Note 1. Organization, Use of Estimates and Basis of Presentation

Champions Oncology, Inc. (the “Company”), is engaged in the development and sale of advanced technology solutions and products to personalize the development and use of oncology drugs. 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 uses this technology, in conjunction with related services, to offer solutions for two consumer groups: Personalized Oncology Solutions (“POS”) and Translational Oncology Solutions (“TOS”). POS assists physicians in developing personalized treatment options for their cancer patients through tumor specific data obtained from drug panels and related personalized oncology services. The Company’s TOS business offers 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.

The Company has three operating subsidiaries: Champions Oncology (Israel), Limited, Champions Biotechnology U.K., Limited and Champions Oncology Singapore, PTE LTD. For the three and six months ended October 31, 2014 and 2013, there were no material revenues earned by these subsidiaries.

The Company’s foreign subsidiaries functional currency is the U.S. dollar. Transaction gains and losses are recognized in earnings. The Company is subject to foreign exchange rate fluctuations in connection with the Company’s international operations.

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission or the SEC. All significant intercompany transactions and accounts have been eliminated. All figures are presented in thousands of U.S. dollars, except share data, or except where expressly stated otherwise. Certain information related to the Company’s organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States or GAAP has been condensed or omitted. The accounting policies followed in the preparation of these unaudited condensed consolidated financial statements are consistent with those followed in the Company’s annual consolidated financial statements for the year ended April 30, 2014, as filed on Form 10-K. In the opinion of management, these unaudited condensed consolidated financial statements contain all material adjustments necessary to fairly state our financial position, results of operations and cash flows for the periods presented and the presentations and disclosures herein are adequate when read in conjunction with the Company’s Annual Report on Form 10-K for the year ended April 30, 2014.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Actual results could differ from those estimates.

Basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted-average number of shares of common stock plus dilutive potential common stock considered outstanding during the period. Such dilutive shares consist of incremental shares that would be issued upon exercise of the Company’s derivative warrants.

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2014		2013		2014		2013
Basic loss per share computation
Net loss attributable to common stockholders	$	(3,078,000)	$	(2,318,000)	$	(6,684,000)	$	(4,556,000)
Weighted Average common shares – basic		66,887,331		66,863,147		66,886,234		66,857,630
Basic net loss per share	$	(0.05)	$	(0.03)	$	(0.10)	$	(0.07)

Diluted loss per share computation
Net loss attributable to common stockholders	$	(3,078,000)	$	(2,318,000)	$	(6,684,000)	$	(4,556,000)
Less: Gain on derivative warrant liability		624,993		-		780,627		-
Loss available to common stockholders	$	(3,702,993)	$	(2,318,000)	$	(7,464,627)	$	(4,556,000)

Weighted Average common shares		66,887,331		66,863,147		66,886,234		66,857,630
Incremental shares from assumed exercise of warrants and stock options		967,994		-		967,994		-
Adjusted weighted average share – diluted		67,855,325		66,863,147		67,854,228		66,857,630

Diluted net loss per share	$	(0.05)	$	(0.03)	$	(0.11)	$	(0.07)

The following table reflects the total potential share-based instruments outstanding at October 31, 2014 and 2013 that could have an effect on the future computation of dilution per common share:

	October 31,
	2014	2013

Stock options	24,256,712	15,473,955
Warrants	3,126,667	3,276,667

Total common stock equivalents	27,383,379	18,750,622

Liquidity

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 sales of products and services, cash and cash equivalents, working capital management, and proceeds from certain private placements of our securities. As of October 31, 2014, we had negative working capital of $1.8 million and cash and cash equivalents on hand of $0.6 million. We believe that our cash and cash equivalents on hand at October 31, 2014 are adequate to fund our operations through at least December 15, 2014.

On December 1, 2014, our chief executive officer and president purchased convertible promissory notes in the aggregate principal amount of $2 million. These notes have a term of 90 days. We believe that the proceeds of these loans, if converted into equity at maturity (which is the option of the noteholders, not the Company), together with our cash and cash equivalents, will be adequate to fund our operations through at least March 31, 2015. If the noteholders do not elect to convert the notes into equity at maturity, then our cash and cash equivalents would not be adequate to fund operations beyond such maturity date, and we may not have enough cash to repay the notes, in which case we would be in default. In order for us to continue as a going concern beyond the maturity date of the notes or March 31, 2015, as applicable, or to avoid a potential default under the notes, we need to obtain capital from external sources. If we are unable to obtain additional financing, we may be required to reduce the scope of, or delay or eliminate, some of our research and development and other activities, which could harm our financial condition and operating results. Financing may not be available on acceptable terms or at all, and our failure to raise capital when needed could negatively impact our growth plans and our financial condition and results of operations. Additional equity financing may be dilutive to the holders of our common stock and debt financing, if available, may involve significant cash payment obligations and covenants and/or financial ratios that restrict our ability to operate our business.

Provision for Income Taxes

Deferred income taxes have been provided to show the effect of temporary differences between the recognition of expenses for financial and income tax reporting purposes and between the tax basis of assets and liabilities, and their reported amounts in the consolidated financial statements. As of October 31, 2014 and 2013, 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.

The income tax provision for the six months ended October 31, 2014 was $15K as compared to $6K for the corresponding period in the previous year, and primarily consists of income tax obligations payable to the foreign jurisdictions.

There is no uncertain tax position identified by the Company.