What changed in this filing

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Item 9A. Controls and Procedures

2023-07-24 compared with 2022-07-22 · 140 added, 145 removed, 730 unchanged (28% of the section changed)

5 unchanged sentences

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.

Based on the evaluation of our disclosure controls and procedures as of April 30, 2023 our Chief Executive Officer and Chief Financial Officer have concluded that, as of April 30, 2023, our disclosure controls and procedures are effective.

Management’s Annual Report on Internal Control over Financial Reporting

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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, 2023, 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 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 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.

There were no changes in the Company’s internal controls over financial reporting during the year ended April 30, 2023, that materially affected, or were reasonably likely to materially affect the Company’s internal control over financial reporting.

Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

Directors, Executive Officers and Corporate Governance

8 unchanged sentences

The information required by this item will be contained in our 2023 Proxy Statement and such information is incorporated herein by this reference.

Exhibits, Financial Statement Schedules

Exhibits and Financial Statement Schedules

Financial Statements

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14 Code of Ethics (incorporated by reference to Exhibit 14 of the April 30, 2008 Form 10-KSB)

21 List of Subsidiaries (incorporated by reference to Exhibit 21 of the Company's Form 10-K filed July 28, 2017)

21 List of Subsidiaries

23.1 Consent of Independent Registered Public Accounting Firm*

11 unchanged sentences

** Furnished hereto.

*** Management contract or compensatory plan or arrangement.

Form 10-K Summary

Not Required.

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHAMPIONS ONCOLOGY, INC.

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(principal executive officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

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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, 2022 and 2021 were approximately $46.8 million and $39.5 million, respectively.

Pharmacology services revenues for the years ended April 30, 2023 and 2022 were approximately $50.7 million and $46.8 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.

36 unchanged sentences

200,000,000 shares authorized;

13,522,441 and 13,414,066 shares issued and outstanding at April 30, 2022 and 2021, respectively

13,558,650 and 13,522,441 shares issued;

and 13,544,228 and 13,522,441 shares outstanding at April 30, 2023 and 2022, respectively

Treasury Stock, at cost ( 74 ) —

Additional paid-in capital 82,013 81,064

13 unchanged sentences

General and administrative 10,240 9,117

Asset impairment 807 —

Total costs and operating expenses 59,126 48,502

Income from operations 607 366

(Loss) income from operations ( 5,256 ) 607

Other expense:

Other income (expense), net ( 24 ) 71

Income before income tax expense 583 437

Other expense, net ( 11 ) ( 24 )

(Loss) income before income tax expense ( 5,267 ) 583

Provision for income tax 68 35

Net income $ 548 $ 362

Net income per common share outstanding

Net (loss) income $ ( 5,335 ) $ 548

Net (loss) income per common share outstanding

basic $ ( 0.39 ) $ 0.04

19 unchanged sentences

Issuance of common stock on exercise of stock options 36,209 — — — 85 — 85

Net income — — — — — 548 548

Repurchase of common stock ( 14,422 ) — 14,422 ( 74 ) — — ( 74 )

Net loss — — — — — ( 5,335 ) ( 5,335 )

Balance, April 30, 2023 13,544,228 $ 14 14,422 $ ( 74 ) $ 82,013 $ ( 77,317 ) $ 4,636

5 unchanged sentences

Operating activities:

Net income $ 548 $ 362

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

Net (loss) income $ ( 5,335 ) $ 548

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

Stock-based compensation expense 864 912

2 unchanged sentences

Operating lease right-of-use assets 952 786

Gain on termination of operating lease — ( 75 )

Asset impairment 807 —

Allowance for doubtful accounts 195 292

5 unchanged sentences

Operating lease liabilities ( 907 ) ( 631 )

Other non-current liability — 3

Deferred revenue 1,706 4,815

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

Net cash provided by operating activities 3,972 6,497

Investing activities:

Purchase of property and equipment ( 2,872 ) ( 2,384 )

Refund of security deposit — 112

Net cash used in investing activities ( 2,872 ) ( 2,384 )

Financing activities:

Proceeds from exercise of options and warrants 207 1,369

Finance lease payments — ( 174 )

Proceeds from exercise of options 85 207

Repurchases of common stock ( 74 ) —

Net cash provided by financing activities 11 207

Increase (decrease) in cash 4,320 ( 3,655 )

Increase in cash 1,111 4,320

Cash, beginning of year 9,007 4,687

35 unchanged sentences

As of April 30, 2023 and 2022 the Company had cash balances of $ 10.1 million and $ 9.0 million, respectively, and no cash equivalents.

The Company maintains its cash balances in three major financial institutions.

The Company regularly monitors the financial stability of these financial institutions and believes that it

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

is not exposed to any significant credit risk in its cash.

