The following table provides a reconciliation of cash, cash
equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the
same amounts shown above:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 – Description of Company
and Basis of Presentation
We are a dedicated contract development
and manufacturing organization (“CDMO”) that provides a comprehensive range of services from process development to
Current Good Manufacturing Practices (“CGMP”) clinical and commercial manufacturing, focused on biopharmaceutical drug
substances derived from mammalian cell culture for biotechnology and pharmaceutical companies.
Basis of Presentation
The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles
(“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”)
related to quarterly reports on Form 10-Q, and accordingly, they do not include all of the information and disclosures required
by U.S. GAAP for annual financial statements. These unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form
10-K for the fiscal year ended April 30, 2020, as filed with the SEC on June 30, 2020. The unaudited financial information for
the interim periods presented herein reflects all adjustments which, in the opinion of management, are necessary for a fair presentation
of the financial condition and results of operations for the periods presented, with such adjustments consisting only of normal
recurring adjustments. Results of operations for interim periods covered by this Quarterly Report on Form 10-Q may not necessarily
be indicative of results of operations for the full fiscal year or any other interim period.
The unaudited condensed
consolidated financial statements include the accounts of Avid Bioservices, Inc. and its subsidiaries. All intercompany accounts
and transactions among the consolidated entities have been eliminated in the unaudited condensed consolidated financial statements.
The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts,
as well as disclosures of commitments and contingencies in the financial statements and accompanying notes. Actual results could
differ materially from those estimates and assumptions.
Note 2 – Summary of Significant Accounting Policies
Information regarding our significant accounting
policies is contained in Note 2, “Summary of Significant Accounting Policies”, of the consolidated financial statements
in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.
Revenue Recognition
Revenue recognized from services provided
under our customer contracts are disaggregated into manufacturing and process development revenue streams.
Manufacturing revenue
Manufacturing revenue generally represents
revenue from the manufacturing of customer products 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. 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 products are manufactured exclusively for a specific customer and have no alternative
use. The customer retains control of its product during the entire manufacturing process and can make changes to the process or
specifications at its request. Under these agreements, we are entitled to consideration for progress to date that includes an element
of profit margin.
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Process development revenue
Process development revenue generally represents
revenue from services associated with the custom development of a manufacturing process and analytical methods for a customer’s
product. Process development revenue 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. 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 its 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 its
product as the product is being created or enhanced by our services and can make changes to its process or specifications upon
request. Under these agreements, we are entitled to consideration for progress to date that includes an element of profit margin.
The following table summarizes our manufacturing
and process development revenue streams (in thousands):
|
|
Three Months Ended July 31,
|
|
|
|
2020
|
|
|
2019
|
|
Manufacturing revenues
|
|
$
|
24,063
|
|
|
$
|
12,908
|
|
Process development revenues
|
|
|
1,329
|
|
|
|
2,346
|
|
Total revenues
|
|
$
|
25,392
|
|
|
$
|
15,254
|
|
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 accounts receivable 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.
During the three months ended July
31, 2020 and 2019, we recognized revenue of $16.4 million and $6.2 million, respectively, for which the contract liability
was recorded in a prior period.
The transaction price for services provided
under our customer contracts reflects our best estimates of the amount of consideration to which we are entitled in exchange for
providing goods and services to our customers. In determining the transaction price, we considered the different sources of variable
consideration including, but not limited to, discounts, credits, refunds, price concessions or other similar items. We have included
in the transaction price some or all of an amount of variable consideration, utilizing the most likely method, only to the extent
that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is subsequently resolved. The actual amount of consideration ultimately received may
differ.
Management may be required to exercise
judgement in estimating revenue to be recognized. Judgement is required in identifying performance obligations, estimating the
transaction price, estimating the stand-alone selling prices of identified performance obligations, and estimating the progress
towards the satisfaction of performance obligations. If actual results in the future vary from our estimates, the estimates will
be adjusted, which will affect revenues in the period that such variances become known.
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. As of July 31, 2020, we do not believe we have any unsatisfied performance obligations for contracts
greater than one year.
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Restricted Cash
Under the terms of an operating lease related
to our facilities (Note 4), we are required to maintain, as collateral, a letter of credit, during the term of such lease. At July
31, 2020 and April 30, 2020, restricted cash of $0.4 million was pledged as collateral under the letter of credit.
Leases
We determine if an arrangement is or contains
a lease at inception. Our operating leases with a term greater than one year are included in operating lease right-of-use assets,
operating lease liabilities and operating lease liabilities, less current portion in our condensed consolidated balance sheets.
