What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-09-13 compared with 2021-03-15 · 140 added, 194 removed, 308 unchanged (52% of the section changed)

18 unchanged sentences

Accrued liabilities 1,981 2,231

Current portion of finance lease — 125

Current portion of operating lease liabilities 854 818

Other current liability 15 —

Deferred revenue 5,481 6,256

6 unchanged sentences

200,000,000 shares authorized;

13,390,172 and 12,726,728 shares issued and outstanding as of January 31, 2021 and April 30, 2020, respectively

13,415,066 and 13,414,066 shares issued and outstanding as of July 31, 2021 and April 30, 2021, respectively

Additional paid-in capital 80,227 79,945

7 unchanged sentences

Three Months Ended

January 31, Nine Months Ended

2021 2020 2021 2020

Oncology services revenue $ 11,253 $ 9,547

5 unchanged sentences

Total costs and operating expenses 11,428 9,523

Income from operations 763 433 795 109

Other income (expense) ( 8 ) ( 14 ) 64 1

Income before provision for income taxes 755 419 859 110

Income (loss) from operations ( 175 ) 24

Other income 17 64

Income (loss) before provision for income taxes ( 158 ) 88

Provision for income taxes 14 13

Net income $ 740 $ 407 $ 816 $ 72

Net income per common share outstanding

Net income (loss) $ ( 172 ) $ 75

Net income (loss) per common share outstanding

basic $ ( 0.01 ) $ 0.01

15 unchanged sentences

Issuance of common stock on exercise of stock options 1,000 — 2 — 2

Net income — — — 75 75

Net loss — — — ( 172 ) ( 172 )

Balance July 31, 2021 13,415,066 $ 13 $ 80,227 $ ( 72,702 ) $ 7,538

Stock-based compensation — — 85 — 85

Issuance of common stock on exercise of stock options 640,657 — 1,294 — 1,294

Net income — — — 1 1

Balance October 31, 2020 13,368,545 $ 13 $ 79,477 $ ( 72,597 ) $ 6,893

Stock-based compensation — — 232 — 232

Issuance of common stock on exercise of stock options 21,627 — 2 — 2

Net income — — — 740 740

Balance January 31, 2021 13,390,172 $ 13 $ 79,711 $ ( 71,857 ) $ 7,867

Common Stock Additional

5 unchanged sentences

Stock-based compensation — — 120 — 120

Net loss — — — ( 641 ) ( 641 )

Balance July 31, 2019 11,619,538 $ 12 $ 73,055 $ ( 71,339 ) $ 1,728

Stock-based compensation — — 77 — 77

Issuance of common stock on exercise of stock options and warrants 625 — 2 — 2

Net income — — — 307 307

Balance October 31, 2019 11,620,163 $ 12 $ 73,134 $ ( 71,032 ) $ 2,114

Stock-based compensation — — 229 — 229

Issuance of common stock on exercise of stock options and warrants 203,111 — 427 — 427

Issuance of common stock on exercise of stock options 1,160 — — — —

Net income — — — 75 75

Balance January 31, 2020 11,823,274 $ 12 $ 73,790 $ ( 70,625 ) $ 3,177

Balance July 31, 2020 12,727,888 $ 13 $ 78,098 $ ( 72,598 ) $ 5,513

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

2 unchanged sentences

(Dollars in Thousands)

Nine Months Ended

Three Months Ended

Operating activities:

Net income $ 816 $ 72

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ ( 172 ) $ 75

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

Stock-based compensation 280 120

Depreciation and amortization expense 317 277

Gain on disposal of equipment — ( 52 )

Net gain on disposal of equipment ( 4 ) —

Gain on termination of operating lease — ( 75 )

Operating lease right-of use assets 245 ( 67 )

Provision for doubtful accounts 49 218

Provision for (reversal of) doubtful accounts 78 ( 6 )

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses and other current assets 93 25

Other long term assets ( 70 ) —

Accounts payable 1,372 ( 465 )

Accrued liabilities ( 250 ) ( 348 )

Other current liabilities 15 —

Other non-current liabilities 62 1

1 unchanged sentence

Deferred revenue ( 775 ) ( 146 )

Net cash provided by operating activities 299 360

Net cash provided by (used in) operating activities 216 ( 715 )

Investing activities:

3 unchanged sentences

Financing activities:

