# Champions Oncology, Inc.: Form 10-Q for the period ended Jul 31, 2022

- Company: [Champions Oncology, Inc.](/companies/csbr.md) (CIK 771856)
- Form: 10-Q
- Filed: 2022-09-12
- Accepted by EDGAR: Sep 12, 2022, 20:52 ET
- Period: 2022-07-31
- Accession: 0001628280-22-024751
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/771856/000162828022024751/csbr-20220731.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/771856/000162828022024751/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-07-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-05-01 to 2022-07-31 | $13.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-05-01 to 2022-07-31 | $7.1m | us-gaap:CostOfGoodsAndServicesSold |
| Research and development | 3 months, 2022-05-01 to 2022-07-31 | $2.9m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-05-01 to 2022-07-31 | −$284.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-05-01 to 2022-07-31 | $17.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-05-01 to 2022-07-31 | −$319.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-05-01 to 2022-07-31 | −$0.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-05-01 to 2022-07-31 | −$0.02 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-05-01 to 2022-07-31 | 13,522,433 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-05-01 to 2022-07-31 | −$195.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-05-01 to 2022-07-31 | $754.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-07-31 | $8.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-07-31 | $18.4m | us-gaap:AssetsCurrent |
| Total assets | at 2022-07-31 | $34.4m | us-gaap:Assets |
| Current liabilities | at 2022-07-31 | $16.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-07-31 | $25.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-07-31 | $9.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 14,278 characters.

*The following discussion of our historical results of operations and our liquidity and capital resources should be read in conjunction with the condensed consolidated financial statements and related notes that appear elsewhere in this report and our most recent annual report for the year ended April 30, 2022, as filed on Form 10-K.*

### Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation, and availability of resources. These forward-looking statements include, without limitation, statements regarding: proposed new programs; expectations that regulatory developments or other matters will not have a material adverse effect on our financial position, results of operations, or liquidity; statements concerning projections, predictions, expectations, estimates, or forecasts as to our business, financial and operational results, and future economic performance; and statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

Forward-looking statements speak only as of the date the statements are made. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2022, as updated in our subsequent reports filed with the SEC, including any updates found in Part II, Item 1A of this or other reports on Form 10-Q, if any. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

### Overview and Recent Developments

We are a technology-enabled research organization engaged in creating transformative technology solutions to be utilized in drug discovery and development. Our research center consists of a comprehensive set of computational and experimental research platforms. Our pharmacology, biomarker, and data platforms are designed to facilitate drug discovery and development at lower costs and increased speeds. We perform studies which we believe may predict the efficacy of experimental oncology drugs or approved drugs as stand-alone therapies or in combination with other drugs and can stimulate the results of human clinical trials. These studies include in vivo studies that rely on implanting multiple tumors from our TumorBank in mice and testing the therapy of interest on these tumors. Studies may also include bioinformatics analysis that reveal the differences in the genetic signatures of the tumors that responded to a therapy as compared to the tumors that did not respond. Additionally, we provide computational or experimental support to identify novel therapeutic targets, select appropriate patient populations for clinical evaluation, identify potential therapeutic combination strategies, and develop biomarker hypothesis of sensitivity or resistance. These studies include the use of our in vivo, ex vivo, analytical and computational platforms.

We are engaged in the development and sale of advanced technology solutions and products to personalize the development and use of oncology drugs through our Translational Oncology Solutions ("TOS"). This technology ranges from computational-based discovery platforms, unique oncology software solutions, and innovative and proprietary experimental tools such as in vivo, ex vivo and biomarker platforms. Utilizing our TumorGraft Technology Platform ("The Platform"), a comprehensive Bank of unique, well characterized models, we provide select 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.

As part of our growth strategy, we launched Lumin Bioinformatics ("Lumin"), a new oncology data-driven software program, during fiscal 2021. Our Lumin software contains comprehensive information derived from our research services and clinical studies. Lumin leverages our large Datacenter coupled with analytics and artificial intelligence to provide a robust tool for computational cancer research. It is the combination of the Datacenter and the analytics that create a unique foundation for Lumin. Insights developed using Lumin can provide the basis for biomarker hypotheses, reveal potential mechanisms of therapeutic resistance, and guide the direction of additional preclinical evaluations.

Our drug discovery and development business leverages the computational and experimental capabilities within our platforms. Our discovery strategy utilizes our rich and unique Datacenter, coupled with artificial intelligence and other advanced computational analytics, to identify novel therapeutic targets. We then employ the use of our proprietary experimental platforms to rapidly validate these targets for further drug development efforts.

We have a rich pipeline of targets at various stages of discovery and validation, with a select group that has progressed to therapeutic development. Our commercial strategy for the validated targets and therapeutics established from this business is wide-ranging and still being developed. It will depend on many factors, and will be specific for each target or therapeutic area identified. Any expenses associated with this part of our business are research and development and are expensed as incurred.

We regularly evaluate strategic options to create additional value from our drug discovery business, which may include, but are not limited to, potential spin-out transactions or capital raises.

### Liquidity and Capital Resources

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. Recently, we have met these cash requirements through cash, working capital management, and sales of products and services. In the past, we have also received proceeds from certain private placements and public offerings of our securities. For the three months ended July 31, 2022, the Company had a net loss of approximately $319,000 and cash used in operations of $195,000. As of July 31, 2022, the Company had an accumulated deficit of approximately $72.3 million, working capital of $1.8 million, and cash of $8.1 million. We believe that our cash on hand, together with expected positive cash flows from operations for fiscal year 2023, are adequate to fund operations through at least 12 months from the filing of this 10-Q. However, should our revenue expectations not materialize, we believe we have cost reduction strategies that could be implemented without disrupting the business or restructuring the Company. 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.