Right-of-use assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation
to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease
commencement date, based on the present value of lease payments over the lease term. In determining the net present value of lease
payments, we use our incremental borrowing rate which represents an estimated rate of interest that we would have to pay to borrow
equivalent funds on a collateralized basis at the lease commencement date.
Our operating leases may include options
to extend the lease which are included in the lease term when it is reasonably certain that we will exercise a renewal option.
Operating lease expense is recognized on a straight-line basis over the expected lease term.
We elected the post-transition practical
expedient to not separate lease components from non-lease components for all existing leases. We also elected a policy to not apply
the recognition requirements of ASC 842 for short-term leases.
Inventory
Inventory consists of raw materials inventory
and is valued at the lower of cost, determined by the first-in, first-out method, or net realizable value. 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 deemed 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 assets, which are generally as follows:
Description
|
|
Estimated Useful Life
|
Leasehold improvements
|
|
Shorter of estimated useful life or lease term
|
Laboratory and manufacturing equipment
|
|
5 – 10 years
|
Furniture, fixtures and office equipment
|
|
5 – 10 years
|
Computer equipment and software
|
|
3 – 5 years
|
Construction-in-progress,
which represents direct costs related to the construction of various equipment and leasehold improvements primarily associated
with our manufacturing facilities, is not depreciated until the asset is completed and placed into service. No interest was incurred
or capitalized as construction-in-progress as of July 31, 2020 and April 30, 2020. All of our property and equipment are located
in the U.S. Property and equipment consist of the following (in thousands):
|
|
July 31, 2020
|
|
|
April 30, 2020
|
|
Leasehold improvements
|
|
$
|
21,130
|
|
|
$
|
21,130
|
|
Laboratory and manufacturing equipment
|
|
|
15,414
|
|
|
|
15,033
|
|
Computer equipment and software
|
|
|
5,350
|
|
|
|
5,334
|
|
Furniture, fixtures and office equipment
|
|
|
685
|
|
|
|
685
|
|
Construction-in-progress
|
|
|
4,026
|
|
|
|
2,564
|
|
Total property and equipment, gross
|
|
$
|
46,605
|
|
|
$
|
44,746
|
|
Less: accumulated depreciation and amortization
|
|
|
(18,471
|
)
|
|
|
(17,641
|
)
|
Total property and equipment, net
|
|
$
|
28,134
|
|
|
$
|
27,105
|
|
Depreciation and amortization
expense for the three months ended July 31, 2020 and 2019 was $0.8 million and $0.7 million, respectively.
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 if impairment indicators exist. For the three
months ended July 31, 2020 and 2019, there were no indicators of impairment of the value of our long-lived assets and no cumulative
impairment losses recognized as of July 31, 2020.
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 July 31, 2020 and April 30, 2020, there were no outstanding stock-based awards with market or performance
conditions.
Comprehensive Income
(Loss)
Comprehensive income
(loss) is the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive
income (loss) is equal to our net income (loss) for all periods presented.
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 July 31, 2020 and
April 30, 2020, 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).
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Recent Accounting Pronouncements
In June 2016, the Financial Accounting
Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement
of Credit Losses of Financial Instruments (“ASU 2016-13”). The standard changes the methodology for measuring credit
losses on financial instruments and the timing of when such losses are recorded. As a smaller reporting company, ASU 2016-13 and
its subsequent updates are effective for fiscal years beginning after December 15, 2022, which will be our fiscal year 2024 beginning
May 1, 2023; however, early adoption is permitted. We are currently evaluating the impact this standard will have on our condensed
consolidated financial statements.
In August 2018, the FASB issued ASU No.
2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value
Measurement (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements of fair value
measurements. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level
2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop
significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods
within those years, beginning after December 15, 2019. We adopted ASU 2018-13 on May 1, 2020. The adoption of this standard
did not have a material impact on our condensed consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-15,
Intangibles-Goodwill and other Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs
Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). The new guidance aligns the
requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirement
for capitalizing implementation costs incurred to develop or obtain internal-use-software (and hosting arrangements that include
an internal-use software license). ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning
after December 14, 2019. We adopted ASU 2018-15 on May 1, 2020. The adoption of this standard did not have a material impact on
our condensed consolidated financial statements.
In December 2019, the FASB issued ASU No.
2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies
the accounting for income taxes by removing certain exceptions and improving consistent application in certain areas of Topic 740.
ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, which will
be our fiscal year 2022 beginning May 1, 2021. Early adoption is permitted. We are currently evaluating the timing and impact of
adopting ASU 2019-12 on our condensed consolidated financial statements and related disclosures.
