issued and outstanding: 17,845,599 at January 31, 2020 and 17,277,750 at April 30, 2019

 

 

18

 

 

 

17

 

Additional paid-in capital

 

 

206,119

 

 

 

191,123

 

Accumulated deficit

 

 

(115,008

)

 

 

(92,476

)

Accumulated other comprehensive loss

 

 

(1,382

)

 

 

(1,926

)

Total stockholders’ equity

 

 

89,747

 

 

 

96,738

 

Total liabilities and stockholders’ equity

 

$

102,935

 

 

$

118,132

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

1


 

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 31,

 

 

January 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

1,577

 

 

$

3,890

 

 

$

8,866

 

 

$

13,201

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

11,233

 

 

 

7,650

 

 

 

30,709

 

 

 

23,882

 

General and administrative

 

 

3,068

 

 

 

2,900

 

 

 

9,733

 

 

 

7,879

 

Total operating expenses

 

 

14,301

 

 

 

10,550

 

 

 

40,442

 

 

 

31,761

 

Operating loss

 

 

(12,724

)

 

 

(6,660

)

 

 

(31,576

)

 

 

(18,560

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

372

 

 

723

 

 

 

1,467

 

 

 

1,016

 

Foreign currency exchange gain

 

 

138

 

 

 

248

 

 

 

245

 

 

 

83

 

Other income

 

 

2,923

 

 

 

1,733

 

 

 

7,332

 

 

 

5,171

 

Total other income

 

 

3,433

 

 

 

2,704

 

 

 

9,044

 

 

 

6,270

 

Net loss

 

$

(9,291

)

 

$

(3,956

)

 

$

(22,532

)

 

$

(12,290

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

142

 

 

 

(97

)

 

 

548

 

 

 

(1,224

)

Unrealized holding gains on available-for-sale securities

 

 

40

 

 

 

232

 

 

 

225

 

 

 

232

 

Reclassification adjustment for realized (gain) on available-for-sale securities included in net loss

 

 

(100

)

 

 

 

 

 

(229

)

 

 

 

Other comprehensive income (loss)

 

 

82

 

 

 

135

 

 

 

544

 

 

 

(992

)

Comprehensive loss

 

$

(9,209

)

 

$

(3,821

)

 

$

(21,988

)

 

$

(13,282

)

Net loss per share to common stockholders, basic and diluted

 

$

(0.52

)

 

$

(0.23

)

 

$

(1.27

)

 

$

(0.85

)

Weighted average common shares outstanding, basic and diluted

 

 

17,838,872

 

 

 

17,231,449

 

 

 

17,717,057

 

 

 

14,379,872

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 


2


 

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

Nine Months Ended January 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at May 1, 2019

 

17,277,750

 

 

$

17

 

 

$

191,123

 

 

$

(92,476

)

 

$

(1,926

)

 

$

96,738

 

Issuance of common stock, net of issuance costs of $123

 

527,221

 

 

 

1

 

 

 

11,421

 

 

 

 

 

 

 

 

 

11,422

 

Issuance of common stock from equity incentive plans

 

10,522

 

 

 

 

 

 

32

 

 

 

 

 

 

 

 

 

32

 

Stock-based compensation expense

 

 

 

 

 

 

 

1,074

 

 

 

 

 

 

 

 

 

1,074

 

Net loss

 

 

 

 

 

 

 

 

 

 

(7,338

)

 

 

 

 

 

(7,338

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

(89

)

 

 

(89

)

Unrealized holding gains from available-for-sale securities, net of reclassification for realized gains

 

 

 

 

 

 

 

 

 

 

 

 

 

28

 

 

 

28

 

Balance at July 31, 2019

 

17,815,493

 

 

 

18

 

 

 

203,650

 

 

 

(99,814

)

 

 

(1,987

)

 

 

101,867

 

Issuance of common stock from exercise of stock options

 

18,633

 

 

 

 

 

 

138

 

 

 

 

 

 

 

 

 

138

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

1,162

 

 

 

 

 

 

 

 

 

1,162

 

Net loss

 

 

 

 

 

 

 

 

