What changed in this filing

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Item 9A. Controls and Procedures

2022-07-22 compared with 2021-07-26 · 180 added, 297 removed, 695 unchanged (41% of the section changed)

Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act, as amended (the “Exchange Act”) as of April 30, 2021.

In designing and evaluating our disclosure controls and procedures.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the relationship between the benefit of desired controls and procedures and the cost of implementing new controls and procedures.

Based upon this evaluation, the Company’s management, including our Chief Executive Officer and Chief Financial Officer concluded that, as of April 30, 2021, due to the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective.

Notwithstanding such material weakness in internal control over financial reporting, our management concluded that our consolidated financial statements in this Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with U.S.

generally accepted accounting principles (“U.S.

Management's Report on Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Principal Executive Officer (our Chief Executive Officer) and Principal Financial Officer (our Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures as of April 30, 2022, the end of our fiscal year covered by this annual report.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of April 30, 2022, that consider remediation efforts commenced by the Company as a result of the material weakness noted during the assessment of the effectiveness of the Company’s internal controls over financial reporting as of and for the year ended April 30, 2021, our Chief Executive Officer and Chief Financial Officer have concluded that, as of April 30, 2022, our disclosure controls and procedures are effective.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

The Company’s internal control over financial reporting is a

process designed by, or under the supervision of Company management, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with U.S.

GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of Company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management has assessed the effectiveness of our internal control over financial reporting as of April 30, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our assessment of those criteria, we identified the following deficiencies in our internal control described below.

Our risk assessment procedures over certain of our contractual arrangements requiring the payment of royalties for the licensing of technology from third-parties did not adequately identify the risks and consider the Company’s obligations based on the recognition of oncology services revenue.

This rule defines internal control over financial reporting as a process designed by, or under the supervision of, Company management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

Management has assessed the effectiveness of our internal control over financial reporting using the components established in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

A system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A material weakness is any deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was effective as of April 30, 2022, the year covered by this Annual Report.

Remediation of Prior Year Material Weakness in Internal Control over Financial Reporting

For the year ended April 30, 2021, we identified a material weakness in the consolidated financial statements close process.

Specifically, our risk assessment procedures over certain of our contractual arrangements requiring the payment of royalties for the licensing of technology from third-parties did not adequately identify the risks and consider the Company’s obligations based on the recognition of oncology services revenue.

As a result, the Company had missing process level controls over the review of royalty arrangements and the timely determination and recognition of related liabilities.

Although no material misstatements were identified in our consolidated financial statements, these control deficiencies resulted in immaterial misstatements to our previously issued consolidated financial statements which have been corrected in the consolidated financial statements included in the Form 10-K for our fiscal year ended April 30, 2021.

However, the control deficiencies create a reasonable possibility that a material misstatement in the Company’s consolidated financial statements will not be prevented or detected on a timely basis and we concluded that our internal control over financial reporting as of April 30, 2021, was not effective due to a material weakness in internal control.

Remediation Plan

The Company’s management had begun to design and implement certain measures to address the above-described material weakness and enhance the Company’s internal control in order to remediate this material weakness.

As part of our remediation measures, the Company will implement plans to enhance the Company’s process and controls including ensuring adequate identification and review of royalty agreement terms and obligations.

Although no material misstatements were identified in our consolidated financial statements, these control deficiencies resulted in immaterial misstatements to our previously issued consolidated financial statements which were corrected in the consolidated financial statements included in the Form 10-K for our fiscal year ended April 30, 2021.

During fiscal year 2022, the Company’s management designed and implemented certain measures to address the above-described material weakness and enhance the Company’s internal controls which has included enhanced processes and controls such as ensuring adequate identification and review of royalty agreement terms and obligations which have been formalized as of the completion of its third fiscal quarter of fiscal 2022.

As part of our remediation measures, the Company has continually monitored its control environment and management has concluded that the remediation plan was implemented, tested, effective, and completed as of April 30, 2022.

Changes in Internal Controls

Other than the material weakness identified above, there were no other changes in the Company’s internal controls over financial reporting during the quarter ended April 30, 2021, that materially affected, or were reasonably likely to materially affect the Company’s internal control over financial reporting.

Other than the remediation of the prior year material weakness, there were no other changes in the Company’s internal controls over financial reporting during the year ended April 30, 2022, that materially affected, or were reasonably likely to materially affect the Company’s internal control over financial reporting.

