Champions Oncology, Inc. (NASDAQ:CSBR) Q1 2020 Results Earnings Conference Call September 16, 2019 4:30 PM ET Company Participants Ronnie Morris - Chief Executive Officer David Miller - Chief Financial Officer Conference Call Participants Casey Woodring - Janney Montgomery Scott Lucas Baranowski - Craig-Hallum Capital Group George Marema - Pareto Ventures Operator Please stand by. Good day, ladies and gentlemen, and welcome to your Champions Oncology First Quarter Fiscal Year 2020 Earnings Conference Call. ...

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock, par value $0.001 per share CSBR Nasdaq Capital Market Securities registered pursuant to Section 12(g) of the Act: None. Form 10-Q (Mark One) þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2019 Or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE AC ...

PART I [Business](index=4&type=section&id=Item%201.%20Business) Champions Oncology, Inc. develops and sells advanced technology solutions and products to personalize oncology drug development and use - The company's core business is the development and sale of advanced technology solutions and products for personalizing oncology drug development and use, primarily through its TumorGraft Technology Platform[16](index=16&type=chunk) - The TumorGraft Technology Platform uses Patient Derived XenoGrafts (PDX Models) to simulate human clinical trials, demonstrating approximately **90% accuracy** in predicting human response with **90% lower costs** and shorter timelines (6 months vs. 2-3 years for human trials)[19](index=19&type=chunk)[20](index=20&type=chunk) - The company's TumorBank currently holds approximately **1,500 PDX Models**, reflecting characteristics of late-stage, pretreated, and metastatic cancer patients[21](index=21&type=chunk)[22](index=22&type=chunk) - Translational Oncology Solutions (TOS) Revenue Growth | Metric | 2019 (approx.) | Previous Year (approx.) | Change (%) | |:-------|:---------------|:------------------------|:-----------| | Revenue | $25.8 million | $18.8 million | 37.3% | - Personalized Oncology Solutions (POS) Revenue Change | Metric | 2019 (approx.) | Previous Year (approx.) | Change (%) | |:-------|:---------------|:------------------------|:-----------| | Revenue | $1.3 million | $1.5 million | -12.2% | - The company's growth strategy focuses on growing its TumorBank (increasing models and adding new tumor types), adding new PDX technologies (e.g., ImmunoGrafts for immune oncology drugs), and increasing the scale of studies for pharmaceutical and biotechnology customers[34](index=34&type=chunk) - Research and Development Expenses | Year | R&D Expense (approx.) | |:-----|:----------------------| | 2019 | $4.8 million | | 2018 | $4.4 million | - As of July 15, 2019, the company had **115 full-time employees**, with **93** engaged in research and development and laboratory operations, **14** in sales and marketing, and **8** in finance and administration[40](index=40&type=chunk) [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including historical operating losses, potential need for substantial capital, and uncertainty in achieving sustained profitability - Financial Performance and Liquidity (as of April 30, 2019) | Metric | Amount (approx.) | |:-------|:-----------------| | Net Income (2019) | $128,000 | | Net Loss (2018) | $1.5 million | | Accumulated Deficit | $70.7 million | | Working Capital Deficit | $103,000 | | Cash and Cash Equivalents | $3.2 million | - The company believes its current cash and cash equivalents, along with improved cash flows, are sufficient to fund operations through at least **August 2020**, but acknowledges the need for additional capital to achieve sustained profitability and growth[44](index=44&type=chunk)[49](index=49&type=chunk) - Changes in FDA regulatory oversight of laboratory-developed tests (LDTs), such as the company's POS services, could lead to increased regulatory burdens, pre-market review requirements, and higher costs, potentially impacting the business[52](index=52&type=chunk)[53](index=53&type=chunk)[55](index=55&type=chunk) - The TumorGraft Technology Platform is proprietary and requires significant know-how but is not patented, making it possible for competitors to develop similar procedures and compete in the market[67](index=67&type=chunk) - Patients are currently unable to obtain reimbursement from third-party payers for the company's services, which limits market acceptance and could hinder revenue growth[73](index=73&type=chunk)[74](index=74&type=chunk) - The company's common stock has limited trading activity and is subject to extreme volatility, which could make it difficult for investors to dispose of shares or obtain accurate price quotations, and may lead to dilution from future equity issuances[79](index=79&type=chunk)[80](index=80&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) [Unresolved Staff Comments](index=15&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC - No unresolved staff comments[99](index=99&type=chunk) [Properties](index=15&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters in Hackensack, New Jersey, and two laboratory and office facilities in Rockville, Maryland - The company leases its corporate headquarters in Hackensack, New Jersey (lease expires **November 2021**) and two primary laboratory and office spaces in Rockville, Maryland (leases expire **August 2028** and **January 2024**)[101](index=101&type=chunk) - Rent Expenses for Leased Facilities | Year | Rent Expense (thousands) | |:-----|:-------------------------| | 2019 | $822 | | 2018 | $657 | [Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - No legal proceedings[103](index=103&type=chunk) [Mine Safety Disclosures](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no disclosures related to mine safety - No mine safety disclosures[104](index=104&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=16&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the Nasdaq Capital Market under the symbol 'CSBR' and has not declared cash dividends - The company's common stock is quoted on the Nasdaq Capital Market under the symbol '**CSBR**' since **August 21, 2015**[106](index=106&type=chunk) - Common Stock High and Low Bid Prices | Fiscal Year Ended April 30, 2019 | High ($) | Low ($) | |:---------------------------------|:---------|:--------| | First quarter | 9.18 | 3.97 | | Second quarter | 17.47 | 7.50 | | Third quarter | 15.11 | 7.29 | | Fourth quarter | 11.62 | 7.51 | | **Fiscal Year Ended April 30, 2018** | | | | First quarter | 2.88 | 2.33 | | Second quarter | 3.97 | 2.93 | | Third quarter | 4.39 | 3.21 | | Fourth quarter | 4.49 | 3.39 | - As of **July 15, 2019**, there were approximately **1,900 record holders** of the company's common stock[109](index=109&type=chunk) - The company has not declared or paid any cash dividends on its common stock and does not anticipate paying any in the foreseeable future[110](index=110&type=chunk) [Selected Financial Data](index=17&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable for the company - Item 6. Selected Financial Data is not applicable[115](index=115&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Champions Oncology's financial performance, highlighting increased revenue, return to net income, and improved liquidity in fiscal year 2019 [Overview and Recent Developments](index=17&type=section&id=Overview%20and%20Recent%20Developments) The company focuses on developing and selling advanced technology solutions for oncology drug development, leveraging its TumorGraft Technology Platform - The company focuses on developing and selling advanced technology solutions and products to personalize oncology drug development and use, leveraging its TumorGraft Technology Platform to simulate clinical trials[117](index=117&type=chunk)[118](index=118&type=chunk) - The company plans to continue expanding its TumorGraft Technology Platform to grow its Translational Oncology Solutions (TOS) program, while the Personalized Oncology Solutions (POS) program will not be a focus for future growth[119](index=119&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) This section details the company's consolidated operating results, showing significant revenue growth and a shift from operating loss to income in 2019 - Consolidated Operating Results (in thousands) | Metric | 2019 ($) | % of Revenue (2019) | 2018 ($) | % of Revenue (2018) | % Change | |:-----------------------------------|:---------|:--------------------|:---------|:--------------------|:---------| | Oncology services revenue | 27,067 | 100.0% | 20,241 | 100.0% | 33.7% | | Cost of oncology services | 14,265 | 52.7% | 10,553 | 52.1% | 35.2% | | Research and development | 4,798 | 17.7% | 4,401 | 21.7% | 9.0% | | Sales and marketing | 3,056 | 11.3% | 2,570 | 12.7% | 18.9% | | General and administrative | 4,678 | 17.3% | 4,071 | 20.1% | 14.9% | | Total costs and operating expenses | 26,797 | 99.0% | 21,595 | 106.7% | 24.1% | | Income (loss) from