 

 

(5,903

)

 

 

 

 

 

(5,903

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

495

 

 

 

495

 

Unrealized holding gains from available-for-sale securities, net of reclassification for realized gains

 

 

 

 

 

 

 

 

 

 

 

 

 

28

 

 

 

28

 

Balance at October 31, 2019

 

17,834,126

 

 

 

18

 

 

 

204,950

 

 

 

(105,717

)

 

 

(1,464

)

 

 

97,787

 

Issuance of common stock from exercise of stock options

 

11,473

 

 

 

 

 

 

47

 

 

 

 

 

 

 

 

 

47

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

1,122

 

 

 

 

 

 

 

 

 

1,122

 

Net loss

 

 

 

 

 

 

 

 

 

 

(9,291

)

 

 

 

 

 

(9,291

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

142

 

 

 

142

 

Unrealized holding gains from available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

40

 

 

 

40

 

Reclassification adjustment for realized (gain) on available-for-sale securities included in net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(100

)

 

 

(100

)

Balance at January 31, 2020

 

17,845,599

 

 

$

18

 

 

$

206,119

 

 

$

(115,008

)

 

$

(1,382

)

 

$

89,747

 

 

 

 

3


 

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

 

Nine Months Ended January 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at May 1, 2018

 

10,799,895

 

 

$

11

 

 

$

100,011

 

 

$

(71,660

)

 

$

(1,109

)

 

$

27,253

 

Cash received pursuant to common stock subscription agreement

 

 

 

 

 

 

 

5,000

 

 

 

 

 

 

 

 

 

5,000

 

Stock-based compensation expense

 

 

 

 

 

 

 

347

 

 

 

 

 

 

 

 

 

347

 

Net loss

 

 

 

 

 

 

 

 

 

 

(5,030

)

 

 

 

 

 

(5,030

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,320

)

 

 

(1,320

)

Balance at July 31, 2018

 

10,799,895

 

 

 

11

 

 

 

105,358

 

 

 

(76,690

)

 

 

(2,429

)

 

 

26,250

 

Issuance of common stock

 

6,378,320

 

 

 

6

 

 

 

82,805

 

 

 

 

 

 

 

 

 

82,811

 

Issuance of common stock from exercise of stock options

 

4,452

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

25

 

Issuance of common stock from vesting of performance stock units

 

42,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

976

 

 

 

 

 

 

 

 

 

976

 

Net loss

 

 

 

 

 

 

 

 

 

 

(3,304

)

 

 

 

 

 

(3,304

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

193

 

 

 

193

 

Balance at October 31, 2018

 

17,225,167

 

 

 

17

 

 

 

189,164

 

 

 

(79,994

)

 

 

(2,236

)

 

 

106,951

 

Issuance of common stock from exercise of stock options

 

22,139

 

 

 

 

 

 

106

 

 

 

 

 

 

 

 

 

106

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

797

 

 

 

 

 

 

 

 

 

797

 

Net loss

 

 

 

 

 

 

 

 

 

 

(3,956

)

 

 

 

 

 

(3,956

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

(97

)

 

 

(97

)

Unrealized holding gains from available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

232

 

 

 

232

 

Balance at January 31, 2019

 

17,247,306

 

 

$

17

 

 

$

190,067

 

 

$

(83,950

)

 

$

(2,101

)

 

$

104,033

 

 

4


 

KalVista Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

 

 

Nine Months Ended

 

 

January 31,

 

 

2020

 

 

2019

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

Net loss

$

(22,532

)

 

$

(12,290

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

382

 

 

 

256

 

Stock-based compensation expense

 

3,358

 

 

 

2,120

 

Realized (gain) from available for sale securities

 

(229

)

 

 

 

Amortization of right of use assets

 

418

 

 

 

 

Amortization of discount/premium on available for sale securities

 

136

 

 

 

 

Foreign currency exchange gain

 

(224

)

 

 

(20

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Research and development tax credit receivable

 

(3,405

)

 

 

(2,409

)

Prepaid expenses and other current assets

 

(187

)

 

 

(2,475

)

Accounts payable

 