Other Information

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4.1 Description of Registered Securities (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed July 28, 2020)

(incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed July 28, 2020)

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

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID# 274 )

Consolidated Balance Sheets

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The determination of the progress as the overall performance obligation is being completed is based on the worked performed in accordance with the SOW and requires management estimates.

Pharmacology services revenues for the year ended April 30, 2021 were approximately $39.5 million.

Pharmacology services revenues for the year ended April 30, 2022 and 2021 were approximately $46.8 million and $39.5 million, respectively.

We identified the accounting for revenue and the related deferred revenue recognized over time as a critical audit matter due to the complexity and subjectivity of management’s estimate of the progress towards completion of its projects.

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Current portion of operating lease liabilities 1,054 818

Current portion of finance lease — 125

Other current liabilities 72 —

Deferred revenue 11,071 6,256

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General and administrative 9,117 6,512

Goodwill Impairment — 335

Total costs and operating expenses 48,502 40,674

Income (loss) from operations 366 ( 1,921 )

Income from operations 607 366

Other expense:

Other income (expense) 71 ( 42 )

Income (loss) before income tax expense 437 ( 1,963 )

Other income (expense), net ( 24 ) 71

Income before income tax expense 583 437

Provision for income tax 35 75

Net income (loss) $ 362 $ ( 2,093 )

Net income (loss) per common share outstanding

Net income $ 548 $ 362

Net income per common share outstanding

basic $ 0.04 $ 0.03

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Shares Amount Shares Amount

Balance, April 30, 2019, as reported 11,619,538 $ 12 — $ 72,924 $ ( 70,698 ) $ 2,238

Impact of immaterial error correction — — — ( 101 ) $ ( 101 )

Balance, April 30, 2019, as restated 11,619,538 $ 12 $ 72,924 $ ( 70,799 ) $ 2,137

Balance, April 30, 2020 12,726,728 $ 13 $ 77,978 $ ( 72,892 ) $ 5,099

Stock-based compensation expense — — — — 598 — 598

Issuance of common stock on exercise of stock options and warrants 1,107,190 1 — — 4,454 — 4,455

Net loss — — — — — ( 2,093 ) ( 2,093 )

Issuance of common stock on exercise of stock options 687,338 — — — 1,369 — 1,369

Net income — — — — — 362 362

Balance, April 30, 2021 13,414,066 $ 13 — $ — $ 79,945 $ ( 72,530 ) $ 7,428

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Operating activities:

Net income (loss) $ 362 $ ( 2,093 )

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

Net income $ 548 $ 362

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

Stock-based compensation expense 912 598

Depreciation and amortization expense 1,627 1,184

Gain on disposal of equipment — ( 52 )

Net gain on disposal of equipment ( 4 ) —

Operating lease right-of-use assets 786 398

Goodwill impairment — 335

Gain on termination of operating lease — ( 75 )

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Deferred revenue 4,815 441

Net cash (used in) provided by operating activities ( 1,681 ) 2,905

Net cash provided by (used in) operating activities 6,497 ( 1,681 )

Investing activities:

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Cash, end of year $ 9,007 $ 4,687

Non-cash investing and financing activities:

Purchased equipment under finance lease — 212

Non-cash financing and investing activities:

Right-of-use assets obtained in exchange for operating lease liabilities $ 205 $ 6,121

Credit received on purchase of equipment — 160

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

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

The Company’s TumorGraft Technology Platform is an 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.

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

The Company has three operating subsidiaries:

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

For the years ended April 30, 2022 and 2021, there were no revenues earned by these subsidiaries.

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The Company is subject to foreign exchange rate fluctuations in connection with the Company’s international operations.

Foreign currency balances are translated at each month end to US dollars, and any resulting gain or loss is recognized in our results of operations, as the amounts are not material.

Use of Estimates

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.

Significant estimates include, among other things, accounts receivable realization, revenue recognition, valuation allowance for deferred tax assets, valuation of goodwill, recoverability of capitalized software development costs, and stock-based compensation and warrant assumptions.

Significant estimates include, among other things, accounts receivable realization, revenue recognition, valuation allowance for deferred tax assets, recoverability of capitalized software development costs, 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.

Correction of Immaterial Errors

During the preparation of its annual consolidated financial statements as of and for the year ended April 30, 2021, management determined that an adjustment was needed to correct its previously issued consolidated financial statements due to an immaterial accounting error.