Proceeds from exercise of options and warrants 1,296 429

Proceeds from exercise of options 2 —

Finance lease payments — ( 58 )

Net cash provided by financing activities 1,123 378

Increase (decrease) in cash ( 913 ) 45

Net cash provided by (used in) financing activities 2 ( 58 )

Decrease in cash ( 689 ) ( 1,399 )

Cash at beginning of period 4,687 8,342

2 unchanged sentences

Right-of-use assets obtained in exchange for operating lease liabilities $ — $ 3,872

Unpaid portion of property and equipment purchase — 321

Credit received on purchase of equipment — 160

Equipment acquired in accounts payable 79 —

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

3 unchanged sentences

Champions Oncology, Inc.

(the “Company”) is engaged in transforming drug discovery and development through data-driven research strategies and innovative pharmacology, biomarker and data platforms.

The Company’s TumorGraft Technology Platform is a novel approach to personalizing cancer care based upon the implantation of human tumors in immune-deficient mice.

The Company provides a technology platform to pharmaceutical and biotechnology companies using proprietary TumorGraft studies, which the Company believes may be predictive of how drugs may perform in clinical settings.

Utilizing the TumorGraft Technology Platform (the "Platform"), a comprehensive Bank of unique, well characterized "Patient Derived XenoGrafts" (PDX) models, the Company offers multiple services to pharmaceutical and biotechnology companies seeking personalized approaches to drug development.

By performing studies to predict the efficacy of oncology drugs, our Platform facilitates drug discovery with lower costs and increased speed of drug development as well as increased adoption of existing drugs.

The Company has two operating subsidiaries:

Champions Oncology (Israel), Limited and Champions Biotechnology U.K., Limited.

For the three and nine months ended January 31, 2021 and 2020, there were no revenues earned by these subsidiaries.

(the “Company”) is engaged in creating transformative technology solutions to be utilized in oncology drug discovery and development.

This technology includes proprietary in-vivo, ex-vivo and biomarker platforms, unique oncology software solutions and computational-based discovery platforms.

Utilizing its TumorGraft Technology Platform ("The Platform"), a comprehensive bank of unique, well characterized models, the Company provides select services to pharmaceutical and biotechnology companies seeking personalized approaches to drug development.

By performing pharmacology studies to predict the efficacy of oncology drugs, the Company’s Platform facilitates drug discovery with lower costs and increased speed of drug development as well as increased adoption of existing drugs.

The Company’s Software as a Service business is centered around a proprietary software platform and data tool, Lumin Bioinformatics ("Lumin”), which contains comprehensive information derived from our research services and clinical studies.

Lumin leverages Champions’ large datacenter coupled with analytics and artificial intelligence to provide a robust tool for computational cancer research.

Insights developed using Lumin can provide the basis for biomarker hypotheses, reveal potential mechanisms of therapeutic resistance, and guide the direction of additional preclinical evaluations.

The Company’s drug discovery and development business leverages the computational and experimental capabilities within its platforms.

Their discovery strategy utilizes our rich and unique datacenter, coupled with artificial intelligence and other advanced computational analytics, to identify novel therapeutic targets.

The use of its proprietary experimental platforms is then deployed to rapidly validate these targets for further drug development efforts.

The Company has three operating subsidiaries:

Champions Oncology (Israel), Limited, Champions Biotechnology U.K., Limited, and Champions Oncology, S.R.L.

For the three months ended July 31, 2021 and 2020, there were no revenues earned by these subsidiaries.

The Company’s foreign subsidiaries functional currency is the U.S.

12 unchanged sentences

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 January 31, 2021 and April 30, 2020 the Company had no cash equivalents.

As of July 31, 2021 and April 30, 2021 the Company had 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 nine months ended January 31, 2021, the Company had net income of approximately $ 816,000 and cash provided by operations of $ 299,000 .

As of January 31, 2021, the Company had an accumulated deficit of approximately $ 71.9 million, working capital of $ 2.6 million and cash of $ 7.4 million.

For the three months ended July 31, 2021, the Company had a net loss of approximately $ 172,000 and cash provided by operations of $ 216,000 .

As of July 31, 2021, the Company had an accumulated deficit of approximately $ 72.7 million, working capital of $ 919,000 and cash of $ 4.0 million.