operations | 270 | 1.0% | (1,354) | (6.7)% | (119.9)% | - Oncology services revenue increased by **$6.8 million (33.7%)** to **$27.1 million** in 2019, driven by increased sales volume and size of studies, higher demand, platform growth, and product line expansion[123](index=123&type=chunk) - Cost of oncology services rose by **$3.7 million (35.2%)** to **$14.3 million** in 2019, primarily due to increased salary and mice costs from higher study volume and **$900,000** for repeat studies, with gross margins slightly decreasing from **47.9%** to **47.3%**[124](index=124&type=chunk) - Research and development expense increased by **$397,000 (9.0%)** to **$4.8 million** in 2019, attributed to lab and salary costs for new product development[125](index=125&type=chunk) - Sales and marketing expense increased by **$486,000 (18.9%)** to **$3.1 million** in 2019, due to higher commissions and an expanded sales force[126](index=126&type=chunk) - General and administrative expense increased by **$607,000 (14.9%)** to **$4.7 million** in 2019, mainly due to increased recruiting and salary expenses[127](index=127&type=chunk) - Other expense decreased from **$89,000** in 2018 to **$39,000** in 2019, primarily due to foreign currency transaction losses[128](index=128&type=chunk) [Inflation](index=19&type=section&id=Inflation) Inflation does not have a meaningful impact on the company's results of operations - Inflation does not have a meaningful impact on the company's results of operations[130](index=130&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity improved in 2019, with management believing current cash and cash flows are sufficient through August 2020 - As of **April 30, 2019**, the company had net income of **$128,000**, an accumulated deficit of **$70.7 million**, a negative working capital of **$103,000**, and cash and cash equivalents of **$3.2 million**[131](index=131&type=chunk) - Management believes current cash and improved cash flows from operations are adequate to fund operations through at least **August 2020**, but acknowledges the need for additional capital if required[131](index=131&type=chunk) - A **$1.5 million** line of credit agreement with a national bank, entered into in **October 2017**, was not renewed upon its maturity in **October 2018**, as the company deemed it no longer necessary for working capital needs[132](index=132&type=chunk) [Cash Flows](index=19&type=section&id=Cash%20Flows) Cash flows from operating activities significantly improved in 2019, driven by revenue growth and increased bookings - Cash Flow Summary (in thousands) | Activity | 2019 ($) | 2018 ($) | Change ($) | |:---------|:---------|:---------|:-----------| | Operating Activities | 1,862 | (1,226) | 3,088 | | Investing Activities | (834) | (1,229) | 395 | | Financing Activities | 1,203 | 13 | 1,190 | - Net cash provided by operating activities increased by **$3.1 million** to **$1.9 million** in 2019, driven by revenue growth and increased bookings[133](index=133&type=chunk) - Net cash used in investing activities decreased by **$395,000** to **$834,000** in 2019, primarily due to lower purchases of lab equipment after the initial investment in a new vivarium facility in the prior year[134](index=134&type=chunk) - Net cash provided by financing activities significantly increased to **$1.2 million** in 2019, mainly due to exercises of stock options and warrants[135](index=135&type=chunk) [Critical Accounting Policies](index=20&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies involve significant judgment in areas like revenue recognition, goodwill valuation, and deferred tax assets - The company's critical accounting policies involve significant judgment and complexity, particularly in areas such as accounts receivable realization, revenue recognition, valuation allowance for deferred tax assets, valuation of goodwill, and stock compensation and warrant assumptions[137](index=137&type=chunk) - The company adopted **ASC 606** (Revenue Recognition) on **May 1, 2018**, recognizing revenue when customers obtain control of promised services, with most contracts having a single performance obligation satisfied over time[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) - Stock-based payments are expensed based on the fair value of awards at the grant date, using the Black-Scholes option pricing model and historical information for assumptions like expected life, volatility, and risk-free interest rates[144](index=144&type=chunk) - Goodwill is tested annually for impairment by comparing its fair value to its carrying amount, involving significant judgment in determining fair value and assessing impairment indicators[145](index=145&type=chunk)[147](index=147&type=chunk) - The company uses the asset and liability method for income taxes, requiring significant judgment in determining deferred tax assets and liabilities and establishing a full valuation allowance against net deferred tax assets due to insufficient operating history[149](index=149&type=chunk) [Accounting Pronouncements Being Evaluated](index=22&type=section&id=Accounting%20Pronouncements%20Being%20Evaluated) The company is assessing the impact of new accounting standards on cloud computing, credit losses, and leases, with leases expected to materially impact the balance sheet - The company is currently assessing the impact of **ASU 2018-15** (Cloud Computing Arrangement implementation costs) and **ASU No. 2016-13** (Financial Instruments - Credit Losses) on its consolidated financial statements, both effective for fiscal years beginning after **December 15, 2019**[151](index=151&type=chunk)[152](index=152&type=chunk) - The adoption of **ASU No. 2016-02** (Leases) on **May 1, 2019**, is anticipated to have a material impact on the consolidated balance sheet, with an expected record of approximately **$4.1 million** in additional lease liabilities and **$3.2 million** in right-of-use assets, but no material impact on statements of operations or cash flows[153](index=153&type=chunk) [Recently Adopted Accounting Pronouncements](index=23&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) The company adopted several accounting standards, including those for share-based payments, restricted cash, and revenue recognition, with no material impact on financial statements - The company early adopted **ASU 2018-07** (Nonemployee Share-Based Payment Accounting) in **Q3 2019**, which did not have a material impact on financial statements[155](index=155&type=chunk) - **ASU 2016-18** (Restricted Cash) and **ASU No. 2016-15** (Cash Flows Classification) were adopted on **May 1, 2018**, with no material impact on consolidated financial statements[156](index=156&type=chunk)[157](index=157&type=chunk) - **ASU 2014-09** (Revenue from Contracts with Customers) was adopted on **May 1, 2018**, using the modified retrospective method, and did not have a material measurement impact on consolidated financial statements[158](index=158&type=chunk) [Off-Balance Sheet Financing](index=23&type=section&id=Off-Balance%20Sheet%20Financing) The company has no off-balance sheet debt, similar obligations, or un-disclosed related party transactions - The company has no off-balance sheet debt, similar obligations, or un-disclosed related party transactions, and does not guarantee any third-party debt[159](index=159&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable for the company - Item 7A. Quantitative and Qualitative Disclosures About Market Risk is not applicable[160](index=160&type=chunk) [Financial Statements and Supplementary Data](index=23&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the consolidated financial statements and the independent registered public accounting firm's report included in the 'F' pages - Consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows for the two-year period ended **April 30, 2019**, along with the independent auditor's report, are presented in the 'F' pages[161](index=161&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=23&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[162](index=162&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of April 30, 2019 - Management concluded that disclosure controls and procedures were effective as of **April 30, 2019**[164](index=164&type=chunk) - Management concluded that internal control over financial reporting was effective as of **April 30, 2019**, based on the **COSO framework**[165](index=165&type=chunk) - No material changes in internal controls over financial reporting occurred during the quarter ended **April 30, 2019**[166](index=166&type=chunk) [Other Information](index=24&type=section&id=Item%209B.