### Operating Results

The following table summarizes our operating results for the periods presented below (dollars in thousands):

|  | For the Three Months Ended July 31, 2022 | % of Revenue | 2021 | % of Revenue | % Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Oncology services revenue | $13,745 | 100.0% | $11,253 | 100.0% | 22.1% |
| **Costs and operating expenses:** |  |  |  |  |  |
| Cost of oncology services | 7,052 | 51.3 | 5,396 | 48.0 | 30.7 |
| Research and development | 2,887 | 21.0 | 2,304 | 20.5 | 25.3 |
| Sales and marketing | 1,692 | 12.3 | 1,574 | 14.0 | 7.5 |
| General and administrative | 2,398 | 17.4 | 2,154 | 19.1 | 11.3 |
| Total costs and operating expenses | 14,029 | 102.1 | 11,428 | 101.6 | 22.8 |
| Income from operations | $(284) | (2.1)% | $(175) | (1.6)% | 62.3% |

### Oncology Services Revenue

Oncology services revenue, which is primarily derived from pharmacology studies, was $13.7 million and $11.3 million for the three months ended July 31, 2022 and 2021, respectively, an increase of $2.5 million or 22.1%. The increase in revenue was primarily due to the expansion of our platform and offerings creating demand for our services and leading to larger pharmacology studies in both our in-vivo and ex-vivo platforms.

### Cost of Oncology Services

Cost of oncology services for the three months ended July 31, 2022 and 2021 were $7.1 million and $5.4 million, respectively, an increase of $1.7 million or 30.7%. The increase in cost of oncology services was primarily from compensation, mice and supply expenses resulting from larger study sizes and compensation expense for our SaaS platform. For the three months ended July 31, 2022 and 2021, gross margins were 48.7% and 52.0%, respectively. The lower margin resulted from an increase in study related expenses in advance of the revenue recognition. Additionally, SaaS costs were expensed during the three months ended July 31, 2022 compared to capitalized during the three months ended July 31, 2021.

### Research and Development

Research and development expenses for the three months ended July 31, 2022 and 2021 were $2.9 million and $2.3 million, respectively, an increase of approximately $583,000 or 25.3%. The increase for the three-month period was mainly due to compensation and lab supply expense related to the investment in our therapeutic drug discovery platform.

### Sales and Marketing

Sales and marketing expenses for the three months ended July 31, 2022 and 2021 were $1.7 million and $1.6 million, respectively, an increase of $118,000, or 7.5%. The increase was mainly due to compensation expense.

### General and Administrative

General and administrative expenses for the three months ended July 31, 2022 and 2021 were $2.4 million and $2.2 million, an increase of $244,000, or 11.3%. General and administrative expenses are primarily comprised of compensation, insurance, professional fees, IT, and depreciation and amortization expenses. The increase was mainly due to an increase in IT related expenses to support the overall infrastructure growth of the company.

### Cash Flows

The following discussion relates to the major components of our cash flows:

#### Cash Flows from Operating Activities

Net cash used in operating activities was $195,000 compared to net cash provided by operations of $216,000 for the three months ended July 31, 2022 and 2021, respectively. The cash used in operating activities during the current period was primarily due to reduction in accounts payable and accrued liability balances.

#### Cash Flows from Investing Activities

Net cash used in investing activities was $754,000 and $907,000 for the three months ended July 31, 2022 and 2021, respectively. The cash used in investing activities was primarily for the investment in additional lab and computer equipment.

#### Cash Flows from Financing Activities

Net cash provided by financing activities was $0 for the three months ended July 31, 2022 compared to cash used by financing activities $2,000 for the three months ended July 31, 2021. The decrease on cash provided by financing is related to decrease in stock options exercise activity.

### Critical Accounting Estimates and Policies

The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to apply methodologies and make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company include, among other things, accounts receivable realization, revenue recognition (replacement of licensed tumors), valuation allowance for deferred tax assets, valuation of goodwill, and stock compensation and warrant assumptions. Actual results could differ from those estimates. The Company’s critical accounting policies are summarized in the Company’s Annual Report on Form 10-K, filed with the SEC on July 22, 2022.

### Recent Accounting Pronouncements

For detailed information regarding recently issued accounting pronouncements and the expected impact on our condensed consolidated financial statements, see Note 2, "Significant Accounting Policies" in the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of this Report on Form 10-Q.

### Off-Balance Sheet Financing

We have no off-balance sheet debt or similar obligations. We have no transactions or obligations with related parties that are not disclosed, consolidated into or reflected in our reported results of operations or financial position. We do not guarantee any third-party debt.

## Controls and procedures

As filed, 2,895 characters.

### Evaluation of Disclosure Controls and Procedures

It is management’s responsibility to establish and maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. 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.

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.

Management has assessed the effectiveness of our internal control over financial reporting as of July 31, 2022. Based on that assessment, our management, including our Chief Executive Officer and our Chief Financial Officer, have concluded that our disclosure controls and procedures were effective as of July 31, 2022 at the reasonable assurance level in ensuring that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. Further, management concluded that our consolidated financial statements in this quarterly report on Form 10-Q 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.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 499 characters.

As a smaller reporting company, we are not required to provide the information required by this Item; however, the discussion of our business and operations should be read together with the Risk Factors set forth in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 22, 2022. Such risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flow, strategies or prospects in a material and adverse manner.

Filed Sep 12, 2022.
Source: SEC EDGAR, the filing index for accession 0001628280-22-024751. Last ingested by Listed: Oct 24, 2026, 14:56 ET. No prices; not investment advice.