| Summary of Significant Accounting Policies | Note 2 – Summary of Significant
Accounting Policies Cash and Cash Equivalents We consider all short-term investments readily convertible
to cash, without notice or penalty, with an initial maturity of 90 days or less to be cash equivalents. Restricted Cash Under the terms of three
separate operating leases related to our facilities, we are required to maintain, as collateral, letters of credit during the terms
of such leases (Note 3). At April 30, 2019 and 2018, restricted cash of $1,150 was pledged as collateral under these letters of
credit. Revenue Recognition We derive revenue from contract manufacturing
services provided under our customer contracts, which we have disaggregated into the following revenue streams: Manufacturing revenue The manufacturing revenue stream generally
represents revenue from the manufacturing of customer product(s) derived from mammalian cell culture covering clinical through
commercial manufacturing runs. Under a manufacturing contract, a quantity of manufacturing runs are ordered and the product is
manufactured according to the customer’s specifications and typically only one performance obligation is included. Each manufacturing
run represents a distinct service that is sold separately and has stand-alone value to the customer. The product(s) are manufactured
exclusively for a specific customer and have no alternative use. The customer retains control of their product during the entire
manufacturing process and can make changes to the process or specifications at their request. Under these agreements, we are entitled
to consideration for progress to date that includes an element of profit margin. Revenue associated with this stream is recognized
over time utilizing an input method that compares the cost of cumulative work-in-process to date to the most current estimates
for the entire cost of the performance obligation. Process development revenue The process development revenue stream
generally represents revenue from non-manufacturing related services associated with the custom development of a manufacturing
process and analytical methods for a customer’s product. Under a process development contract, the customer owns the product
details and process, which has no alternative use. These process development projects are customized to each customer to meet their
specifications and typically only one performance obligation is included. Each process represents a distinct service that is sold
separately and has stand-alone value to the customer. The customer also retains control of their product as the product is being
created or enhanced by our services and can make changes to their process or specifications upon request. Revenue associated with
this stream is recognized over time utilizing an input method that compares the cost of cumulative work-in-process to date to the
most current estimates for the entire cost of the performance obligation. The
following table disaggregates our revenue for the fiscal years ended April 30, 2019, 2018 and 2017 by revenue stream.
Fiscal Year Ended April 30,
2019 2018 2017
Manufacturing revenue $ 43,432 $ 47,437 $ 52,215
Process development revenue 10,171 6,184 5,415
Total Revenues $ 53,603 $ 53,621 $ 57,630 Revenues for the fiscal years ended April 30, 2018 and 2017
have not been adjusted in accordance with our modified retrospective adoption of Accounting Standards Concepts (“ASC”)
606 Revenue from Contracts with Customers (“ASC 606”) as of May 1, 2018, and continues to be reported under the accounting
standards that were in effect prior to our adoption of ASC 606 as further discussed below under the section, “ Accounting
Standards Adopted in Fiscal Year 2019 The timing of revenue recognition, billings
and cash collections results in billed trade receivables, contract assets (unbilled receivables), and contract liabilities (customer
deposits and deferred revenue). Contract assets are recorded when our right to consideration is conditioned on something other
than the passage of time. Contract assets are reclassified to trade receivables on the balance sheet when our rights become unconditional.
Contract liabilities represent customer deposits and deferred revenue billed and/or received in advance of our fulfillment of performance
obligations. Contract liabilities convert to revenue as we perform our obligations under the contract. Payment terms can vary by the type of
contract manufacturing services offered, however, the term between invoicing and when payment is due is not significant. For certain
services, payment prior to satisfaction of a performance obligation can be required, and results in recording a contract liability. During the fiscal year ended April 30,
2019, we recognized revenue of $14,312 for which the contract liability was recorded in the prior year. We apply the practical expedient available
under ASC 606 that permits us not to disclose the value of unsatisfied performance obligations for contracts with an original expected
length of one year or less. In addition, we currently do not have any unsatisfied performance obligations for contracts greater
than one year. Costs incurred to obtain
a contract are not material. These costs are generally employee sales commissions, which are expensed when incurred and included
in selling, general and administrative expense in the accompanying consolidated statements of operations and comprehensive loss. Accounts Receivable Accounts receivable generally represent
trade amounts billed for contract manufacturing services and are recorded at the invoiced amount net of an allowance for doubtful
accounts, if necessary. Accounts receivable consisted of the following:
April 30,
2019 2018
Trade receivables $ 7,374 $ 3,539
Other receivables – 215
Total Accounts receivable $ 7,374 $ 3,754 We continually monitor
our allowance for doubtful accounts for all receivables. We apply judgment in assessing the ultimate realization of our receivables
and we estimate an allowance for doubtful accounts based on various factors, such as the aging of accounts receivable balances,
historical experience, and the financial condition of our customers. Based on our analysis of our receivables as of April 30, 2019
and 2018, we determined no allowance for doubtful accounts was necessary. Concentrations of Credit Risk and Customer
Base Financial instruments that potentially subject us to a significant
concentration of credit risk consist of cash and cash equivalents, restricted cash, trade receivables and contract assets. We maintain our cash and restricted cash balances primarily with one major commercial bank and our deposits held
with the bank exceed the amount of government insurance limits provided on our deposits. We are exposed to credit risk in the event
of default by the major commercial bank holding our cash and restricted cash balances to the extent of the cash and restricted
cash amounts recorded on the accompanying consolidated balance sheet. Our trade receivables
from amounts billed for contract manufacturing services have historically been derived from a small customer base. Most contracts
require up-front payments and installment payments during the service period. We perform periodic evaluations of the financial
condition of our customers and generally do not require collateral, but we can terminate any contract if a material default occurs.