Note 3 – Note Payable
On April 17, 2020, we
entered into a promissory note (the “Note”) with City National Bank, the lender, evidencing an unsecured loan pursuant
to the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) of the Coronavirus
Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) of approximately $4.4 million (the “PPP Loan”).
We applied for and received the PPP Loan pursuant to the then published PPP qualification and certification requirements.
On April 23, 2020, the
SBA, in consultation with the Department of Treasury, issued new guidance that created uncertainty regarding the qualification
requirements for a PPP Loan (the “New Guidance”). In light of the New Guidance, we determined it appropriate to pay
off the entire amount of the PPP Loan. Accordingly, on May 12, 2020, we paid off in full the principal and interest on the PPP
Loan, resulting in the termination of the Note.
Note 4 – Leases
We currently lease office, manufacturing,
laboratory and warehouse space in four buildings under three separate non-cancellable operating lease agreements. All of our leased
facilities are located in close proximity in Tustin, California, have original lease terms ranging from 7 to 12 years, contain
two multi-year renewal options, and scheduled rent increases of 3% on either an annual or biennial basis. A multi-year renewal
option was included in determining the right-of-use asset and lease liability for two of our leases as we considered it reasonably
certain that we would exercise such renewal options. In addition, two of our leases provide for periods of free rent, lessor improvements
and tenant improvement allowances, of which certain of these improvements have been classified as leasehold improvements and are
being amortized over the shorter of the estimated useful life of the improvements or the remaining life of the lease. The operating
lease right-of-use assets and liabilities included in our accompanying condensed consolidated balance sheets primarily relate to
these facility leases.
Certain of our facility leases require
us to pay property taxes, insurance and common area maintenance. While these payments are not included as part of our lease liabilities,
they are recognized as variable lease cost in the period they are incurred.
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The components of lease cost included
in our accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three months
ended July 31, 2020 and 2019 were as follows (in thousands):
|
|
Three Months Ended July
31,
|
|
|
|
2020
|
|
|
2019
|
|
Operating lease cost
|
|
$
|
788
|
|
|
$
|
892
|
|
Variable lease cost
|
|
|
121
|
|
|
|
156
|
|
Short-term lease cost
|
|
|
92
|
|
|
|
–
|
|
Total lease cost
|
|
$
|
1,001
|
|
|
$
|
1,048
|
|
Supplemental consolidated balance sheet and other information
related to our operating leases as of July 31, 2020 and April 30, 2020 were as follows (in thousands, expect weighted average data):
|
|
July 31, 2020
|
|
|
April 30, 2020
|
|
Assets
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets
|
|
$
|
19,757
|
|
|
$
|
20,100
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Operating lease liabilities
|
|
$
|
1,268
|
|
|
$
|
1,228
|
|
Operating lease liabilities, less current portion
|
|
|
20,911
|
|
|
|
21,244
|
|
Total operating lease liabilities
|
|
$
|
22,179
|
|
|
$
|
22,472
|
|
Weighted average remaining lease term
|
|
|
10.3 years
|
|
|
|
10.5 years
|
|
Weighted average discount rate
|
|
|
8.0%
|
|
|
|
8.0%
|
|
Cash paid for amounts included in the measurement
of lease liabilities for the three months ended July 31, 2020 and 2019 was $0.7 million and $0.8 million, respectively, and is
included in net cash used in operating activities in our accompanying unaudited condensed consolidated statements of cash flows.
As of July 31, 2020, the maturities of
our operating lease liabilities, which includes those derived from lease renewal options that we considered it reasonably certain
that we would exercise, were as follows (in thousands):
Fiscal Year Ending April 30,
|
|
Total
|
|
2021 (remaining period)
|
|
$
|
2,233
|
|
2022
|
|
|
2,995
|
|
2023
|
|
|
3,010
|
|
2024
|
|
|
3,086
|
|
2025
|
|
|
3,171
|
|
Thereafter
|
|
|
18,767
|
|
Total lease payments
|
|
$
|
33,262
|
|
Less: imputed interest
|
|
|
(11,083
|
)
|
Total operating lease liabilities
|
|
$
|
22,179
|
|
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note
5 – Stockholders’ Equity
Series E Preferred
Stock
Each share of issued
and outstanding 10.50% Series E Convertible Preferred Stock $0.001 par value per share (“Series E Preferred Stock”)
is convertible at any time, at the option of the holder, into a number of shares of our common stock determined by dividing the
liquidation preference of $25.00 per share Series E Preferred Stock, plus any accrued and unpaid dividends (whether or not earned
or declared), by the then-current conversion price per share, currently $21.00 per share, rounded down to the nearest whole number.