%20Other%20Information) There is no other information to report under this item - No other information to report[167](index=167&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=24&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item is incorporated by reference from the company's definitive Proxy Statement for its 2019 Annual Meeting of Shareholders - Information regarding Directors, Executive Officers, and Corporate Governance is incorporated by reference from the Proxy Statement[169](index=169&type=chunk) [Executive Compensation](index=25&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item is incorporated by reference from the company's definitive Proxy Statement - Information regarding Executive Compensation is incorporated by reference from the Proxy Statement[171](index=171&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=25&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item is incorporated by reference from the company's definitive Proxy Statement - Information regarding Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters is incorporated by reference from the Proxy Statement[172](index=172&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=25&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item is incorporated by reference from the company's definitive Proxy Statement - Information regarding Certain Relationships and Related Transactions, and Director Independence is incorporated by reference from the Proxy Statement[173](index=173&type=chunk) [Principal Accounting Fees and Services](index=25&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information required for this item is incorporated by reference from the company's definitive Proxy Statement - Information regarding Principal Accounting Fees and Services is incorporated by reference from the Proxy Statement[174](index=174&type=chunk) PART IV [Exhibits, Financial Statement Schedules.](index=25&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules.) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K - The financial statements include the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statement of Changes in Stockholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[176](index=176&type=chunk) - All financial statement schedules have been omitted as they are not applicable[177](index=177&type=chunk) - Exhibits include corporate organizational documents (Articles of Incorporation, Bylaws), employment agreements, equity incentive plans (**2010 Equity Incentive Plan**), various securities purchase agreements, warrants, and certifications (CEO/CFO certifications, XBRL documents)[180](index=180&type=chunk)[182](index=182&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) [Form 10-K Summary](index=29&type=section&id=Item%2016.%20Form%2010-K%20Summary) A Form 10-K Summary is not required for this filing - Form 10-K Summary is not required[186](index=186&type=chunk) [Signatures](index=30&type=section&id=Signatures) The report is signed by the Chief Executive Officer (Ronnie Morris) and Chief Financial Officer (David Miller), along with other directors, on July 29, 2019 - The report was signed by **Ronnie Morris** (Chief Executive Officer) and **David Miller** (Chief Financial Officer) on **July 29, 2019**[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS [Report of Independent Registered Public Accounting Firm](index=32&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) EisnerAmper LLP issued an unqualified opinion on the consolidated financial statements for 2019 and 2018, affirming fair presentation in accordance with GAAP - EisnerAmper LLP provided an unqualified opinion on the consolidated financial statements for the years ended **April 30, 2019** and **2018**, affirming fair presentation in accordance with GAAP[199](index=199&type=chunk) - The audit was conducted in accordance with **PCAOB standards**, including assessing risks of material misstatement and evaluating accounting principles and estimates[201](index=201&type=chunk)[202](index=202&type=chunk) [Consolidated Balance Sheets](index=33&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $11.265 million in 2019, driven by cash and accounts receivable, with stockholders' equity significantly rising to $2.238 million - Consolidated Balance Sheet Highlights (in thousands) | Metric | April 30, 2019 ($) | April 30, 2018 ($) | |:--------------------------|:-------------------|:-------------------| | Cash and cash equivalents | 3,237 | 856 | | Accounts receivable, net | 4,377 | 3,917 | | Total current assets | 7,922 | 5,060 | | Property and equipment, net | 2,546 | 2,083 | | Total assets | 11,265 | 8,078 | | Accounts payable | 2,807 | 2,154 | | Accrued liabilities | 1,180 | 569 | | Deferred revenue | 4,022 | 4,704 | | Total current liabilities | 8,025 | 7,453 | | Total liabilities | 9,027 | 8,075 | | Total stockholders' equity | 2,238 | 3 | - Cash and cash equivalents significantly increased from **$856,000** in 2018 to **$3.237 million** in 2019[206](index=206&type=chunk) - The company's accumulated deficit improved from **$(70.826) million** in 2018 to **$(70.698) million** in 2019[206](index=206&type=chunk) [Consolidated Statements of Operations](index=35&type=section&id=Consolidated%20Statements%20of%20Operations) The company achieved net income of $128,000 in 2019, a significant improvement from a net loss of $1.476 million in 2018, driven by 33.7% revenue growth - Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Year Ended April 30, 2019 ($) | Year Ended April 30, 2018 ($) | |:-----------------------------------|:------------------------------|:------------------------------| | Oncology services revenue | 27,067 | 20,241 | | Total costs and operating expenses | 26,797 | 21,595 | | Income (loss) from operations | 270 | (1,354) | | Net income (loss) | 128 | (1,476) | | Net income (loss) per common share (basic and diluted) | 0.01 | (0.13) | | Weighted average common shares outstanding (basic) | 11,340,184 | 10,991,105 | - The company reported a net income of **$128,000** in 2019, a substantial improvement from a net loss of **$1.476 million** in 2018[210](index=210&type=chunk) - Oncology services revenue increased by **33.7%** from **$20.241 million** in 2018 to **$27.067 million** in 2019[210](index=210&type=chunk) - Income from operations turned positive at **$270,000** in 2019, compared to a loss of **$1.354 million** in 2018[210](index=210&type=chunk) [Consolidated Statement of Changes in Stockholders' Equity](index=36&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity significantly increased to $2.238 million in 2019, primarily due to common stock issuance from option and warrant exercises and net income - Changes in Stockholders' Equity (in thousands) | Metric | April 30, 2018 ($) | April 30, 2019 ($) | |:-----------------------------------|:-------------------|:-------------------| | Total Stockholders' Equity (Balance) | 3 | 2,238 | | Stock-based compensation | 1,004 | 636 | | Issuance of common stock for services | 37 | 6 | | Issuance of common stock on exercise of stock options and warrants | 38 | 1,465 | | Net income (loss) | (1,476) | 128 | - Stockholders' equity increased from **$3,000** at April 30, 2018, to **$2.238 million** at April 30, 2019[212](index=212&type=chunk) - The exercise of stock options and warrants contributed **$1.465 million** to stockholders' equity in 2019[212](index=212&type=chunk) [Consolidated Statements of Cash Flows](index=37&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and restricted cash increased by $2.231 million in 2019, driven by positive operating cash flow and increased financing activities - Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Year Ended April 30, 2019 ($) | Year Ended April 30, 2018 ($) | |:-----------------------------------|:------------------------------|:------------------------------| | Net income (loss) | 128 | (1,476) | | Net cash provided by (used in) operating activities | 1,862 | (1,226) | | Net cash used in investing activities | (834) | (1,229) | | Net cash provided by financing activities | 1,203 | 13 | | Increase/(decrease) in cash and restricted cash | 2,231 | (2,439) | | Cash and restricted cash, end of year | 3,237 | 1,006 | - Net cash provided by operating activities was **$1.862 million** in 2019, a significant increase from net cash used of **$1.226 million** in 2018[216](index=216&type=chunk) - Net cash provided by financing activities increased substantially to **$1.203 million** in 2019, primarily due to proceeds from the exercise of options and warrants[216](index=216&type=chunk) - Cash and restricted cash at the end of the year increased to **$3.237 million** in 2019 from **$1.006 million** in 2018[216](index=216&type=chunk) [Notes to Consolidated Financial Statements](index=38&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies, financial statement line items, and other disclosures, including revenue recognition, income taxes, and stock-based compensation [Note 1. Organization and Basis of Presentation](index=38&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) Champions Oncology, Inc. is engaged in research and development technology solutions and services for oncology drug development, operating in one segment - Champions Oncology, Inc. is engaged in research and development technology solutions