At April 30, 2019 and 2018, approximately 95% and 93%, respectively, of our trade receivables were due from six customers. Our
contract assets are reclassified to trade receivables when our rights to consideration become unconditional.
At April 30, 2019 approximately 87% of our contract assets were attributable to eight customers. Our revenues have historically
been derived from a small customer base. Historically, these customers have not entered into long-term contracts because their
need for drug supply depends on a variety of factors, including a product’s stage of development, the timing of regulatory
filings and approvals, the product needs of their collaborators, if applicable, their financial resources and the market demand
with respect to a commercial product. The percentages below
represent revenues derived from each customer as a percentage of total revenues during the fiscal years ended April 30, 2019, 2018
and 2017:
Customer Geographic Location 2019 2018 2017
Halozyme Therapeutics, Inc. U.S. 30% 55% 58%
ADC Therapeutics America Inc. U.S. 21 9 –
Coherus BioSciences, Inc. U.S. 13 22 26
Other customers U.S./non-U.S. 36 14 16
Total 100% 100% 100% We attribute revenue to the individual
countries where the customer is headquartered. Revenues derived from U.S. based customers were 95%, 99% and 100% for the fiscal
years ended April 30, 2019, 2018 and 2017, respectively. Inventories Inventories are valued
at the lower of cost or net realizable value, determined by the first-in, first-out method. Subsequent to the adoption of ASC
606 (Note 2), manufacturing costs associated with work-in-process inventory (comprised of raw materials, direct labor and overhead
costs associated with in-process manufacturing services) are recorded to cost of revenues in the accompanying consolidated financial
statements as incurred. Overhead costs allocated to work-in-process inventory are based on the normal capacity of our production
facilities and do not include costs from under absorption of overhead costs or idle capacity, which are expensed directly to cost
of revenues in the period incurred. Inventories consist of the following:
April 30,
2019 2018
Raw materials $ 6,557 $ 8,165
Work-in-process – 7,964
Total Inventories $ 6,557 $ 16,129 We periodically review raw materials inventory
for potential impairment and adjust inventory to its net realizable value based on the estimate of future use and reduce the carrying
value of inventory as determined necessary. Property and Equipment Property and equipment
is recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line
method over the estimated useful lives of the related asset, generally ranging from three to ten years. Amortization of leasehold
improvements is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the remaining
lease term. Construction-in-progress, which represents direct costs related to the construction of various equipment and leasehold
improvements primarily associated with our manufacturing facilities, are not depreciated until the asset is completed and placed
into service. No interest was incurred or capitalized as construction-in-progress as of April 30, 2019 and 2018. All of our property
and equipment are located in the U.S. Property and equipment consist of the following:
April 30,
2019 2018
Leasehold improvements $ 20,574 $ 20,686
Laboratory and manufacturing equipment 12,858 10,258
Computer equipment and software 4,644 4,087
Furniture, fixtures and office equipment 528 510
Construction-in-progress 1,590 3,310
Total Property and equipment, gross 40,194 38,851
Less: Accumulated depreciation and amortization (14,569 ) (12,372 )
Total Property and equipment, net $ 25,625 $ 26,479 Depreciation and amortization
expense for the years ended April 30, 2019, 2018 and 2017 was $2,746, $2,562 and $2,463, respectively. Impairment Long-lived assets are reviewed for impairment
in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events
or changes in circumstances that indicate that their carrying value may not be recoverable. Long-lived assets are reported at the
lower of carrying amount or fair value less cost to sell. For the fiscal years ended April 30, 2019 and 2018, there were no indicators
of impairment of the value of our long-lived assets. Fair Value of Financial
Instruments The carrying amounts
in the accompanying Consolidated Balance Sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable
and accrued liabilities approximate their fair values due to their short-term maturities. Fair Value Measurements Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. The guidance prioritizes the inputs used in measuring fair value into the following hierarchy:
· Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical
assets or liabilities.