As of July 31, 2020, if all of our issued and outstanding shares of Series E Preferred Stock were converted at the conversion price
of $21.00 per share, the holders of our Series E Preferred Stock would receive an aggregate of 1,978,783 shares of our common stock.
However, because the conversion price of our Series E Preferred Stock is subject to adjustment from time to time in accordance
with the applicable provisions of our certificate of incorporation, we have reserved the maximum number of shares of our common
stock that could be issued upon the conversion of our Series E Preferred Stock upon a change of control event, assuming our shares
of common stock are acquired for consideration of $5.985 per share or less. In this scenario, each outstanding share of our Series
E Preferred Stock would be converted into 4.14 shares of our common stock, or 6,826,435 shares in the aggregate.
The Series E Preferred
Stock has no stated maturity date or mandatory redemption and is senior to all of our other securities. We may redeem the Series
E Preferred Stock for cash, in whole or in part, by paying the redemption price of $25.00 per share, plus any accrued and unpaid
dividends to the redemption date. Holders of the Series E Preferred Stock have no voting rights, except as defined in the Certificate
of Designations of Rights and Preferences filed with the Secretary of State of the State of Delaware on February 12, 2014.
Holders of our Series
E Preferred Stock are entitled to receive cumulative dividends at the rate of 10.50% per annum based on the liquidation preference
of $25.00 per share, or $2.625 per annum per share, and are payable quarterly in cash, on or about the first day of each January,
April, July and October. For each of the three months ended July 31, 2020 and 2019, we paid aggregate cash dividends of $1.1 million
for issued and outstanding shares of our Series E Preferred Stock.
Note
6 – Equity Compensation Plans
Stock Incentive Plans
As of July 31, 2020,
we had an aggregate of 6,853,052 shares of our common stock reserved for issuance under our stock incentive plans, of which 4,190,908
shares were subject to outstanding stock options and restricted stock units (“RSUs”) and 2,662,144 shares were available
for future grants of stock-based awards.
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Stock Options
The following summarizes
our stock option transaction activity for the three months ended July 31, 2020:
|
|
Stock Options
|
|
|
Grant Date Weighted Average Exercise Price
|
|
|
|
(in thousands)
|
|
|
|
|
|
Outstanding at May 1, 2020
|
|
|
2,896
|
|
|
$
|
6.20
|
|
Granted
|
|
|
770
|
|
|
$
|
6.97
|
|
Exercised
|
|
|
(20
|
)
|
|
$
|
4.33
|
|
Canceled or expired
|
|
|
(30
|
)
|
|
$
|
7.67
|
|
Outstanding at July 31, 2020
|
|
|
3,616
|
|
|
$
|
6.36
|
|
Restricted Stock Units
The following summarizes
our RSUs transaction activity for the three months ended July 31, 2020:
|
|
Shares
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
|
(in thousands)
|
|
|
|
|
|
Outstanding at May 1, 2020
|
|
|
307
|
|
|
$
|
5.23
|
|
Granted
|
|
|
337
|
|
|
$
|
7.09
|
|
Vested
|
|
|
(68
|
)
|
|
$
|
5.10
|
|
Forfeited
|
|
|
(1
|
)
|
|
$
|
4.77
|
|
Outstanding at July 31, 2020
|
|
|
575
|
|
|
$
|
6.34
|
|
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Employee Stock Purchase Plan
The Avid Bioservices,
Inc. 2010 Employee Stock Purchase Plan (the “ESPP”) is a stockholder-approved plan under which eligible employees can
purchase shares of our common stock, based on a percentage of their compensation, subject to certain limits. The purchase price
per share is equal to the lower of 85% of the fair market value of our common stock on the first trading day of the offering period
or on the last trading day of the six-month offering period. During the three months ended July 31, 2020, a total of 32,197 shares
of our common stock were purchased under the ESPP at a purchase price of $5.58 per share. As of July 31, 2020, we had 1,116,538
shares of our common stock reserved for issuance under the ESPP.
Stock-Based Compensation
Stock-based compensation expense for the
three months ended July 31, 2020 and 2019 was comprised of the following (in thousands):
|
|
Three Months Ended July 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cost of revenues
|
|
$
|
278
|
|
|
$
|
187
|
|
Selling, general and administrative
|
|
|
452
|
|
|
|
416
|
|
Total stock-based compensation
|
|
$
|
730
|
|
|
$
|
603
|
|
As of July 31, 2020, the total estimated
unrecognized compensation cost related to non-vested stock options and non-vested RSUs was $6.9 million and $3.5 million, respectively.