However, in March and April 2023, certain U.S.

government banking regulators took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened uncertainties in financial markets.

While these events have not had a material direct impact on the Company's operations, if further liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions, the Company's ability to access cash or enter into new financing arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.

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

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

For the year ended April 30, 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 expected cash flows from operations, are adequate to fund operations through at least August 2023.

For the year ended April 30, 2023, the Company had a net loss of approximately $ 5.3 million, an accumulated deficit of approximately $ 77.3 million, negative working capital of $ 2.3 million and cash of $ 10.1 million.

Despite the negative working capital, we believe that our cash on hand, together with expected cash flows from operations, are adequate to fund operations through at least August 2024.

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.

6 unchanged sentences

The Company evaluates its hierarchy disclosures each quarter.

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.

The Company has no assets or liabilities that are measured at fair value on a recurring and/or non-recurring basis during the years ended April 30, 2023 and 2022.

Property and Equipment

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The Company uses estimates of future cash flows over the remaining useful life of a long- lived asset or asset group to determine the recoverability of the asset.

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

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

These estimates only include the net cash flows

CHAMPIONS ONCOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of the asset or asset group.

The Company has recognized an impairment loss of $ 807,000 for its Lumin Bioinformatics platform ("Lumin") for the year ending April 30, 2023 resulting from a recoverability analysis performed at that date.

The net book value of Lumin at April 30, 2023 is zero.

Refer to Note 4, "Property and Equipment".

The Company did no t recognized any impairment losses for the Company’s long-lived assets for the year ending April 30, 2022.

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.

15 unchanged sentences

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

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

For the years ended April 30, 2023 and 2022, the Company's annual assessment did no t result in any impairment indicators.

Deferred Revenue

11 unchanged sentences

Research and Development

Research and development costs represent both costs incurred internally for research and development activities, including personnel costs, mice purchases, and maintenance, as well as costs incurred externally to facilitate research activities, such as tumor tissue procurement and characterization expenses.

All research and development costs are expensed as incurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All research and development costs are expensed as incurred.

Sales and Marketing

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

Dilutive earnings per share is not presented when it would be antidilutive to do so.

Stock-based Payments

22 unchanged sentences

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

The Company accrued $ 0 and $ 3,000 , for interest and penalties on the Company’s statement of operations for the years ended April 30, 2022 and 2021, respectively.

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

For the year ended April 30, 2022 and 2021, the Company recognized a provision for income taxes of $ 35,000 and $ 75,000 , respectively.

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

The Company accrued $ 0 for interest and penalties on the Company’s statement of operations for the years ended April 30, 2023

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and 2022, respectively as the Company believes its recorded liability for uncertain tax positions covers any potential interest and/or penalties.

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

For the years ended April 30, 2023 and 2022, the Company recognized a provision for income taxes of $ 68,000 and $ 35,000 , respectively.

These amounts are mainly attributable to taxable income earned in Israel relating to transfer pricing and, in fiscal 2023, state net operating loss limitations.

Revenue Recognition

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Variable Consideration

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In some cases, contracts provide for variable consideration that is contingent upon the occurrence of uncertain future events, such as the success of the initial performance obligation.

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

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

Early adoption is permitted.

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

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

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

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

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

We 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.

The standard is effective May 1, 2023 for the Company.

The Company is currently assessing the impact of this update on its consolidated financial statements but does not expect the adoption of the pronouncement to have a material impact on its balance sheet or results of operations.

Accounts Receivable, Unbilled Services and Deferred Revenue

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

April 30, 2022 April 30, 2021

April 30, 2023 April 30, 2022 April 30, 2021

Accounts receivable $ 3,843 $ 6,037 $ 4,304

6 unchanged sentences

Deferred revenue $ 12,776 $ 11,071

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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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Depreciation and amortization expense was $ 2.2 million and $ 1.6 million for the years ended April 30, 2023 and 2022, 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.

Depreciation and amortization expense, excluding expense recorded under finance leases, was $ 2.1 million and $ 1.5 million for the years ended April 30, 2023 and 2022, respectively.

As of April 30, 2023 and 2022, property, plant and equipment included gross assets held under finance leases of $ 1.0 million and $ 713,000 , respectively.

Related depreciation expense for these assets was $ 135,000 and $ 87,000 for the years ended April 30, 2023 and 2022, respectively.

Capitalized software development costs under a hosting arrangement

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

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).

The Company has capitalized development and implementation costs in accordance with accounting guidance for its bioinformatics platform, Lumin.

Lumin is the Company's 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.

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

There are no capitalized software development costs classified as assets in progress as of April 30 2023 or 2022.

The total cost capitalized gross asset investment for the Lumin platform that was launched and placed into service was $ 1.9 million.