· Level 2 – Observable inputs other than quoted prices included in Level 1, such as assets
or liabilities whose values are based on quoted market prices in markets where trading occurs infrequently or whose values are
based on quoted prices of instruments with similar attributes in active markets.
· Level 3 – Unobservable inputs that are supported by little or no market activity and significant
to the overall fair value measurement of the assets or liabilities; therefore, requiring the company to develop its own valuation
techniques and assumptions. As of April 30, 2019
and 2018, we do not have any Level 2 or Level 3 financial assets or liabilities and our cash equivalents, which are primarily invested
in money market funds with one major commercial bank, are carried at fair value based on quoted market prices for identical securities
(Level 1 input). In addition, there were no transfers between any Levels of the fair value hierarchy during the fiscal years ended
April 30, 2019 and 2018. Deferred Rent Rent expense is recorded on a straight-line
basis over the initial term of our operating lease agreements and the difference between rent expense and the amounts paid is recorded
as a deferred rent liability. Incentives granted under our operating leases, including tenant improvements and landlord-funded
lease incentives, are recorded as a deferred rent liability, which is amortized as a reduction to rent expense over the term of
the operating lease (Note 3). Restructuring Charges Restructuring charges consist of one-time
termination benefits, including severance and other employee-related costs related to a workforce reduction pursuant to a restructuring
plan we implemented and completed during the fiscal year ended April 30, 2018 (Note 9). One-time termination benefits were expensed
at the date we notified the employee, unless the employee was required to provide future service, in which case the benefits were
expensed ratably over the future service period. Stock-Based Compensation We account for stock
options, restricted stock units and other stock-based awards granted under our equity compensation plans in accordance with the
authoritative guidance for stock-based compensation. The estimated fair value of stock options granted to employees in exchange
for services is measured at the grant date, using a fair value based method, such as a Black-Scholes option valuation model, and
is recognized as expense on a straight-line basis over the requisite service periods. The fair value of restricted stock units
is measured at the grant date based on the closing market price of our common stock on the date of grant, and is recognized as
expense on a straight-line basis over the period of vesting. Forfeitures are recognized as a reduction of stock-based compensation
expense as they occur. As of April 30, 2019, there were no outstanding stock-based awards with market or performance conditions. Income Taxes We utilize the liability method of accounting
for income taxes in accordance with ASC 740: Income Taxes The income tax benefit recognized in the
accompanying Consolidated Statements of Operations and Comprehensive Loss for the year ended April 30, 2019 resulted from the
“Intraperiod Tax Allocation” rules under ASC 740, which requires the allocation of an entity’s total annual
income tax provision among continuing operations and, in our case, discontinued operations. Accordingly, a tax benefit was recorded
in continuing operations with an offsetting tax expense recorded in discontinued operations (Note 10). Comprehensive Loss Comprehensive loss is the change in equity
during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss is equal to our
net loss for all periods presented. Accounting Standards Adopted in Fiscal
Year 2019 In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers
(Topic 606) (codified as ASC 606), which, along with subsequent amendments issued after May 2014, replaced substantially all the
relevant U.S. GAAP revenue recognition guidance. ASC 606, as amended, is based on the principle that revenue is recognized to depict
the contractual transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services utilizing a new five-step revenue recognition model, which steps include
(i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as)
the entity satisfies a performance obligation. On May 1, 2018, we adopted ASC 606, as
amended, to all contracts that had not been completed as of May 1, 2018 using the modified retrospective method. Accordingly, results
for the reporting period beginning after May 1, 2018 are presented in accordance with ASC 606, while prior period amounts have
not been adjusted and continue to be reported under the accounting standards that were in effect for the prior periods. The cumulative effect of adopting ASC
606 resulted in a one-time adjustment of $2,739 to the opening balance of accumulated deficit which is reflected in the accompanying
Consolidated Statements of Stockholders’ Equity for the fiscal year ended April 30, 2019. The cumulative effect adjustment
relates to the recognition of revenue and related costs for customer contracts that transfer goods or services over time. Under