133

 

 

 

1,748

 

Accrued expenses

 

(766

)

 

 

417

 

Lease obligations

 

(416

)

 

 

 

Deferred revenue

 

(8,866

)

 

 

(13,201

)

Net cash used in operating activities

 

(32,198

)

 

 

(25,854

)

Cash Flows from Investing Activities

 

 

 

 

 

 

 

Acquisition of property and equipment

 

(212

)

 

 

(806

)

Purchases of available for sale securities

 

(45,114

)

 

 

(55,419

)

Sales and maturities of available for sale securities

 

52,052

 

 

 

850

 

Net cash provided by (used in) investing activities

 

6,726

 

 

 

(55,375

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

Capital lease principal payments

 

(53

)

 

 

(155

)

Issuance of common stock from equity incentive plans

 

214

 

 

 

132

 

Issuance of common stock, net of offering expenses

 

11,422

 

 

 

87,811

 

Net cash provided by financing activities

 

11,583

 

 

 

87,788

 

Effect of exchange rate changes on cash and cash equivalents

 

498

 

 

 

(1,269

)

Net (decrease) increase in cash and cash equivalents

 

(13,391

)

 

 

5,290

 

Cash and cash equivalents at beginning of period

 

32,006

 

 

 

51,055

 

Cash and cash equivalents at end of period

$

18,615

 

 

$

56,345

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

5


 

Notes to the Condensed Consolidated Financial Statements (unaudited)

 

 

1.

The Company

KalVista Pharmaceuticals, Inc. (“KalVista” or the “Company”) is a clinical stage pharmaceutical company focused on the discovery, development and commercialization of small molecule protease inhibitors for diseases with significant unmet need. The Company’s first product candidates are inhibitors of plasma kallikrein being developed for two indications: hereditary angioedema (“HAE”) and diabetic macular edema (“DME”). The Company applies its insights into the chemistry of proteases and, with current programs, the biology of the plasma kallikrein system, to develop small molecule inhibitors with high selectivity, potency and bioavailability that it believes will make them successful treatments for disease.

 

KalVista has created a structurally diverse portfolio of oral plasma kallikrein inhibitors and advanced multiple drug candidates into clinical trials in order to create best-in-class oral therapies for both HAE and DME. In HAE, KalVista intends to develop drug candidates for both on-demand and prophylactic use, with the goal of providing patients with a complete set of oral options to treat their disease.

 

KVD900, the Company’s most advanced HAE drug candidate, is being developed as a potential on-demand therapy for HAE attacks and is in an ongoing Phase 2 clinical trial that is expected to provide data in the second quarter of 2020. KVD900 has received Fast Track designation from the U.S. Food and Drug Administration (“FDA”), supporting the Company’s belief in the high level of unmet need in HAE and providing a potentially expedited path to drug approval.

 

In early 2020, the Company announced the selection of KVD824 as the next program to be developed for HAE. Based on preclinical and clinical work conducted, the Company believes that KVD824 can achieve the profile necessary for a twice-daily treatment for prevention of HAE attacks, which also remains an area of high unmet need. The Company is currently undertaking formulation refinement intended to optimize the dosing profile of KVD824. Following that activity, the Company is planning to commence a Phase 2 clinical trial intended to evaluate KVD824 as an oral prophylactic treatment for HAE, to begin in the second half of 2020.

 

In the case of DME, the Company’s most advanced program is KVD001, an intravitreally delivered plasma kallikrein inhibitor. KVD001 has completed a Phase 2 clinical trial intended to evaluate the safety and efficacy of two dose levels (3μg and 6μg) of KVD001 compared to a sham control in 129 DME patients who had previously been treated with anti-VEGF therapy, and still had significant edema and reduced visual acuity. In December 2019 the Company announced that the primary efficacy endpoint of change in best corrected visual acuity (BCVA) at 16 weeks compared to sham was not met. KVD001 was generally safe and well tolerated with no drug-related serious adverse events. In the overall study population, KVD001 demonstrated a protection against vision loss compared to sham. The study also included a pre-specified subgroup analysis investigating the impact of baseline visual acuity on response. After excluding those patients with the most severe vision loss (visual acuity of <55 letters at baseline), the remaining 70% of the total patient population showed a difference in BCVA compared to sham of 4.9 letters (p=0.056) at the 6μg dose. As many as 40% of DME patients may not respond adequately to VEGF inhibitor treatment, and the Company believes that KVD001 may offer these patients protection against further vision loss.

