What changed in this filing

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Item 9A. Controls and Procedures

2020-07-28 compared with 2019-07-29 · 315 added, 212 removed, 618 unchanged (46% of the section changed)

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Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have reviewed and evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 10-K.

Based on that evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K.

Management’s Annual Report on Internal Control Over Financial Reporting

As required by Rule 13a-15 under the Exchange Act , our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have reviewed and evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act Rule 13a-15(e)) as of April 30, 2020.

Based on that evaluation, these officers have concluded that, as of April 30, 2020, our disclosure controls and procedures were effective to achieve their stated purpose.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules, regulations, and forms.

Disclosure controls and procedures include, without limitation,

controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding disclosure.

Limitations on the Effectiveness of Controls

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a–15(f).

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on control criteria framework of the Committee of Sponsoring Organizations, or COSO, of the Treadway Commission published in its report entitled Internal Control – Integrated Framework (2013) .

Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of April 30, 2019 .

Management’s Annual Report on Changes in Internal Controls

There were no changes in our internal controls over financial reporting during the quarter ended April 30, 2019 , that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on control criteria framework, Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations, or COSO.

Based on our evaluation, management concluded that our internal control over financial reporting was effective as of April 30, 2020 .

Management’s Report on Changes in Internal Controls

In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our Chief Executive Officer and Chief Financial Officer, concluded that there were no changes in our internal control over financial reporting during the quarter ended April 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

Directors, Executive Officers and Corporate Governance

The information required by item 10 will be contained in the Proxy Statement and is incorporated herein by reference.

The information required by this item will be contained in our 2020 Proxy Statement and such information is incorporated herein by this reference.

Executive Compensation

The information required by item 11 will be contained in the Proxy Statement and is incorporated herein by reference.

The information required by this item will be contained in our 2020 Proxy Statement and such information is incorporated herein by this reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by item 12 will be contained in the Proxy Statement and is incorporated herein by reference.

The information required by this item will be contained in our 2020 Proxy Statement and such information is incorporated herein by this reference.

Certain Relationships and Related Transactions, and Director Independence

The information required by item 13 will be contained in the Proxy Statement and is incorporated herein by reference.

The information required by this item will be contained in our 2020 Proxy Statement and such information is incorporated herein by this reference.

Principal Accounting Fees and Services

The information required by item 14 will be contained in the Proxy Statement and is incorporated herein by reference.

The information required by this item will be contained in our 2020 Proxy Statement and such information is incorporated herein by this reference.

Exhibits, Financial Statement Schedules

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Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed May 9, 2017)

Description of Registered Securities *

Employment Agreement, dated November 5, 2013, between the Company and Ronnie Morris, M.D.

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Consolidated Statements of Operations

Consolidated Statement of Changes in Stockholders' Equity

Consolidated Statements of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

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and Subsidiaries (the “Company") as of April 30, 2020 and 2019 , and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of April 30, 2020 and 2019, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases in fiscal year 2020 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

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Current assets:

Cash and cash equivalents

Accounts receivable, net

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Total current assets

Restricted cash

Operating lease right-of-use assets, net

Property and equipment, net

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Accrued liabilities

Current portion of capital lease

Current portion of operating lease liabilities

Current portion of finance lease

Deferred revenue

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Deferred rent

Capital lease, net of current portion

Non-current portion operating lease liabilities

Other non-current liabilities

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12,726,728 and 11,619,538 shares issued and 12,726,728 and 11,619,538 shares outstanding as of April 30, 2020 and April 30, 2019, respectively

Treasury stock, at cost, nil and 269,685 common shares as of April 30, 2019 and April 30, 2018, respectively

Additional paid-in capital

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General and administrative

Goodwill Impairment

Total costs and operating expenses

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Other expense

Total other expense

Income (loss) before income tax expense

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Stockholders'

Balance, May 1, 2017

Balance, April 30, 2018

Stock-based compensation and modification expense

Issuance of common stock for services

Issuance of common stock on exercise of stock options

Issuance of common stock on exercise of stock options and warrants

Balance, April 30, 2019

Stock-based compensation

Issuance of common stock for services

Issuance of common stock on exercise of stock options and warrants

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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Stock-based compensation and modification expense

Stock-based compensation expense

Depreciation and amortization expense

Gain on disposal of equipment

Operating lease right-of-use assets

Deferred rent

Deferred compensation

Provision for (recovery of) doubtful accounts

Goodwill impairment

Allowance for doubtful accounts

Issuance of common stock for services

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Accrued liabilities

Operating lease liabilities

Other non-current liability

Deferred revenue

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Investing activities:

Purchase of property and equipment

Gain on disposal of fixed assets

Net cash used in investing activities

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Proceeds from exercise of options and warrants

Capital lease payments

Finance lease payments

Net cash provided by financing activities

Increase/(decrease) in cash and restricted cash

Cash and restricted cash, beginning of year

Cash and restricted cash, end of year

Increase in cash

Cash, beginning of year

Cash, end of year

Non-cash investing and financing activities:

Purchase equipment under capital lease

Purchased equipment under finance lease

Right-of-use assets obtained in exchange for operating lease liabilities

Credit received on purchase of equipment

The accompanying notes are an integral part of these Consolidated Financial Statements.

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The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates include, among other things, accounts receivable realization, revenue recognition (replacement of licensed tumors), valuation allowance for deferred tax assets, valuation of goodwill, and stock-based compensation and warrant assumptions.

We base our estimates on historical experience, our observance of trends in particular areas and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources.

Actual amounts could differ significantly from amounts previously estimated.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash, Cash Equivalents and Restricted Cash

The Company considers only those investments which are highly liquid, readily convertible to cash, and that mature within three months from date of purchase to be cash equivalents.

Restricted cash as of April 30, 2019 and 2018 was nil and $150,000 , respectively, which is classified as a non-current asset on the consolidated balance sheets.