and services for oncology drug development, utilizing its TumorGraft Technology Platform for Translational Oncology Solutions (TOS) and Personalized Oncology Solutions (POS)[218](index=218&type=chunk) - The company operates in one reportable business segment and has two foreign subsidiaries (Champions Oncology (Israel), Limited and Champions Biotechnology U.K., Limited) which generated no revenue in **2018** or **2019**[219](index=219&type=chunk)[220](index=220&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=38&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) The consolidated financial statements are prepared in accordance with GAAP, requiring management estimates in areas like revenue recognition and deferred taxes - The consolidated financial statements are prepared in accordance with **GAAP**, requiring management to make estimates and assumptions that affect reported amounts[223](index=223&type=chunk) - Cash and cash equivalents include highly liquid investments maturing within **three months**, with restricted cash of **$150,000** in 2018 reclassified to cash in 2019 as it was no longer required as collateral[226](index=226&type=chunk)[227](index=227&type=chunk) - The company's liquidity needs are met through cash on hand, working capital, and proceeds from securities sales, with management believing current resources are adequate through **August 2020**[228](index=228&type=chunk) - Property and equipment are recorded at cost and depreciated on a straight-line basis over **3 to 7 years**, with capital leases recognized for laboratory equipment[232](index=232&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) - Goodwill is tested annually for impairment, with no impairment losses recognized in **2018** or **2019**, and POS operations no longer qualify as a separate reportable segment due to revenue representing approximately **5%** of total revenue[147](index=147&type=chunk)[239](index=239&type=chunk)[245](index=245&type=chunk) - Revenue is recognized under **ASC 606** when control of services is transferred to the customer, typically over time for single performance obligations in fixed-fee service contracts[261](index=261&type=chunk)[263](index=263&type=chunk) - Stock-based payments are expensed over the vesting period based on fair value calculated using the **Black-Scholes model**[254](index=254&type=chunk)[255](index=255&type=chunk) - Deferred income taxes are accounted for using the asset and liability method, with a full valuation allowance established against net deferred tax assets due to insufficient earnings history[256](index=256&type=chunk)[329](index=329&type=chunk) [Note 3. Accounts Receivable, Unbilled Services and Deferred Revenue](index=45&type=section&id=Note%203.%20Accounts%20Receivable%2C%20Unbilled%20Services%20and%20Deferred%20Revenue) Total accounts receivable, net, increased to $4.377 million in 2019, while deferred revenue decreased to $4.022 million - Accounts Receivable and Deferred Revenue (in thousands) | Metric | April 30, 2019 ($) | April 30, 2018 ($) | |:-----------------------------------|:-------------------|:-------------------| | Accounts receivable | 1,982 | 1,837 | | Unbilled services | 2,417 | 2,093 | | Total accounts receivable and unbilled services | 4,399 | 3,930 | | Less allowance for doubtful accounts | (22) | (13) | | Total accounts receivable, net | 4,377 | 3,917 | | Deferred revenue | 4,022 | 4,704 | - Total accounts receivable, net, increased from **$3.917 million** in 2018 to **$4.377 million** in 2019[278](index=278&type=chunk) - Deferred revenue decreased from **$4.704 million** in 2018 to **$4.022 million** in 2019[278](index=278&type=chunk) [Note 4. Property and Equipment](index=45&type=section&id=Note%204.%20Property%20and%20Equipment) Property and equipment, net, increased to $2.546 million in 2019, with depreciation and amortization expense rising to $606,000 - Property and Equipment, Net (in thousands) | Category | April 30, 2019 ($) | April 30, 2018 ($) | |:-----------------------------------|:-------------------|:-------------------| | Furniture and fixtures | 142 | 73 | | Computer equipment and software | 1,104 | 973 | | Laboratory equipment | 3,358 | 2,490 | | Assets in progress | 16 | 15 | | Total property and equipment | 4,620 | 3,551 | | Less: Accumulated depreciation and amortization | (2,074) | (1,468) | | Property and equipment, net | 2,546 | 2,083 | - Property and equipment, net, increased from **$2.083 million** in 2018 to **$2.546 million** in 2019[279](index=279&type=chunk) - Depreciation and amortization expense was **$606,000** in 2019, up from **$360,000** in 2018[279](index=279&type=chunk) [Note 5. Revenue from Contracts with Customers](index=46&type=section&id=Note%205.%20Revenue%20from%20Contracts%20with%20Customers) The company adopted ASC 606 in 2018, recognizing revenue over time for pharmacology services, which significantly increased in 2019 - The company adopted **ASC 606** on **May 1, 2018**, recognizing revenue when customers obtain control of promised services, with most contracts having a single performance obligation satisfied over time[283](index=283&type=chunk)[284](index=284&type=chunk)[285](index=285&type=chunk) - Disaggregated Revenue (in thousands) | Service Type | 2019 ($) | 2018 ($) | |:---------------------------|:---------|:---------| | Pharmacology services | 25,484 | 18,026 | | Personalized oncology services | 1,277 | 1,455 | | Other TOS revenue | 306 | 760 | | Total oncology services revenue | 27,067 | 20,241 | - Pharmacology services revenue increased significantly from **$18.026 million** in 2018 to **$25.484 million** in 2019, while Personalized oncology services revenue decreased[288](index=288&type=chunk) [Note 6. Significant Customers](index=47&type=section&id=Note%206.%20Significant%20Customers) In 2019, one customer accounted for 10.7% of total revenue, a change from two significant customers in 2018 - In 2019, one customer accounted for **10.7% ($2.9 million)** of total revenue, compared to two customers accounting for **20.6% ($4.2 million)** and **12.8% ($2.6 million)** in 2018[292](index=292&type=chunk)[293](index=293&type=chunk) - As of **April 30, 2019**, no single customer accounted for more than **10.0%** of total accounts receivable, a change from 2018 where two customers represented **22.6%** and **19.0%** of receivables[294](index=294&type=chunk) [Note 7. Commitments and Contingencies](index=47&type=section&id=Note%207.%20Commitments%20and%20Contingencies) The company leases facilities with future minimum lease payments totaling $11.527 million and is not involved in material legal matters - The company leases office and laboratory facilities under non-cancelable operating leases, with total rent expenses of **$822,000** in 2019 and **$657,000** in 2018[295](index=295&type=chunk) - Future Minimum Lease Payments (in thousands) | Fiscal Year | Amount ($) | |:------------|:-----------| | 2020 | 1,388 | | 2021 | 1,471 | | 2022 | 1,445 | | 2023 | 1,404 | | 2024 | 1,419 | | Thereafter | 4,400 | | Total | 11,527 | - The company is not currently party to any material legal matters and has not accrued any liquidated damages related to its registration payment arrangements[300](index=300&type=chunk)[301](index=301&type=chunk) - The company incurs upfront fees for licensing tumor samples and may be subject to royalty payments (**2% to 5%** of contract price) if licensed tumor models are used for sale in its TOS business, though no royalties have been paid or incurred as of **April 30, 2019**[302](index=302&type=chunk) [Note 8. Stock-based Payments](index=48&type=section&id=Note%208.%20Stock-based%20Payments) Total stock-based compensation expense decreased to $649,000 in 2019, with options granted having a weighted average fair value of $6.03 - Stock-based Compensation Expense (in thousands) | Category | 2019 ($) | 2018 ($) | |:---------------------------|:---------|:---------| | General and administrative | 458 | 689 | | Sales and marketing | 91 | 112 | | Research and development | 14 | 166 | | TOS cost of sales | 86 | 65 | | POS cost of sales | — | 2 | | Total | 649 | 1,034 | - Total stock-based compensation expense decreased from **$1.034 million** in 2018 to **$649,000** in 2019[303](index=303&type=chunk) - The company has two equity incentive plans (**2010** and **2008 Equity Plans**) and a Director Compensation Plan for granting stock options and restricted stock awards to employees, directors, and non-employees[306](index=306&type=chunk)[307](index=307&type=chunk)[309](index=309&type=chunk) - Stock Option Grants Black-Scholes Assumptions | Assumption | 2019 | 2018 | |:-----------|:----------------|:----------------| | Expected term in years | 3 - 6 | 3 - 6 | | Risk-free interest rates | 2.6% - 3.0% | 1.8% - 2.6% | | Volatility | 65% - 85% | 84% - 88% | | Dividend yield | —% | —% | - The weighted average fair value of stock options granted was **$6.03** in 2019 and **$2.19** in 2018[313](index=313&type=chunk) - Stock Options Activity | Metric | April 30, 2019 | April 30, 2018 | |:-----------------------------------|:---------------|:---------------| | Outstanding, May 1 | 2,705,845 | 2,308,704 | | Granted | 206,790 | 455,310 | | Exercised | (363,383) | (12,500) | | Canceled | (49,766) | — | | Forfeited | (9,750) | (7,042) | | Expired | (66,110) | (38,627) | | Outstanding, April 30 | 2,423,626 | 2,705,845 | | Vested as of April 30 | 2,133,920 | 2,462,099 | [Note 9. Common Stock](index=52&type=section&id=Note%209.