We believe that our cash on hand, together with expected net positive cash provided by operations for fiscal year 2022, are adequate to fund operations through at least 12 months from the filing of this 10-Q.

1 unchanged sentence

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.

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

The Company accounts for its leases under Accounting Standards Codification ("ASC") Topic 842, Leases.

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, if applicable, or the Company’s incremental borrowing rate.

7 unchanged sentences

Three Months Ended

January 31, Nine Months Ended January 31,

2021 2020 2021 2020

Basic and diluted net income per share computation (dollars in thousands):

Net income attributable to common stockholders $ 740 $ 407 $ 816 $ 72

Basic and diluted net income (loss) per share computation (dollars in thousands):

Net income (loss) attributable to common stockholders $ ( 172 ) $ 75

Weighted Average common shares – basic 13,401,929 12,727,275

Basic net income per share $ 0.06 $ 0.03 $ 0.06 $ 0.01

Diluted income per share computation:

Net income attributable to common stockholders $ 740 $ 407 $ 816 $ 72

Net income available to common stockholders $ 740 $ 407 $ 816 $ 72

Basic net income (loss) per share $ ( 0.01 ) $ 0.01

Diluted income (loss) per share computation:

Net income (loss) attributable to common stockholders $ ( 172 ) $ 75

Net income (loss) available to common stockholders $ ( 172 ) $ 75

Weighted Average common shares 13,401,929 12,727,275

1 unchanged sentence

Adjusted weighted average share – diluted 13,401,929 14,231,641

Diluted net income per share $ 0.05 $ 0.03 $ 0.06 $ 0.01

The following table reflects the total potential share-based instruments outstanding at January 31, 2021 and 2020 that could have an effect on the future computation of dilution per common share, had their effect not been anti-dilutive:

Stock options 1,693,312 2,366,598

Warrants — 1,669,773

Diluted net income (loss) per share $ ( 0.01 ) $ 0.01

The following table reflects the total potential share-based instruments outstanding at July 31, 2021 and 2020 that could have an effect on the future computation of dilution per common share, had their effect not been anti-dilutive:

Total common stock equivalents 1,734,428 2,276,263

1 unchanged sentence

In assessing the realizability of deferred tax assets, the Company assesses the likelihood that deferred tax assets will be recovered through tax planning strategies or from future taxable income, and to the extent that recovery is not likely or there is insufficient earnings history, a valuation allowance is established.

Our ability to utilize net operating losses (“NOL”) carryforwards to offset our future taxable income would be limited if we have undergone or were to undergo an “ownership change” within the meaning of Section 382 of the Internal Revenue Code (the “IRC”).

The Company's ability to utilize net operating losses (“NOL”) carryforwards to offset future taxable income would be limited if the Company had undergone or were to undergo an “ownership change” within the meaning of Section 382 of the Internal Revenue Code (the “IRC”).

The Company adjusts the valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will not be realized.

Changes in valuation allowances from period to period are included in the tax provision in the period of change.

As of January 31, 2021 and April 30, 2020, 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.

As of July 31, 2021 and April 30, 2021, 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.

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.

4 unchanged sentences

The Company reflects tax benefits only if it is more likely than not that the Company will be able to sustain the tax position, based on its technical merits.

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.

The Company recorded $ 181,000 and $ 178,000 of liabilities related to uncertain tax positions relative to one of its foreign operations as of January 31, 2021 and April 30, 2020, respectively.

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.

The Company recorded $ 181,000 of liabilities related to uncertain tax positions relative to one of its foreign operations as of July 31, 2021 and April 30, 2021.

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

The Company recognized approximately $ 3,000 for interest and penalties on the Company’s balance sheets as of January 31, 2021, and recognized approximately $ 3,000 of interest and penalties in the statement of operations for the nine months ended January 31, 2021.

Other than approximately $ 4,500 for interest and penalties, the Company does not anticipate additional unrecognized tax benefits will be recorded during the next 12 months.

The provision for income taxes for the three months ended January 31, 2021 and 2020 was $ 15,000 and $ 12,000 , respectively, and for the nine months ended January 31, 2021 and 2020 was $ 43,000 and $ 38,000 , respectively.

These amounts are mainly attributable to taxable income earned in Israel relating to transfer pricing.

The Company accrued $ 3,000 for interest and penalties on its consolidated balance sheets as of July 31, 2021 and April 30, 2021.