ASC 606, the timing of the recognition of revenue and the related cost of revenue associated with goods or services provided to
customers with no alternative use are recognized over time utilizing an input method that compares the cost of cumulative work-in-process
to date to the most current estimates for the entire cost of the performance obligation. By contrast, in the prior periods, revenue
and the related costs were recognized upon completion of the performance obligation in accordance with accounting standards that
were in effect in the prior periods. Under these customer contracts the customer retains control of the product as it is being
created or enhanced by our services and/or we are entitled to compensation for progress to date that includes an element of profit
margin. The cumulative effect of the adoption of
ASC 606 on amounts previously reported on the Consolidated Balance Sheet at April 30, 2018 was as follows:
As Reported April 30, 2018 ASC 606 Transition Adjustment Balance at May 1, 2018
Contract assets $ – $ 2,888 $ 2,888
Inventories 16,129 (7,871 ) 8,258
Contract liabilities 27,935 (7,913 ) 20,022
Other current liabilities 905 191 1,096
Accumulated deficit (559,129 ) 2,739 (556,390 ) The impact of the adoption of ASC 606 on
the Consolidated Balance Sheet at April 30, 2019 was as follows:
As Reported Effect of Adoption Increase/(Decrease) Balance Without Adoption of ASC 606
Contract assets $ 4,327 $ 4,327 $ –
Inventories 6,557 (18,293 ) 24,850
Contract liabilities 14,651 (19,771 ) 34,422 The impact of the adoption of ASC 606 on
the Consolidated Statements of Operations and Comprehensive Loss for the fiscal year ended April 30, 2019 was as follows:
As Reported Effect of Adoption Increase/(Decrease) Balance Without Adoption of ASC 606
Revenues $ 53,603 $ 13,243 $ 40,360
Cost of revenues 46,379 9,743 36,636
Gross profit 7,224 3,500 3,724
Operating loss (5,622 ) 3,500 (9,122 )
Loss from continuing operations (5,056 ) 3,500 (8,556 ) In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash In May 2017, the FASB issued ASU 2017-09,
Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, New Accounting Standards
Not Yet Adopted In February 2016, the
FASB issued ASU 2016-02, Leases and its related amendments (collectively referred to as Topic 842) (codified as “ASC 842”).
The new standard requires lessees to recognize right-of-use assets and corresponding lease liabilities for leases with durations
of greater than 12 months on the balance sheet as well as provide disclosures with respect to certain qualitative and quantitative
information regarding the amount, timing and uncertainty of cash flows arising from leases. The right-of-use assets and lease
liabilities will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent
measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a
finance lease or an operating lease. ASC 842 is effective for fiscal years, and interim periods within those years, beginning
after December 15, 2018, which will be our fiscal year 2020 beginning May 1, 2019. On May 1, 2019, we adopted
ASC 842 and have elected the optional transition method to apply the standard as of the effective date and therefore, we will not
apply the standard to the comparative periods presented in the consolidated financial statements. We have elected the transition
package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions
about lease identification, lease classification, and initial direct costs. Further, we have elected a short-term lease exception
policy, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e., leases with terms
of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain
classes of assets. While we are finalizing our evaluation of the impact of the adoption of ASC 842 on our consolidated financial
statements and related disclosures, we expect to recognize on our balance sheet right-of-use assets ranging from $22,000 to $25,000,
in aggregate, and lease liabilities ranging from $24,000 to $27,000, in aggregate, which are primarily related to our facility
operating leases (Note 3). The difference between the right-of-use assets and lease liabilities is primarily attributed to the
elimination of deferred rent. The adoption of ASC 842 is also expected to impact our consolidated financial statement disclosures.
We do not anticipate the adoption of ASC 842 will have a material impact to our Consolidated Statements of Operations and Comprehensive
Loss or to require a cumulative-effect adjustment to the opening balance of accumulated deficit. The estimated impact
of adopting ASC 842 is based on our best estimates at the time of the preparation of this Annual Report. The actual impact is subject
to change prior to our first quarterly filing of our fiscal year 2020. We are finalizing our implementation related to policies,
processes and internal controls to comply with this guidance. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit
Losses (Topic 326) , Measurement of Credit Losses on Financial Instruments. In August 2018, the
FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements
for Fair Value Measurement, |