%20Common%20Stock) In 2016, the company completed a public offering of 2,258,749 shares, generating $4.3 million in net proceeds, and issued shares for consulting services in 2019 - In **June 2016**, the company completed a public offering of **2,258,749 shares** of common stock at **$2.25 per share**, generating net proceeds of **$4.3 million** for R&D, working capital, and general corporate purposes[320](index=320&type=chunk)[321](index=321&type=chunk) - For the year ended **April 30, 2019**, the company issued **5,462 shares** of common stock valued at **$20,600** for consulting services[322](index=322&type=chunk) [Note 10. Provision for Income Taxes](index=53&type=section&id=Note%2010.%20Provision%20for%20Income%20Taxes) The company has a full valuation allowance against its net deferred tax assets and estimated U.S. net operating loss carry-forwards of $43 million in 2019 - Provision for Income Taxes (in thousands) | Category | 2019 ($) | 2018 ($) | |:---------|:---------|:---------| | Current Federal | — | — | | Current State | 2 | 3 | | Current Foreign | 101 | 30 | | Total Current | 103 | 33 | - Effective Tax Rate Reconciliation | Item | 2019 (%) | 2018 (%) | |:-----------------------------------|:---------|:---------| | Federal income tax at statutory rate | 21.0 | 29.7 | | US vs. foreign tax rate difference | 1.1 | 0.1 | | State income tax, net of federal benefit | 0.9 | (0.2) | | Permanent differences | (25.4) | 0.5 | | Increase in uncertain tax position | — | (2.1) | | Change in valuation allowance | 41.0 | 498.0 | | Changes in tax rates | 6.1 | (528.4) | | Income tax expense | 44.7 | (2.4) | - The **Tax Cuts and Jobs Act (2017)** resulted in a one-time **$7.6 million** reduction to deferred tax assets, offset by a similar reduction in the valuation allowance[328](index=328&type=chunk) - The company has established a full valuation allowance against its net deferred tax assets (**$15.0 million** in 2019, **$14.4 million** in 2018) due to insufficient operating history[329](index=329&type=chunk) - Estimated U.S. net operating loss carry-forwards were approximately **$43 million** in 2019 and **$41 million** in 2018, with some subject to **Section 382 limitations**[330](index=330&type=chunk)[331](index=331&type=chunk) - The company recognized a liability for uncertain tax positions of **$151,000** in both 2019 and 2018, related to foreign operations[334](index=334&type=chunk) [Note 11. Earnings Per Share](index=56&type=section&id=Note%2011.%20Earnings%20Per%20Share) Basic and diluted net income per share was $0.01 in 2019, a positive change from a net loss per share of $(0.13) in 2018 - Earnings Per Share Computation (dollars in thousands, except per share) | Metric | Year Ended 2019 | April 30, 2018 | |:-----------------------------------|:----------------|:---------------| | Net income (loss) attributable to common stockholders | $128 | $(1,476) | | Weighted Average common shares - basic | 11,340,184 | 10,991,105 | | Basic net income (loss) per share | $0.01 | $(0.13) | | Incremental shares from assumed exercise of warrants and stock options | 2,755,933 | — | | Adjusted weighted average share – diluted | 14,096,117 | 10,991,105 | | Diluted net income (loss) per share | $0.01 | $(0.13) | - Basic and diluted net income per share was **$0.01** in 2019, a positive change from a net loss per share of **$(0.13)** in 2018[337](index=337&type=chunk) - Total potential stock-based instruments outstanding that could affect future dilution were **4,095,066** in 2019, down from **4,710,129** in 2018[337](index=337&type=chunk) [Note 12. Related Party Transactions](index=56&type=section&id=Note%2012.%20Related%20Party%20Transactions) The company paid two board members for consulting services unrelated to their board duties in both 2019 and 2018 - The company paid two board members for consulting services unrelated to their board duties: **$72,000** to one member in both 2019 and 2018, and **$73,000** (2019) and **$95,000** (2018) to another[339](index=339&type=chunk) [Note 13. Line of Credit](index=56&type=section&id=Note%2013.%20Line%20of%20Credit) A $1.5 million line of credit was not renewed upon its October 2018 maturity, as it was no longer deemed necessary for working capital needs - A **$1.5 million** line of credit agreement, entered into in **October 2017**, was not renewed upon its **October 2018** maturity, as the company determined it was no longer necessary for working capital needs[340](index=340&type=chunk)

Champions Oncology, Inc. (NASDAQ:CSBR) Q4 2019 Earnings Conference Call July 15, 2019 8:00 AM ET Company Participants Ronnie Morris - CEO David Miller - CFO Conference Call Participants Matthew Hewitt - Craig-Hallum Capital Group LLC Paul Knight - Janney Montgomery Scott LLC. Operator Greetings. Welcome to the Champions Oncology Fourth Quarter Fiscal Year 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-answer session will follow the formal presentation. (O ...

Champions Oncology, Inc. (NASDAQ:CSBR) Q3 2019 Earnings Conference Call March 18, 2019 4:30 PM ET Company Participants Ronnie Morris - CEO David Miller - CFO Conference Call Participants Matt Hewitt - Craig-Hallum Capital Paul Knight - Janney Montgomery Scott Unidentified Analyst - Unidentified Analyst - Unidentified Analyst - Operator Greetings, welcome to Champions Oncology Third Quarter Fiscal Year 2019 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer sessi ...

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and related disclosures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Champions Oncology, Inc., including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, and specific financial line items for the periods ended January 31, 2019, and April 30, 2018 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets ($ Thousands) | Metric | January 31, 2019 (unaudited) ($ Thousands) | April 30, 2018 ($ Thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------- | | Total Current Assets | 7,527 | 5,060 | | Total Assets | 10,911 | 8,078 | | Total Current Liabilities | 7,704 | 7,453 | | Total Liabilities | 8,588 | 8,075 | | Total Stockholders' Equity | 2,323 | 3 | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income or loss over specific periods Unaudited Condensed Consolidated Statements of Operations ($ Thousands) | Metric | Three Months Ended Jan 31, 2019 ($ Thousands) | Three Months Ended Jan 31, 2018 ($ Thousands) | Nine Months Ended Jan 31, 2019 ($ Thousands) | Nine Months Ended Jan 31, 2018 ($ Thousands) | | :--------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Oncology services revenue | 6,430 | 5,082 | 19,348 | 15,319 | | Total costs and operating expenses | 6,800 | 5,149 | 18,962 | 16,074 | | Income (loss) from operations | (370) | (67) | 386 | (755) | | Net income (loss) | (369) | (76) | 381 | (844) | | Basic and diluted EPS | (0.03) | (0.01) | 0.03 | (0.08) | [Condensed Consolidated Statement of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity) This section outlines the changes in the company's equity components over a specified period Condensed Consolidated Statement of Changes in Stockholders' Equity ($ Thousands) | Metric | May 1, 2018 Balance ($ Thousands) | Jan 31, 2019 Balance ($ Thousands) | | :--------------------------------- | :-------------------------------- | :--------------------------------- | | Common Stock Amount | 11 | 12 | | Additional Paid-in Capital | 72,070 | 72,756 | | Accumulated Deficit | (70,826) | (70,445) | | Total Stockholders' Equity | 3 | 2,323 | - Total stockholders' equity increased significantly from **$3,000** as of May 1, 2018, to **$2,323,000** as of January 31, 2019, driven by net income, stock-based compensation, and issuance of common stock from option/warrant exercises[13](index=13&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities Unaudited Condensed Consolidated Statements of Cash Flows ($ Thousands) | Cash Flow Activity | Nine Months Ended Jan 31, 2019 ($ Thousands) | Nine Months Ended Jan 31, 2018 ($ Thousands) | | :---------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash from operating activities | 1,610 | (1,235) | | Net cash from investing activities | (693) | (1,017) | | Net cash from financing activities | 1,387 | 19 | | Increase/(decrease) in cash and restricted cash | 2,304 | (2,233) | | Cash and restricted cash at end of period | 3,310 | 1,062 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the financial statements [Note 1. Organization, Use of Estimates and Basis of Presentation](index=9&type=section&id=Note%201.