This restricted cash served primarily as collateral for corporate credit cards to provide financial assurance that the Company will fulfill its obligations.

The cash was held in custody by the issuing bank, was restricted as to withdrawal or use, and was invested in an interest-bearing Certificate of Deposit (“CD”).

The CD matured in October 2018 and the issuing bank determined it was not necessary for the Company to renew.

As a result, the $150,000 was reclassified to cash on the Company's April 30, 2019 Consolidated Balance Sheet.

Cash and restricted cash consists of the following (table in thousands):

April 30, 2019

April 30, 2018

Restricted cash

Total cash and restricted cash

Cash and Cash Equivalents

The Company considers only those investments which are highly liquid, readily convertible to cash, and with original maturities of three months or less to be cash equivalents.

As of April 30, 2020 and 2019 the Company had cash balances of $8.3 million and $3.2 million , respectively, and no cash equivalents.

Our liquidity needs have typically arisen from the funding of our research and development programs and the launch of new products, working capital requirements, and other strategic initiatives.

In the past, we have met these cash requirements through our cash on hand, working capital management, proceeds from certain private placements and public offerings of our securities, and sales of products and services.

For the year ended April 30, 2019 , the Company had net income of approximately $128,000 .

As of April 30, 2019 , the Company had an accumulated deficit of approximately $70.6 million , negative working capital of $103,000 and cash and cash equivalents of $3.2 million .

For the year ended April 30, 2020 , the Company had a net loss of approximately $2.0 million , an accumulated deficit of approximately $72.7 million , working capital of $1.4 million and cash and cash equivalents of $8.3 million .

We believe that our cash on hand, together with continued improved cash flows from operations, are adequate to fund operations through at least August 2021.

Should the Company be required to raise additional capital, there can be no assurance that management would be successful in raising such capital on terms acceptable to us, if at all.

On October 30, 2017, the Company entered into a line of credit agreement with a national bank which provides that the Company may borrow up to $1.5 million .

The revolving line maturity date was October 29, 2018 and the line of credit was not renewed.

The Company believes that such line of credit was no longer necessary to fund the Company's working capital needs.

The carrying value of cash and cash equivalents, accounts receivable, prepaid expenses, deposits and other receivables, accounts payable, and accrued liabilities approximate their fair value based on the liquidity or the short-term maturities of these instruments.

The carrying value of cash, accounts receivable, prepaid expenses, deposits and other receivables, accounts payable, and accrued liabilities approximate their fair value based on the liquidity or the short-term maturities of these instruments.

The fair value hierarchy promulgated by GAAP consists of three levels:

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The Company evaluates its hierarchy disclosures each quarter.

The Company has no assets that are measured at fair value on a recurring basis and there were no assets or liabilities measured at fair value on a non-recurring basis during the year ended April 30, 2019 .

Property and Equipment

Property and equipment is recorded at cost and primarily consists of laboratory equipment, furniture and fixtures, and computer hardware and software.

Assets in progress include equipment not yet placed in service.

Depreciation and amortization is calculated on a straight-line basis over the estimated useful lives of the various assets ranging from three to seven years.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Capital Lease

In November 2014, the Company entered into a lease for laboratory equipment.

The lease was determined to be a capital lease that has costs of approximately $149,000 , at inception, through November 2019.

The current monthly capital lease payment is approximately $3,000 .

The future minimum lease payments remaining under this capital lease is $16,000 , which will be paid during fiscal year 2020.

The present value of minimum future obligations is calculated based on interest rate of 5% .

The short-term and long-term components of the capital lease obligation are included in accrued liabilities and other non-current liabilities, respectively at April 30, 2019 and 2018 .

In July 2018, the Company entered into a second capital lease for laboratory equipment.

The lease had total costs of approximately $266,000 , inclusive of interest and taxes, with a monthly payment of approximately $11,000 .

Although the lease was originally due to mature in July 2020, the Company decided to pay the outstanding balance on February 1, 2019.

As a result, the outstanding balance is nil as of April 30, 2019.

Assets in progress include equipment or software not yet placed in service.

Depreciation and amortization is calculated on a straight-line basis over the estimated useful lives of the various assets ranging from three to nine years.

Effective May 1, 2019, the Company accounts for its leases under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 842, Leases ("ASC 842").

Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

As the Company's leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term.

For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term.

The Company continues to account for leases in the prior period financial statements in accordance with ASC Topic 840.

Impairment of Long-Lived Assets

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These estimates only include the net cash flows directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of the asset or asset group.

The Company has not recognized any impairment losses for the Company’s long-lived assets for the years ending April 30, 2019 and 2018 .

Other long term assets

Other long term assets represents amounts relating to lease deposits for our Hackensack, New Jersey and Rockville, Maryland locations.

Goodwill represents the excess of the cost over the fair market value of the net assets acquired including identifiable assets.

Goodwill is tested annually for impairment of value and whenever events or changes in circumstances indicate the carrying amount of the asset may be impaired.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred.

Such indicators may include deterioration in general economic conditions, adverse changes in the markets in which an entity operates, increases in input costs that have negative effects on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others.

The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill.

The Company tests for goodwill impairment at the reporting unit level.

In testing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of a reporting unit is less than its carrying amount.

If the Company elects to perform a qualitative assessment and determine that an impairment is more likely than not, it is then required to perform a quantitative impairment test, otherwise no further analysis is required.

The Company also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test.

Under the qualitative assessment, various events and circumstances that would affect the estimated fair value of a reporting unit are identified (similar to impairment indicators above).

Furthermore, management considers the results of the most recent two-step quantitative impairment test completed for a reporting unit and compares the weighted average cost of capital between the current and prior years for each reporting unit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Under the quantitative impairment test, the evaluation involves comparing the current fair value of each reporting unit to its carrying value, including goodwill.