Ordinary amortization expense related to this asset addition was $ 630,000 and $ 317,000 for the years ended April 30, 2023 and 2022, respectively.

During the fourth quarter of fiscal 2023, the Company assessed the recoverability of the Lumin capitalized software development costs by comparing the forecasted future revenues from Lumin sales, based on management’s best estimates and using appropriate assumptions and projections, to the carrying amount of the capitalized asset.

The Company considered several factors in this analysis including the decrease in Lumin revenue growth from the prior year, the deceleration of new Lumin bookings in the current year, and the strategic consideration for additional capital investment into the platform, sales team, and marketing campaigns to bolster awareness and growth.

As the carrying value was determined not to be recoverable from future

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

revenues, an impairment loss was recognized for the year ending April 30, 2023 equal to the amount by which the carrying amount exceeded the future revenues, or, its net book value at that date of $ 807,000 .

Finance Lease

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.

This lease expired December 2020.

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 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 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.

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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 $ 72,000 and $ 87,000 for the years ended April 30, 2023 and 2022, respectively.

During fiscal 2023, 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 $ 368,000 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 $ 368,000 was calculated based on an interest rate of 3.5 %.

Depreciation and amortization expense related to this finance lease was $ 63,000 and zero for the years ended April 30, 2023 and 2022, respectively.

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Significant Customers

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.

For the years ended April 30, 2023 and 2022, one of our customers accounted for more than 10% of our total revenue, at 14 % and 13 %, respectively.

As of April 30, 2023, one customer accounted for 14 % of our total accounts receivable balance.

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

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

Commitments and Contingencies

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commitments and Contingencies

Legal Matters

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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

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.

As of April 30, 2023, approximately 1.7 million shares were left to issue under this plan.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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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-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.

Under the Director Plan, independent directors of the Company were 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 was 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 were also to receive an annual grant of a five-year option to purchase 1,667 shares of the Company’s common stock.

During fiscal year 2021, the plan was modified to an annual base compensation of $ 100,000 for each Board Director which could be taken in either company options or a combination of company options and cash, not to exceed $ 35,000 .

The Chairman of the Board’s annual compensation was set at an equivalent of $ 150,000 .

Compensation for Independent Directors who serve as chairperson of a committee was set at an equivalent of between $ 110,000 to $ 120,000 .

All options issued under the Director Plan vest quarterly at a rate of 25 %.

Option grants will typically be issued after the annual shareholder meeting which will generally be held in October of each year.

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

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

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

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Dividend yield 0 %

The weighted average fair value of stock options granted during the years ended April 30, 2023 and 2022, was $ 4.31 and $ 5.56 , respectively.

The Company’s stock options activity and related information as of and for the years ended April 30, 2023 and 2022 is as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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-

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Outstanding, April 30, 2023

1,739,336 36,331 1,775,667 4.80 4.6 $ 2,683,000

Vested and expected to vest as of April 30, 2023

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

1,739,336 36,331 1,775,667 4.80 4.6 $ 2,683,000

Exercisable as of April 30, 2023

1,436,932 1,875 1,438,807 4.35 3.8 $ 2,681,000

Employees Non-

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Outstanding, April 30, 2022

1,617,324 40,915 1,658,239 4.51 4.9 $ 6,131,000

Vested and expected to vest as of April 30, 2022

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

Provision for Income Taxes

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

1,617,324 40,915 1,658,239 4.51 4.9 $ 6,131,000

Exercisable as of April 30, 2022

1,349,895 4,584 1,354,479 3.93 4.2 $ 5,778,000

Share Repurchase Program

On March 29, 2023, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $ 5.0 million of the Company’s common stock.

The share repurchase program is designed in accordance with Rule 10b-18 of the Exchange Act.

The shares may be purchased from time to time in the open market, as permitted under applicable rules and regulations, at prevailing market prices.

The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements and other factors.

The program does not obligate the Company to acquire a minimum number of shares.

As of April 30, 2023, the Company had purchased approximately 14,000 shares of its common stock, at an average price of $ 5.11 per share, totaling approximately $ 74,000 and leaving an available balance of approximately $ 4.9 million authorized by the Board for use in the program as of that date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Provision for Income Taxes

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

Year Ended April 30, 2023

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Stock-based compensation expense 4,024 3,874

Capitalized research and development costs 2,597 —

Net operating loss carry-forward 9,756 11,546

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Net deferred tax asset $ — $ —

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

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

increased limitation threshold for determining deductible interest expense;

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

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

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

Management has evaluated the available evidence about future tax planning strategies, taxable income, and other possible sources of realization of deferred tax assets and has established a full valuation allowance against its net deferred tax assets as of April 30, 2023 and 2022.