%20Organization%2C%20Use%20of%20Estimates%20and%20Basis%20of%20Presentation) This note describes the company's business, operational structure, and key accounting assumptions - Champions Oncology, Inc. specializes in oncology drug research and development technology solutions and services, utilizing its TumorGraft Technology Platform for Translational Oncology Solutions (TOS) for pharmaceutical companies and Personalized Oncology Solutions (POS) for physicians[19](index=19&type=chunk) - The company operates with two foreign subsidiaries, Champions Oncology (Israel), Limited and Champions Biotechnology U.K., Limited, which generated no revenue for the reported periods[20](index=20&type=chunk) [Note 2. Significant Accounting Policies](index=10&type=section&id=Note%202.%20Significant%20Accounting%20Policies) This note outlines the critical accounting principles and methods used in preparing the financial statements [Cash, Cash Equivalents and Restricted Cash](index=10&type=section&id=Cash%2C%20Cash%20Equivalents%20and%20Restricted%20Cash) This sub-note details the composition and changes in the company's cash and restricted cash balances - Restricted cash of **$150,000** as of April 30, 2018, previously held as collateral for corporate credit cards, was reclassified to cash by January 31, 2019, as the issuing bank deemed renewal unnecessary after the CD matured in October 2018[24](index=24&type=chunk) Cash, Cash Equivalents and Restricted Cash ($ Thousands) | Metric | January 31, 2019 (unaudited) ($ Thousands) | April 30, 2018 ($ Thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------- | | Cash | 3,310 | 856 | | Restricted cash | — | 150 | | Total cash and restricted cash | 3,310 | 1,006 | [Liquidity](index=10&type=section&id=Liquidity) This sub-note discusses the company's ability to meet its short-term and long-term financial obligations - The Company's liquidity needs are primarily for R&D, new product launches, working capital, and strategic initiatives, historically met through cash, working capital management, and proceeds from securities offerings[26](index=26&type=chunk) Liquidity Metrics ($ Thousands) | Metric | As of January 31, 2019 ($ Thousands) | | :-------------------- | :----------------------------------- | | Net income (9 months) | 381 | | Cash flow from operations (9 months) | 1,600 | | Accumulated deficit | (70,400) | | Negative working capital | (177) | | Cash | 3,300 | - Management believes current cash and improved operational cash flows are sufficient to fund operations through at least March 2020, but acknowledges no assurance for raising additional capital if needed[26](index=26&type=chunk) [Earnings Per Share](index=11&type=section&id=Earnings%20Per%20Share) This sub-note explains the calculation of basic and diluted earnings per share - Basic and diluted EPS are calculated by dividing net income/loss by the weighted-average common shares outstanding, with dilutive shares including common stock purchase warrants and stock options[28](index=28&type=chunk) Earnings Per Share and Shares Outstanding | Metric | Three Months Ended Jan 31, 2019 | Three Months Ended Jan 31, 2018 | Nine Months Ended Jan 31, 2019 | Nine Months Ended Jan 31, 2018 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic and Diluted EPS | $(0.03) | $(0.01) | $0.03 | $(0.08) | | Weighted Average Common Shares Outstanding (Basic) | 11,508,180 | 10,994,434 | 11,257,314 | 10,987,797 | | Weighted Average Common Shares Outstanding (Diluted) | 11,508,180 | 10,994,434 | 13,909,063 | 10,987,797 | [Income Taxes](index=12&type=section&id=Income%20Taxes) This sub-note provides information on the company's income tax provisions, deferred taxes, and uncertain tax positions - The Company provides a valuation allowance for all net deferred tax assets due to an insufficient history of earnings, indicating that recovery is not more likely than not[31](index=31&type=chunk) - The income tax provision for the nine months ended January 31, 2019, was **$0**, compared to **$18,000** for the same period in 2018[35](index=35&type=chunk) - The Company has recorded **$151,000** in liabilities for uncertain tax positions related to foreign operations as of January 31, 2019, and April 30, 2018[33](index=33&type=chunk) [Revenue Recognition](index=12&type=section&id=Revenue%20Recognition) This sub-note describes the company's policies and methods for recognizing revenue from customer contracts - Revenue is generated from service-type contracts, primarily less than a year in duration, and recognized when control of services is transferred to the customer, reflecting the expected consideration[36](index=36&type=chunk) - The Company's fixed-fee oncology service arrangements are considered a single performance obligation, with revenue recognized over time using a progress-based input method[38](index=38&type=chunk)[39](index=39&type=chunk) - Variable consideration, contingent on uncertain future events, is estimated and included in the transaction price if a significant reversal of cumulative revenue is improbable upon resolution of uncertainty[40](index=40&type=chunk) [Accounting Pronouncements Being Evaluated](index=13&type=section&id=Accounting%20Pronouncements%20Being%20Evaluated) This sub-note identifies new accounting standards under assessment for future impact on financial statements - The Company is currently assessing the impact of ASU 2018-15 (Cloud Computing Arrangement implementation costs) and ASU No. 2016-13 (Financial Instruments - Credit Losses) on its consolidated financial statements, both effective for fiscal years beginning after December 15, 2019[43](index=43&type=chunk)[44](index=44&type=chunk) - The adoption of ASU No. 2016-02 (Leases) on May 1, 2019, is expected to have a material impact on the consolidated balance sheet by recognizing operating leases as right-of-use assets and lease liabilities, but not on statements of operations or cash flows[46](index=46&type=chunk) [Recently Adopted Accounting Pronouncements](index=14&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) This sub-note details the impact of recently implemented accounting standards on the financial statements - The Company adopted ASU 2018-07 (Nonemployee Share-Based Payment Accounting) for the quarter ended January 31, 2019, with no material impact[47](index=47&type=chunk) - ASU 2016-18 (Restricted Cash) and ASU No. 2016-15 (Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments) were adopted on May 1, 2018, with no material impact on consolidated financial statements[49](index=49&type=chunk)[50](index=50&type=chunk) - ASU 2014-09 (Revenue from Contracts with Customers) was adopted on May 1, 2018, using the modified retrospective method, which did not have a material measurement impact on consolidated financial statements[51](index=51&type=chunk) [Note 3. Accounts Receivable, Unbilled Services and Deferred Revenue](index=15&type=section&id=Note%203.%20Accounts%20Receivable%2C%20Unbilled%20Services%20and%20Deferred%20Revenue) This note provides details on the company's accounts receivable, unbilled services, and deferred revenue balances Accounts Receivable, Unbilled Services and Deferred Revenue ($ Thousands) | Metric | January 31, 2019 (unaudited) ($ Thousands) | April 30, 2018 ($ Thousands) | | :---------------------------------------- | :--------------------------------------- | :--------------------------- | | Deferred revenue | 4,723 | 4,704 | | Accounts receivable, net | 3,919 | 3,917 | - Deferred revenue, classified as a current liability, increased slightly from **$4,704,000** to **$4,723,000**, while net accounts receivable remained stable at approximately **$3,919,000**[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) [Note 4. Revenue from Contracts with Customers](index=15&type=section&id=Note%204.%20Revenue%20from%20Contracts%20with%20Customers) This note provides a breakdown of revenue by service category and explains the application of ASC 606 - The Company adopted ASC 606 on May 1, 2018, recognizing revenue when customers obtain control of promised services, with most contracts having a single performance obligation completed within a year[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) Revenue from Contracts with Customers ($ Thousands) | Revenue Category | Three Months Ended Jan 31, 2019 ($ Thousands) | Three Months Ended Jan 31, 2018 ($ Thousands) | Nine Months Ended Jan 31, 2019 ($ Thousands) | Nine Months Ended Jan 31, 2018 ($ Thousands) | | :----------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Pharmacology services | 5,988 | 4,447 | 18,037 | 13,600 | | Personalized oncology services | 416 | 259 | 1,024 | 1,077 | | Other | 26 | 376 | 287 | 642 | | Total oncology services revenue | 6,430 | 5,082 | 19,348 | 15,319 | [Note 5. Property and Equipment](index=17&type=section&id=Note%205.