These costs are expected to be recognized over weighted average vesting periods of 3.02 years and 3.39 years, respectively.
Note 7 – Net Income (Loss) Per Common Share
Basic net income (loss)
per common share is computed by dividing our net income (loss) attributable to common stockholders by the weighted average number
of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing our
net income (loss) attributable to common stockholders by the sum of the weighted average number of shares of common stock outstanding
during the period plus the potential dilutive effects of stock options, unvested RSUs, shares of common stock expected to be issued
under our ESPP, and Series E Preferred Stock outstanding during the period.
Net income (loss) attributable
to common stockholders represents our net income (loss) plus Series E Preferred Stock accumulated dividends. Series E Preferred
Stock accumulated dividends include dividends declared for the period (regardless of whether or not the dividends have been paid)
and dividends accumulated for the period (regardless of whether or not the dividends have been declared).
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The potential dilutive
effect of stock options, unvested RSUs, and shares of common stock expected to be issued under our ESPP during the period are calculated
in accordance with the treasury stock method, but are excluded if their effect is anti-dilutive. The potential dilutive effect
of our Series E Preferred Stock outstanding during the period is calculated using the if-converted method assuming the conversion
of Series E Preferred Stock as of the earliest period reported or at the date of issuance, if later, but are excluded if their
effect is anti-dilutive. A reconciliation of the numerators and the denominators of the basic and dilutive net income (loss) per
common share computations for the three months ended July 31, 2020 and 2019, are as follows (in thousands, expect per share amounts):
|
|
Three Months Ended July 31,
|
|
|
|
2020
|
|
|
2019
|
|
Numerator
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,730
|
|
|
$
|
(3,164
|
)
|
Series E preferred stock accumulated dividends
|
|
|
(1,442
|
)
|
|
|
(1,442
|
)
|
Net income (loss) attributable to common stockholders
|
|
$
|
3,288
|
|
|
$
|
(4,606
|
)
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic
|
|
|
56,523
|
|
|
|
56,167
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
264
|
|
|
|
–
|
|
RSUs
|
|
|
101
|
|
|
|
–
|
|
ESPP
|
|
|
4
|
|
|
|
–
|
|
Weighted average common shares outstanding, dilutive
|
|
|
56,892
|
|
|
|
56,167
|
|
Net income (loss) per share, basic
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
Net income (loss) per share, diluted
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
The following table presents
the securities excluded from the calculation of diluted net income (loss) per share for the three months ended July 31, 2020 and
2019, as the effect of their inclusion would have been anti-dilutive (in thousands):
|
|
Three Months Ended July 31,
|
|
|
|
2020
|
|
|
2019
|
|
Stock options
|
|
|
2,064
|
|
|
|
2,965
|
|
RSUs
|
|
|
48
|
|
|
|
88
|
|
ESPP
|
|
|
–
|
|
|
|
2
|
|
Series E Preferred Stock
|
|
|
1,979
|
|
|
|
1,979
|
|
Total
|
|
|
4,091
|
|
|
|
5,034
|
|
avid bioservices, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 8 – Commitments and Contingencies
In March 2020, the World Health Organization
declared the global novel coronavirus disease (“COVID-19”) outbreak a pandemic and recommended containment and mitigation
measures worldwide. Since the announcement we have been monitoring this closely, and although the COVID-19 pandemic has not had
a significant impact on our operations to date, the ultimate duration and severity of the outbreak and its impact on the economic
environment and our business is highly uncertain. Accordingly, we cannot provide any assurance that the COVID-19 pandemic will
not have a material adverse impact on our operations or future results. The extent to which the COVID-19 pandemic may impact our
future business, strategic initiatives, results of operations and financial condition will depend on future developments, which
are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity and resurgence of the
COVID-19 pandemic, the effects of the COVID-19 pandemic on our customers, vendors, and employees and the remedial actions and stimulus
measures adopted by local and federal governments, and the extent to which normal economic and operating conditions can resume.
Note 9 – Subsequent
Events
On August 31, 2020, our
Board of Directors declared a quarterly cash dividend of $0.65625 per share on our outstanding Series E Preferred Stock. The dividend
payment is equivalent to an annualized 10.50% per share, based on the $25.00 per share stated liquidation preference, accruing
from July 1, 2020 through September 30, 2020. The cash dividend is payable on October 1, 2020 to holders of the Series E Preferred
Stock of record on September 14, 2020.