Specifically, the Company did not accrue for its obligation to remit royalty payments based on oncology service revenue earned in prior periods to third-parties pursuant to contractual arrangements.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As a result, the accompanying consolidated financial statements and the related Note 7 - Commitments and Contingencies, have been revised to correct the immaterial accounting error for the affected periods.

Correction of this immaterial error resulted in an increase in accrued liabilities of approximately $ 101,000 with a corresponding reduction in retained earnings as of May 1, 2019, to adjust for the cumulative impact of the error as of the beginning of the earliest period presented in the accompanying consolidated financial statements.

The correction of this immaterial error also required an adjustment to the consolidated financial statements for fiscal year 2020, resulting in an increase in cost of sales and net loss and an increase in accrued liabilities and reduction in retained earnings of approximately $ 118,000 .

Management initially recorded the effect of this immaterial error of approximately $ 219,000 in the unaudited consolidated financial statements as of and for the three and nine month periods ended January 31, 2021.

Subsequently, management determined that the correction of the immaterial error should have been reflected in the periods in which the error originated, following the approach described above.

Accordingly, the following tables summarize the effects of the immaterial error correction to the Company's consolidated financial statements as of and for the year ended April 30, 2020, and the unaudited consolidated financial statements as of and for the three and nine month periods ended January 31, 2021.

(in thousands):

April 30, 2020

As Previously Reported Impact of adjustment As Revised

Consolidated Balance Sheet

Accrued liabilities $ 2,502 $ 219 $ 2,721

Total current liabilities $ 12,085 $ 219 $ 12,304

Total liabilities $ 15,433 $ 219 $ 15,652

Accumulated deficit $ ( 72,673 ) $ ( 219 ) $ ( 72,892 )

Total stockholders' equity $ 5,318 $ ( 219 ) $ 5,099

For the year ended

April 30, 2020

As Previously Reported Impact of Adjustment Revised as

Consolidated Income Statement

Cost of oncology services $ 16,882 $ 118 $ 17,000

Total costs and operating expenses $ 33,926 $ 118 $ 34,044

Loss from operations $ ( 1,803 ) $ ( 118 ) $ ( 1,921 )

Net loss $ ( 1,975 ) $ ( 118 ) $ ( 2,093 )

Basic and diluted EPS $ ( 0.17 ) $ ( 0.01 ) $ ( 0.18 )

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

January 31, 2021

3 Months Ended 9 Months Ended

(unaudited) (unaudited)

As Reported Impact of

Adjustment As Revised As Reported Impact of

Adjustment As Revised

Consolidated Income Statement

Cost of oncology services $ 4,842 $ ( 219 ) $ 4,623 $ 15,822 $ ( 219 ) $ 15,603

Total costs and operating expenses $ 10,049 $ ( 219 ) $ 9,830 $ 29,681 $ ( 219 ) $ 29,462

Income from operations $ 763 $ 219 $ 982 $ 795 $ 219 $ 1,014

Net income $ 740 $ 219 $ 959 $ 816 $ 219 $ 1,035

Basic EPS $ 0.06 $ 0.01 $ 0.07 $ 0.06 $ 0.02 $ 0.08

Diluted EPS $ 0.05 $ 0.02 $ 0.07 $ 0.06 $ 0.01 $ 0.07

Consolidated Balance Sheet

Accrued liabilities $ 2,426 $ ( 219 ) $ 2,207 $ 2,426 $ ( 219 ) $ 2,207

Total current liabilities $ 11,414 $ ( 219 ) $ 11,195 $ 11,414 $ ( 219 ) $ 11,195

Total liabilities $ 17,393 $ ( 219 ) $ 17,174 $ 17,393 $ ( 219 ) $ 17,174

Accumulated deficit $ ( 71,857 ) $ 219 $ ( 71,638 ) $ ( 71,857 ) $ 219 $ ( 71,638 )

Total stockholders' equity $ 7,867 $ 219 $ 8,086 $ 7,867 $ 219 $ 8,086

Cash and Cash Equivalents

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As of April 30, 2022 and 2021 the Company had cash balances of $ 9.0 million and $ 4.7 million, respectively, and no cash equivalents.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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For the year ended April 30, 2022, the Company had net income of approximately $ 548,000 , an accumulated deficit of approximately $ 72.0 million, working capital of $ 2.2 million and cash of $ 9.0 million.