%20Property%20and%20Equipment) This note details the company's property and equipment, including additions, depreciation, and capital leases Property and Equipment, Net ($ Thousands) | Asset Category | January 31, 2019 (unaudited) ($ Thousands) | April 30, 2018 ($ Thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------- | | Total property and equipment | 4,479 | 3,551 | | Less: Accumulated depreciation | (1,901) | (1,468) | | Property and equipment, net | 2,578 | 2,083 | - Net property and equipment increased by **$495,000** from April 30, 2018, to January 31, 2019, primarily due to additions in laboratory equipment and computer equipment[66](index=66&type=chunk) - Depreciation and amortization expense increased significantly for both the three-month (**$127,000** vs. **$98,000**) and nine-month (**$353,000** vs. **$233,000**) periods ended January 31, 2019, compared to 2018[66](index=66&type=chunk) - The Company entered into a second capital lease for laboratory equipment in July 2018 for approximately **$266,000**, which was paid off on February 1, 2019, and is included as a current liability[68](index=68&type=chunk) [Note 6. Share-Based Payments](index=18&type=section&id=Note%206.%20Share-Based%20Payments) This note describes the company's share-based compensation plans and related expenses Total Stock-Based Compensation Expense ($ Thousands) | Metric | Three Months Ended Jan 31, 2019 ($ Thousands) | Three Months Ended Jan 31, 2018 ($ Thousands) | Nine Months Ended Jan 31, 2019 ($ Thousands) | Nine Months Ended Jan 31, 2018 ($ Thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total stock-based compensation expense | 335 | 152 | 498 | 848 | - Stock-based compensation expense increased for the three months ended January 31, 2019, due to increased expense from stock options granted, but decreased for the nine-month period compared to the prior year, which included a **$57,000** option modification charge[73](index=73&type=chunk) - As of January 31, 2019, there was **$970,000** in unrecognized stock-based compensation to be expensed over 4.3 years[73](index=73&type=chunk) Stock Option Activity | Stock Option Activity | Outstanding, May 1, 2018 | Granted | Exercised | Forfeited | Canceled | Expired | Outstanding, Jan 31, 2019 | | :-------------------- | :----------------------- | :------ | :-------- | :-------- | :-------- | :------ | :------------------------ | | Total Options | 2,705,845 | 206,790 | (357,242) | (8,375) | (40,183) | (16,667) | 2,490,168 | | Weighted Average Exercise Price | $2.85 | $9.86 | $2.18 | — | $2.10 | — | $3.45 | | Aggregate Intrinsic Value | $5,265,000 | — | $2,782,000 | — | $370,626 | — | $22,036,000 | [Note 7. Related Party Transactions](index=20&type=section&id=Note%207.%20Related%20Party%20Transactions) This note discloses transactions between the company and its related parties - The Company paid **$54,000** to a Board member for consulting services in both the nine-month periods ended January 31, 2019 and 2018[79](index=79&type=chunk) - An affiliate of a board member received **$54,000** for consulting services in the nine months ended January 31, 2019, a decrease from **$73,000** in the prior year[79](index=79&type=chunk) [Note 8. Commitments and Contingencies](index=20&type=section&id=Note%208.%20Commitments%20and%20Contingencies) This note outlines the company's contractual obligations and potential liabilities - Total rent expenses for operating leases increased to **$583,000** for the nine months ended January 31, 2019, from **$480,000** in the prior year[80](index=80&type=chunk) - The Company entered into a new lease for laboratory and office space at 1405 Research Boulevard, Rockville, Maryland, effective January 17, 2019, expiring in January 2024[86](index=86&type=chunk) Future Minimum Lease Payments ($ Thousands) | Fiscal Year Ended April 30, | Future Minimum Lease Payments ($ Thousands) | | :-------------------------- | :------------------------------------------ | | 2019 (remaining) | 155 | | 2020 | 1,077 | | 2021 | 1,161 | | 2022 | 1,139 | | 2023 | 1,102 | | Thereafter | 4,225 | | Total | 8,859 | [Note 9. Lines of Credit](index=21&type=section&id=Note%209.%20Lines%20of%20Credit) This note provides information on the company's credit facilities and their status - A **$1.5 million** line of credit agreement with a national bank, entered into on October 30, 2017, matured on October 29, 2018, and was not renewed, as the Company believes it is not currently necessary for working capital needs[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, liquidity, and capital resources, highlighting key operational results and recent developments [Forward-Looking Statements](index=22&type=section&id=Forward-Looking%20Statements) This section cautions readers about inherent risks and uncertainties in future-oriented statements - The report contains forward-looking statements regarding future events, financial performance, strategies, and expectations, which are subject to risks and uncertainties that could cause actual results to differ materially[93](index=93&type=chunk)[94](index=94&type=chunk) - The Company assumes no obligation to update forward-looking statements unless required by applicable securities laws[95](index=95&type=chunk) [Overview and Recent Developments](index=22&type=section&id=Overview%20and%20Recent%20Developments) This section provides a general description of the company's business and recent operational highlights - Champions Oncology develops and sells advanced technology solutions for oncology drug development, leveraging its TumorGraft Technology Platform to provide services to pharmaceutical and biotechnology companies[96](index=96&type=chunk) - The TumorGraft Technology Platform aims to simulate human clinical trials, reducing drug development costs and accelerating drug discovery, while focusing future growth on the Translational Oncology Solutions (TOS) program[97](index=97&type=chunk)[98](index=98&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial resources and its ability to meet ongoing cash needs - The Company's liquidity needs are driven by R&D, new product launches, working capital, and strategic initiatives, historically funded by cash, working capital management, and proceeds from securities offerings[101](index=101&type=chunk) Liquidity and Capital Resources Metrics ($ Thousands) | Metric | As of January 31, 2019 ($ Thousands) | | :-------------------- | :----------------------------------- | | Net income (9 months) | 381 | | Cash flow from operations (9 months) | 1,600 | | Accumulated deficit | (70,400) | | Negative working capital | (177) | | Cash | 3,300 | - Management believes current cash and improved cash flows from operations are sufficient to fund operations through at least March 2020, but there's no guarantee of successfully raising additional capital if required[101](index=101&type=chunk) [Operating Results](index=23&type=section&id=Operating%20Results) This section analyzes the company's financial performance, including revenue and expense trends [Oncology Services Revenue](index=23&type=section&id=Oncology%20Services%20Revenue) This sub-section analyzes the revenue generated from the company's oncology services Oncology Services Revenue ($ Thousands) | Period | 2019 Revenue ($ Thousands) | 2018 Revenue ($ Thousands) | % Change | | :-------------------------- | :------------------------- | :------------------------- | :------- | | Three Months Ended Jan 31 | 6,430 | 5,082 | 26.5% | | Nine Months Ended Jan 31 | 19,348 | 15,319 | 26.3% | - The increase in oncology services revenue for both periods is attributed to higher sales volume (number and size of studies), an expanding customer base, and platform growth[103](index=103&type=chunk) [Cost of Oncology Services](index=24&type=section&id=Cost%20of%20Oncology%20Services) This sub-section examines the expenses directly associated with providing oncology services Cost of Oncology Services ($ Thousands) | Period | 2019 Cost ($ Thousands) | 2018 Cost ($ Thousands) | % Change | | :-------------------------- | :---------------------- | :---------------------- | :------- | | Three Months Ended Jan 31 | 3,429 | 2,473 | 38.7% | | Nine Months Ended Jan 31 | 9,963 | 7,737 | 28.8% | Gross Margin | Period | 2019 Gross Margin | 2018 Gross Margin | | :-------------------------- | :---------------- | :---------------- | | Three Months Ended Jan 31 | 46.7% | 51.3% | | Nine Months Ended Jan 31 | 48.5% | 49.5% | - The increase in cost of oncology services is primarily due to higher salary and mice costs resulting from increased study volume, leading to a decrease in gross margins due to timing differences between expense and revenue recognition[105](index=105&type=chunk) [Research and Development](index=24&type=section&id=Research%20and%20Development) This sub-section details the expenses incurred for the company's research and development activities Research and Development Expense ($ Thousands) | Period | 2019 Expense ($ Thousands) | 2018 Expense ($ Thousands) | % Change | | :-------------------------- | :------------------------- | :------------------------- | :------- | | Three Months