 

Both KVD001 and the Company’s planned future oral DME programs were subject to an option agreement with Merck Sharpe & Dohme Corp. (“Merck”) entered into in 2017 (the “Merck Option Agreement”). Under the terms of the agreement, Merck had a defined period, following receipt of a clinical data package including the results of the Phase 2 trial for KVD001, to determine whether to exercise its option to acquire KVD001 and to maintain its option on the oral DME programs. In February 2020, the Company announced that both of those options expired. As a result, KalVista has retained all the rights and intellectual property that were previously subject to the Merck Option Agreement, and Merck has no further rights or obligations to KalVista.

 

The Company’s headquarters is located in Cambridge, Massachusetts, with research activities located in Porton Down, United Kingdom and Boston, Massachusetts.

 

The Company has devoted substantially all of its efforts to research and development, including clinical trials of its product candidates. The Company has not completed the development of any product candidates. Pharmaceutical drug product candidates, like those being developed by the Company, require approvals from the FDA or foreign regulatory agencies prior to commercial sales. There can be no assurance that any product candidates will receive the necessary approvals and any failure to receive approval or delay in approval may have a material adverse impact on the Company’s business and financial results. The Company has not yet commenced commercial operations. The Company is subject to a number of risks and uncertainties similar to those of other life science companies developing new products, including, among others, the risks related to the necessity to obtain adequate additional financing, to successfully develop product candidates, to obtain regulatory approval of product candidates, to comply with government

6


 

regulations, to successfully commercialize its potential products, to the protection of proprietary technology and to the dependence on key individuals.

The Company has funded operations primarily through the issuance and sale of capital stock and the Merck Option Agreement. As of January 31, 2020, the Company had an accumulated deficit of $115.0 million and $80.6 million of cash, cash equivalents and marketable securities. To date, the Company has not generated any product sales revenues and does not have any products that have been approved for commercialization. The Company does not expect to generate significant revenue unless and until it obtains regulatory approval for, and commercializes, one of its current or future product candidates. The Company anticipates that it will continue to incur losses for the foreseeable future, and it expects those losses to increase as it continues the development of, and seeks regulatory approvals for, product candidates, and begins to commercialize any approved products. The Company is subject to all of the risks inherent in the development of new therapeutic products, and it may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect its business. The Company currently anticipates that, based upon its operating plans and existing capital resources, it has sufficient funding to operate for at least the next twelve months.

Until such time, if ever, as the Company can generate substantial revenues, it expects to finance its cash needs through a combination of equity or debt financings, collaborations, strategic partnerships and licensing arrangements. To the extent that additional capital is raised through the sale of stock or convertible debt securities, the ownership interest of existing stockholders may be diluted, and the terms of these newly issued securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing, if available, may involve agreements that include increased fixed payment obligations and covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, selling or licensing intellectual property rights and other operating restrictions that could adversely impact its ability to conduct business. Additional fundraising through collaborations, strategic partnerships or licensing arrangements with third parties may require the Company to relinquish valuable rights to product candidates, including other technologies, future revenue streams or research programs, or grant licenses on terms that may not be favorable. If the Company is unable to raise additional funds when needed, it may be required to delay, limit, reduce or terminate product development or future commercialization efforts or grant rights to develop and commercialize other product candidates even if it would otherwise prefer to develop and commercialize such product candidates internally.

2.

Summary of Significant Accounting Policies

Principles of Consolidation: The accompanying unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Such financial statements reflect all adjustments that are, in management’s opinion, necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations, and cash flows. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements. There were no adjustments other than normal recurring adjustments. These unaudited interim condensed consolidated financial results are not necessarily indicative of the results to be expected for the year ending April 30, 2020, or for any other future annual or interim period. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended April 30, 2019 in the Company’s Annual Report on Form 10-K filed with the SEC on July 16, 2019.