We believe that our cash on hand, together with future improved cash flows from operations, are adequate to fund operations through at least August 2022.

We believe that our cash on hand, together with expected cash flows from operations, are adequate to fund operations through at least August 2023.

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.

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 carrying value of cash, accounts receivable, prepaid expenses, and other current assets, 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 has no assets or liabilities that are measured at fair value on a recurring and/or non-recurring during the years ended April 30, 2022 and 2021.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and Equipment

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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 .

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 .

Refer to Footnote 4, "Property and Equipment" for a detailed discussion.

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 ("ROU") 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.

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 ("ROU") 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.

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The Company has no t recognized any impairment losses for the Company’s long-lived assets for the years ending April 30, 2022 and 2021.

Other long term assets

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

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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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 business unit.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company has one reportable segment.

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For the year ended April 30, 2022, the Company's annual assessment did not result in any impairment indicators.

The Company recognized goodwill impairment for the years ended April 30, 2021 and 2020 of $ 0 and $ 335,000 , respectively.

As of April 30, 2021 and 2020, goodwill was $ 335,000 .

Deferred Revenue

Deferred revenue represents payments received in advance for products to be delivered.

When products are delivered, deferred revenue is then recognized as earned.

Deferred revenue represents payments received in advance of products to be delivered or services to be performed.

When products are delivered and/or services are performed, deferred revenue is recognized as earned.

Deferred revenue is expected to be recognized within one year.

Other Non-Current Liabilities

Other non-current liabilities represent amounts for 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 and a financing lease of laboratory equipment in exchange for a lab supplies purchasing commitment.

Cost of Oncology Services

Cost of oncology services relates primarily to our TOS business unit.

Cost of oncology services relates primarily to our Translational Oncology Solutions ("TOS") business unit.

TOS costs consist of direct costs related to laboratory supplies, mice purchases, and maintenance costs for studies completed internally as well as charges from Contract Research Organization's for studies handled externally.

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All research and development costs are expensed as incurred.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Sales and Marketing

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107 with the continued use of this method extended under the provisions of Staff Accounting Bulletin No.

Estimated volatility is based

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

upon the historical volatility of the Company's common stock.

Estimated volatility is based upon the historical volatility of the Company's common stock.

The Company does not anticipate paying a dividend, and therefore, no expected dividend yield was used.

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As of April 30, 2022 and 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.

Tax positions include, but are not limited to, the following:

• An allocation or shift of income between taxing jurisdictions;

• The characterization of income or a decision to exclude reportable taxable income in a tax return;

• A decision to classify a transaction, entity or other position in a tax return as tax exempt.

The Company reflects tax benefits only if it is more likely than not that we 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.

As of April 30, 2021 and 2020 the Company has recorded $ 181,000 and $ 178,000 , respectively, of liabilities related to uncertain tax positions relative to one of its foreign operations.

As of April 30, 2022 and 2021 the Company has recorded $ 181,000 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.

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

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue Recognition

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All revenue is generated from contracts with customers.

The Company's arrangements are service type contracts that mainly have a duration of less than a year.

The Company recognizes revenue when control of these services is transferred to the customer in an amount, referred to as the transaction price, that reflects the consideration to which the Company is expected to be entitled in exchange for those services.

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The Company records revenues net of any tax assessments by governmental authorities, such as value added taxes, that are imposed on and concurrent with specific revenue generating transactions.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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.

Most of the Company's contracts can be terminated by the customer without cause.

In the event of termination, the Company's contracts provide that the customer pay the Company for services rendered through the termination date.

The Company generally receives compensation based on a predetermined invoicing schedule relating to specific milestones for that contract.

Amendments to contracts are common.

The Company evaluates each amendment which meets the criteria of a contract modification under ASC 606.

Each modification is further evaluated to determine whether the contract modification should be accounted for as a separate contract or as a continuation of the original agreement.

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

Pharmacology Study and Other Services

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The estimate of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Company.

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Trade Receivables, Unbilled Services and Deferred Revenue

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Neither the Company nor its customers view such upfront payments and contracted payment schedules as a means of financing.

Unbilled services primarily arise from timing of payment terms and when an input method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer.

Unbilled services primarily arise when the revenue recognized exceeds the amount billed to the customer.