The Company did no t recognize interest or penalties on its consolidated statements of operations during the three-month periods ended July 31, 2021 and 2020.

The Company does no t anticipate unrecognized tax benefits will be recorded during the next 12 months.

The provision for income taxes for the three months ended July 31, 2021 and 2020 was $ 14,000 and $ 13,000 , respectively, mainly attributable to taxable income earned in Israel relating to transfer pricing.

Revenue Recognition

The Company recognizes revenue in accordance with "ASC 606", Revenue from Contracts with Customers.

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 this 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.

All revenue is generated from contracts with customers.

11 unchanged sentences

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.

Variable Consideration

13 unchanged sentences

Accounting Pronouncements Being Evaluated

In October 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-10, Codification Improvements.

The purpose of the ASU is to clarify, correct errors in, or make minor improvements to a variety of ASC topics.

The changes in ASU 2020-03 are not expected to have a significant effect on the Company's current accounting practices.

The ASU improves various topics in the Codification to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications.

The ASU is effective for fiscal years beginning after December 15, 2020 with early application permitted.

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

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes.

The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC Topic 740 and 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.

This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years with early adoption permitted.

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

In June 2016, the FASB issued ASU No.

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

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

4 unchanged sentences

Early adoption is permitted.

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

The Company is currently assessing the impact of this update on our consolidated financial statements and do not anticipate a significant impact.

Recently Adopted Accounting Pronouncements

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.

See Note 8 of this Form 10-Q for additional information and required disclosures.

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.

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.

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.

This ASU was effective for and adopted by the Company on May 1, 2020.

The adoption had no material impact on our consolidated financial statements.

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 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 adopted this new rule beginning with its financial reporting for the quarter ended January 31, 2019.

The adoption had no material impact on our consolidated financial statements.

On November 11, 2019, the FASB issued ASU 2019-08 which clarifies the accounting for share-based payments issued as consideration payable to a customer in accordance with ASC 606.

Under the ASU, entities apply the guidance in ASC 718 to measure and classify share-based payments issued to a customer that are not in exchange for a distinct good or service (i.e., share-based sales incentives).

The ASU was effective for the Company on May 1, 2020 and the adoption had no material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes.

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.

The Company adopted this ASU on May 1, 2021 and it did not have an impact on the Company's consolidated financial statements.

Accounts Receivable, Unbilled Services and Deferred Revenue

Accounts receivable and unbilled services were as follows (in thousands):

January 31, 2021 April 30, 2020

July 31, 2021 April 30, 2021

Accounts receivable $ 4,465 $ 4,304

4 unchanged sentences

Deferred revenue was as follows (in thousands):

January 31, 2021 April 30, 2020

July 31, 2021 April 30, 2021

Deferred revenue $ 5,481 $ 6,256

Deferred revenue is shown as a current liability on the Company's condensed consolidated balance sheet.

Deferred revenue is shown as a current liability on the Company's condensed consolidated balance sheets.

Revenue from Contracts with Customers

Oncology Services Revenue

The Company recognizes revenue under ASC 606, Revenue Recognition - Revenue from Customers ("ASC 606").

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

The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services.

A performance obligation is a promise (or a combination of promises) in a contract to transfer distinct goods or services to a customer and is the unit of accounting under ASC 606 for the purposes of revenue recognition.

A contract's transaction price is allocated to each separate performance obligation based upon the standalone selling price and is recognized as revenue, when, or as, the performance obligation is satisfied.

The majority of the Company's contracts have a single performance obligation because the promise to transfer individual services is not separately identifiable from other promises in the contracts, and therefore, is not distinct.

The Company recognizes revenue in accordance with ASC 606, Revenue Recognition - Revenue from Customers.

The majority of the Company's revenue arrangements are service contracts that are complete within a year or less.

There are a few contracts that range in duration between 1 and 3 years.

There are a few

contracts that range in duration between 1 and 3 years.

Substantially all of the Company's performance obligations, and associated revenue, are transferred to the customer over time.

4 unchanged sentences

This variable consideration is generally awarded upon achievement of certain performance metrics.

For the purposes of revenue recognition, variable consideration is assessed on a contract-by-contract basis and the amount to be recorded is estimated based on the assessment of the Company's anticipated performance and consideration of all information

that is reasonably available.