Ended Jan 31 | 1,269 | 1,045 | 21.4% | | Nine Months Ended Jan 31 | 3,550 | 3,308 | 7.3% | - Increased R&D expenses for both periods are attributed to lab costs and salaries associated with new product development[106](index=106&type=chunk) [Sales and Marketing](index=24&type=section&id=Sales%20and%20Marketing) This sub-section analyzes the expenses related to the company's sales and marketing efforts Sales and Marketing Expense ($ Thousands) | Period | 2019 Expense ($ Thousands) | 2018 Expense ($ Thousands) | % Change | | :-------------------------- | :------------------------- | :------------------------- | :------- | | Three Months Ended Jan 31 | 879 | 627 | 40.2% | | Nine Months Ended Jan 31 | 2,138 | 1,862 | 14.8% | - The rise in sales and marketing expenses for both periods is primarily due to increased commissions paid to the business development team based on bookings[107](index=107&type=chunk) [General and Administrative](index=24&type=section&id=General%20and%20Administrative) This sub-section discusses the overhead expenses not directly tied to production or sales General and Administrative Expense ($ Thousands) | Period | 2019 Expense ($ Thousands) | 2018 Expense ($ Thousands) | % Change | | :-------------------------- | :------------------------- | :------------------------- | :------- | | Three Months Ended Jan 31 | 1,223 | 1,004 | 21.8% | | Nine Months Ended Jan 31 | 3,311 | 3,167 | 4.5% | - General and administrative expenses increased for the three-month period due to higher stock-based compensation and salary expenses, while the nine-month increase was mainly from recruiting and salary expenses[108](index=108&type=chunk) [Inflation](index=24&type=section&id=Inflation) This sub-section assesses the impact of inflation on the company's financial performance - Inflation does not have a meaningful impact on the Company's operating results[109](index=109&type=chunk) [Cash Flows](index=25&type=section&id=Cash%20Flows) This section provides an overview of the company's cash inflows and outflows across different activities [Cash Flows from Operating Activities](index=25&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This sub-section details cash generated or used by the company's core business operations Net Cash Flow from Operating Activities ($ Thousands) | Period | Net Cash Flow from Operating Activities ($ Thousands) | | :-------------------------- | :---------------------------------------------------- | | Nine Months Ended Jan 31, 2019 | 1,600 | | Nine Months Ended Jan 31, 2018 | (1,200) | - The significant improvement in cash flow from operating activities is primarily due to an increase in net income and favorable timing of ordinary business fluctuations in current operating accounts[111](index=111&type=chunk) [Cash Flows from Investing Activities](index=25&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This sub-section outlines cash used for or generated from investment-related activities Net Cash Flow from Investing Activities ($ Thousands) | Period | Net Cash Flow from Investing Activities ($ Thousands) | | :-------------------------- | :---------------------------------------------------- | | Nine Months Ended Jan 31, 2019 | (693) | | Nine Months Ended Jan 31, 2018 | (1,000) | - Cash used in investing activities decreased, reflecting continued capital investment for product and service expansion in 2019, compared to higher outflows in 2018 for a new lab facility[112](index=112&type=chunk) [Cash Flows from Financing Activities](index=25&type=section&id=Cash%20Flows%20from%20Financing%20Activities) This sub-section describes cash flows related to debt, equity, and dividend transactions Net Cash Flow from Financing Activities ($ Thousands) | Period | Net Cash Flow from Financing Activities ($ Thousands) | | :-------------------------- | :---------------------------------------------------- | | Nine Months Ended Jan 31, 2019 | 1,400 | | Nine Months Ended Jan 31, 2018 | 19 | - The significant increase in net cash provided by financing activities is primarily due to the exercise of stock options[113](index=113&type=chunk) [Critical Accounting Estimates and Policies](index=25&type=section&id=Critical%20Accounting%20Estimates%20and%20Policies) This section highlights accounting estimates requiring significant management judgment - Key accounting estimates include accounts receivable realization, revenue recognition, valuation allowance for deferred tax assets, goodwill valuation, and stock compensation/warrant assumptions, which require management judgment and can impact reported financial amounts[114](index=114&type=chunk) [Recent Accounting Pronouncements](index=25&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to detailed information on new accounting standards - Detailed information on recently issued accounting pronouncements and their expected impact is provided in Note 2, 'Significant Accounting Policies,' within the financial statements[115](index=115&type=chunk) [Off-Balance Sheet Financing](index=25&type=section&id=Off-Balance%20Sheet%20Financing) This section confirms the absence of certain financial arrangements not recorded on the balance sheet - The Company has no off-balance sheet debt, similar obligations, or undisclosed related-party transactions, and does not guarantee any third-party debt[116](index=116&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not applicable to smaller reporting companies - Quantitative and qualitative disclosures about market risk are not applicable to smaller reporting companies[117](index=117&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the management's evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=25&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section assesses the effectiveness of controls ensuring accurate and timely financial reporting - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of January 31, 2019, ensuring timely and accurate reporting of required information[118](index=118&type=chunk)[120](index=120&type=chunk) [Changes in Internal Control Over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports any material changes in the company's internal controls - There were no material changes in internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q[121](index=121&type=chunk) [PART II – OTHER INFORMATION](index=27&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section contains additional disclosures not covered in the financial statements [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms that the Company is not currently involved in any legal proceedings - The Company is not currently party to any legal matters and is unaware of any other matters that would materially impact its financial position or results of operations[89](index=89&type=chunk)[124](index=124&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section outlines the primary risk factor related to the Company's ability to meet its cash requirements and continue as a going concern beyond March 2020 - The Company may not be able to meet its cash requirements beyond March 2020 without continued improved cash flows from operations, reducing activities, or obtaining additional capital, which could jeopardize its ability to continue as a going concern[125](index=125&type=chunk)[126](index=126&type=chunk) Risk Factors Metrics ($ Thousands) | Metric | As of January 31, 2019 ($ Thousands) | | :-------------------- | :----------------------------------- | | Net income (9 months) | 381 | | Cash flow from operations (9 months) | 1,600 | | Accumulated deficit | (70,400) | | Negative working capital | (177) | | Cash | 3,300 | [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities or use of proceeds during the reporting period[128](index=128&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities - There were no defaults upon senior securities during the reporting period[129](index=129&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[130](index=130&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - There is no other information to report in this section[131](index=131&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed or furnished with the Form 10-Q, including certifications and XBRL documents - Exhibits include Section 302 Certifications from the Principal Executive Officer and Principal Financial Officer, Certification Pursuant to 18 U.S.C. Section 1350, and various XBRL Taxonomy Extension Documents[133](index=133&type=chunk) [SIGNATURES](index=29&type=section&id=SIGNATURES) This section formally attests to the accuracy and completeness of the report by authorized officers [Signatures](index=29&type=section&id=Signatures) This section contains the signatures of the registrant's authorized officers, confirming the filing of the report - The report is duly signed on behalf of CHAMPIONS ONCOLOGY, INC. by Ronnie Morris, Chief Executive Officer, and David Miller, Chief Financial Officer, on March 18, 2019[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)