Such situations occur due to divergences between revenue recognition and the invoicing milestones which are based on predetermined payment terms.

Deferred revenue consists of unearned payments received in excess of revenue recognized.

As the contracted services are subsequently performed and the associated revenue is recognized, the deferred revenue balance is reduced by the amount of the revenue recognized during the period.

As the contracted services are subsequently performed and the associated revenue recognized, the deferred revenue balance is reduced by the amount of the revenue recognized during the period.

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

Accounting Pronouncements Being Evaluated

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

In June 2016, the FASB issued ASU No.

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

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We are currently assessing the impact of this update on our consolidated financial statements and have not yet determined the impact on our consolidated financial statements.

Recently Adopted Accounting Pronouncements

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

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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

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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 12.

Leases" for additional information.

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.

The adoption did not have an impact on the Company's 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 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.

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

The Company adopted this guidance on May 1, 2020.

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

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.

The Company adopted this guidance on May 1, 2020.

We adopted this guidance on May 1, 2021.

The adoption of this ASU did not have a material impact is reflected in the Company's current year consolidated financial statements.

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

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April 30, 2022 April 30, 2021

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Deferred revenue $ 11,071 $ 6,256

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

As of April 30, 2020 unbilled services was $ 2.4 million and deferred revenue was $ 5.8 million.

Property and Equipment

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Property and equipment, net $ 7,134 $ 6,090

Depreciation and amortization expense was $ 1.2 million and $ 825,000 for the years ended April 30, 2021 and 2020, respectively.

Depreciation and amortization expense, excluding expense recorded under finance leases, was $ 925,000 and $ 683,000 for the twelve months ended April 30, 2021 and 2020.

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

Depreciation and amortization expense was $ 1.6 million and $ 1.2 million for the years ended April 30, 2022 and 2021, respectively.

Depreciation and amortization expense, excluding expense recorded under finance leases, was $ 1.5 million and $ 925,000 for the years ended April 30, 2022 and 2021.

As of April 30, 2022 and 2021, property, plant and equipment included gross assets held under finance leases of $ 713,000 and $ 343,000 , respectively.

Related depreciation expense for these assets was $ 87,000 and $ 124,000 for the years ended April 30, 2022 and 2021.

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 from that point forward.

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

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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.

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.

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

During the year ended April 30, 2020, the Company began to capitalize development and implementation costs in accordance with accounting guidance for its Lumin Bioinformatics platform ("Lumin").

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

The Company has capitalized development and implementation costs in accordance with accounting guidance for its Lumin Bioinformatics platform ("Lumin").

Lumin is the Company's new oncology data-driven software program and data tool which is operates 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.

As of April 30, 2020, development was not yet complete and, as such, the platform was not placed into service or made available for sale.

Therefore, these costs were classified as assets in progress in the amount of $ 315,000 at April 30, 2020.

After additional 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 $ 134,000 for the year ended April 30, 2021.

During the second quarter ended October 31, 2021 and through the end of fiscal 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 April 30, 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 April 30, 2021 are $ 991,000 .

These developments will be placed into service and made available for sale during fiscal 2022.

Capitalized costs are classified as assets in progress during the development process until development is complete and the asset is available for sale.

The initial version of the Lumin platform was launched during fiscal year 2021, at which time initial capitalization ceased and amortization commenced.

The total Lumin assest placed into service and available for sale as of July 31, 2020 was $ 484,000 .

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.

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

During the third quarter of fiscal year 2022, these capitalized costs were placed into

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service as the enhanced version was launched and made available for sale.

The total cost of the enhanced Lumin asset placed into service and available for sale as of January 31, 2022 was $ 1.4 million, bringing the total capitalized gross asset investment to $ 1.9 million.

Amortization expense related to this asset addition was $ 317,000 and $ 134,000 for the years ended April 30, 2022 and 2021, respectively.

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.

During fiscal 2020, the Company entered into a finance lease for laboratory equipment.

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

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Prior to expiration, the monthly finance lease payment was approximately $ 19,000 .

The future minimum lease payments remaining under this finance lease at April 30, 2021 and 2020 were zero are $ 135,000 , respectively.

The future minimum lease payments remaining under this finance lease at April 30, 2021 and 2020 were zero and $ 135,000 , respectively.

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

Depreciation and amortization expense related to this finance lease was $ 124,000 and $ 88,500 for the years ended April 30, 2021 and 2020, respectively.