Variable consideration is recognized as revenue if and when it is deemed probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved in the future.

3 unchanged sentences

The Company accounts for amendments as a separate contract if they meet the criteria under ASC 606-10-25-12.

Other revenue represents services provided to the pharmaceutical and biotechnology companies.

The Company does not consider these services part of their core product offerings.

The following tables represents disaggregated revenue for the three and nine months ended January 31, 2021 and 2020:

Other TOS revenue represents additional services provided to the Company's pharmaceutical and biotechnology customers, specifically flow cytometry services and SaaS provided via our Lumin Bioinformatics software.

The following tables represents disaggregated revenue for the three months ended July 31, 2021 and 2020:

Three Months Ended

January 31, Nine Months Ended January 31,

2021 2020 2021 2020

Pharmacology services $ 10,703 $ 9,412

Other TOS revenue 526 21

Personalized oncology services 24 113

Other 62 — 122 62

Total oncology services revenue $ 11,253 $ 9,547

5 unchanged sentences

Contract assets and liabilities are presented on the balance sheet on a net contract-by-contract basis at the end of each reporting period.

There were no material contract assets or liabilities recorded on the condensed consolidated balance sheets as of January 31, 2021 and April 30, 2020.

Property and Equipment

5 unchanged sentences

Computer equipment and software 1,516 1,461

Capitalized software development costs 484 484

Laboratory equipment 7,126 6,640

4 unchanged sentences

Property and equipment, net $ 6,763 $ 6,090

Depreciation and amortization expense, excluding expense recorded under the finance lease, was $ 279,000 and $ 184,000 for the three months ended January 31, 2021 and 2020, respectively.

Depreciation and amortization expense, excluding expense recorded under the finance lease, was $ 757,000 and $ 491,000 for the nine months ended January 31, 2021 and 2020, respectively.

As of January 31, 2021 and April 30, 2020, property, plant and equipment included gross assets held under finance leases of $ 343,000 .

Related depreciation expense was approximately $ 18,000 and $ 35,000 for the three months ended January 31, 2021 and 2020, respectively, and $ 124,000 and $ 88,000 for the nine months ended January 31, 2021 and 2020, respectively.

Depreciation and amortization expense, excluding expense recorded under the finance lease, was $ 317,000 and $ 224,000 for the three months ended July 31, 2021 and 2020, respectively.

As of July 31, 2021 and April 30, 2021, property, plant and equipment included gross assets held under finance leases of $ 343,000 .

Related depreciation expense was approximately $ 0 and $ 53,000 for the three months ended July 31, 2021 and 2020, respectively.

Capitalized software development costs under a hosting arrangement

The Company accounts for the cost of computer software obtained or developed for internal use as well as the software development and implementation costs associated with a hosting arrangement ("internal-use software") that is a service contract in accordance and with ASC 350, Intangibles - Goodwill and Other ("ASC-350").

We capitalize certain costs in the development of our internal-use software when the preliminary project stage is completed and it is probable that the project itself will be completed and the software will perform as intended.

These capitalized costs include personnel and related expenses for employees and costs of third-party consultants who are directly associated with and who devote time to these internal-use software projects.

Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose.

Costs incurred for significant upgrades, increased functionality, and enhancements to the Company's internal-use software solutions are also capitalized.

Costs incurred for training, maintenance, and minor modifications are expensed as incurred.

Capitalized software development costs are amortized using the straight-line method over an estimated useful economic life of three years .

The Company capitalizes development and implementation costs, in accordance with ASC-350, for its Lumin Bioinformatics platform ("Lumin").

Lumin is the Company's oncology data-driven software program and data tool which is classified as Software as a Service (SaaS).

These capitalized costs represent salaries, including direct payroll-related costs, certain software development consultant expenses and molecular sequencing programming costs incurred in the engineering and coding of the software development.

During the first quarter of fiscal 2021, the initial version of the Lumin platform was launched, at which time initial capitalization ceased and amortization commenced.

The total Lumin asset was placed into service as of July 31, 2020 in the gross amount of $ 484,000 .

Depreciation and amortization related to this asset was $ 40,000 and zero for the three-months ended July 31, 2021 and 2020, respectively.

During the second quarter ended October 31, 2020 and through the first quarter ended July 31, 2021, the Company continued to develop increased functionality, expand product design and usability, and add enhancements to the Lumin platform.