Fair value is typically estimated using a discounted cash flow analysis, which requires the Company to estimate the future cash flows anticipated to be generated by the reporting unit being tested for impairment as well as to select a risk-adjusted discount rate to measure the present value of the anticipated cash flows.

Company has no t recognized any impairment losses for the Company’s long-lived assets for the years ending April 30, 2020 and 2019 .

Other long term assets

Other long term assets represents amounts relating to lease deposits for our Hackensack, New Jersey and Rockville, Maryland locations.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.

The Company evaluates the carrying value of goodwill annually in connection with the annual budgeting and forecast process and also between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit to which goodwill was allocated to below its carrying amount.

Such circumstances could include, but are not limited to:

(1) a significant adverse change in legal factors, market conditions, or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator.

When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach.

Subsequently (if necessary after step zero), an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying value.

Under FASB's Accounting Standards Update ("ASU") 2014-02, Topic 350, "Intangibles—Goodwill and Other" goodwill impairment is measured as the excess of the carrying amount of the reporting unit over its fair value.

The impairment evaluation test involves comparing the current fair value of each business unit to its carrying value, including goodwill.

Fair value is typically estimated using a discounted cash flow analysis, which requires the Company to estimate the future cash flows anticipated to be generated by the business unit being tested for impairment as well as to select a risk-adjusted discount rate to measure the present value of the anticipated cash flows.

When determining future cash flow estimates, the Company considers historical results adjusted to reflect current and anticipated operating conditions.

The Company estimates cash flows for the reporting unit over a discrete period (typically four or five years) and the terminal period (considering expected long term growth rates and trends).

The Company estimates cash flows for the business unit over a discrete period (typically four or five years) and the terminal period (considering expected long term growth rates and trends).

Estimating future cash flows requires significant judgment by management in such areas as future economic conditions, industry-specific conditions, product pricing, and necessary capital expenditures.

The use of different assumptions or estimates for future cash flows or significant changes in risk-adjusted discount rates due to changes in market conditions could produce substantially different estimates of the fair value of the reporting unit.

The Company has not recognized any impairment losses for the Company’s goodwill for the years ended April 30, 2019 and 2018 .

We have one reportable segment.

The Company evaluated its TOS and POS business operations (or business units) and determined that the POS operations no longer qualified as a separate reportable segment primarily due to its revenue representing approximately 2.5% of total revenue.

The Company assesses goodwill by business unit, which are also reporting units.

Judgments regarding the existence of impairment indicators are based on legal factors, market conditions and operational performance of the acquired businesses.

Future events, including but not limited to continued declines in economic activity, loss of contracts or a significant number of customers, or a rapid increase in costs or capital expenditures, could cause us to conclude that impairment indicators exist and that goodwill is impaired.

As a result of its annual assessment, which included an estimation of the future cash flows of the POS operations as described above, the Company determined that, under a discounted cash flow model, the fair value of the POS business/reporting unit was below its carrying amount as of April 30, 2020.

The Company recognized goodwill impairment for the quarter and year ended April 30, 2020 of $335,000 .

As of April 30, 2020 and 2019, goodwill was $335,000 and $670,000 , respectively.

Deferred Revenue

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Other Non-Current Liabilities

Other non-current liabilities represents amounts relating to deferred rent for our Rockville, Maryland laboratory facilities and uncertain tax positions relating to one of our foreign entities.

Other non-current liabilities represent amounts for uncertain tax positions relating to one of our foreign entities.

Cost of Oncology Services

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Indirect costs include salaries for personnel directly engaged in providing TOS products.

All costs of performing studies in-house are expensed as incurred.

All TOS costs of performing studies from external sources, if any, are expensed when incurred.

All costs of performing studies

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

in-house are expensed as incurred.

All TOS costs of performing studies from external sources, are expensed when incurred.

POS consists of costs related to implantations, drug panels, tumor boards, and gene sequencing services, as well as indirect internal costs, such as salaries for personnel directly engaged in these products.

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Such dilutive shares consist of incremental shares that would be issued upon exercise of the Company’s common stock purchase warrants and stock options.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-based Payments

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These assumptions are based on historical information and management judgment.

The risk-free interest rate used is based on the United States treasury security rate with a term consistent with the expected term of the award at the time of the grant.

The risk-free interest rate used is based on the United States treasury security rate with a term consistent

with the expected term of the award at the time of the grant.

Since the Company has limited option exercise history, it has generally elected to estimate the expected life of an award based upon the Securities and Exchange Commission-approved “simplified method” noted under the provisions of Staff Accounting Bulletin No.

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As of April 30, 2020 and 2019 , the Company provided a valuation allowance for all net deferred tax assets, as recovery is not more likely than not based on an insufficient history of earnings.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Tax positions are positions taken in a previously filed tax return or positions expected to be taken in a future tax return that are reflected in measuring current or deferred income tax assets and liabilities reported in the consolidated financial statements.

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If a tax benefit meets this criterion, it is measured and recognized based on the largest amount of benefit that is cumulatively greater than 50% likely to be realized.

As of April 30, 2019 and 2018 the Company has recorded $151,000 of liabilities related to uncertain tax positions relative to one of its foreign operations.

As of April 30, 2020 and 2019 the Company has recorded $178,000 and $151,000 , respectively, of liabilities related to uncertain tax positions relative to one of its foreign operations.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

The Company had no material accrual for interest or penalties on the Company’s balance sheets at April 30, 2019 and 2018 , and has not recognized any material interest and/or penalties in the statement of operations for either period.

We do not anticipate any significant unrecognized tax benefits will be recorded during the next 12 months.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company accrued $27,000 and $0 , for interest and penalties on the Company’s statement of operations for the years ended April 30, 2020 and 2019 , respectively.

The Company does not anticipate any significant unrecognized tax benefits to be recorded during the next 12 months.