Depreciation and amortization expense related to this finance lease was zero and $ 124,000 for the years ended April 30, 2022 and 2021, respectively.

During fiscal 2022, the Company recognized a finance lease for laboratory equipment.

This equipment was obtained as the result of a laboratory supplies purchase commitment with costs of approximately $ 370,000 at inception through December 2025.

Cash payments for this lease are in the form of consideration for purchasing lab supplies under a purchase commitment agreement.

The present value of the minimum future obligations of $ 370,000 was calculated based on an interest rate of 3.25 %.

Depreciation and amortization expense related to this finance lease was $ 87,000 and zero for the years ended April 30, 2022 and 2021, respectively.

Revenue from Contracts with Customers

Oncology Services Revenue

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers.

Under 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.

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

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.

Most of the Company's contracts can be terminated by the customer without cause.

In the event of termination, the Company's contracts provide that the customer pay the Company for services rendered through the termination date.

The Company generally receives compensation based on a predetermined invoicing schedule relating to specific milestones for that contract.

In addition, in certain instances a customer contract may include forms of variable consideration such as performance increases or other provisions that can increase or decrease the transaction price.

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.

Amendments to contracts are common.

The Company evaluates each amendment which meets the criteria of a contract modification under ASC 606.

Each modification is further evaluated to determine whether the contract modification should be accounted for as a separate contract or as a continuation of the original agreement.

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

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 table represents disaggregated revenue for the twelve months ended April 30, 2022 and 2021:

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Pharmacology services $ 46,833 $ 39,473

Personalized oncology services 166 790

Other TOS revenue 2,227 1,401

Personalized oncology services 49 166

Total oncology services revenue $ 49,109 $ 41,040

Contract Balances

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

Refer to Note 3 for related balances.

Significant Customers

For the years ended April 30, 2021 and 2020, none of our customers accounted for more than 10.0% of our total revenue.

As of April 30, 2021 and 2020, none of our customers accounted for more than 10.0% of our total accounts receivable balance.

For the years ended April 30, 2022 and 2021, one and none of our customers accounted for more than 10% of our total revenue, respectively.

As of April 30, 2022, one customer accounted for 17 % of our total accounts receivable balance.

As of April 30, 2021, no customers accounted for 10% or more of our total accounts receivable balance.

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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.

These types of arrangements have an upfront fee ranging from approximately nil to $ 30,000 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.

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

For the years ended April 30, 2021 and 2020, we have paid or accrued approximately $ 127,000 and $ 128,000 related to these royalty arrangements, respectively.

For the years ended April 30, 2022 and 2021, we have recognized approximately $ 401,000 and $ 127,000 in expense related to these royalty arrangements, respectively.

Stock-based Payments

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TOS cost of sales 142 84

POS cost of sales — 1

Total stock-based compensation expense $ 912 $ 598

The Company has in place a 2021 Equity Incentive Plan, 2010 Equity Incentive Plan and 2008 Equity Incentive Plan ("the Plans").

In general, these plans provide for stock-based compensation to the Company’s employees, directors and non-employees.

The plans also provide for limits on the aggregate number of shares that may be granted, the term of grants and the strike price of option awards.

2021 Equity Incentive Plan

As part of the 2021 Annual Shareholders Meeting, shareholders approved the adoption of the 2021 Equity Incentive Plan (“2021 Equity Plan”).

The purpose of the 2021 Equity Plan is to grant (i) Non-statutory Stock Options;

(ii) Incentive Stock Options;

(iii) Restricted Stock Awards;

and/or (iv) Stock Appreciation Rights (collectively, stock-based compensation) to its employees, directors and non-employees.

Total stock awards under the 2021 Equity Plan shall not exceed 2 million shares of common stock.

Options and Stock Appreciation Rights expire no later than ten years from the date of grant and the awards vest as determined by the Board of Directors.

Options and Stock Appreciation Rights have a strike price not less than 100 % of the

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fair market value of the common stock subject to the option or right at the date of grant.

As of April 30, 2022, approximately 1.8 million shares were left to issue under this plan.

2010 Equity Incentive Plan

On February 18, 2011, shareholders owning a majority of the issued and outstanding shares of the Company executed a written consent approving the 2010 Equity Incentive Plan (“2010 Equity Plan”).