In accordance with accounting guidance, these costs were capitalized, and as of July 31, 2021, were not yet placed into service or made available for sale.

This developmental work does not render the initial released version to be obsolete or diminished in value but, rather, adds to the base level of the existing platform.

Total costs included in assets in progress related to these capitalized enhancements and additional functionality as of July 31, 2021 and April 30, 2021 are $ 1.2 million and $ 991,000 , respectively.

These developments are expected to be placed into service and made available for sale in the latter half of fiscal 2022.

Finance Lease

1 unchanged sentence

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.

As of January 31, 2021 the asset has been fully depreciated and book value is nil .

As of July 31, 2021 the asset has been fully depreciated and book value is nil .

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

The lease had 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 entire outstanding balance of the lease was nil for periods subsequent to that date.

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 lease had costs of approximately $ 266,000 , inclusive of interest and taxes.

The Company elected to pay the outstanding balance of the lease early during the fourth quarter of fiscal 2019.

During the quarter of fiscal 2020, 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 , resulting in a gain on the disposal of the asset of $ 53,000 , which was included as an offset in the other expense line within the Company's consolidated statement of operations for the nine months ended January 31, 2020.

As of July 31, 2021 the assets have been fully depreciated and book value is nil .

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

1 unchanged sentence

The lease term expired December 2020.

Depreciation and amortization expense related to this finance lease was $ 18,000 and $ 35,000 for the three months ended January 31, 2021 and 2020, respectively, and $ 124,000 and $ 35,000 for the nine months ended January 31, 2021 and 2020, respectively.

Depreciation and amortization expense related to this finance lease was $ 53,000 and zero for the three months ended July 31, 2021 and 2020, respectively.

As of July 31, 2021 the asset has been fully depreciated and book value is nil .

Share-Based Payments

The Company has in place a 2010 Equity Incentive Plan and a 2008 Equity Incentive Plan.

The Company also has in place a 2021 Equity Incentive Plan, subject to shareholder approval at its next shareholder meeting.

In general, these plans provide for stock-based compensation in the form of (i) Non-statutory Stock Options;

4 unchanged sentences

Three Months Ended

January 31, Nine Months Ended

2021 2020 2021 2020

General and administrative $ 171 $ 47

4 unchanged sentences

Stock Option Grants

Black-Scholes assumptions used to calculate the fair value of options granted during the three and nine months ended January 31, 2021 and 2020 were as follows:

Black-Scholes assumptions used to calculate the fair value of options granted during the three months ended July 31, 2021 and 2020 were as follows:

Three Months Ended

January 31, Nine Months Ended

2021 2020 2021 2020

Expected term in years 6

Risk-free interest rates 0.82 %

1.57 %- 1.80 %

0.12 %- 0.39 %

1.57 %- 1.80 %

Volatility 65.94 %- 66.21 %

69.14 %- 70.99 %

72.64 %- 74.98 %

69.14 %- 71.11 %

Dividend yield — % — %

The weighted average fair value of stock options granted during the three months ended January 31, 2021 and 2020 was $ 5.80 and $ 2.56 , respectively, and $ 5.08 and $ 3.09 for the nine months ended January 31, 2021 and 2020, respectively.

The Company’s stock options activity for the nine months ended January 31, 2021 was a s follows:

The weighted average fair value of stock options granted during the three months ended July 31, 2021 and 2020 was $ 5.33 and $ 9.85 , respectively.

The Company’s stock options activity for the three months ended July 31, 2021 was a s follows:

Employees Non-

8 unchanged sentences

Expired — — — —

Outstanding, January 31, 2021 1,657,896 35,416 1,693,312 4.02 5.66 $ 11,975,000

Vested and expected to vest as of January 31, 2021 1,657,896 35,416 1,693,312 4.02 5.66 $ 11,975,000

Exercisable as of January 31, 2021 1,289,104 9,584 1,298,688 3.25 4.93 $ 10,173,000

Outstanding, July 31, 2021 1,696,013 38,415 1,734,428 4.19 5.4 $ 11,063,000

Vested and expected to vest as of July 31, 2021 1,696,013 38,415 1,734,428 4.19 5.4 $ 11,063,000

Exercisable as of July 31, 2021 1,353,752 9,584 1,363,336 3.50 4.6 $ 9,666,000

The Company accounts for its leases under ASU 2016-02, "Leases", Topic 842.