For the year ended April 30, 2020 and 2019, the Company recognized a provision for income taxes of $130,000 and $103,000 , respectively, related to state and foreign taxes.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-19, Revenue from Contracts with Customers (Topic 606) which was added to the FASB's Accounting Standards Codification as ASC 606.

The objective of the standard is to establish a single comprehensive revenue recognition model that is designed to create greater comparability of financial statements across industries and jurisdictions.

Under new standard, companies recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services.

The Company adopted ASU 2014-09 on May 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption and by recognizing the cumulative effect of applying the standard as an adjustment to the Company’s Balance Sheet.

All revenue is generated from contracts with customers.

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The Company recognizes revenue as portions of the overall performance obligation are completed as this best depicts the progress of the performance obligation.

Incremental Costs of Obtaining a Contract (Sales Commissions)

Under ASC 606, the costs of obtaining a contract can be expensed immediately, rather than capitalized and amortized, if the amortization period is one year or shorter.

Sales commissions for the Company represent contract costs with a term of one year or less.

Therefore, under ASC 606, the Company elected the practical expedient to expense these costs as incurred.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Variable Consideration

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Deferred revenue is classified as a current liability on the condensed consolidated balance sheet as the Company expects to recognize the associated revenue in less than one year.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounting Pronouncements Being Evaluated

In August 2018, the FASB issued ASU 2018-15, which amends ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software, to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement ("CCA") that is a service contract.

This update aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

The update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Early adoption of the amendments in this update is permitted, including adoption in any interim period.

We are currently assessing the impact of this update on our consolidated financial statements.

In June 2016, the FASB issued ASU No.

In June 2016, the Financial Accounting Standards Board (FASB) FASB issued Accounting Standards Update (ASU) No.

2016-13, "Financial Instruments - Credit Losses".

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The new model is applicable to all financial instruments that are not accounted for at fair value through net income.

The standard is effective for fiscal years beginning after December 15, 2019 for public entities.

The standard is effective for fiscal years beginning after December 15, 2022 for public entities qualifying as smaller reporting companies.

Early adoption is permitted.

We are currently assessing the impact of this update on our consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, "Leases".

The Company will adopt the new accounting standard using the modified retrospective transition option on adoption on May 1, 2019.

While we are continuing to assess all impacts of the standard, we anticipate this standard will have a material impact to our consolidated balance sheet.

Upon adoption, we expect to record additional lease liabilities of approximately $4.1 million attributable to our operating leases based on the present value of the remaining minimum lease payments with an increase to right-of-use assets of approximately $3.2 million .

The Company does not expect the adoption of this standard to have a material impact on its consolidated statements of operations or cash flows.

We are currently assessing the impact of this update on our consolidated financial statements and do not expect a material impact on our consolidated financial statements.

The update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Early adoption of the amendments in this update is permitted, including adoption in any interim period.

We are currently assessing the impact of this update on our consolidated financial statements and do not expect a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820) — Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.

ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures.

ASU 2018-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019.

Early adoption is permitted.

We are currently assessing the potential impact of the amendments in this ASU on our consolidated financial statements and do not expect a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (ASC 740) — Simplifying the Accounting for Income Taxes.

ASU 2019-12 which modifies ASC 740 to simplify the accounting for income taxes.

The ASU removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods.

The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

ASU 2019-12 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2020.

We are currently assessing the potential impact of this ASU on our consolidated financial statements and do not expect a material impact on our consolidated financial statements.

Recently Adopted Accounting Pronouncements

In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting".

This ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services.

Under the new guidance, the existing employee guidance will apply to nonemployee sharebased transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost.

The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services.

The new accounting guidance will be effective for the Company on May 1, 2019.

The Company early adopted ASU 2018-07 beginning with its financial reporting for the quarter ended January 31, 2019.

The adoption did not have a material impact on our consolidated financial statements.

On November 17, 2016, the FASB issued ASU No.

2016-18, "Restricted Cash (a consensus of the FASB Emerging Issues Task Force)" ("ASU 2016-18"), which addresses classification and presentation of changes in restricted cash on the statement of cash flows.

ASU 2016-18 requires an entity's reconciliation of the beginning-of-period and end-of-period total amounts shown on the statement of cash flows to include in cash and cash equivalents amounts generally described as restricted cash and restricted cash equivalents.

ASU 2016-18 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017.

The Company adopted ASU 2016-18 on May 1, 2018 and did not have a material impact on our consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In February 2016, the FASB issued ASU No.

2016-02, "Leases", (Topic 842), which required the Company to recognize lease assets and lease liabilities (related to leases previously classified as operating under previous U.S.

GAAP) on its consolidated balance sheet for all leases in excess of one year in duration.

The ASU was effective for the Company on May 1, 2019.

The Company elected to adopt ASU 2016-02 using the modified retrospective method and, therefore, have not recast comparative periods presented in its unaudited consolidated financial statements.

As permitted under ASU 2016-02, the Company elected to account for the non-lease components together with the lease components as a single lease component.

The Company recorded an operating lease right-of-use ("ROU") asset of $3.2 million , net of deferred rent of $900,000 and an operating lease liability of $4.1 million as of May 1, 2019.

Refer to "Note 13.

Leases" for additional information.

In August 2016, the FASB issued ASU No.

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The new guidance was effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years.

The Company adopted ASU 2016-15 on May 1, 2018 and it did not have a material impact on our consolidated financial statements.

In May 2014, the FASB and the International Accounting Standards Board issued a converged standard on the recognition of revenue from contracts with customers ("ASU 2014-09").

The objective of the new standard is to establish a single comprehensive revenue recognition model that is designed to create greater comparability of financial statements across industries and jurisdictions.

Under the new standard, companies will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services.

The adoption of ASU 2014-09 did not have a material impact on our consolidated financial statements.

Revenue from Contracts with Customers" for more information.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company adopted ASU 2016-15 on May 1, 2018 and it did not have a material impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No.