For the years ended April 30, 2023 and 2022, the Company recorded a valuation allowance

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

of $ 16.8 million and $ 15.5 million, respectively.

The net changes in the valuation allowance of $ 1.3 million and $ 0.2 million during the fiscal years ended April 30, 2023 and 2022, respectively, were mainly due to increases in the deferred tax asset related to capitalized research expenses and other timing differences.

Management continues to assess the realizability of the deferred tax assets at each interim and annual balance sheet date based upon actual and forecasted operating results.

As of April 30, 2023 and 2022, the Company’s estimated U.S.

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Year Ended April 30,

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

Net income attributable to common stockholders $ 548 $ 362

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

Net income (loss) attributable to common stockholders $ ( 5,335 ) $ 548

Weighted Average common shares - basic 13,541,559 13,197,170

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

Basic net income (loss) per share $ ( 0.39 ) $ 0.04

Diluted income (loss) per share computation

Net income (loss) attributable to common stockholders $ ( 5,335 ) $ 548

Income (loss) available to common stockholders $ ( 5,335 ) $ 548

Weighted Average common shares 13,541,559 13,197,170

1 unchanged sentence

Adjusted weighted average share – diluted 13,541,559 14,159,799

Diluted net income per share $ 0.04 $ 0.02

Diluted net income (loss) per share $ ( 0.39 ) $ 0.04

The following table reflects the total potential stock-based instruments outstanding at April 30, 2023 and 2022 that could have an effect on the future computation of dilution per common share.

7 unchanged sentences

Consulting Services

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.

During the years ended April 30, 2022 and 2021, the Company paid another board member $ 17,000 and $ 5,500 , respectively, for consulting services unrelated to his duties as a board member.

For both years ended April 30, 2023 and 2022, the Company paid a member of its Board of Directors $ 36,000 for consulting services unrelated to his duties as a board member.

During the years ended April 30, 2023 and 2022, the Company paid another board member zero and $ 5,500 , respectively, for consulting services unrelated to his duties as a board member.

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

5 unchanged sentences

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

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

The Company has determined that no material

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

embedded leases exist.

Under ASC 842, the Company determines if an arrangement is a lease at inception.

5 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 $ 1.9 million and $ 1.3 million for the years ended April 30, 2022 and 2021, respectively.

Rent expenses totaled $ 1.9 million for each the years ended April 30, 2023 and 2022.

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 was renewed during fiscal 2022 and expires in November 2026.

The lease expires in November 2026.

The Company recognized $ 83,000 and $ 88,000 of rent expense relative to this lease for fiscal 2023 and 2022, respectively.

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

The Company executed this lease (the "Original Premises") on January 11, 2017.

The Company executed the original lease in January 2017.

The lease was amended to expand the premises and extend the expiration date in March 2020 and again in December 2020.

The operating commencement date was August 11, 2017.

This lease originally expired 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.

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

The Expansion Premises operating lease commencement date was June 1, 2020 and, under the amendment, both leases expire February 28, 2029.

◦ In accordance with ASC 842, the Company evaluated the first amendment and also performed a reassessment of the existing lease for Suite 025 to determine the impact of the six-month term extension.

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.

◦ 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.

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.

The Company executed this lease on November 1, 2018.

The operating commencement date was January 17, 2019.

This lease was set to expire in April 2024.

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

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

This lease expires in February 2029.

The Company recognized $ 1.7 million of rent expense for both fiscal 2023 and 2022.

• 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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company executed separate leases for its laboratory space and office space during fiscal 2022.

During fiscal 2023, the Company executed a new lease to consolidate its office and laboratory space at a new nearby location in Italy.

The lease expires October 31, 2028 and it replaces the previous two leases, which were terminated.

Upon new lease execution, the Company recognized an operating ROU asset and related operating lease liability for the lab and office space of $ 231,000 each, respectively.

Upon termination of the office space lease, the Company recognized a reduction in the related net operating ROU asset and operating lease liability of approximately $ 41,000 .

Upon termination of the laboratory space lease, the Company recognized a reduction in the related net operating ROU asset and operating lease liability of approximately $ 20,000 .

The Company recognized $ 98,000 and $ 81,000 of rent expense associated with the leases in Italy for fiscal 2023 and 2022, respectively.

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

5 unchanged sentences

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Thereafter 2,390

36 unchanged sentences

14 Code of Ethics (incorporated by reference to Exhibit 14 of the April 30, 2008 Form 10-KSB)

21 List of Subsidiaries (incorporated by reference to Exhibit 21 of the Company's Form 10-K filed July 28, 2017)

21 List of Subsidiaries

23.1 Consent of Independent Registered Public Accounting Firm*

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** Furnished hereto.

*** Management contract or compensatory plan or arrangement.

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