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Options and Stock Appreciation Rights have a strike price not less than 100 % of the fair market value of the common stock subject to the option or right at the date of grant.

After February 2021, no more shares were available to be issued from this plan.

2008 Equity Incentive Plan

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The Company has previously granted (i) Non-statutory Stock Options;

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Options granted under the 2008 Equity Plan expire no later than ten years from the date of grant and the awards vest as determined by the Board of Directors.

For stock-based payments to non-employee consultants under both the 2010 and 2008 Equity Plan, the fair value of the stock-based consideration issued is used to measure the transaction, as management believes this to be a more reliable measure of fair value than the services received.

For stock-based payments to non-employee consultants under the Plans, the fair value of the stock-based consideration issued is used to measure the transaction, as management believes this to be a more reliable measure of fair value than the services received.

The fair value of the award is expensed over the period service is provided to the Company;

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.

After 2018, no more shares were available to be issued from this plan.

Director Compensation Plan

On December 12, 2013, the Compensation Committee of the Board of Directors of the Company adopted changes to the Director Compensation Plan of 2010 (the “Director Plan”) effective December 1, 2013.

Under the Director Plan, independent directors of the Company are entitled to an annual award of a five-year option to purchase 8,333 shares of the Company’s common stock, and the Chairman of the Board of the Company is entitled to an annual award of a five years option to purchase 16,667 shares of the Company’s common stock.

Under the Director Plan, independent directors of the Company are entitled to an annual award of a five-year option to purchase 8,333 shares of the Company’s common stock, and the Chairman of the Board of the Company is entitled to an annual award of a five-year option to purchase 16,667 shares of the Company’s common stock.

Independent directors who serve as chairperson of a committee will also receive an annual grant of a five-year option to purchase 1,667 shares of the Company’s common stock.

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New directors will receive a grant upon joining the Board equal to the pro-rata annual grant for the remainder of the year.

Options issued under the Director Plan are issued pursuant to the 2010 Equity Plan.

Options issued under the Director Plan are now issued pursuant to the 2021 Equity Plan.

Stock Option Grants

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Dividend yield — %

The weighted average fair value of stock options granted during the years ending April 30, 2021 and 2020, was $ 5.11 and $ 5.33 , respectively.

The Company’s stock options activity and related information as of and for the years ended April 30, 2021 and 2020 is as follows:

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Employees Directors

The weighted average fair value of stock options granted during the years ending April 30, 2022 and 2021, was $ 5.56 and $ 5.11 , respectively.

The Company’s stock options activity and related information as of and for the years ended April 30, 2022 and 2021 is as follows:

Employees Non-

Employees Total Weighted

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Vested as of April 30, 2022 1,349,895 4,584 1,354,479 3.93 4.2 $ 5,778,000

Employees Directors

Employees Non-

Employees Total Weighted

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Vested as of April 30, 2021 1,323,270 9,584 1,332,854 3.34 4.8 $ 9,995,000

Stock Purchase Warrants

As of April 30, 2021 and 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.

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Shares Weighted

Price Weighted

Life (Years) Aggregate

Outstanding, May 1, 2019 1,671,440 $ 6.20 0.9 $ 5,730,000

Granted — — — —

Exercised ( 858,695 ) 5.62 — 10,045,000

Forfeited ( 760,601 ) 5.76 — 8,587,000

Expired ( 52,144 ) 4.85 — 700,000

Outstanding, April 30, 2020 — $ — — $ —

Provision for Income Taxes

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

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Year Ended April 30, 2022

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Increase in uncertain tax position — 0.7

Goodwill impairment — ( 3.5 )

Change in valuation allowance 27.7 ( 24.3 )

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

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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, 2022 and 2021.

For the years ended April 30, 2021 and 2020, the Company recorded a valuation allowance of $ 15.3 million.

For the years ended April 30, 2022 and 2021, the Company recorded a valuation allowance of $ 15.5 million and $ 15.3 million, respectively.

As of April 30, 2022 and 2021, the Company’s estimated U.S.

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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 years ended April 30, 2021 and 2020 can be carried forward indefinitely.

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

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

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During the fiscal year ended April 30, 2013, approximately $ 12.0 million of the Company’s net operating losses became subject to limitation under Internal Revenue Code Section 382 in connection with an ownership change on January 28, 2013.

As a result of the ownership change, the Company’s annual limitation is approximately $ 432,000 .