ASU 2016-18 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017.

The Company adopted ASU 2016-18 on May 1, 2018 and did not have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-04, “Intangibles - Goodwill and Other” (Topic 350):

Simplifying the Test for Goodwill Impairment (ASU 2017-04).

This new standard simplifies how an entity is required to test goodwill for impairment by eliminating a step from the goodwill impairment test.

ASU 2017-04 allows for prospective application and is effective for fiscal years beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company adopted this guidance on May 1, 2019 and it did not have an impact on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting".

Under the new guidance, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost.

The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services.

The new accounting guidance was effective for the Company on May 1, 2019.

The Company early adopted ASU 2018-07 beginning with its financial reporting for the quarter ended January 31, 2019.

The adoption did not have a material impact on the Company's consolidated financial statements.

Accounts Receivable, Unbilled Services and Deferred Revenue

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Total accounts receivable and unbilled services

Less allowance for doubtful accounts

allowance for doubtful accounts

Total accounts receivable, net

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Deferred revenue was as follows (in thousands):

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Property and Equipment

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and equipment consisted of the following (in thousands):

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Assets in progress

Leasehold improvements

Total property and equipment

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Depreciation and amortization expense was $825,000 and $606,000 for the years ended April 30, 2020 and 2019 , respectively.

For the year ended April 30, 2018 the company disposed of fixed assets which reduced total property and equipment and accumulated depreciation by $16,000 , respectively, leaving a gain on disposal of fixed asset of $3,000 .

Additionally, included in “Laboratory equipment” as of April 30, 2019 and 2018 are assets originally purchased under a capital lease of $366,000 and $130,000 , respectively.

Depreciation and amortization expense relating to these assets was approximately $116,000 and $27,000 for the years ended April 30, 2019 and 2018 , respectively.

Depreciation and amortization expense, excluding expense recorded under finance leases, was $ 683,000 and $ 490,000 for the twelve months ended April 30, 2020 and 2019.

As of April 30, 2020 and 2019, property, plant and equipment included gross assets held under finance leases of $343,000 and $366,000 , respectively.

Related depreciation expense for these assets was $142,000 and $116,000 for the years ended April 30, 2020 and 2019.

As of April 30, 2020, assets in progress includes approximately $300,000 of capitalized software development costs.

During the year ended April 30, 2020, specifically during the quarter ended October 31, 2019, the Company traded in and disposed of a $235,000 leased asset that was previously included in the laboratory equipment category.

At the time of disposal, the accumulated depreciation related to that asset was written off in the amount of $127,000 (see also paragraph below).

As of January 31, 2020, the remaining leased asset included in the laboratory equipment category was fully depreciated resulting in a net balance of nil.

Finance Lease

In November 2014, the Company entered into a finance lease for laboratory equipment.

The lease had costs of approximately $149,000 , at inception, through November 2019.

The final lease payment under this finance lease of $2,000 was paid during the three months ended January 31, 2020.

In July 2018, the Company entered into a second finance lease for laboratory equipment.

The lease had total costs of approximately $266,000 , inclusive of interest and taxes, with a monthly payment of approximately $11,000 .

Although the lease was originally due to mature in July 2020, the Company decided to pay the outstanding balance on February 1, 2019.

During the quarter ended October 31, 2019, the Company traded in this asset and received a $160,000 reduction in the purchase price of two newly acquired assets.

The net book value of the asset traded in at the time of trade in was $108,000 , which resulted in the gain on the disposal of the asset of $52,000 , which is included as an offset in the other expense line within the Company's consolidated statement of operations for the year ended April 30, 2020.

In December 2019, the Company entered into a finance lease for laboratory equipment.

The lease had costs of approximately $231,000 , at inception, through November 2020.

This lease expires December 2020.

The current monthly finance lease payment is approximately $19,000 .

The future minimum lease payments remaining under this finance lease at April 30, 2020 are $135,000 .

The present value of minimum future obligations is calculated based on interest rate of 4.75% .

Depreciation and amortization expense related to this finance lease was $88,500 for the year ended April 30, 2020.

CHAMPIONS ONCOLOGY

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Oncology Services Revenue

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-19, Revenue from Contracts with Customers (Topic 606) which was added to the FASB's Accounting Standards Codification as ASC 606.

The Company adopted ASC 606 on May 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption.

The reported results for the twelve months ended April 30, 2019 reflect the application of ASC 606, while the reported results for the twelve months ended April 30, 2018 were prepared under ASC 605 - Revenue Recognition and other authoritative guidance in effect for that period.

The reported results for the twelve months ended April 30, 2020 and 2019 reflect the application of ASC 606.

In accordance with ASC 606, revenue is now recognized when, or as, a customer obtains control of promised services.

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Significant Customers

For the year ended April 30, 2020 , none of our customers accounted for more than 10.0% of our total revenue.

For the year ended April 30, 2019 , one of our customers accounted for more than 10.0% of our total revenue in the amount of $2.9 million , or 10.7% .

The revenue from this customer is part of the TOS business and captured in the consolidated oncology services revenue line item within the income statement.

For the year ended April 30, 2018 , two of our customers accounted for more than 10.0% of our total revenue in the amount of $4.2 million and $2.6 million , or 20.6% and 12.8% .

The revenue from this customer is part of the TOS business and was captured in the consolidated oncology services revenue line item within the income statement.

As of April 30, 2019 , none of our customers accounted for more than 10.0% of our total accounts receivable balance.

As of April 30, 2018 , two of our customers accounted for more than 10.0% of our total accounts receivable balance in the amount of $878,530 and $736,071 , or 22.6% and 19.0% , respectively.

The revenue from this customer is part of the TOS business and was captured in the consolidated oncology services revenue line item within the statement of operations.

As of April 30, 2020 and 2019, none of our customers accounted for more than 10.0% of our total accounts receivable balance.