2 unchanged sentences

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 $ 941,000 and $ 717,000 for the nine months ended January 31, 2021 and 2020, respectively.

For the three months ended January 31, 2021 and 2020, rent expenses totaled $ 312,000 and $ 240,000 , respectively.

Rent expenses totaled $ 452,000 and $ 307,000 for the three months ended July 31, 2021 and 2020, respectively.

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

2 unchanged sentences

The lease expires in November 2021.

The Company recognized $ 67,000 and $ 71,000 of rental costs relative to this lease for the nine months ended January 31, 2021 and 2020, respectively, and $ 24,000 for each the three months ended January 31, 2021 and 2020.

The Company recognized $ 24,000 and $ 20,000 of rental costs relative to this lease for the three months ended July 31, 2021 and 2020, 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.

1 unchanged sentence

The operating commencement date was August 11, 2017.

This lease originally expired in August 2028.

This lease was originally set to expire in August 2028.

◦ 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 add on Suites 050 and 104.

3 unchanged sentences

As a result of this assessment, the Company recognized an additional operating ROU asset and related operating lease liability for Suite 025 of $ 118,000 and $ 125,000 , respectively, as well as an incremental net rent expense of $ 8,000 during the three months ended July 31, 2020.

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

◦ Upon the Expansion Premises operating lease commencement date (June 1, 2020), the Company recognized an operating ROU asset and related operating lease liability for Suites 050 and 104 of $ 3.8 million, each, respectively.

◦ For the leases related to the Original and Expansion Premises at Piccard Drive, the Company recognized $ 823,000 and $ 454,000 of rental expense for the nine months ended January 31, 2021 and 2020, and $ 288,000 and $ 152,000 for the three months ended January 31, 2021 and 2020, respectively.

◦ For the leases related to the Original and Expansion Premises at Piccard Drive, the Company recognized $ 292,000 and $ 244,000 of rental expense for the three months ended July 31, 2021 and 2020, respectively.

◦ On December 22, 2020, the Company executed the second amendment to this lease to expand the existing premises at 1330 Piccard Drive, Suites 025, 050, and 104 ("Additional Expansion Premises") to add on Suite 201.

The Additional Expansion Premises operating lease commencement date is April 1, 2021 and, under the second amendment, reaffirms that all three leases expire February 28, 2029.

The Company did not recognize any rental expense under this lease for the three and nine month periods ended January 31, 2021 as the lease commencement date is subsequent to this time period.

◦ Upon the Additional Expansion Premises operating lease commencement date (April 1, 2021), the Company expects to recognize an operating ROU asset and related operating lease liability for Suite 201 of $ 3.3 million, each, respectively.

◦ Upon the Additional Expansion Premises operating lease commencement date (April 1, 2021), the Company recognized an operating ROU asset and related operating lease liability for Suite 201 of $ 3.3 million, each, respectively.

◦ The Company recognized $ 130,000 and zero of rental expense for the three months ended July 31, 2021 and 2020, respectively, for the Additional Expansion Premises.

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

4 unchanged sentences

Upon lease termination, the Company recognized 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 $ 75,000 .

The Company also recognized $ 43,000 and $ 193,000 of rental expense for the nine months ended January 31, 2021 and 2020, and zero and $ 64,000 for the three months ended January 31, 2021 and 2020, respectively.

The Company also recognized zero and $ 43,000 of rental expense for the three months ended July 31, 2021 and 2020, respectively.

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

January 31, 2021 April 30, 2020

July 31, 2021 April 30, 2021

Operating lease right-of-use assets, net

2 unchanged sentences

Non-current portion of operating lease liabilities 8,652 8,783

As of January 31, 2021, the weighted average remaining operating lease term and the weighted average discount rate were 7.98 years and 6.07 %, respectively.

As of July 31, 2021, the weighted average remaining operating lease term and the weighted average discount rate were 7.55 years and 5.77 %, respectively.

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

2 unchanged sentences

Total $ 20,547

Refer to Note 5, Property and Equipment, for more information on financing leases.

Refer to Note 5, Property and Equipment, for information on financing leases.

Related Party Transactions

2 unchanged sentences

Consulting Services

During the three months ended January 31, 2021 and 2020, the Company paid an affiliate of a board member $ 12,000 and $ 18,000 , respectively, for consulting services unrelated to his duty as a board member.