As a result of the ownership change, the Company’s annual limitation on its use of net operating loss carry-forwards is approximately $ 432,000 .

The Company files income tax returns in various jurisdictions with varying statutes of limitations.

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The following table indicates the changes to the Company’s uncertain tax positions for the period and years ended April 30, 2022 and 2021 in thousands:

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Year Ended April 30,

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Balance, end of year $ 181 $ 181

As of April 30, 2021 and 2020, the above amounts of $ 181,000 and $ 178,000 were included in other long-term liabilities.

As of April 30, 2022 and 2021, the above amounts of $ 181,000 for each fiscal year were included in other long-term liabilities.

Earnings Per Share

A reconciliation of net income (loss) and number of shares used in computing basic and diluted earnings (loss) per share was as follows:

A reconciliation of net income and number of shares used in computing basic and diluted earnings per share was as follows:

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Year Ended April 30,

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

Net income (loss) attributable to common stockholders $ 362 $ ( 2,093 )

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

Net income attributable to common stockholders $ 548 $ 362

Weighted Average common shares - basic 13,197,170 13,138,995

Basic net income (loss) per share $ 0.03 $ ( 0.18 )

Diluted income (loss) per share computation

Net income (loss) attributable to common stockholders $ 362 $ ( 2,093 )

Income (loss) available to common stockholders $ 362 $ ( 2,093 )

Basic net income per share $ 0.04 $ 0.03

Diluted income per share computation

Net income attributable to common stockholders $ 548 $ 362

Income available to common stockholders $ 548 $ 362

Weighted Average common shares 13,197,170 13,138,995

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Adjusted weighted average share – diluted 14,159,799 14,573,561

Diluted net income (loss) per share $ 0.02 $ ( 0.18 )

Diluted net income per share $ 0.04 $ 0.02

The following table reflects the total potential stock-based instruments outstanding at April 30, 2022 and 2021 that could have an effect on the future computation of dilution per common share.

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Consulting Services

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For both years ended April 30, 2022 and 2021, the Company paid a member of its Board of Directors $ 36,000 and $ 54,000 for consulting services unrelated to his duties as a board member.

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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 recognizes rent

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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.

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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 $ 1,247,000 and $ 955,000 for the years ended April 30, 2021 and 2020, respectively.

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

Rent expenses totaled $ 1.9 million and $ 1.3 million for the years ended April 30, 2022 and 2021, respectively.

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 $ 94,000 of rental costs relative to this lease for fiscal 2021 and 2020, respectively.

The lease was renewed during fiscal 2022 and expires in November 2026.

The Company recognized $ 88,000 and $ 91,000 of rent expense relative to this lease for fiscal 2022 and 2021, 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.

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◦ 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 $ 1,113,000 and $ 604,000 of rental expense for fiscal 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") and add on Suite 201.

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

The Company recognized $ 43,000 of rental expense under this lease for fiscal 2021.

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

◦ For the leases related to the premises at Piccard Drive, the Company recognized $ 1.7 million and $ 1.2 million of rental expense for fiscal 2022 and 2021, respectively.

• 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.

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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 $ 76,000 .

The Company also recognized $ 43,000 and $ 257,000 of rental expense for fiscal 2021 and 2020, respectively.

The Company recognized zero and $ 43,000 of rental expense for fiscal 2022 and 2021, respectively.

• VIA LEONE XIII, 14, Milan, Italy, which consists of laboratory and office space where the Company conducts operations related to its flow cytometry service offerings.

The Company executed the lease for its laboratory space in June 2021, and commenced occupancy during the three months ended October 31, 2021.

This lease expires May 2023.

The Company executed the lease for its office space on October 1, 2021.

This lease expires September 2027.

◦ The Company recognized an operating ROU asset and related operating lease liability for the lab and office space of $ 205,000 each, respectively.

◦ The Company recognized rental costs associated with these leases of $ 81,000 and zero for fiscal 2022 and 2021, respectively.

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

April 30, 2021 May 1, 2020

April 30, 2022 April 30, 2021

Operating lease right-of-use assets, net

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Thereafter 5,164

Total $ 21,014

Total undiscounted liabilities 19,311

Imputed interest ( 9,845 )

Present value of minimum lease payments $ 9,466

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.

As of the filing date of this annual report on form 10-K, there are no such subsequent events to disclose.

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Exhibit Index

48 unchanged sentences

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