Commitments and Contingencies

Operating Leases

The Company currently leases certain office equipment and its office and laboratory facilities under non-cancelable operating leases.

Rent expenses under the office and laboratory facilities totaled $822,000 and $657,000 for the years ended April 30, 2019 and 2018 , respectively.

The Company considers its facilities adequate for its current operational needs.

The Company leases the following facilities:

One University Plaza, Suite 307, Hackensack, New Jersey 07601, which, since November 2011, serves as the Company’s corporate headquarters.

The lease expires in November 2021 .

The Company recognized $91,000 and $90,000 of rental costs relative to this lease for fiscal 2019 and 2018 , respectively.

855 North Wolfe Street, Suite 619, Baltimore, Maryland 21205, which consists of laboratories and office space where the Company conducts operations related to its primary service offerings.

This lease was terminated in October 2017 .

The Company transitioned its activities from this location to 1330 Piccard Drive, Suite 025, Rockville, MD.

The Company recognized nil and $59,000 of rental costs relative to the 855 North Wolfe Street location for fiscal 2019 and 2018 , respectively.

450 East 29t h Street, New York, New York, 10016, which was a laboratory facility.

The Company recognized nil and $52,000 of rental expense for fiscal 2019 and 2018 , respectively.

This lease expired in May 2017 and was not renewed.

1330 Piccard Drive, Suite 025, Rockville, MD 20850, consists of laboratory and office space where the Company conducts operations related to its primary service offerings.

The Company executed this lease on January 11, 2017.

The operating commencement date was August 11, 2017 .

This lease expires in August 2028 .

The Company recognized $604,000 and $454,000 of rental expense for fiscal 2019 and 2018 , respectively.

910 Clopper Road, Suites 260S and 280S, Gaithersburg, Maryland 20878, which consisted of laboratory and office space where the Company conducted operations related to its primary service offerings.

The Company executed this lease on April 1, 2018 .

The operating commencement date was May 1, 2018 .

The Company transitioned its activities from this location to the New Location, as defined below, and terminated this lease seven days after the commencement date of the New Location.

The Company recognized $41,000 and nil of rental expense for fiscal 2019 and 2018 , respectively.

1405 Research Boulevard, Suite 125, Rockville, Maryland 20850 (“New Location”), which consists of laboratory and office space where the Company conducts operations related to its primary service offerings.

The Company executed this lease on November 1, 2018 .

The operating commencement date was January 17, 2019 .

This lease expires in January 2024 .

The Company recognized $86,000 and nil of rental expense for fiscal 2019 and 2018 , respectively.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future minimum lease payments due each fiscal year are as follows (in thousands):

In December 2019, a novel strain of coronavirus, COVID-19, was first identified in Wuhan, China.

This virus continues to spread globally and, as of July 2020, has spread to over 200 countries, including the United States.

The spread of COVID-19 from China to other countries has resulted in the World Health Organization declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020.

Many countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus.

Employers are also required to increase, as much as possible, the capacity and arrangement for employees to work remotely.

In addition, on March 11, 2020, the President of the United States issued a proclamation to restrict travel to the United States from foreign nationals who have recently been in certain European and Latin American countries.

Although, to date, these restrictions have not impacted our operations, the effect on our business, from the spread of COVID-19 and the actions implemented by the governments of the the United States and elsewhere across the globe, may worsen over time.

Any outbreak of contagious diseases, or other adverse public health developments, could have a material and adverse effect on our business operations.

These could include disruptions or restrictions on our ability to travel, pursue partnerships and other business transactions, receive shipments of biologic materials, as well as be impacted by the temporary closure of the facilities of suppliers.

The spread of an infectious disease, including COVID-19, may also result in the inability of our suppliers to deliver supplies to us on a timely basis.

In addition, health professionals may reduce staffing and reduce or postpone meetings with clients in response to the spread of an infectious disease.

Though we have not yet experienced such events, if they would occur, they could result in a period of business disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations.

However, as of the date of this Annual Report on Form 10-K, we have not experienced a material adverse effect on our business nor the need for reduction in our work force;

and, currently, and we do not expect any material impact on our long-term activity.

The extent to which COVID-19 impacts our business will depend on future developments which are highly uncertain and cannot be predicted, including, but not limited to, new information which may emerge concerning the increased severity of COVID-19, the actions to contain COVID-19, or treat its impact.

Legal Matters

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Registration Payment Arrangements

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company has entered into an Amended and Restated Registration Rights Agreement in connection with the March 2015 Private Placement.

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In addition, under certain agreements, for a limited period of time, the Company is subject to royalty payments if the licensed tumor models are used for sale in our TOS business, ranging from 2% to 5% of the contract price after recouping certain initiation costs.

As of April 30, 2019 , no royalties have been paid or incurred.

As of April 30, 2020 , no royalties have been paid or accrued.

Stock-based Payments

Stock-based compensation in the amount of $649,000 and $1.0 million was recognized for years ended April 30, 2019 and 2018 , respectively.

Included in stock-based compensation expense for the twelve months ended April 30, 2019 and April 30, 2018 under "general and administrative" line item is $13,000 and $15,000 , respectively related to the issuance of common stock as compensation for services performed.

Additionally, for the twelve months ended April 30, 2018 under "general and administrative" line item is an option modification charge of $56,529 .

Stock-based compensation in the amount of $600,000 and $649,000 was recognized for years ended April 30, 2020 and 2019 , respectively.

Included in stock-based compensation expense for the twelve months ended April 30, 2020 and April 30, 2019 under "general and administrative" line item is nil and $6,000 , respectively related to the issuance of common stock as compensation for services performed.

Stock-based compensation costs were recorded as follows (in thousands):

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Total stock-based compensation expense

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2010 Equity Incentive Plan

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however, it is ultimately measured at the price of the Company’s common stock or the fair value of stock options using the Black-Scholes valuation model on the date that the commitment for performance by the non-employee consultant has been reached or performance is complete, which is generally the vesting date of the award.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Director Compensation Plan

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Dividend yield

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The weighted average fair value of stock options granted during the years ending April 30, 2020 and 2019 , was $5.33 and $6.03 , respectively.