Segment Reporting: The Company’s Chief Operating Decision Maker, the CEO, manages the Company’s operations as a single operating segment for the purposes of assessing performance and making operating decisions.

Net Loss per Share: Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of common shares and the number of potential dilutive common share equivalents outstanding during the period. Potential dilutive common share equivalents consist of the incremental common shares issuable upon the exercise of share options and awards.

 

 Potential dilutive common share equivalents consist of:

 

 

January 31,

 

 

 

2020

 

 

2019

 

Stock options and awards

 

 

2,315,677

 

 

 

1,729,928

 

7


 

In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive. As a result, there is no difference between the Company’s basic and diluted loss per share for the periods presented.

Fair Value Measurement: The Company classifies fair value measurements using a three level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices in active markets for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1, such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. These fair values are obtained from independent pricing services which utilize Level 1 and Level 2 inputs.

The following table summarizes the cash and cash equivalents and marketable securities measured at fair value on a recurring basis as of January 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

January 31, 2020

 

Cash equivalents

$

85

 

 

$

 

 

$

 

 

$

85

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

 

 

50,362

 

 

 

 

 

 

50,362

 

U.S. government agency securities

 

 

 

 

11,593

 

 

 

 

 

 

11,593

 

 

$

85

 

 

$

61,955

 

 

$

 

 

$

62,040

 

 

Recently Adopted Accounting Pronouncements:

The Company adopted ASC 842, Leases (“ASC 842”), using the modified retrospective approach with cumulative effect adjustment, effective May 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the new standard which allows the Company to not reassess previous accounting conclusions around whether arrangements are or contain leases, the classification of its existing leases as of the transition date, and the treatment of initial direct costs. In addition, the Company elected the practical expedient not to apply the recognition requirements in the lease standard to short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that the lessee is reasonably certain to exercise) and the practical expedient that permits lessees to make an accounting policy election (by class of underlying asset) to account for each separate lease component of a contract and its associated non-lease components as a single lease component.

The adoption of ASC 842 resulted in the following impact on the financial statements:

 

 

May 1, 2019

 

 

 

 

 

 

 

 

 

 

Prior to ASC 842

 

 

ASC 842 Adjustment

 

 

May 1, 2019 As Adjusted

 

Consolidated Balance Sheet Data (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Right of use assets - operating leases

$

 

 

$

1,913

 

 

$

1,913

 

Deferred rent, current portion

$

19

 

 

$

(19

)

 

$

 

Current operating lease liabilities

$

 

 

$

569

 

 

$

569

 

Non-current operating lease liabilities

$

 

 

$

1,363

 

 

$

1,363

 

 

3.       Marketable Securities

The objectives of the Company’s investment policy are to ensure the safety and preservation of invested funds, as well as to maintain liquidity sufficient to meet cash flow requirements. The Company invests its excess cash in securities issued by financial institutions, commercial companies, and government agencies that management believes to be of high credit quality in order to limit the amount of its credit exposure. The Company has not realized any losses from its investments.

 

The Company classifies all of its debt securities as available for sale. Unrealized gains and losses on debt securities are recognized in comprehensive loss, unless an unrealized loss is considered to be other than temporary, in which case the unrealized loss is charged to operations. The Company periodically reviews its investments for other than temporary declines in fair value below cost

8


 

basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company believes the individual unrealized losses represent temporary declines primarily resulting from interest rate changes. Realized gains and losses are included in other income in the consolidated statements of operations and comprehensive loss and are determined using the specific identification method with transactions recorded on a trade date basis.

 

The following tables summarize the fair value of the Company’s investments by type:

 

 

January 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate debt securities

$

49,953

 

 

$

413

 

 

$

(4

)

 

$

50,362

 

Obligations of the U.S. Government and its agencies

 

11,551

 

 

 

42

 

 

 

 

 

 

11,593

 

Total investments

$

61,504

 

 

$

455

 

 

$

(4

)

 

$

61,955