During the three months ended January 31, 2021 and 2020, the Company paid an affiliate of another board member $ 3,900 and $ 10,100 , respectively, for consulting services unrelated to their duties as a board member.

During the nine months ended January 31, 2021 and 2020, the Company paid an affiliate of a board member $ 45,000 and $ 54,000 for consulting services unrelated to his duty as a board member.

During the nine months ended January 31, 2021 and 2020, the Company paid an affiliate of another board member $ 13,400 and $ 39,100 , respectively, for consulting services unrelated to their duties as a board member.

As of January 31, 2021, $ 4,000 was due to these related parties.

During the three months ended July 31, 2021 and 2020, the Company paid an affiliate of a board member $ 9,000 and $ 18,000 , respectively, for consulting services unrelated to his duty as a board member.

During the three months ended July 31,

2021 and 2020, the Company paid an affiliate of another board member $ 2,974 and $ 5,606 , respectively, for consulting services unrelated to their duties as a board member.

As of July 31, 2021, $ 4,400 was due to these related parties.

Commitments and Contingencies

Risks and uncertainties related to Covid-19

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

The global spread of COVID-19 from China to other countries 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, including the United States, subsequently imposed various degrees of restrictions and other measures, including but not limited to, mandatory temporary closures, quarantine and shelter in place guidelines, and restrictions on mass gatherings and on travel in an effort to slow and/or reduce the spread of the virus.

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

While the COVID-19 pandemic has continued to evolve and remains highly unpredictable and dynamic in its duration and severity, many of these previously imposed restrictions and other measures have now been eased and/or lifted, while governments continue to monitor active cases and the health and safety of their citizens.

The spread of COVID-19 and the related actions implemented by the governments of the United States and elsewhere across the globe, may worsen again over time.

Thus, the COVID-19 pandemic may continue to have a negative impact on the US and Global economies for the foreseeable future.

Although, to date, these restrictions and the affect on the Global economy have not materially impacted the

Company's operations, the future effect on its business will largely depend on future developments which are highly uncertain and cannot be predicted at this time.

The Company continues to monitor its operations and applicable government recommendations and requirements.

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

These could include disruptions or restrictions on the Company's ability to travel, pursue partnerships and other business transactions, receive shipments of biologic materials, as well as an impact by the temporary closure of the facilities of its suppliers.

The spread of an infectious disease, including COVID-19, may also result in the inability of the Company's suppliers to deliver supplies to them 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 the Company has not yet experienced such events related to COVID-19, if they would occur, they could result in a period of business disruption, and in reduced operations, any of which could materially affect its business, financial condition and results of operations.

However, as noted, as of the date of this Form 10-Q, the Company has not experienced a material adverse effect on our business nor the need for reduction in its work force;

and, currently, and it does not expect any material impact on its long-term activity.

As noted, the extent to which COVID-19 impacts the Company's 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 the COVID-19 virus, the actions to contain COVID-19, or treat its impact.

Legal Matters

1 unchanged sentence

The Company is not aware of any other matters that would have a material impact on the Company’s financial position or results of operations.

Registration Payment Arrangements

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

This Amended and Restated Registration Rights Agreement contains provisions that may call for the Company to pay penalties in certain circumstances.

This registration payment arrangement primarily relates to the Company’s ability to file a registration statement within a particular time period, have a registration statement declared effective within a particular time period and to maintain the effectiveness of the registration statement for a particular time period.

The Company has not accrued any liquidated damages associated with the Amended and Restated Registration Right Agreement as the Company has filed the required registration statement and anticipates continued compliance with the agreement.

The Company contracts with third-party vendors to license tumor samples for development into PDX models and use in our TOS business.

These types of arrangements have an upfront fee ranging from nil to $10,000 per tumor sample depending on the successful growth of the tumor model and ability to develop them into a sellable product.

The upfront costs are expensed as incurred.

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 12.5% of the contract price after recouping certain initiation costs.

Some of these arrangements also set forth an annual minimum royalty due regardless of tumor models used for sale.

For the quarter ended July 31, 2021 and the year ended April 30, 2021, we have paid or accrued approximately $44,000 and $127,000 related to these royalty arrangements, respectively.

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-Q

Item 1. Financial Statements