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Vested as of April 30, 2020

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Outstanding, May 1, 2018

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On June 30, 2017, the Board of Directors extended the expiration terms of a previous employee's vested grants to November 2018.

As a result of this modification, the Company had an additional stock option expense of $56,529 , which was expensed under the "General and Administrative" line item on the income statement.

On July 21, 2016, the Company and certain members of its senior management team agreed to exchange existing options to purchase shares of the Company's common stock with new options.

The new options have a lower exercise price for fewer shares and have the same vesting schedules and the same termination expiration dates as the existing options.

The Company used the Black Scholes valuation method to determine if the modification created additional stock option expense.

As a result of the option exchange, an aggregate of 1,793,781 existing options with exercise prices ranging from $4.55 to $6.96 per share were exchanged for an aggregate of 1,568,191 new options with exercise prices of $2.10 per share.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As a result of this modification, the Company had an additional stock option expense of $56,529 , which was expensed under the "General and Administrative" line item on the income statement for the twelve months ended April 30, 2019.

Stock Purchase Warrants

As of April 30, 2019 , the Company had warrants outstanding for the purchase of 1,671,440 shares of its common stock, all of which were exercisable.

Activity related to these warrants, which expire in March 2020, is summarized as follows:

As of April 30, 2020 , the Company had zero warrants outstanding for the purchase of shares of its common stock, as all those that were exercisable as of April 30, 2019 were either exercised or expired by March 2020.

For the year ending April 30, 2020, the Company received cash proceeds related to the exercise of these warrants of approximately $3.9 million .

Activity related to warrants is summarized in the following table.

Approximately 161,000 shares noted as exercised below were done so via a cash-less exercise basis.

Outstanding, May 1, 2019

Outstanding, April 30, 2020

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Outstanding, May 1, 2018

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In addition, the underwriter exercised a partial exercise of the over-allotment option granted to the underwriter to purchase an additional 258,749 shares of its common stock at the public offering price.

All of the shares have been offered by the Company.

All of the shares were offered by the Company.

The net proceeds from The June 2016 Public Offering, including the partial exercise of the over-allotment option, was $4.3 million , after deducting the underwriting discount and offering-related expenses of $742,000 .

The Company used the net proceeds of this offering for research and development to grow the TumorGraft platform, and the balance of the net proceeds for working capital and general corporate purposes.

For the year ended April 30, 2020 , the Company did no t issue any common stock for consulting services.

For the year ended April 30, 2019 , the Company issued a total of 5,462 shares of common stock valued at $20,600 in consideration for consulting services, approximately $14,600 of which was accrued for at April 30, 2019 .

For the year ended April 30, 2018 , the Company issued a total of 8,569 shares of common stock valued at $22,500 in consideration for consulting services.

CHAMPIONS ONCOLOGY

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Provision for Income Taxes

The components of the provision (benefit) for income taxes are as follows (in thousands):

The components of the provision for income taxes are as follows (in thousands):

Year Ended April 30, 2020

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Increase in uncertain tax position

Goodwill impairment

Change in valuation allowance

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Stock-based compensation expense

Capitalized research and development costs

Foreign net operating loss carry-forward

Net operating loss carry-forward

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Net deferred tax asset

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law.

The Act contains several new or changed income tax provisions, including but not limited to the following:

increased limitation threshold for determining deductible interest expense;

class life changes to qualified improvements (in general, from 39 years to 15 years);

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

The Tax Act made broad and significant changes to the U.S.

tax code including, but not limited to, a change in the federal rate from 34% to 21%, as well as the requirement to pay a one-time transition tax (“deemed repatriation tax”) on all undistributed earnings of foreign subsidiaries.

As a result of the enactment of the legislation, the Company recorded a one-time reduction to its deferred tax assets of approximately $7.6 million , which was offset by a similar reduction in the valuation allowance.

the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years.

The Company has evaluated the new tax provisions of the CARES Act and determined the impact to be either immaterial or not applicable.

Management has evaluated the available evidence about future tax planning strategies, taxable income, and other possible sources of realization of deferred tax assets and has established a full valuation allowance against its net deferred tax assets as of April 30, 2020 and 2019.

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Net operating losses generated prior to May 1, 2018 have a 20-year carryforward and will begin expiring in 2025 for federal and 2031 for state purposes.

Losses generated in the fiscal year ended April 30, 2019 can be carried forward indefinitely.

As of April 30, 2019 and 2018 , the Company’s foreign net operating loss carry-forward was approximately $0 and $890,000 , respectively, which have an unlimited carryforward period.

Losses generated in the fiscal years ended April 30, 2020 and 2019 can be carried forward indefinitely.

A valuation allowance has been recorded against all of these loss carryforwards.

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All of the amounts paid to these related parties have been recognized in expense in the period the services were performed.

Line of Credit

On October 30, 2017, the Company entered into a line of credit agreement with a national bank which provided that the Company may borrow up to $1.5 million .

The revolving line maturity date was October 29, 2018 and the line of credit was not renewed.

The Company believes that such line of credit was no longer necessary to fund the Company's working capital needs.

In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840, Leases.

The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months.

Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing,

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and uncertainty of cash flows arising from leases.

For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

Effective May 1, 2019, the Company accounts for its leases under Topic 842 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption.

Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both an operating lease ROU asset and operating lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term.

For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term.

Variable lease expenses, if any, are recorded when incurred.

The Company has elected to apply the short-term lease exemption practical expedient for each class of underlying assets and excludes short-term leases having initial terms of 12 months or less.

The Company recognizes rent expense on a straight-line basis over the lease term for these short-term leases.

The Company has determined that no material embedded leases exist.

Under Topic 842, the Company determined if an arrangement is a lease at inception.

ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term.

For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement.

The adoption of the new guidance resulted in the recognition of an operating ROU asset of $3.2 million , net of deferred rent of $900,000 and an operating lease liability of $4.1 million as of May 1, 2019.

The incremental borrowing rate based on the information available at commencement date was 7.25% .

The weighted average remaining lease term and the weighted average discount rate at the adoption date were 7.68 years and 7.25% , respectively.

The Company continues to account for leases in the prior period financial statements in accordance with ASC Topic 840.

Operating Leases

The Company currently leases certain office equipment and its office and laboratory facilities under non-cancelable operating leases.

Rent expense for operating leases is recognized on a straight-line basis over the lease term from the lease commencement date through the scheduled expiration date.

Rent expenses totaled $955,000 and $822,000 for the years ended April 30, 2020 and 2019 , respectively.

The Company considers its facilities adequate for its current operational needs.

The Company leases the following facilities:

One University Plaza, Suite 307, Hackensack, New Jersey 07601, which, since November 2011, serves as the Company’s corporate headquarters.

The lease expires in November 2021 .

The Company recognized $94,000 and $91,000 of rental costs relative to this lease for fiscal 2020 and 2019 , respectively.

1330 Piccard Drive, Suite 025, Rockville, MD 20850, which consists of laboratory and office space where the Company conducts operations related to its primary service offerings.

The Company executed this lease on January 11, 2017.

The operating commencement date was August 11, 2017 .

This lease expires in August 2028 .

The Company recognized $604,000 of rental expense for both fiscal 2020 and 2019 .

On March 30, 2020, the Company executed the first amendment to this lease to expand the existing premises at 1330 Piccard Drive, Suite 025 ("Expansion Premises") to Suites 050 and 104.

This amendment also extended the current lease term by six months.

The Expansion Premises operating lease commencement date was June 1, 2020 and the lease expires February 28, 2029.

In accordance with ASC 842, "Leases", the Company evaluated the first amendment and also performed a reassessment of the existing lease to determine the impact of the six-month term extension.

The Company did not recognize rental expense under this amendment during fiscal 2020 as the Expansion Premises operating lease commencement date is during fiscal 2021.

Upon the Expansion Premises operating lease commencement date, the Company will recognize an operating ROU asset and related operating lease liability of $3.8 million , each, respectively.

The Company will also recognize an operating ROU asset and related operating lease liability of approximately $118,000 and $125,000 , respectively, related to the extension of the current lease, as well as interest and amortization expense of $7,000 .

910 Clopper Road, Suites 260S and 280S, Gaithersburg, Maryland 20878, which consisted of laboratory and office space where the Company conducted operations related to its primary service offerings.

The Company executed this lease on April 1, 2018 .

The operating commencement date was May 1, 2018 .

The Company transitioned its activities from this location to the New Location, as defined below, and terminated this lease seven days after the commencement date of the New Location.

The Company recognized $0 and $41,000 of rental expense for fiscal 2020 and 2019 , respectively.

The Company executed this lease on November 1, 2018 .

The operating commencement date was January 17, 2019 .

This lease expires in April 2024 .

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recognized $257,000 and $86,000 of rental expense for fiscal 2020 and 2019 , respectively.

The Company terminated this lease on June 30, 2020 and transition its activities from this location to the Expansion Premises, as defined above, during the first quarter of fiscal 2021.

Upon lease termination, the Company will recognize a decrease in the related operating ROU asset and operating lease liability of approximately $850,000 and 926,000 , respectively, as well as a gain on lease termination of $76,000 .

ROU assets and lease liabilities related to our current operating leases are as follows (in thousands):

April 30, 2020

Operating lease right-of-use assets, net

Current portion of operating lease liabilities

Non-current portion of operating lease liabilities

As of April 30, 2020, the weighted average remaining operating lease term and the weighted average discount rate were 6.89 years and 7.25% , respectively.

Future minimum lease payments due each fiscal year as follows (in thousands):

The following disclosure as of April 30, 2019 continues to be stated in accordance with ASC 840.

Future minimum lease payments for operating and capital leases at April 30, 2019 were as follows:

Refer to Note 4, Property and Equipment, for more information on financing leases.

Subsequent Events

Subsequent events are defined as those events or transactions that occur after the balance sheet date, but before the financial statements are filed with the Securities and Exchange Commission.

During the fourth quarter of fiscal 2020, the Company executed the first amendment to its operating lease at 1330 Piccard Drive in Rockville, Maryland.

This amendment expands the premises ("Expansion Premises") for which the Company leases laboratory and office space and extends the existing lease by six months to match the term of the Expansion Premises lease.

The Expansion Premises operating lease commencement date is June 1, 2020 and the lease expires February 28, 2029.

In accordance with ASC 842, "Leases", the Company evaluated the first amendment and also performed a reassessment of the existing lease to determine the impact of the six-month term extension.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company did not recognize rental expense under this amendment during fiscal 2020 as the Expansion Premises operating lease commencement date is during fiscal 2021.

Upon the Expansion Premises operating lease commencement date, the Company will recognize an operating ROU asset and related operating lease liability of $3.8 million , respectively, related to the Expansion Premises lease.

On June 30, 2020, the Company terminated its operating lease at 1405 Research Boulevard in Rockville, Maryland, where it also leased laboratory and office space, in order to transition its activities from this location to the Expansion Premises, as defined above, during the first quarter of fiscal 2021.

Upon lease termination, the Company will recognize a decrease in the related operating ROU asset and operating lease liability of approximately $850,000 and $926,000 , respectively, as well as a gain on lease termination of $76,000 .

Exhibit Index

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Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed May 9, 2017)

Description of Registered Securities *

Employment Agreement, dated November 5, 2013, between the Company and Ronnie Morris, M.D.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures