10-K 1 csbr10-k4302017.htm 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)

| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  | For the fiscal year ended April 30, 2017

or

| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  | For the transition period from to

Commission file number 001-11504
CHAMPIONS ONCOLOGY, INC.
(Exact name of registrant as defined in its charter)

Delaware | 52-1401755
(State or other jurisdiction of | (I.R.S. Employer
incorporation or organization) | Identification No.)
One University Plaza, Suite 307 | 07601
Hackensack, New Jersey | (Zip Code)
(Address of principal executive offices) |

Registrant’s telephone number, including area code:
(201) 808-8400
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class |  | Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share |  | Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer |  | ¨ |  | Accelerated filer |  | ¨
Non-accelerated filer |  | ¨ (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x
|  |  |  | Emerging growth company |  | ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
The approximate aggregate market value of the voting stock held by non-affiliates of the Registrant as of October 31, 2016 was $17.3 million based on the closing price of the Registrant’s Common Shares as quoted on the Nasdaq Capital Market as of that date.
The number of Common Shares of the Registrant outstanding as of July 15, 2017 was 10,982,159.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement for its 2017 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, are incorporated by reference into Part III of this Form 10-K.

INDEX TO FORM 10-K
FOR THE YEAR ENDED APRIL 30, 2017

PART I
Item 1. | Business | 2
Item 1A. | Risk Factors | 6
Item 1B. | Unresolved Staff Comments | 12
Item 2. | Properties | 12
Item 3. | Legal Proceedings | 13
Item 4. | Mine Safety Disclosures | 13
PART II
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 13
Item 6. | Selected Financial Data | 14
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 19
Item 8. | Financial Statements and Supplementary Data | 20
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 20
Item 9A. | Controls and Procedures | 20
Item 9B. | Other Information | 20
PART III
Item 10. | Directors, Executive Officers and Corporate Governance | 20
Item 11. | Executive Compensation | 20
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 20
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 20
Item 14. | Principal Accounting Fees and Services | 20
PART IV
Item 15. | Exhibits, Financial Statement Schedules. | 20
Item 16. | Form 10-K Summary | 23
Signatures |  | 24
Exhibit Index |  |

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As used in this Annual Report on Form 10-K (the "Annual Report"), “Champions Oncology, Inc.,” “Champions,” the “Company,” “we,” “ours,” and “us” refer to Champions Oncology, Inc. and its subsidiaries, except where the context otherwise requires or as otherwise indicated.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that inherently involve risk and uncertainties. Forward-looking statements may be identified by the words “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” “may,” “likely” or similar expressions. Forward-looking statements in this Annual Report include statements about our business strategies and products development activities, including the anticipated benefits and risks associated with those strategies as well as statements about the sufficiency of our capital resources. One should not place undue reliance on these forward-looking statements. We cannot guarantee that we will achieve the plans, intentions or expectations expressed or implied in our forward-looking statement. There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those expressed or implied in the forward-looking statements we make. These important factors are described under “Risk Factors” set forth below. In addition, any forward-looking statements we make in this Annual Report speak only as of the date of this document, and we do not intend to update any such forward-looking statements to reflect events or circumstances that occur after that date, except as required by law. As a result of these and other factors, our stock price may fluctuate dramatically.
PART I
Item 1. Business
Overview
We are engaged in the development and sale of advanced technology solutions and products to personalize the development and use of oncology drugs. Utilizing our TumorGraft Technology Platform, 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. The current oncology drug development paradigm is challenging for the pharmaceutical and biotechnology industry. We believe that on average, the clinical trial process in oncology currently:

• | costs more than $1.2 billion;

• | takes approximately 8 years to complete;

• | has a 93% failure rate; and

• | results in approved compounds that cost more than $11,000 per month.

Our platform provides a novel approach to simulating the results of human clinical trials used in developing oncology drugs. According to a 2013 study conducted by Cutting Edge Information, it can cost up to $100,000 per patient in oncology clinical trials and the typical cost for each phase of development per year increases from approximately $3 million in the pre-clinical setting to approximately $150 million in phase III. Simulating trials before executing them provides benefits to both pharmaceutical companies and patients. Pharmaceutical companies can lower the risk of spending resources on drugs that do not show significant anti-cancer activities and increase the chance that the clinical development path they pursue will be focused on an appropriate patient population and a successful combination with other drugs.
TumorGraft Technology Platform
Our clinical trial simulation platform consists of processes, physical tumors, and information that we use to personalize the development and use of oncology drugs. Each tumor from individual patients that we have preserved for future implantation in mice, along with the patient data and molecular information associated with these tumors, are referred to as “TumorGrafts” or “Patient Derived XenoGrafts” of “PDX Models”. Our process technology involves the following:

• | implantation of human tumor fragments in immune-deficient mice;

• | expansion of the original human tumor into a larger colony of mice through the passage of the tumor to a limited number of generations of mice;

• | treatment of the implanted mice with oncology drugs;

• | measurement of tumor growth inhibition in treated mice relative to a control group of mice to determine the response of the tumor to the drug; and

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• | permanent cryo-preservation of fragments of tumor tissue for future use in additional clinical trial simulations.

A growing body of evidence demonstrates the power of PDX to predict the response of individual patients to oncology drugs. Our platform has demonstrated a positive predictive value of approximately 87% and negative predictive value of approximately 94%. As a result, we believe our PDX platform results in simulated clinical studies with approximately 90% accuracy in predicting human response with approximately 90% lower costs than a human clinical trial while shortening the timelines from 2-3 years for human trial to 6 months for PDX studies.
TumorBank
The collection of TumorGrafts that we have built is referred to as our "TumorBank". We currently have over 900 PDX Models in our TumorBank that we believe reflect characteristics of patients who enroll in clinical trials (late stage, pretreated and metastic). We implant tumors in mice to provide pharmaceutical and biotechnology companies the opportunity to test oncology compounds on multiple tumors to test efficacy and simulate the results of human clinical trials.
Increasing breadth and depth of the TumorBank is an important strategic effort of the company. We invest significant research and development resources to increase the number of PDX Models in our TumorBank and add different sub-types of cancer that we have not historically addressed. In addition, we are also developing an extensive database of information about the tumors in our TumorBank. We expect that this database will include certain information about the patient (e.g. age, gender), the response of the tumors to different oncology drugs or drug combinations, mutational status of key oncogenes, and other genetic and epigenetic data about each tumor. We expect that such data could be valuable to companies seeking to develop new cancer drugs.
Based on our extensive knowledge of the industry, we believe that we are a leading provider of Patient Derived XenoGrafts and a pioneer in the use of PDX Models for use with patients and clinical trial simulations. Our research and development efforts and customer sponsored platform development has contributed to the acceptance of the accuracy of PDX Models as a valuable tool in the development and use of oncology drugs.
Our Strategy
Our strategy is to use TumorGrafts as a platform technology to drive multiple synergistic revenue streams. We continue to build this platform with investments in research and development. Our goal is to populate our TumorBank and its related database with tumors and information we receive from patients, research collaborations and validation studies. The tumors and information in the TumorBank are then available for work with pharmaceutical company customers. In addition, we are looking for additional opportunities to utilize the data we are gathering about the tumors to develop proprietary biomarkers and signatures of response that can predict the resistance or sensitivity of individual patients to oncology drugs.
Translational Oncology Solutions Business
Our Translational Oncology Solutions ("TOS") business utilizes our technology platform to assist pharmaceutical and biotechnology companies with their drug development process. We provide studies, or license tumors for use in 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. Our studies can be used to determine which types of cancer, if any, may be inhibited by a drug. The studies can also be used to identify specific sub-populations, often characterized by particular genetic mutations that are differentially sensitive or resistant to a drug or drug combination. These studies, used in pre-clinical testing or during phase I or II of a clinical trial, can help guide the clinical development path of new compounds or find new indications or combinations for compounds that are already approved by the United States Food and Drug Administration, or FDA. We believe that the results may lead to lower costs and shorter timeframes for drug development.
We have performed more than 620 studies for approximately 100 different pharmaceutical and biotechnology companies over the past six years. We have a high rate of repeat business with more than 75 companies having used our platform for more than one study. Typical studies range in price from $50,000 to $250,000. We have completed approximately fifteen studies with prices above $500,000. Revenue from this business segment has grown at a cumulative annual growth rate of 42% since the current management team joined the company in fiscal 2010.
Our sales and marketing efforts are dependent on a dedicated sales force that sells our services directly to pharmaceutical and biotechnology companies. We have a team of eight professionals dedicated to this sales and marketing effort. The team is focused
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on identifying and selling studies to new customers as well as increasing our revenue from existing customers. We spend significant resources in informing our current customers and reaching out to new customers within companies that we currently serve. These efforts are aimed at moving our customers along the adoption curve for PDX-based clinical trial simulation and increasing the number of studies and the average study size of our existing customers. Our success in these efforts is demonstrated by the 15 customers who have spent more than $500,000 on our services over the past three years.
For the year ended April 30, 2017, revenues from our TOS products totaled approximately $13.7 million, an increase of approximately 48.7% from the previous year.
Personalized Oncology Solutions Business
Our Personalized Oncology Solutions ("POS") business offers physicians and patients information to help guide the development of personalized treatment plans. Our core products, TumorGraft implants and drug panels, utilize TumorGraft technology to empirically test the response of a patient’s tumor to multiple oncology drugs or drug combinations. The response of the tumors in the mice is tracked over time and analyzed to determine which drug or drug combination is providing the highest level of tumor growth inhibition in the mice. This process simulates the results of multiple, simultaneous clinical trials in which a patient might consider participating. By providing this product, we achieve an important goal of adding PDX Models to our TumorBank, and gain valuable data about the accuracy of PDX Models in predicting patient response and in building the operational capabilities to collect, implant and grow tumors from patients, physicians and hospitals around the United States and internationally. Our data, which is currently limited in nature, indicates that there may be a correlation between the response to drugs of a tumor in a mouse with the response to drugs of a tumor in a patient.
In addition to our core TumorGraft POS products, we offer non-core related POS products to our customers, including personalized tumor boards and gene sequencing. Personalized tumor boards are designed to provide access to oncologists with expertise in particular tumor types. We also provide access to gene sequencing that analyzes the genetic makeup of patient’s tumor for the purpose of identifying potentially useful drugs. We will continue to offer related personal oncology products to our customers.
We rely on the internet, word of mouth, and a small sales force to market these services to patients and physicians.
For the year ended April 30, 2017, revenues from our POS business totaled approximately $1.7 million, a decrease of approximately 12.8% from the previous year. As previously disclosed, our POS business is not the focus of our growth moving forward.
Our Growth and Expansion Strategy
Our strategy is to continue to use TumorGrafts as a platform technology to drive multiple synergistic revenue streams.
Our current strategy for growth has three components:

• | Growing our TumorBank: We grow our TumorBank in two ways. First, we increase the number of TumorGrafts in the bank for our existing tumor types to ensure customers are finding the specific models they need for their studies. Second, we add new tumor types to the bank to enable studies in tumor types that we have not historically been able to run for our pharmaceutical and biotechnology customers.

• | Adding new PDX technologies: The fields of oncology research and drug development are evolving. To keep up with new approaches, we add new technologies to our PDX platform. We are currently investing in developing ImmunoGrafts, a new PDX model that is developed in a mouse with a humanized immune system. These models are built to specifically serve the needs of pharmaceutical and biotechnology companies developing immune oncology drugs. This is a relatively new area of oncology research that has shown significant promise and is attracting a significant amount of research and development interest.

• | Increasing the scale of studies: We have facilitated studies for approximately 100 pharmaceutical and biotechnology companies. We believe there is significant opportunity to grow our revenue by increasing the size of the studies these customers run. To accomplish this, we are developing new study designs that offer solutions to compounds that are in phase I and phase II clinical trials. We believe that the increased budgets of these drugs, as compared to drugs in the pre-clinical stage, will enable us to sell larger studies.

Competition
Our TumorGraft Technology Platform is proprietary and requires significant know-how to both initiate and operate, but is not patented. It is, therefore, possible for competitors to develop other implantation procedures or to discover the same procedures
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utilized by the Company that could compete with the Company in its market. Competition in our industry is intense and based significantly on scientific, technological, and market forces, which include the effectiveness of the technology and products and the ability to commercialize technological developments. The Company faces significant competition from other healthcare companies in the United States and abroad. The majority of these competitors are, and will be, substantially larger than the Company, and have substantially greater resources and operating histories. There can be no assurance that developments by other companies will not render our products or technologies obsolete or non-competitive or that we will be able to keep pace with the technological or product developments of our competitors. These companies, as well as academic institutions, governmental agencies, and private research organizations also compete with us in recruiting and retaining highly qualified scientific, technical and professional personnel and consultants.
Research and Development
For the years ended April 30, 2017 and 2016, we spent approximately $4.3 million and $4.2 million, respectively, to develop our TumorGraft Technology Platform. We continue to expand our TumorBank through the inclusion of tumor tissue and implanted models through research collaborations and relationships with hospitals and academic institutions. In addition, we expect to grow our TumorBank through our POS business. Our research and development efforts were focused on increasing our understanding of our TumorGraft models, their clinical predictability, improving growth and tumor take rates, and other biological and molecular characteristics of the models.
Government Regulation
The research, development, and marketing of our products, the performance of our POS testing services, and the operation of our facilities are generally subject to federal, state, local, or foreign legislation, including licensure of our laboratories located in Baltimore, Maryland and New York, New York by the States of Maryland and New York, respectively, and compliance with federal, state, local or foreign legislation applicable to the use of live animals in scientific testing, research and education.
The FDA has claimed regulatory authority over laboratory developed tests such as our POS products, but has generally not exercised it. The FDA has announced regulatory and guidance initiatives that could increase federal regulation of our business. We are subject to federal and international regulations with regard to shipment of hazardous materials, including the Department of Transportation and the International Air Transit Authority. These regulations require interstate, intrastate, and foreign shipments comply with applicable labeling, documentation, and training requirements.
Employees
As of July 15, 2017, we had 79 full-time employees, including 25 with doctoral or other advanced degrees. Of our workforce, 64 employees are engaged in research and development and laboratory operations, 8 employees are engaged in sales and marketing, and 7 employees are engaged in finance and administration. None of our employees are represented by a labor union or covered by collective bargaining agreements. We have never experienced a work stoppage and believe our relationship with our employees is good.
Company History
We were incorporated as a merger and acquisition company under the laws of the State of Delaware on June 4, 1985, under the name “International Group, Inc.” In September 1985, the Company completed a public offering and shortly thereafter acquired the world-wide rights to the Champions sports theme restaurant concept and changed its name to “Champions Sports, Inc.” In 1997, the Company sold its Champions service mark and concept to Marriott International, Inc. and until 2005, was a consultant to Marriott International, Inc. and operated one Champions Sports Bar Restaurant. In January 2007, the Company changed its business direction to focus on biotechnology and subsequently changed its name to Champions Biotechnology, Inc. On May 18, 2007, the Company acquired Biomerk, Inc., at which time we began focusing on our current line of business. In April 2011, the Company changed its name to Champions Oncology, Inc. to reflect the Company's new strategic focus on developing advanced technologies to personalize the development and use of oncology drugs.
Reverse Stock Split
On October 15, 2013, the shareholders of the Company authorized our Board of Directors to effect a reverse stock split of all outstanding shares of common stock, warrants and options. The Board of Directors subsequently approved the implementation of a reverse stock split at a ratio of one-for-twelve shares, which became effective on August 12, 2015. All share and per share data in this Annual Report, including the consolidated financial statements contained herein and the related notes thereto have been retroactively adjusted to account for the effect of the reverse stock split.
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Recent Developments
On June 15, 2016, the Company closed a public offering of 2,000,000 registered shares of its common stock, par value $0.001 per share, at an offering price of $2.25 per share. In addition, the underwriter exercised a partial exercise of the over-allotment option granted to the underwriter to purchase an additional 258,749 shares at the public offering price.
The net proceeds from the offering, including the partial exercise of the over-allotment option, were approximately $4.3 million, after deducting the underwriting discount and offering-related expenses of $742,000. The Company is using the net proceeds of this offering for research and development to grow our TumorGraft platform, and the balance of the net proceeds for working capital and general corporate purposes.
Available Information
Our internet website address is www.championsoncology.com. Information on our website is not part of this Annual Report. Through our website, we make available, free of charge, access to all reports filed with the United States Securities and Exchange Commission, or SEC, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our Proxy Statements on Schedules 14A and amendments to those reports, as filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Copies of any materials we file with, or furnish to, the SEC can also be obtained free of charge through the SEC’s website at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Item 1A. Risk Factors
You should carefully consider the risks described below together with all of the other information included in this Annual Report. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known, or those we currently consider insignificant, may also impair our business operations in the future.
Risks Related to Our Business
We historically incurred losses from operating activities, expect losses for the foreseeable future, may require significant capital and may never achieve profitability.
For the years ended April 30, 2017 and 2016, the Company had a net loss of approximately $6.9 million and $10.4 million, respectively. As of April 30, 2017, the Company has an accumulated deficit of approximately $69.3 million. As of April 30, 2017, we had negative working capital of $1.6 million and cash and cash equivalents of $3.3 million. As of July 15, 2017, we had $1.0 million in cash and cash equivalents. We believe that our cash and cash equivalents on hand are adequate to fund our operations through at least August of 2018.
The amount of our losses and liquidity requirements may vary significantly from year-to-year and quarter-to-quarter and will depend on, among other factors:

• | the cost of continuing to build out our TumorGraft Technology Platform;

• | the cost and rate of progress toward growing our TOS businesses;

• | the cost and rate of progress toward building our sales forces;

• | the cost of increasing our research and development;

• | the cost of renting our laboratory and animal testing facilities and payment for associated services;

• | the timing and cost of obtaining and maintaining any necessary regulatory approvals;

• | the cost of expanding and building out our infrastructure; and

• | the cost incurred in hiring and maintaining qualified personnel.

Currently, the Company derives revenue from POS products and TOS products, while pursuing efforts to further develop bioinformatics from its TumorBank and its TumorGraft Technology Platform. In addition, we are building our sales and marketing operations to grow the sales of our TOS products. Our POS products are not the focus of our growth moving forward. Accordingly, we expect to generate operating losses in the future until such time as we are able to generate significantly more revenue.
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To become profitable, we will need to generate revenues to offset our operating costs, including our research and development and general and administrative expenses. We may not achieve or, if achieved, sustain our revenue or profit objectives. Our losses may increase in the future, and, ultimately, we may have to cease operations.
In order to grow revenues, we must invest capital to implement our sales and marketing efforts and to successfully develop our bioinformatics from our TumorBank and our TumorGraft Technology Platform. Because we do not have sufficient history of commercial efforts, our sales and marketing efforts may never generate significant increases in revenues or achieve profitability and it is likely that we will be required to raise additional capital to continue our operations as currently contemplated. If we must devote a substantial amount of time to raising capital, it will delay our ability to achieve our business goals within the time frames that we now expect, which could increase the amount of capital we need. In addition, the amount of time expended by our management on fundraising distracts them from concentrating on our business affairs. If we require additional capital and are not successful in raising the needed capital, we may have to cease operations.
We may incur greater costs than anticipated, which could result in sustained losses.
We use reasonable efforts to assess and predict the expenses necessary to pursue our business strategies. However, implementing our business strategies may require more employees, capital equipment, supplies or other expenditure items than management has predicted. Similarly, the cost of compensating additional management, employees and consultants or other operating costs may be more than we estimate, which could result in ongoing and sustained losses.
We may not be able to implement our business strategies which could impair our ability to continue operations.
Implementation of our business strategies will depend in large part on our ability to (i) attract and maintain a significant number of customers; (ii) effectively provide acceptable services to our customers; (iii) develop and license new products and technologies; (iv) maintain appropriate internal procedures, policies, and systems; (v) hire, train, and retain skilled employees and management; (vi) continue to operate despite increasing competition in our industry; and (vii) establish, develop and maintain our name recognition. Our inability to obtain or maintain any or all these factors could impair our ability to implement our business strategies successfully, which could have material adverse effects on our results of operations and financial condition.
Our business could be adversely impacted by changes in FDA’s regulatory oversight of laboratory-developed tests such as our POS services that are currently under consideration or by other changes in the regulatory requirements applicable to our POS services imposed by the FDA or regulatory authorities in other countries in which our services are provided.
The FDA has claimed regulatory authority over all laboratory-developed tests, or LDTs, such as our POS services, but has generally not exercised its regulatory authority for most LDTs performed by CLIA-certified laboratories such as our facilities. The FDA has announced several regulatory and guidance initiatives that may impact our business, including by increasing FDA’s regulation of LDTs.
On July 31, 2014 the FDA notified Congress of the FDA’s intent to issue a draft oversight framework for LDTs based on risk to patients rather than whether they were made by a conventional manufacturer or a single laboratory. This draft oversight framework includes pre-market review for higher-risk LDTs, like those used to guide treatment decisions, including the many companion diagnostics that have entered the market as LDTs. In addition, under the draft framework, the FDA would continue to exercise enforcement discretion for low-risk LDTs and LDTs for rare diseases, among others. The framework would be phased in over many years. If this framework is implemented, these initiatives may lead to an increased regulatory burden on our Company, which may result in a requirement for FDA review and clearance or approval of our POS services. Any increased regulatory burdens would probably result in an increase in the cost of our POS services and could keep us from selling POS services until such time as any required FDA clearance or approval is obtained. If our POS services become subject to FDA’s approval and oversight as medical devices, the additional regulatory burdens may be significant, and may require the addition of experienced medical device quality, regulatory and compliance personnel to assume these burdens. Any POS services that we provide in other countries may be similarly subject to regulation by foreign regulatory agencies, which would also increase our costs. These matters could hurt our business and our financial results.
Our laboratories are subject to regulation and licensure requirements, and the healthcare industry is highly regulated; we may face substantial penalties, and our business activities may be impacted, if we fail to comply.
Our TumorGraft products are performed in laboratories that are subject to state regulation and licensure requirements. Such regulation and requirements are subject to change, and may result in additional costs or delays in providing our products to our customers. In addition, the healthcare industry in general is highly regulated in the United States at both the federal and state levels. We seek to conduct our business in compliance with all applicable laws, but many of the laws and regulations potentially
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applicable to us are vague or unclear. These laws and regulations may be interpreted or applied by an authority in a way that could require us to make changes in our business. We may not be able to obtain all regulatory approvals needed to operate our business or sell our products. If we fail to do so, we could be subject to civil and criminal penalties or fines or lose the authorizations necessary to operate our business, as well as incur additional liabilities from third parties. If any of these events happened, they could hurt our business and financial results.
If our laboratory facilities are damaged or destroyed, or we have a dispute with one of our landlords, our business would be negatively affected.
We currently utilize two laboratories in Baltimore, Maryland and New York, New York to perform the work of our tumor studies and develop and bank our TumorGraft Technology Platform models. The lab in Baltimore is where a majority of the work is performed. We will be opening a laboratory in Rockville, Maryland during the first quarter of fiscal 2018 and will start to transition our activities from the Baltimore lab to this new facility. If this facility, or, to a lesser degree, any of our other facilities, were to be significantly damaged or destroyed, we could suffer a loss of our ongoing and future drug studies, as well as our TumorBank. In addition, we lease the space for each of these laboratories from a third party. If we had a dispute with any of our landlords or otherwise could not utilize this space, it would take time to find and move to a new facility, which could negatively affect our results of operations.
Any health crisis impacting our colony of laboratory mice could have a negative impact on our business.
Our TumorGraft operations depend on having a colony of live mice available. If this population experienced a health crisis, such as a virus or other pathogen, such crisis would affect the success of our existing POS and TOS business and future business, as we would have to rebuild the population and repeat current TumorGrafts.
We have limited experience marketing and selling our products and may need to rely on third parties to successfully market and sell our products and generate revenues.
Currently, we rely on the internet, word of mouth, and a small sales force to market our services. We have to compete with other pharmaceutical, biotechnology and life science technology and service companies to recruit, hire, train, and retain marketing and sales personnel. However, there can be no assurance that we will be able to develop in-house sales, and as a result, we may not be able to generate product revenue.
We will continue to be dependent upon key employees.
Our success, currently, is dependent upon the efforts of several full-time key employees, the loss of the services of one or more of which would have a material adverse effect on our business and financial condition. We intend to continue to develop our management team and attract and retain qualified personnel in all functional areas to expand and grow our business. This may be difficult in the healthcare industry where competition for skilled personnel is intense.
Because our industry is very competitive and many of our competitors have substantially greater capital resources and more experience in research and development, we may not succeed in selling or increasing sales of our products and technologies.
We are engaged in a rapidly changing and highly competitive field. Potential competitors in the United States and abroad are numerous and include providers of clinical research services, most of which have substantially greater capital resources and more experience in research and development capabilities. Furthermore, new companies will likely enter our market from the United States and abroad, as scientific developments surrounding other pre-clinical and clinical services grow in the multibillion dollar oncology marketplace. Our competitors may succeed in selling their products to our pharmaceutical and biotech customers more effectively than we sell our products. In addition, academic institutions, hospitals, governmental agencies, and other public and private research organizations also may conduct similar research, seek patent protection, and may develop and commercially introduce competing products or technologies on their own or through joint ventures. If one or more of our competitors succeeds in developing similar technologies and products that are more effective or successful than any of those that we currently sell or will develop, our results of operations will be significantly adversely affected.
If we are unable to protect our intellectual property, we may not be able to compete as effectively.
It is important in the healthcare industry to obtain patent and trade secret protection for new technologies, products, and processes. Our success will depend, in part, upon our ability to obtain, enjoy, and enforce protection for any products we have, develop or acquire under United States and foreign patent laws and other intellectual property laws, preserve the confidentiality of our trade
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secrets, and operate without infringing the proprietary rights of third parties. Where appropriate, we will seek patent protection for certain aspects of our technology. However, while our TumorGraft Technology Platform is proprietary and requires significant know-how to both initiate and operate, it is not patented. It is, therefore, possible for competitors to develop other implantation procedures, or to discover the same procedures utilized by us, that could compete with us in our market.
It also is unclear whether efforts to secure our trade secrets will provide useful protection. While we will use reasonable efforts to protect our trade secrets, our employees or consultants may unintentionally or willfully disclose our proprietary information to competitors resulting in a loss of protection. Enforcing a claim that someone else illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Finally, our competitors may independently develop equivalent knowledge, methods and know-how.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
We rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also seek to enter into confidentiality and invention assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties by other means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
Claims by others that our products infringe their patents or other intellectual property rights could adversely affect our financial condition.
The healthcare industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Patent applications are maintained in secrecy in the United States and also are maintained in secrecy outside the United States until the application is published. Accordingly, we can conduct only limited searches to determine whether our technology infringes the patents or patent applications of others. Any claims of patent infringement asserted by third parties would be time-consuming and could likely:

• | result in costly litigation;

• | divert the time and attention of our technical personnel and management;

• | require us to develop non-infringing technology; or

• | require us to enter into royalty or licensing agreements.

Patients are unable to obtain reimbursement from third-party payers for our services, limiting the market acceptance of our services, and as a result we may not achieve significant revenues.
Currently, patients are unable to obtain reimbursement from third party payers for our services. Furthermore, the continuing efforts of government and insurance companies, health maintenance organizations (“HMOs”) and other payers of healthcare costs to contain or reduce costs of health care could affect our revenues and profitability. In the U.S., given recent federal and state government initiatives directed at lowering the total cost of health care, the U.S. Congress and state legislatures will likely continue to focus on health care reform, the cost of prescription pharmaceuticals and on the reform of the Medicare and Medicaid systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the inability to obtain reimbursement from third party payers for our services limits the market acceptance of our services. As a result, we may not achieve significant revenues.
Our ability to expand our business may depend in part on the extent to which appropriate reimbursement levels for the cost of our proposed formulations and products and related treatments are obtained by governmental authorities, private health insurers and other organizations, such as HMOs. The trend toward managed health care in the U.S. and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of health care services and drugs, as well as legislative proposals to reform health care or reduce government insurance programs, may all result in lower prices for or rejection of our services.
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TOS studies are subject to cancellation based on changes in customer’s development plans.
Our revenue is primarily derived from studies performed for pharmaceutical and biotechnology companies to assist in the development of oncology drugs. There are many factors that could result in the change of our customers development plans for specific drugs, including without limitation to their research and development budgets and drug development strategies. These changes could lead to the cancellation or modification of on-going or planned studies. This would have a negative impact on the Company’s revenue growth and profit margin.
Our ability to use our net operating loss carry-forwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended, referred to as the Internal Revenue Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carry-forwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We believe that our recent public offering, taken together with our private placements and other transactions that have occurred over the past three years, we may have triggered an “ownership change” limitation. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carry-forwards to offset U.S. federal taxable income may be subject to limitations, which potentially could result in increased future tax liability to us.
Risks Related to Our Common Stock
If the market value of our listed securities continues to remain below $35 million, our common stock may be subject to delisting from the Nasdaq Stock Market.
On April 24, 2017, we received a notification letter from Nasdaq advising us of our failure to comply with the required minimum of $35,000,000 of market value of listed securities for continued listing on The Nasdaq Capital Market, pursuant to Nasdaq listing rule 5550(b)(2). We fell below the minimum requirement for the preceding 30 consecutive business days. Nasdaq stated in the letter that we have 180 calendar days from April 24, 2017 (or until October 23, 2017) to regain compliance. If at any time during this compliance period the market value of listed securities closes at $35 million or more for a minimum of ten consecutive business days, Nasdaq will provide us written confirmation of compliance. However, there can be no assurance that we will comply with the required minimum of $35,000,000 of market value of listed securities during such period.
To the extent that we are unable to resolve the listing deficiency, there is a risk that our common stock may be delisted from Nasdaq and would likely trade only on the over-the-counter market (the “OTC”). If our common stock were to trade on the OTC, selling our common stock could be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and it may be difficult to attract security analysts’ coverage. In addition, in the event our common stock is delisted, broker-dealers transacting in our common stock would be subject to certain additional regulatory burdens, which may discourage them from effecting transactions in our common stock, thus further limiting the liquidity of our common stock and potentially resulting in lower prices and larger spreads in the bid and ask prices for our common stock.
We have a limited market for our common stock, which makes our securities very speculative.
Trading activity in our common stock is and has been limited. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of our common stock. There can be no assurance that a more active market for our common stock will develop, or if one should develop, there is no assurance that it will be sustained. This could severely limit the liquidity of our common stock, and would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital. Furthermore, like many stocks quoted on the Nasdaq Capital Market, trading in our common stock is thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance.
Investment in our common stock may be diluted if we issue additional shares in the future.
We may issue additional shares of common stock, which will reduce shareholders’ percentage ownership and may dilute per share value. Our Certificate of Incorporation authorizes the issuance of 200,000,000 shares of common stock. As of July 15, 2017, we had 11,251,844 shares of common stock issued and 10,982,159 shares outstanding. The future issuance of all or part of the remaining authorized common stock would result in substantial dilution in the percentage of the common stock held by existing
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shareholders. The issuance of common stock for future services, acquisitions, or other corporate actions may have the effect of diluting the value of the shares held by existing shareholders, and might have an adverse effect on any market for our common stock.
To the extent that we raise additional funds by issuing equity securities or convertible debt securities in the future, our stockholders may experience significant dilution. Sale of additional equity and/or convertible debt securities at prices below certain levels will trigger anti-dilution provisions with respect to certain securities we have previously sold. If additional funds are raised through a credit facility or the issuance of debt securities or preferred stock, lenders under the credit facility or holders of these debt securities or preferred stock would likely have rights that are senior to the rights of holders of our common stock, and any credit facility or additional securities could contain covenants that would restrict our operation.
Potential future sales or issuances of our common stock to raise capital, or the perception that such sales could occur, could cause dilution to our current stockholders and the price of our common stock to fall.
We have historically supported our operations through the issuance of equity and expect to continue to do so in the future. Although we may not be successful in obtaining financing through equity sales on terms that are favorable to us, if at all, any such sales that do occur could result in substantial dilution to the interests of existing holders of our common stock.
Additionally, the sale of a substantial number of shares of our common stock or other equity securities to any new investors, or the anticipation of such sales, could cause the trading price of our common stock to fall.
The exercise of outstanding options and warrants may dilute current shareholders.
As of July 15, 2017, there were warrants and options outstanding to purchase an aggregate of 4,312,988 shares of our common stock, of which 2,061,805 were vested. The exercise of a substantial number of these outstanding warrants and options could adversely affect our share price and dilute current shareholders.
Our stock price is volatile and therefore investors may not be able to sell their common stock at or above the price they paid for it.
The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price they paid for it. The market price for our common stock may be influenced by many factors, including:

• | regulatory developments in the United States and foreign countries;

• | variations in our financial results or those of companies that are perceived to be similar to us;

• | changes in the healthcare payment system overseas to the degree we receive revenue from such healthcare systems overseas;

• | announcements by us of significant acquisition, strategic partnerships, joint ventures or capital commitments;

• | sales of significant shares of stock by large investors;

• | intellectual property, product liability, or other litigation against us; and

• | the other key facts described in this “Risk Factors” section.

Certain provisions of our charter and bylaws and of our contractual agreements contain provisions that could delay and discourage takeover attempts and any attempts to replace our current management by shareholders.
Certain provisions of our certificate of incorporation and bylaws, and our contractual agreements could make it difficult for or prevent a third party from acquiring control of us or changing our board of directors and management. These provisions include:

• | requirements that our stockholders comply with advance notice procedures in order to nominate candidates for election to our board of directors or to place stockholders’ proposals on the agenda for consideration at meetings of stockholders; and

• | in connection with private placements of our stock in 2011, 2013 and 2015, we covenanted that we would not merge or consolidate with another company unless either the transaction and the trading volume of our stock met certain thresholds and qualifications or we obtained the consent of certain of the investors who purchased our stock in those private placements.

Certain provisions of Delaware law make it more difficult for a third party to acquire us and make a takeover more difficult to complete, even if such a transaction were in the stockholders’ interest.
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The Delaware General Corporation Law contain provisions that may have the effect of making it more difficult or delaying attempts by others to obtain control of us, even when these attempts may be in the best interests of our stockholders. We also are subject to the anti-takeover provisions of the Delaware General Corporation Law, which prohibit us from engaging in a “business combination” with an “interested stockholder” unless the business combination is approved in a prescribed manner and prohibit the voting of shares held by persons acquiring certain numbers of shares without obtaining requisite approval. The statutes have the effect of making it more difficult to effect a change in control of a Delaware company.
Our management and six significant stockholders collectively own a substantial majority of our common stock.
Collectively, our officers, our directors and six significant stockholders own or exercise voting and investment control of approximately 52% of our outstanding common stock as of July 15, 2017. As a result, investors may be prevented from affecting matters involving our company, including:

• | the composition of our board of directors and, through it, any determination with respect to our business direction and policies, including the appointment and removal of officers;

• | any determinations with respect to mergers or other business combinations;

• | our acquisition or disposition of assets; and

• | our corporate financing activities.

Furthermore, this concentration of voting power could have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders. This significant concentration of share ownership may also adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in a company that is controlled by a small number of stockholders.
We have not paid any cash dividends in the past and have no plans to issue cash dividends in the future, which could cause the value of our common stock to have a lower value than other similar companies which do pay cash dividends.
We have not paid any cash dividends on our common stock to date and do not anticipate any cash dividends being paid to holders of our common stock in the foreseeable future. While our dividend policy will be based on the operating results and capital needs of the business, it is anticipated that any earnings will be retained to finance our future expansion. As we have no plans to issue cash dividends in the future, our common stock could be less desirable to other investors and as a result, the value of our common stock may decline, or fail to reach the valuations of other similarly situated companies who have historically paid cash dividends in the past.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the price of our common stock and trading volume could decline.
The trading market for our common stock may be influenced by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any analyst who may cover us was to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our common stock or trading volume to decline.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company leases its office facilities. Rent expenses totaled $398,000 and $304,000 for the years ended April 30, 2017 and 2016, respectively. The Company considers its facilities adequate for its current operational needs.
The Company leases the following facilities under non-cancelable operating lease agreements:

• | One University Plaza, Suite 307, Hackensack, New Jersey 07601, which, since November 2011, serves as the Company’s corporate headquarters and consists of approximately 3,800 square feet of office space. The lease expires in November 2021. The Company recognized $86,000 and $85,000 of rental costs relative to this lease for fiscal 2017 and 2016, respectively.

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• | 855 North Wolfe Street, Suite 619, Baltimore, Maryland 21205, which consists of laboratories and office space where the Company conducts operations related to its primary service offerings. This lease expires in December 2017. The Company will be transitioning its activities from this location to the new location in Rockville, MD. The Company recognized $105,000 and $83,000 of rental costs relative to this lease for fiscal 2017 and 2016, respectively.

• | 450 East 29 th Street, New York, New York, 10016, which is a laboratory at which we implant tumors. This lease expires in July 2017 and it's not anticipated to be renewed. The Company recognized $207,000 and $136,000 of rental costs relative to this lease for fiscal 2017 and 2016, respectively.

• | 1330 Piccard Drive, Suite 025, Rockville, MD 20850, which consists of laboratory and office space where the Company will conduct operations related to its primary service offerings. The Company executed this lease on January 11, 2017. The operating commencement date is August 11, 2017. This lease expires in August 31, 2028. The Company did not recognize any rental costs associated with this lease for fiscal 2017.

Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
None.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Principal Market or Markets
Our shares of common stock are currently quoted on the Nasdaq Capital Market under the symbol “CSBR.” Our common stock commenced trading on the Nasdaq Capital Market on August 21, 2015. Prior to such date, our shares of common stock were traded over-the-counter and quoted on the OTCQB Marketplace.
The table below sets forth the high and low bid prices of our common stock, as reported on Nasdaq or the OTCQB Marketplace for the periods shown (as adjusted for the reverse stock split of our outstanding shares of common stock at a ratio of 1-for-12 that became effective on August 12, 2015):

| High |  | Low
Fiscal Year Ended April 30, 2017: |  |  |  |  |
First quarter | $ | 4.10 |  |  | $ | 1.96 |
Second quarter | 2.00 |  |  | 1.48 |
Third quarter | 4.75 |  |  | 1.57 |
Fourth quarter | 4.57 |  |  | 2.65 |

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| High |  | Low
Fiscal Year Ended April 30, 2016: |  |  |  |  |
First quarter | $ | 8.40 |  |  | $ | 5.28 |
Second quarter | 7.50 |  |  | 4.65 |
Third quarter | 5.46 |  |  | 3.50 |
Fourth quarter | 4.10 |  |  | 3.40 |

Approximate Number of Holders of Common Stock
As of July 15, 2017, there were approximately 1,907 record holders of the Company’s common stock.
Dividends
Holders of our common stock are entitled to receive such dividends as may be declared by our Board of Directors. No dividends have been declared or paid with respect to our common stock and no dividends are anticipated to be paid in the foreseeable future. Any future decisions as to the payment of dividends will be at the discretion of our Board of Directors, subject to applicable law.
Recent Sales by the Company of Unregistered Securities
None.
Repurchases of Securities
None.
Use of Proceeds
We received approximately $4.3 million in net proceeds from the sale of common stock in the public offering on June 15, 2016. We are using the net proceeds of this offering for research and development to grow our TumorGraft platform, and the balance of the net proceeds of this offering for working capital and general corporate purposes. The amounts and timing of our actual expenditures will depend upon numerous factors, including market conditions, cash generated by our operations, business developments and related rate of growth. We may find it necessary or advisable to use portions of the proceeds from this offering for other purposes.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis together with our consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that are based on our current expectations, estimates, and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those we discuss under Item 1A – “Risk Factors” and elsewhere in this Annual Report.
Overview and Recent Developments
We are engaged in the development and sale of advanced technology solutions and products to personalize the development and use of oncology drugs. Utilizing our TumorGraft Technology Platform, 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.
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Our Platform provides a novel approach to simulating the results of human clinical trials used in developing oncology drugs. We believe it costs more than $100,000 per patient in oncology clinical trials and the typical cost for each phase of development per year increases from approximately $3 million in the pre-clinical setting to approximately $150 million in phase III. Simulating trials before executing them provides benefits to both pharmaceutical companies and patients. Pharmaceutical companies can lower the risk of spending resources on drugs that do not show significant anti-cancer activities and increase the chance that the clinical development path they pursue will be focused on an appropriate patient population and a successful combination with other drugs.
We plan to continue our efforts to expand our TumorGraft Technology Platform in order to expand our TOS program. Our POS program will not be the focus of our growth moving forward.
On June 15, 2016, the Company closed a public offering of 2,000,000 registered shares of its common stock at an offering price of $2.25 per share. In addition, the underwriter exercised a partial exercise of the over-allotment option granted to the underwriter to purchase an additional 258,749 shares at the public offering price. The net proceeds from the offering, including the partial exercise of the over-allotment option, were approximately $4.3 million, after deducting the underwriting discount and offering-related expenses of $742,000. The Company is using the net proceeds of this offering for research and development to grow our TumorGraft platform, and the balance of the net proceeds for working capital and general corporate purposes.
Results of Operations
The following table summarizes our operating results for the periods presented below (dollars in thousands):

| For the Years Ended April 30,
| 2017 |  | % of Revenue |  | 2016 |  | % of Revenue |  | % Change
Operating revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Personalized oncology solutions | $ | 1,720 |  |  | 11.2 | % |  | $ | 1,972 |  |  | 17.6 | % |  | (12.8 | )%
Translational oncology solutions | 13,691 |  |  | 88.8 |  |  | 9,210 |  |  | 82.4 |  |  | 48.7 |
Total operating revenue | 15,411 |  |  | 100.0 |  |  | 11,182 |  |  | 100.0 |  |  | 37.8 |
Costs and operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of personalized oncology solutions | 1,433 |  |  | 9.3 |  |  | 2,102 |  |  | 18.8 |  |  | (31.8 | )
Cost of translational oncology solutions | 8,270 |  |  | 53.7 |  |  | 6,584 |  |  | 58.9 |  |  | 25.6 |
Research and development | 4,293 |  |  | 27.9 |  |  | 4,194 |  |  | 37.5 |  |  | 2.4 |
Sales and marketing | 3,261 |  |  | 21.2 |  |  | 3,445 |  |  | 30.8 |  |  | (5.3 | )
General and administrative | 4,963 |  |  | 32.2 |  |  | 5,173 |  |  | 46.3 |  |  | (4.1 | )
Total costs and operating expenses | 22,220 |  |  | 144.3 |  |  | 21,498 |  |  | 192.3 |  |  | 3.4 |
Loss from operations | $ | (6,809 | ) |  | (44.3 | )% |  | $ | (10,316 | ) |  | (92.3 | )% |  | (34.0 | )%

Operating Revenues
Operating revenues for the years ended April 30, 2017 and 2016 were $15.4 million and $11.2 million, respectively, an increase of $4.2 million, or 37.8%, driven by the increase in TOS revenue.
Personalized Oncology Solutions Revenues
POS revenues were $1.7 million and $2.0 million for the years ended April 30, 2017 and 2016, respectively, a decrease of $300,000 or 12.8%. The decrease is primarily the result of the decline in implant and drug panel revenue. The number of implants during fiscal 2017 was 74, a decrease of 47.9% over fiscal 2016. The number of patients for whom panels were completed was 42 for fiscal 2017, a decrease of 12.5% over fiscal 2016.
Translational Oncology Solutions Revenues
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TOS revenues were $13.7 million and $9.2 million for the years ended April 30, 2017 and 2016, respectively, an increase of $4.5 million or 48.7%. The increase was due to increased bookings, both in the number and size of the studies, and growth of the platform.
Cost of Personalized Oncology Solutions
POS cost of sales were $1.4 million and $2.1 million for the years ended April 30, 2017 and 2016, respectively, a decrease of $700,000 or 31.8%. For the years ended April 30, 2017 and 2016, gross margins for POS were 16.7% and (6.6%), respectively. The improvement is attributed to the increase in higher margin sequencing revenue and aggressively managing our lab costs.
Cost of Translational Oncology Solutions
TOS cost of sales were $8.3 million and $6.6 million for the years ended April 30, 2017 and 2016, respectively, an increase of $1.7 million, or 25.6%. For the years ended April 30, 2017 and 2016, gross margins for TOS were 39.6% and 28.5%, respectively. The increase in TOS cost of sales was due to an increase in TOS studies. Gross margin varies based on timing differences between expense and revenue recognition; however, the improvement can be attributed to aggressively managing our costs and leveraging cost of sales against a growing revenue base.
Research and Development
Research and development expense was $4.3 million and $4.2 million for the years ended April 30, 2017 and 2016, respectively, an increase of $100,000 or 2.4%.
Sales and Marketing
Sales and marketing expense was $3.3 million and $3.4 million for the years ended April 30, 2017 and 2016, respectively, a decrease of $100,000, or 5.3%. The decrease is due to the consolidation of sales and marketing personnel resources of the POS and TOS division.
General and Administrative
General and administrative expense was $5.0 million and $5.2 million for the years ended April 30, 2017 and 2016, respectively, a decrease of $200,000, or 4.1%. The decrease is primarily due to aggressive cost management.
Other Income/(Expense)
Other Expense was ($56,000) and ($38,000) for the years ended April 30, 2017 and 2016, respectively. The current year expense is mainly due to foreign currency transaction losses.
Inflation
Inflation does not have a meaningful impact on the results of our operations.
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. In the past, we have met these cash requirements through our cash and cash equivalents, working capital management, proceeds from certain private placements and public offerings of our securities and sales of products and services. For the years ended April 30, 2017 and 2016, the Company had a net loss of approximately $6.9 million and $10.4 million, respectively. As of April 30, 2017, the Company had an accumulated deficit of approximately $69.3 million, negative working capital of $1.6 million and cash and cash equivalents of $3.3 million. We believe that our cash and cash equivalents on hand are adequate to fund operations through at least August 2018. 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.
Cash Flows
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The following discussion relates to the major components of our cash flows:
Cash Flows from Operating Activities
Net cash used in operating activities was $2.8 million and $6.4 million for the years ended April 30, 2017 and 2016, respectively. The decrease of $3.6 million cash used in operations relates to an increase in revenues in conjunction with the reduction of fixed costs and effective management of variable lab costs.
Cash Flows from Investing Activities
Net cash used in investing activities was $766,000 and $322,000 for the years ended April 30, 2017 and 2016, respectively. These cash flows relate to the purchase of property and equipment.
Cash Flows from Financing Activities
Net cash provided by (used in) financing activities was $4.3 million and ($42,000) for the years ended April 30, 2017 and 2016, respectively. The cash flows in fiscal year 2017 primarily relate to the public offering of common stock that occurred on June 15, 2016.
Critical Accounting Policies
We believe that of our significant accounting policies (refer to the Notes to Consolidated Financial Statements contained in Item 15 of this Annual Report), the following may involve a higher degree of judgment and complexity:
General
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States or GAAP. The preparation of the consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. 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. We have not identified any estimates that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. 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.
Revenue Recognition
The Company derives revenue from its POS and TOS businesses. Personalized oncology solutions assist physicians by providing information to help guide the development of personalized treatment plans for their patients using our core offerings, including testing oncology drugs and drug combinations on personalized TumorGrafts, and through other products. Translational oncology solutions offer a preclinical TumorGraft 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 recognizes revenue when the following four basic criteria are met: (i) a contract has been entered into with its customers; (ii) delivery has occurred or services rendered to its customers; (iii) the fee is fixed and determinable as noted in the contract; and (iv) collectability is reasonably assured. The Company utilizes a proportional performance revenue recognition model for its TOS business, under which it recognizes revenue as performance occurs, based on the relative outputs of the performance that have occurred up to that point in time under the respective agreement, typically the delivery of reports to its customers documenting the results of testing protocols.
When a POS or TOS arrangement involves multiple elements, the items included in the arrangement (deliverables) are evaluated to determine whether they represent separate units of accounting. We perform this evaluation at the inception of an arrangement and as each item in the arrangement is delivered. Generally, we account for a deliverable (or a group of deliverables) separately if: (i) the delivered item(s) has standalone value to the customer, and (ii) we have given the customer a general right of return relative to the delivered item(s) and the delivery or performance of the undelivered item(s) or service(s) is probable and substantially in our control. Revenue on multiple element arrangements is recognized using a proportional method for each separately identified element. All revenue from contracts determined not to have separate units of accounting is recognized based on consideration of
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the most substantive delivery factor of all the elements in the contract or if there is no predominant deliverable upon delivery of the final element of the arrangement.
Stock-Based Payments
We typically recognize expense for stock-based payments based on the fair value of awards on the date of grant. We use the Black-Scholes option pricing model to estimate fair value. The option pricing model requires us to estimate certain key assumptions such as expected life, volatility, risk free interest rates, and dividend yield to determine the fair value of stock-based awards. These assumptions are based on historical information and management judgment. We expense stock-based payments over the period that the awards are expected to vest, net of estimated forfeitures. If actual forfeitures differ from management’s estimates, compensation expense is adjusted. We report cash flows resulting from tax deductions in excess of the compensation cost recognized from those options (excess tax benefits) as financing cash flows when the cash tax benefit is received.
Goodwill
Goodwill represents the excess of the cost over the fair market value of the net assets acquired including identifiable assets. Goodwill is tested annually, or more frequently, if circumstances indicate potential impairment, by comparing its fair value to its carrying amount. The determination of whether or not goodwill is impaired involves significant judgment. Although we believe our goodwill is not impaired, changes in strategy or market conditions could significantly impact the judgments and may require future adjustments to the carrying value of goodwill. We use a two-step process to test for goodwill impairment. The first step is to screen for potential impairment, while the second step measures the amount of the impairment, if any. The first step of the goodwill impairment test compares the fair value of each reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value of the reporting unit’s net assets, including goodwill, exceeds the fair value of the reporting unit, then we determine the implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, then an impairment of goodwill has occurred and an impairment loss would be recognized for the difference between the carrying amount and the implied fair value of goodwill as a component of operating income. The implied fair value of goodwill is calculated by subtracting the fair value of tangible and intangible assets associated with the reporting unit from the fair value of the unit.
In addition, we evaluate impairment if events or circumstances change between the annual assessments, indicating a possible impairment. Examples of such events or circumstances include: (i) a significant adverse change in legal factors or in the business climate; (ii) an adverse action or assessment by a regulator; or (iii) a significant decline in market capitalization as compared to book value.
We have two reportable segments and two reporting units. The estimated fair value of each reporting unit, as calculated for the April 30, 2017 impairment test, exceeded the carrying value of the reporting unit. Judgments regarding the existence of impairment indicators are based on legal factors, market conditions and operational performance of the acquired businesses. 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. Any resulting goodwill impairment could have a material adverse impact on our financial condition and results of operations.
Accounting for Income Taxes
We use the asset and liability method to account for income taxes. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets. In preparing the consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax liability together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, depreciation on property, plant and equipment, goodwill and losses for tax and accounting purposes. These differences result in deferred tax assets, which include tax loss carry-forwards, and liabilities, which are included within the consolidated balance sheet. We then assess the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, a valuation allowance is established. To the extent a valuation allowance is established or increased in a period, we include an expense within the tax provision of the consolidated statements of operations. As of April 30, 2017 and 2016, we have established a full valuation allowance for all deferred tax assets.
As of April 30, 2017 and 2016, we recognized a liability for uncertain tax positions on the balance sheet relative to foreign operations in the amount of $121,000 and $165,000, respectively. We do not anticipate any significant unrecognized tax benefits
18

will be recorded during the next 12 months. Any interest or penalties related to unrecognized tax benefits is recognized in income tax expense. The Company has not accrued for any penalties and interest.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers”, on revenue recognition. The new standard provides for a single five-step model to be applied to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. As amended by ASU No. 2015-14 issued in August 2015, this ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2017, with early adoption permitted. We do not intend to early adopt and are currently assessing the impact of this update, but preliminarily believe that its adoption will not have a material impact on our consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The amendments in this update state that in connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). The amendments in this update are effective for the annual reporting period beginning after December 15, 2016 and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this update is not expected to have a material impact on our consolidated financial statements.
In February 2016, the FASB ASU No. 2016-02, Leases. The new standard will require most leases to be recognized on the balance sheet which will increase reported assets and liabilities. Lessor accounting remains substantially similar to current guidance. The new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018, which for us is the first quarter of fiscal 2019 and mandates a modified retrospective transition method. We are currently assessing the impact of this update on our consolidated financial statements.
In April 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU No. 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for financial statements that have not already been issued. We do not intend to early adopt but preliminarily believe the adoption of this update is not expected to have a material impact on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments” . The new standard attempts to reduce diversity in practice in how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 provides guidance on eight specific cash flow issues. The new guidance will be effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted including adoption in an interim period. We do not intend to early adopt and we are currently assessing the impact of adoption of this update will have on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill Impairment”. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. It affects public entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. A public entity that is a U.S. Securities and Exchange Commission ("SEC") filer should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. For the Company, the amendments are effective January 1, 2020. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
19

Not applicable.
Item 8. Financial Statements and Supplementary Data
Consolidated balance sheets as of April 30, 2017 and 2016, consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended April 30, 2017 together with the reports of our independent registered public accounting firms, are set forth in the “F” pages in Item 15 of this Annual Report.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our principal financial and accounting officer, have reviewed and evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 10-K. Based on that evaluation, our management, including our Chief Executive Officer and our principal financial and accounting officer, have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a–15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on control criteria framework of the Committee of Sponsoring Organizations, or COSO, of the Treadway Commission published in its report entitled Internal Control – Integrated Framework (2013). Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of April 30, 2017.
Management’s Annual Report on Changes in Internal Controls
There were no changes in our internal controls over financial reporting during the quarter ended April 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by item 10 will be contained in the Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by item 11 will be contained in the Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by item 12 will be contained in the Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by item 13 will be contained in the Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by item 14 will be contained in the Proxy Statement and is incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)1. Financial Statements

Report of Independent Registered Public Accounting Firm | F-2
Consolidated Balance Sheets | F-3
Consolidated Statements of Operations | F-4
Consolidated Statement of Changes in Stockholders' Equity | F-5
Consolidated Statements of Cash Flows | F-6
Notes to Consolidated Financial Statements | F-7

(a)2. Financial Statement Schedules
All schedules have been omitted because they are not applicable.
(a)3. Exhibits required to be filed by Item 601 of Regulation S-K.

Exhibit No. |  |

20

3.1 |  | Amended and Restated Articles of Incorporation (incorporated by reference to Appendix A to the Company’s Information Statement on Schedule 14C filed March 7, 2011)
3.1.1 |  | Certificate of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3(i) to the Company’s Current Report on Form 8-K filed April 28, 2015)
3.2 |  | Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed May 9, 2017)
10.2 |  | Employment Agreement, dated November 5, 2013, between the Company and Ronnie Morris, M.D. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed November 12, 2013)
10.3 |  | Amendment to Employment Agreement, dated March 16, 2015, between the Company and Ronnie Morris (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed March 20, 2015)
10.4 |  | Offer letter dated June 3, 2013 between the Company and David Miller (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 3, 2013)
10.5 |  | Master Supply and Services Contract, made on December 3, 2013, between Pfizer, Inc. and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended January 31, 2014, filed March 14, 2013) **
10.6 |  | 2010 Equity Incentive Plan (incorporated by reference to Appendix B to the Company’s Definitive Information Statement on Schedule 14C filed March 7, 2011)
10.7 |  | Form of Note Purchase Agreement, dated December 1, 2014, between the Company and each of Joel Ackerman and Ronnie Morris (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 5, 2014)
10.8 |  | Form of Convertible Promissory Note, dated December 1, 2014, issued to each of Joel Ackerman and Ronnie Morris in connection with the Note Purchase Agreement, dated December 1, 2014 between the Company and each of Joel Ackerman and Ronnie Morris incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 5, 2014)
10.8.1 |  | Amendment No. 1 to Convertible Promissory Note, dated December 1, 2014 issued to Joel Ackerman in connection with the Note Purchase Agreement, dated December , 2014, between the Company and each of Joel Ackerman and Ronnie Morris (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 2, 2015)
10.8.2 |  | Amendment No. 1 to Convertible Promissory Note, dated December 1, 2014 issued to Ronnie Morris in connection with the Note Purchase Agreement, dated December , 2014, between the Company and each of Joel Ackerman and Ronnie Morris (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 2, 2015)
10.9 |  | Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 30, 2011)
10.9.1 |  | Amendment No. 1 to Securities Purchase Agreement, dated January 29, 2014, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 6, 2014)
10.9.2 |  | Amended and Restated 2011 Securities Purchase Agreement, dated March 13, 2015, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.10 |  | Amended and Restated Registration Rights Agreement, dated January 28, 2013, between the Company and each person or entities that are signatories to (i) the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature page thereto, and (ii) the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed January 30, 2013)
10.11 |  | Form of warrant issued to each person or entities that are signatories to the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed January 30, 2013)

21

10.11.1 |  | Amendment No. 1 to warrants, dated March 13, 2015, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.12 |  | Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 30, 2013)
10.12.1 |  | Amendment No. 1 to Securities Purchase Agreement, dated January 29, 2014, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 6, 2014)
10.12.2 |  | Amended and Restated 2013 Securities Purchase Agreement, dated March 13, 2015, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.14 |  | Form of warrant issued to each person or entities that are signatories to the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed January 30, 2013)
10.14.1 |  | Amendment No. 1 to warrants, dated March 13, 2015, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.15 |  | Put Right Agreement, dated January 29, 2014, between the Company and each of Joel Ackerman and Ronnie Morris (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 6, 2014)
10.16 |  | Securities Purchase Agreement, dated March 11, 2015, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 12, 2015)
10.17 |  | Amended and Restated Registration Rights Agreement, dated March 13, 2015, between the Company and each person or entities that are signatories to (i) the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature page thereto, (ii) the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature page thereto, and (iii) the Securities Purchase Agreement, dated March 11, 2015, between the Company. And each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.18 |  | Form of Investor Warrant issued to each person or entities that are signatories to the Securities Purchase Agreement, dated March 11, 2015, between the Company and each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.19 |  | Option Exchange Agreement, dated March 16, 2015, between the Company and Joel Ackerman (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 20, 2015)
10.20 |  | Option Exchange Agreement, dated March 16, 2015, between the Company and Ronnie Morris (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 20, 2015)
10.21 |  | Option Exchange Agreement, dated March 16, 2015, between the Company and James McGorry (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 20, 2015)
10.22 |  | Option Exchange Agreement, dated March 16, 2015, between the Company and David Miller (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed March 20, 2015)
14 |  | Code of Ethics (incorporated by reference to Exhibit 14 of the April 30, 2008 Form 10-KSB)
21 |  | List of Subsidiaries*
23.1 |  | Consent of Independent Registered Public Accounting Firm*

22

31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer*
31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer*
32.1 |  | Section 1350 Certifications***
101.INS* |  | XBRL Instance Document.
101.SCH* |  | XBRL Taxonomy Extension Schema Document.
101.CAL* |  | XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* |  | XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* |  | XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* |  | XBRL Taxonomy Extension Presentation Linkbase Document.

___________________________
* Filed herewith
** Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.
*** Furnished hereto.
Item 16. Form 10-K Summary
Not Required.
23

SIGNATURES
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.

| CHAMPIONS ONCOLOGY, INC.
July 28, 2017 | /s/ RONNIE MORRIS
| Ronnie Morris
| Chief Executive Officer
| (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.

Signature |  | Title |  | Date
/s/ RONNIE MORRIS |  | Chief Executive Officer and Director |  | July 28, 2017
Ronnie Morris |  | (principal executive officer) |  |
/s/ DAVID MILLER |  | Vice President, Finance |  | July 28, 2017
David Miller |  | (principal financial and accounting officer) |  |
/s/ JOEL ACKERMAN |  | Director, |  | July 28, 2017
Joel Ackerman |  | Chairman of the Board of Directors |  |
/s/ DAVID SIDRANSKY |  | Director |  | July 28, 2017
David Sidransky |  |  |  |
/s/ ABBA D. POLIAKOFF |  | Director |  | July 28, 2017
Abba D. Poliakoff |  |  |  |
/s/ SCOTT R. TOBIN |  | Director |  | July 28, 2017
Scott R. Tobin |  |  |  |
/s/ DANIEL MENDELSON |  | Director |  | July 28, 2017
Daniel Mendelson |  |  |  |
/s/ PHILIP BREITFELD |  | Director |  | July 28, 2017
Philip Breitfeld |  |  |  |

24

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm | F-2
Consolidated Balance Sheets | F-3
Consolidated Statements of Operations | F-4
Consolidated Statement of Changes in Stockholders' Equity | F-5
Consolidated Statements of Cash Flows | F-6
Notes to Consolidated Financial Statements | F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Champions Oncology, Inc.
We have audited the accompanying consolidated balance sheets of Champions Oncology, Inc. and Subsidiaries (the “Company") as of April 30, 2017 and 2016, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended April 30, 2017. The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Champions Oncology, Inc. and Subsidiaries as of April 30, 2017 and 2016, and the consolidated results of their operations and their cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ EisnerAmper LLP
Iselin, New Jersey
July 28, 2017
F-2

CHAMPIONS ONCOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 30
(In Thousands except for shares)

| 2017 |  | 2016
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 3,295 |  |  | $ | 2,585 |
Accounts receivable, net | 2,274 |  |  | 1,312 |
Prepaid expenses and other current assets | 300 |  |  | 443 |
Total current assets | 5,869 |  |  | 4,340 |
Restricted cash | 150 |  |  | 150 |
Property and equipment, net | 1,216 |  |  | 618 |
Other long term assets | 107 |  |  | — |
Goodwill | 669 |  |  | 669 |
Total assets | 8,011 |  |  | $ | 5,777 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 1,852 |  |  | $ | 1,896 |
Accrued liabilities | 685 |  |  | 271 |
Deferred revenue | 4,910 |  |  | 3,139 |
Total current liabilities | 7,447 |  |  | 5,306 |
Other non-current liabilities | 164 |  |  | 233 |
Total liabilities | 7,611 |  |  | 5,539 |
Stockholders' equity: |  |  |
Common stock, $.001 par value; 200,000,000 shares authorized; 11,251,844 and 8,974,531 shares issued and 10,982,159 and 8,704,846 shares outstanding as of April 30, 2017 and 2016, respectively | 11 |  |  | 9 |
Treasury stock, at cost, 269,685 common shares as of April 30, 2017 and 2016 | (1,252 | ) |  | (1,252 | )
Additional paid-in capital | 70,991 |  |  | 63,947 |
Accumulated deficit | (69,350 | ) |  | (62,466 | )
Total stockholders' equity | 400 |  |  | 238 |
Total liabilities and stockholders' equity | 8,011 |  |  | $ | 5,777 |

The accompanying notes are an integral part of these Consolidated Financial Statements.
F-3

CHAMPIONS ONCOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)

| Year Ended April 30,
| 2017 |  | 2016
Operating revenue: |  |  |  |  |
Personalized oncology solutions | $ | 1,720 |  |  | $ | 1,972 |
Translational oncology solutions | 13,691 |  |  | 9,210 |
Total operating revenue | 15,411 |  |  | 11,182 |
Costs and operating expenses: |  |  |  |  |
Cost of personalized oncology solutions | 1,433 |  |  | 2,102 |
Cost of translational oncology solutions | 8,270 |  |  | 6,584 |
Research and development | 4,293 |  |  | 4,194 |
Sales and marketing | 3,261 |  |  | 3,445 |
General and administrative | 4,963 |  |  | 5,173 |
Total costs and operating expenses | 22,220 |  |  | 21,498 |
Loss from operations | (6,809 | ) |  | (10,316 | )
Other expense: |  |  |  |  |
Other expense | (56 | ) |  | (38 | )
Total other expense | (56 | ) |  | (38 | )
Net loss before income tax expense | (6,865 | ) |  | (10,354 | )
Provision for income tax | 19 |  |  | 92 |
Net loss | $ | (6,884 | ) |  | $ | (10,446 | )
Net loss per common share outstanding |  |  |
basic and diluted | $ | (0.64 | ) |  | $ | (1.20 | )
Weighted average common shares outstanding basic and diluted | 10,684,395 |  |  | 8,695,199 |

F-4

CHAMPIONS ONCOLOGY, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(In Thousands except for shares)

| Common Stock |  | Treasury Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Total Stockholders' Equity
| Shares |  | Amount |  | Shares |  | Amount |  |  |
Balance, May 1, 2015 | 8,692,616 |  |  | $ | 9 |  |  | 269,685 |  |  | $ | (1,252 | ) |  | $ | 61,322 |  |  | $ | (52,020 | ) |  | $ | 8,059 |
Stock-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 2,599 |  |  | — |  |  | 2,599 |
Exercise of options and warrants | — |  |  | — |  |  | — |  |  | — |  |  | (18 | ) |  | — |  |  | (18 | )
Issuance of common stock for services | 12,230 |  |  | — |  |  | — |  |  | — |  |  | 44 |  |  | — |  |  | 44 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (10,446 | ) |  | (10,446 | )
Balance, April 30, 2016 | 8,704,846 |  |  | $ | 9 |  |  | 269,685 |  |  | $ | (1,252 | ) |  | $ | 63,947 |  |  | $ | (62,466 | ) |  | $ | 238 |
Stock-based compensation and modification expense | — |  |  | — |  |  | — |  |  | — |  |  | 2,662 |  |  | — |  |  | 2,662 |
Issuance of common stock for services | 18,564 |  |  | — |  |  | — |  |  | — |  |  | 44 |  |  | — |  |  | 44 |
Sale of common stock, net of issuance costs of $742 | 2,258,749 |  |  | 2 |  |  | — |  |  | — |  |  | 4,338 |  |  | — |  |  | 4,340 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,884 | ) |  | (6,884 | )
Balance, April 30, 2017 | 10,982,159 |  |  | $ | 11 |  |  | 269,685 |  |  | $ | (1,252 | ) |  | $ | 70,991 |  |  | $ | (69,350 | ) |  | $ | 400 |

The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5

CHAMPIONS ONCOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

| Year Ended April 30,
| 2017 |  | 2016
Operating activities: |  |  |  |  |
Net loss | $ | (6,884 | ) |  | $ | (10,446 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |
Stock-based compensation and modification expense | 2,662 |  |  | 2,599 |
Depreciation and amortization expense | 168 |  |  | 156 |
Allowance for doubtful accounts | 24 |  |  | 30 |
Issuance of common stock for services | 44 |  |  | 44 |
Changes in operating assets and liabilities: |  |  |  |  |
Accounts receivable | (986 | ) |  | (282 | )
Prepaid expenses and other current assets | 143 |  |  | (97 | )
Restricted cash | — |  |  | 13 |
Other long term assets | (107 | ) |  | — |
Accounts payable | (43 | ) |  | 482 |
Accrued liabilities | 412 |  |  | (102 | )
Other non-current liabilities | (44 | ) |  | 65 |
Deferred revenue | 1,771 |  |  | 1,130 |
Net cash used in operating activities | (2,840 | ) |  | (6,408 | )
Investing activities: |  |  |  |  |
Purchase of property and equipment | (766 | ) |  | (322 | )
Net cash used in investing activities | (766 | ) |  | (322 | )
Financing activities: |  |  |  |  |
Proceeds from June 2016 public offering, net of financing costs of $742 | 4,340 |  |  | — |
Payment of issuance costs related to 2015 private placement | — |  |  | (18 | )
Capital lease payments | (24 | ) |  | (24 | )
Net cash provided by (used in) financing activities | 4,316 |  |  | (42 | )
Increase (decrease) in cash and cash equivalents | 710 |  |  | (6,772 | )
Cash and cash equivalents, beginning of year | 2,585 |  |  | 9,357 |
Cash and cash equivalents, end of year | $ | 3,295 |  |  | $ | 2,585 |

The accompanying notes are an integral part of these Consolidated Financial Statements.
F-6

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Basis of Presentation
Background
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 two operating subsidiaries: Champions Oncology (Israel), Limited and Champions Biotechnology U.K., Limited. For the years ended April 30, 2017 and 2016, there were no material revenues earned by these subsidiaries.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Reverse Stock Split
On October 15, 2013, the shareholders of the Company authorized our Board of Directors to effect a reverse stock split of all outstanding shares of common stock, warrants and options. The Board of Directors subsequently approved the implementation of a reverse stock split at a ratio of one-for-twelve shares, which became effective on August 12, 2015. All share and per share data in these consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the reverse stock split.
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 cash and cash equivalents, working capital management, proceeds from certain private placements and public offerings of our securities and sales of products and services. For the years ended April 30, 2017 and 2016, the Company had a net loss of approximately $6.9 million and $10.4 million, respectively. As of April 30, 2017, the Company had an accumulated deficit of approximately $69.3 million, negative working capital of $1.6 million and cash and cash equivalents of $3.3 million. We believe that our cash and cash equivalents on hand are adequate to fund operations through at least August 2018. 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.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
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.
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
F-7

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less at the time of purchase, to be cash equivalents. At various times, the Company has amounts on deposit at financial institutions in excess of federally insured limits.
Fair Value
The carrying value of cash and cash equivalents, 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 fair value hierarchy promulgated by GAAP consists of three levels:

• | Level one — Quoted market prices in active markets for identical assets or liabilities;

• | Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

• | Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The Company has no assets that are measured at fair value on a recurring basis and there were no assets or liabilities measured at fair value on a non-recurring basis during the year ended April 30, 2017.
Accounts Receivable
Accounts receivable represent amounts due under agreements with pharmaceutical and biotechnology companies for TOS and amounts due under agreements with patients for POS. At each reporting period, the Company evaluates open accounts receivable for collectability and records an allowance for potentially uncollectible accounts. For April 30, 2017 and 2016, the allowance for these accounts was $56,000 and $32,000, respectively. Accounts receivable is also comprised of certain unbilled accounts receivable for services completed under TOS that have not been billed as of the balance sheet date. As of April 30, 2017 and 2016, the Company had unbilled receivables of $1.6 million and $617,000, respectively.
Restricted Cash
As of April 30, 2017 and 2016, the Company has restricted cash of $150,000 and $150,000, respectively, which is classified as a noncurrent asset on the consolidated balance sheets. This restricted cash serves primarily as collateral for corporate credit cards to provide financial assurance that the Company will fulfill its obligations. The cash is held in custody by the issuing bank, is restricted as to withdrawal or use, and is currently invested in an interest-bearing Certificate of Deposit (“CD”). Though the CD matures in the second quarter of fiscal 2018, the cash will be reinvested into another CD to continue use of the corporate cards. The Company accounts for this CD as a non-current asset.
F-8

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property and Equipment
Property and equipment is recorded at cost and primarily consists of laboratory equipment, furniture and fixtures, and computer hardware and software. Assets in progress include equipment not yet placed in service for the new laboratory facility. 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. Property and equipment consisted of the following (in thousands):

| April 30,
| 2017 |  | 2016
Furniture and fixtures | $ | 74 |  |  | $ | 73 |
Computer equipment and software | 872 |  |  | 715 |
Laboratory equipment | 918 |  |  | 782 |
Assets in progress | 472 |  |  | — |
Leasehold improvements | 2 |  |  | 2 |
Total property and equipment | 2,338 |  |  | 1,572 |
Less: Accumulated depreciation and amortization | (1,122 | ) |  | (954 | )
Property and equipment, net | $ | 1,216 |  |  | $ | 618 |

Depreciation and amortization expense was $168,000 and $156,000 for the years ended April 30, 2017 and 2016, respectively. Additionally, included in “Laboratory equipment” as of April 30, 2017 and 2016 is a capital lease asset of $124,000. Depreciation and amortization expense relating the capital lease was $24,045 and $24,818 for the years ended April 30, 2017 and April 30, 2016, respectively.
Capital Lease
In November 2014, the Company entered into a lease for laboratory equipment. The lease was determined to be a capital lease that has costs of approximately $149,000, at inception, through November 2019. The current monthly capital lease payment is approximately $3,000.
The following is a schedule by years of future minimum lease payments under this capital lease together with the present value of the net minimum lease payments as of April 30, 2017 (table in thousands):

For the Years Ended April 30, | 2018 |  | $ | 25 |
| 2019 |  | 27 |
| 2020 |  | 16 |
Total minimum lease payments |  |  | 68 |
Less: amount representing interest |  |  | (5 | )
Present value of minimum payments |  |  | 63 |
Less: current portion |  |  | (25 | )
|  |  | $ | 38 |

The present value of minimum future obligations shown above is calculated based on interest rate of 5%. The short-term and long-term components of the capital lease obligation are included in accrued liabilities and other non-current liabilities, respectively at April 30, 2017 and 2016.
Impairment of Long-Lived Assets
Impairment losses are to be recognized when the carrying amount of a long-lived asset is not recoverable or exceeds its fair value. The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that a carrying value may not be recoverable. 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
F-9

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Company has not recognized any impairment losses for the Company’s long-lived assets for the years ending April 30, 2017 and 2016.
Other long term assets
Other long term assets represents amount relating to lease deposits for our Hackensack, New Jersey and Rockville, Maryland locations.
Goodwill
Goodwill represents the excess of the cost over the fair market value of the net assets acquired including identifiable assets. Goodwill is tested annually, or more frequently if circumstances indicate potential impairment, by comparing its fair value to its carrying amount. The determination of whether or not goodwill is impaired involves significant judgment. Although the Company believes its goodwill is not impaired, changes in strategy or market conditions could significantly impact the judgments and may require future adjustments to the carrying value of goodwill. The Company uses a two-step process to test for goodwill impairment. The first step is to screen for potential impairment, while the second step measures the amount of the impairment, if any. The first step of the goodwill impairment test compares the fair value of each reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value of the reporting unit’s net assets, including goodwill, exceeds the fair value of the reporting unit, then the Company determines the implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, then an impairment of goodwill has occurred and an impairment loss would be recognized for the difference between the carrying amount and the implied fair value of goodwill as a component of operating income. The implied fair value of goodwill is calculated by subtracting the fair value of tangible and intangible assets associated with the reporting unit from the fair value of the unit. The Company tests for goodwill impairment at the reporting unit segment level.
The Company has not recognized any impairment losses for the Company’s goodwill for the years ended April 30, 2017 and 2016.
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.
Revenue Recognition
The Company derives revenue from its POS and TOS businesses. Personalized oncology solutions assist physicians by providing information to help guide the development of personalized treatment plans for their patients using our core offerings, including testing oncology drugs and drug combinations on personalized TumorGrafts, and through other products. Translational oncology solutions offer a preclinical TumorGraft 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 recognizes revenue when the following four basic criteria are met: (i) a contract has been entered into with its customers; (ii) delivery has occurred or services rendered to its customers; (iii) the fee is fixed and determinable as noted in the contract; and (iv) collectability is reasonably assured. The Company utilizes a proportional performance revenue recognition model for its TOS business, under which it recognizes revenue as performance occurs, based on the relative outputs of the performance that have occurred up to that point in time under the respective agreement, typically the delivery of reports to its customers documenting the results of testing protocols.
When a POS or TOS arrangement involves multiple elements, the items included in the arrangement (deliverables) are evaluated to determine whether they represent separate units of accounting. The Company performs this evaluation at the inception of an arrangement and as each item in the arrangement is delivered. Generally, the Company accounts for a deliverable (or a group of deliverables) separately if: (i) the delivered item(s) has standalone value to the customer, and (ii) if the Company has given the customer a general right of return relative to the delivered item(s) and the delivery or performance of the undelivered item(s) or service(s) is probable and substantially in the Company’s control. All revenue from contracts determined not to have separate units of accounting is recognized based on consideration of the most substantive delivery factor of all the elements in the contract or if there is no predominant deliverable upon delivery of the final element of the arrangement.
Cost of Personalized Oncology Solutions
F-10

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cost of POS consists of costs related to POS revenue earned from implantations, drug panels, tumor boards, and gene sequencing services, as well as indirect internal costs, such as salaries for personnel directly engaged in these products. Direct costs associated with implantation revenues are primarily related to mice purchases and maintenance and shipping of tumor tissue. Direct drug panel costs are primarily incurred from mice purchases and maintenance and drug purchases. Direct tumor board costs are primarily related to physicians’ honorariums and any tumor board participation costs such as travel, lodging and meals. Direct gene sequencing costs are primarily related to costs billed from the gene sequencing service provider. All costs are expensed as incurred.
Cost of Translational Oncology Solutions
Cost of TOS consists of costs related to TOS revenue. Direct costs include mice purchases and maintenance costs for studies completed internally and charges from CROs for studies handled externally. Indirect costs include salaries for personnel directly engaged in providing TOS products. All costs of performing studies in-house are expensed as incurred. All costs of performing studies from external sources, if any, are expensed when incurred.
Research and Development
Research and development costs represent both costs incurred internally for research and development activities, including personnel costs and 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.
Sales and Marketing
Selling and marketing expenses represent costs incurred to promote the Company’s products offered, including salaries, benefits and related costs of our sales and marketing personnel, and represent costs of advertising and other selling and marketing expenses. All sales and marketing costs, including advertising costs, are expensed as incurred.
Basic and Dilutive Loss Per Common Share
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 common stock purchase warrants and stock options. For the three and twelve months ended April 30, 2017 and 2016, basic and dilutive loss per share were the same, as the potentially dilutive securities did not have a dilutive effect.

| Year Ended April 30,
| 2017 |  | 2016
Basic and diluted net loss per share computation |  |  |  |  |
Net loss attributable to common stockholders | $ | (6,883,882 | ) |  | $ | (10,445,537 | )
Weighted Average common shares | 10,684,395 |  |  | 8,695,199 |
Basic and diluted net loss per share | $ | (0.64 | ) |  | $ | (1.20 | )

The following table reflects the total potential stock-based instruments outstanding at April 30, 2017 and 2016 that could have an effect on the future computation of dilution per common share:

| Year Ended April 30
| 2017 |  | 2016
Stock options | 2,308,704 |  |  | 2,212,757 |
Warrants | 2,004,284 |  |  | 2,109,840 |
Total common stock equivalents | 4,312,988 |  |  | 4,322,597 |

Stock-based Payments
F-11

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company typically recognizes expense for stock-based payments based on the fair value of awards on the date of grant. The Company uses the Black-Scholes option pricing model to estimate fair value. The Black-Scholes option valuation model was developed for use in estimating the fair value of short-traded options that have no vesting restrictions and are fully transferable. The option pricing model requires the Company to estimate certain key assumptions such as expected life, volatility, risk free interest rates and dividend yield to determine the fair value of stock-based awards. These assumptions are based on historical information and management judgment. The risk-free interest rate used is based on the United States treasury security rate with a term consistent with the expected term of the award at the time of the grant. Since the Company has limited option exercise history, it has generally elected to estimate the expected life of an award based upon the Securities and Exchange Commission-approved “simplified method” noted under the provisions of Staff Accounting Bulletin No. 107 with the continued use of this method extended under the provisions of Staff Accounting Bulletin No. 110. 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.
The Company expenses stock-based payments over the period that the awards are expected to vest, net of estimated forfeitures. If actual forfeitures differ from management’s estimates, compensation expense is adjusted. The Company expenses modification charges in the period of modification and, if required, over the remaining period the awards are expected to vest. The Company will report cash flows resulting from tax deductions in excess of the compensation cost recognized from those options (excess tax benefits) as financing cash flows, if they should arise.
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. In assessing the realizability of deferred tax assets, the Company assesses the likelihood that deferred tax assets will be recovered through tax planning strategies or from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, a valuation allowance is established. The Company adjusts the valuation allowance in the period management determines it is more likely than not that net deferred tax assets will or will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. As of April 30, 2017 and 2016, 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; or

• | 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. The Company has recorded $121,000 and $165,000 of liabilities related to uncertain tax positions relative to one of its foreign operations as of April 30, 2017 and 2016, respectively.
The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company’s balance sheets at April 30, 2017 and 2016, and has not recognized interest and/or penalties in the statement of operations for either period. We do not anticipate any significant unrecognized tax benefits will be recorded during the next 12 months.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers”, on revenue recognition. The new standard provides for a single five-step model to be applied to all revenue contracts with customers as well as requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. As amended by ASU No. 2015-14 issued in August 2015, this ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2017, with early adoption permitted. We do not intend to early adopt and are currently assessing the impact of this update, but preliminarily believe that its adoption will not have a material impact on our consolidated financial statements.
F-12

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The amendments in this update state that in connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). The amendments in this update are effective for the annual reporting period beginning after December 15, 2016 and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this update is not expected to have a material impact on our consolidated financial statements.
In February 2016, the FASB ASU No. 2016-02, Leases. The new standard will require most leases to be recognized on the balance sheet which will increase reported assets and liabilities. Lessor accounting remains substantially similar to current guidance. The new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018, which for us is the first quarter of fiscal 2019 and mandates a modified retrospective transition method. We are currently assessing the impact of this update on our consolidated financial statements.
In April 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU No. 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for financial statements that have not already been issued. We do not intend to early adopt but preliminarily believe the adoption of this update is not expected to have a material impact on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments” . The new standard attempts to reduce diversity in practice in how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 provides guidance on eight specific cash flow issues. The new guidance will be effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted including adoption in an interim period. We do not intend to early adopt and we are currently assessing the impact of adoption of this update will have on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill Impairment”. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. It affects public entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. A public entity that is a U.S. Securities and Exchange Commission ("SEC") filer should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. For the Company, the amendments are effective January 1, 2020. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
Note 3. Teva Agreement
On July 30, 2013, the Company entered into an agreement with Teva Pharmaceutical Industries Ltd., pursuant to which the Company agreed to conduct TumorGraft studies on multiple proprietary chemical compounds provided by Teva to determine the activity or response of these compounds in potential clinical indications. Under the agreement, Teva agreed to pay an upfront payment and, under certain conditions, pay the Company various amounts upon achieving certain milestones, based on the performance of the compounds in preclinical testing and dependent upon testing the compound in clinical settings and obtaining FDA approval. In addition, Teva agreed to pay the Company royalties on any commercialized products developed under the agreement. This agreement terminated a prior collaborative agreement between Cephalon, Inc., a wholly-owned subsidiary of Teva, and the Company. For the years ended April 30, 2017 and 2016, revenue of $0 and $40,000, respectively, were recognized relating to this agreement.
Note 4. Significant Customers
For the year ended April 30, 2017, one of our customers accounted for more than 10.0% of our total revenue in the amount of $3.3 million, or 21.3%. The revenue from this customer is captured in the TOS revenue line item within the income statement.
For the year ended April 30, 2016, one of our customers accounted for more than 10.0% of our total revenue in the amount of $2.0 million, or 17.6%. The revenue from this customer was captured in the TOS revenue line item within the income statement.
F-13

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of April 30, 2017, two of our customers accounted for more than 10.0% of our total accounts receivable balance in the amount of $994,095 and $256,022, or 43.7% and 11.3%, respectively.
As of April 30, 2016, two of our customers accounted for more than 10.0% of our total accounts receivable balance in the amount of $401,654 and $161,150, or 30.7% and 12.3%, respectively.
Note 5. Commitments and Contingencies
Operating Leases
The Company currently leases its office facilities. Rent expenses totaled $398,000 and $304,000 for the years ended April 30, 2017 and 2016, respectively. The Company considers its facilities adequate for our current operational needs.
The Company leases the following facilities under non-cancelable operating lease agreements:

• | One University Plaza, Suite 307, Hackensack, New Jersey 7601, which, since November 2011, serves as the Company’s corporate headquarters. The lease expires in November 2021. The Company recognized $86,000 and $85,000 of rental costs relative to this lease for fiscal 2017 and 2016, respectively.

• | 855 North Wolfe Street, Suite 619, Baltimore, Maryland 21205, which consists of laboratories and office space where the Company conducts operations related to its primary service offerings. This lease expires in December 30, 2017. The Company will be transitioning its activities from this location to the new location in Rockville, MD. The Company recognized $105,000 and $83,000 of rental costs relative to this lease for fiscal 2017 and 2016, respectively.

• | 450 East 29t h Street, New York, New York, 10016, which is a laboratory at which we implant tumors. This lease expires in July 2017 and it's not anticipated to be renewed. The Company recognized $207,000 and $136,000 of rental costs relative to this lease for fiscal 2017 and 2016, respectively.

• | 1330 Piccard Drive, Suite 025, Rockville, MD 20850, which consists of laboratory and office space where the Company will conduct operations related to its primary service offerings. The Company executed this lease on January 11, 2017. The operating commencement date is August 11, 2017. This lease expires in August 31, 2028. The Company did not recognize any rental costs associated with this lease for fiscal 2017.

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

2018 | $ | 177,126 |
2019 | 382,650 |
2020 | 683,256 |
2021 | 759,161 |
2022 | 729,780 |
Thereafter | $ | 4,482,027 |
Total | $ | 7,214,000 |

Included in the table above are future minimum lease payments relating to Rockville, MD lease noted above.
Legal Matters
The Company is not currently party to any legal matters to its knowledge. The Company is not aware of any other matters that would have a material impact on the Company’s financial position or results of operations.
Registration Payment Arrangements
The Company has entered into an Amended and Restated Registration Rights Agreement in connection with the March 2015 Private Placement. This Amended and Restated Registration Rights Agreement contains provisions that may call for the Company to pay penalties in certain circumstances. This registration payment arrangement primarily relates to the Company’s ability to file a registration statement within a particular time period, have a registration statement declared effective within a particular time period and to maintain the effectiveness of the registration statement for a particular time period. The Company has not accrued any liquidated damages associated with the Amended and Restated Registration Right Agreement as the Company has filed the required registration statement and anticipates continued compliance with the agreement.
Note 6. Stock-based Payments
F-14

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock-based compensation in the amount of $2.7 million and $2.6 million was recognized for years ended April 30, 2017 and 2016, respectively. Included in 2017 stock-based compensation expense under “general and administrative” line item is the option modification charge of $612,534. Stock-based compensation costs were recorded as follows (in thousands):

| Year Ended April 30,
| 2017 |  | 2016
General and administrative | $ | 2,193 |  |  | $ | 2,035 |
Sales and marketing | 201 |  |  | 198 |
Research and development | 216 |  |  | 308 |
TOS cost of sales | 50 |  |  | 31 |
POS cost of sales | 2 |  |  | 27 |
Total stock-based compensation expense | $ | 2,662 |  |  | $ | 2,599 |

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”). The purpose of the 2010 Equity Plan is to grant (i) Non-statutory Stock Options; (ii) Restricted Stock Awards; and (iii) Stock Appreciation Rights (collectively, stock-based compensation) to its employees, directors and non-employees. Total stock awards under the 2010 Equity Plan shall not exceed 30,000,000 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 fair market value of the common stock subject to the option or right at the date of grant.
2008 Equity Incentive Plan
The Company has previously granted (i) Non-statutory Stock Options; (ii) Restricted Stock Awards; and (iii) Stock Appreciation Rights (collectively, stock-based compensation) to its employees, directors and non-employees under a 2008 Equity Incentive Plan (the “2008 Equity Plan”). Such awards may be granted by the Company’s Board of Directors. 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 Incentive 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. 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.
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. 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. 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. Options issued under the Director Plan are issued pursuant to the 2010 Equity Plan.
Stock Option Grants
Black-Scholes assumptions used to calculate the fair value of options granted during the years ended April 30, 2017 and 2016 were as follows:
F-15

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

| Year Ended April 30,
| 2017 |  | 2016
Expected term in years | 3 - 6 |  | 2.5 - 6.0
Risk-free interest rates | 0.6% - 1.9% |  | 0.6% - 1.8%
Volatility | 72% - 88% |  | 83% - 93%
Dividend yield | —% |  | —%

The weighted average fair value of stock options granted during the years ending April 30, 2017 and 2016, was $1.71 and $3.54, respectively. The Company’s stock options activity and related information as of and for the years ended April 30, 2017 and 2016 is as follows:

| Non- Employees |  | Directors and Employees |  | Total |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value
Outstanding, May 1, 2016 | 51,250 |  |  | 2,161,507 |  |  | 2,212,757 |  |  | $ | 5.58 |  |  | 6.1 |  | $ | 10,000 |
Granted | — |  |  | 2,420,681 |  |  | 2,420,681 |  |  | 1.99 |  |  |  |  |  |
Exercised | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |
Canceled | — |  |  | (1,793,779 | ) |  | (1,793,779 | ) |  | 4.92 |  |  |  |  |  |
Forfeited | — |  |  | (421,487 | ) |  | (421,487 | ) |  | 2.03 |  |  |  |  |  |
Expired | (1,250 | ) |  | (108,218 | ) |  | (109,468 | ) |  | 7.86 |  |  |  |  |  |
Outstanding, April 30, 2017 | 50,000 |  |  | 2,258,704 |  |  | 2,308,704 |  |  | 2.86 |  |  | 6.1 |  | $ | 1,282,000 |
Vested and expected to vest as of April 30, 2017 | 50,000 |  |  | 2,258,704 |  |  | 2,308,704 |  |  |  |  |  | 6.1 |  | $ | 1,282,000 |
Vested as of April 30, 2017 | 33,336 |  |  | 2,028,469 |  |  | 2,061,805 |  |  | 2.93 |  |  | 5.9 |  | $ | 1,101,000 |

| Non- Employees |  | Directors and Employees |  | Total |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value
Outstanding, May 1, 2015 | 57,917 |  |  | 1,946,085 |  |  | 2,004,002 |  |  | $ | 5.74 |  |  | 6.7 |  | $ | 4,166,000 |
Granted | — |  |  | 343,749 |  |  | 343,749 |  |  | 5.33 |  |  |  |  |  |
Exercised | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |
Canceled | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |
Forfeited | — |  |  | (42,515 | ) |  | (42,515 | ) |  | 6.90 |  |  |  |  |  |
Expired | (6,667 | ) |  | (85,812 | ) |  | (92,479 | ) |  | 6.97 |  |  |  |  |  |
Outstanding, April 30, 2016 | 51,250 |  |  | 2,161,507 |  |  | 2,212,757 |  |  | 5.58 |  |  | 6.1 |  | $ | 10,000 |
Vested and expected to vest as of April 30, 2016 | 51,250 |  |  | 2,161,507 |  |  | 2,212,757 |  |  |  |  |  | 6.1 |  | $ | 10,000 |
Vested as of April 30, 2016 | 34,271 |  |  | 1,703,035 |  |  | 1,737,306 |  |  | 5.71 |  |  | 5.6 |  | $ | 9,000 |

Included in the forfeited balance in the fiscal 2017 table above are 203,043 options (which vest based on performance criteria) granted to each of the Company's Chief Executive Officer and its President as of November 5, 2013 as part of their employment
F-16

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
agreements. Performance-based options are expensed on an accelerated basis once the Company determines it is probable that the performance-based conditions will be met. It was determined the performance conditions will not be set and as such the 203,043 options have been forfeited. Additionally, included in the forfeited balance in the table above are 209,383 options which were granted to the previous Chief Executive Officer as part of his yearly compensation beginning in November 2016. The Chief Executive Officer has transitioned to Chairman of the Board of Directors as of January 31, 2017.
On April 24, 2017, the Board of Directors extended the expiration terms of the previous Chief Executive Officer's vested grants to its contractual life. As a result of this modification, the Company had an additional stock option expense of $612,534 which was expensed under the "General and Administrative" line item on the income statement.
On July 21, 2016, the Company and certain members of its senior management team agreed to exchange existing options to purchase shares of the Company's common stock with new options. The new options have a lower exercise price for fewer shares and have the same vesting schedules and the same termination expiration dates as the existing options. The Company used the Black Scholes valuation method to determine if the modification created additional stock option expense. As a result of the option exchange, an aggregate of 1,793,781 existing options with exercise prices ranging from $4.55 to $6.96 per share were exchanged for an aggregate of 1,568,191 new options with exercise prices of $2.10 per share. Due to the modification the Company had an additional stock option expense of $414,756 of which $39,920 related to the performance awards that have been forfeited as noted above, $373,069 of which was recognized during the current fiscal year and $1,767 of which will be recognized over the next year as the options continue to vest.
Stock Purchase Warrants
As of April 30, 2017, the Company had warrants outstanding for the purchase of 2,004,284 shares of its common stock, all of which were exercisable. Of these warrants, 1,849,285 were issued in connection with the March 2015 Private Placement. Activity related to these warrants, which expire at various dates through January 2019, is summarized as follows:

| Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value
Outstanding, May 1, 2016 | 2,109,840 |  |  | $ | 5.54 |  |  | 3.6 |  |  | $ | — |
Granted | — |  |  | — |  |  | — |  |  | — |
Exercised | — |  |  | — |  |  | — |  |  | — |
Forfeited | — |  |  | — |  |  | — |  |  | — |
Expired | (105,556 | ) |  | 4.80 |  |  | — |  |  | — |
Outstanding, April 30, 2017 | 2,004,284 |  |  | $ | 5.57 |  |  | 2.8 |  |  | $ | — |

| Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value
Outstanding, May 1, 2015 | 2,109,840 |  |  | $ | 5.54 |  |  | 4.6 |  |  | $ | 3,248 |
Granted | — |  |  | — |  |  | 0 |  |  | — |
Exercised | — |  |  | — |  |  | — |  |  | — |
Forfeited | — |  |  | — |  |  | — |  |  | — |
Expired | — |  |  | — |  |  | — |  |  | — |
Outstanding, April 30, 2016 | 2,109,840 |  |  | $ | 5.54 |  |  | 3.6 |  |  | $ | — |

Note 7. Common Stock
F-17

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On June 15, 2016, the Company closed a public offering ("The June 2016 Public Offering") of 2,000,000 registered shares of its common stock at an offering price of $2.25 per share. In addition, the underwriter exercised a partial exercise of the over-allotment option granted to the underwriter to purchase an additional 258,749 shares of its common stock at the public offering price. All of the shares have been offered by the Company.
The net proceeds from The June 2016 Public Offering, including the partial exercise of the over-allotment option, was $4.3 million, after deducting the underwriting discount and offering-related expenses of $742,000. The Company is using the net proceeds of this offering for research and development to grow the TumorGraft platform, and the balance of the net proceeds for working capital and general corporate purposes.
The Company issued 3,807 shares valued at $7,500 on April 27, 2017, 7,614 shares valued at $15,000 on February 22, 2017, 3,247 shares valued at $11,852 on January 24, 2017 and 3,896 shares valued at $8,688 on July 6, 2016 of common stock in consideration for consulting services.
Note 8. Provision for Income Taxes
The components of the provision (benefit) for income taxes are as follows (in thousands):

| Year Ended April 30, 2017
| Federal |  | State |  | Foreign |  | Total
Current | $ | (14 | ) |  | $ | — |  |  | $ | 33 |  |  | $ | 19 |
Total | $ | (14 | ) |  | $ | — |  |  | $ | 33 |  |  | $ | 19 |

| Year Ended April 30, 2016
| Federal |  | State |  | Foreign |  | Total
Current | $ | — |  |  | $ | — |  |  | $ | 92 |  |  | $ | 92 |
Total | $ | — |  |  | $ | — |  |  | $ | 92 |  |  | $ | 92 |

A reconciliation between the Company’s effective tax rate and the United States statutory tax rate for the years ended April 30, 2017 and 2016 is as follows:

| Year Ended April 30,
| 2017 |  | 2016
Federal income tax at statutory rate | 34.0 | % |  | 34.0 | %
State income tax, net of federal benefit | 3.9 |  |  | 3.1 |
Permanent differences | (0.2 | ) |  | (0.2 | )
Increase in uncertain tax position | 1.6 |  |  | (0.6 | )
Other | (0.3 | ) |  | (2.2 | )
Change in valuation allowance | (39.8 | ) |  | (37.2 | )
Changes in tax rates | 0.5 |  |  | 2.2 |
Income tax expense | (0.3 | )% |  | (0.9 | )%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of April 30, 2017 and 2016 consist of the following (in thousands):
F-18

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

| As of April 30,
| 2017 |  | 2016
Accrued liabilities | $ | 103 |  |  | $ | 21 |
State taxes | 22 |  |  | 12 |
Stock-based compensation expense | 6,503 |  |  | 5,528 |
Capitalized research and development costs | 195 |  |  | 316 |
Foreign net operating loss carry-forward | 214 |  |  | 224 |
Net operating loss carry-forward | 14,786 |  |  | 12,970 |
Total deferred tax assets | 21,823 |  |  | 19,071 |
Less: Valuation allowance | (21,779 | ) |  | (19,071 | )
Net deferred tax asset | $ | 44 |  |  | $ | — |

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, 2017 and 2016. For the years ended April 30, 2017 and 2016, the Company recorded a valuation allowance of $21.8 million and $19.1 million, respectively.
As of April 30, 2017 and 2016, the Company’s estimated U.S. net operating loss carry-forwards were approximately $41 million and $36 million, respectively, which will begin expiring in 2025 for federal and 2031 for state purposes. As of April 30, 2017 and 2016, the Company’s foreign net operating loss carry-forward was approximately $890,000 and $900,000, respectively, which have an unlimited carryforward period. A valuation allowance has been recorded against all of these losses due to continued overall losses.
The Company may be subject to the net operating loss provisions of Section 382 of the Internal Revenue Code. Due to the company's funding transaction, the company may have triggered a net operating loss limitation under Internal Revenue Code §382. The company has not calculated if an ownership change has occurred. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period, and the federal published interest rate.
The Company has made no provision for U.S. taxes on the cumulative earnings of foreign subsidiaries as those earnings are intended to be reinvested for an indefinite period of time. Upon distribution of these earnings in the form of dividends or otherwise, the Company may be subject to U.S. income taxes and foreign withholding taxes. It is not practical, however, to estimate the amount of taxes that may be payable on the eventual repatriation of these earnings.
The Company files income tax returns in various jurisdictions with varying statues of limitations. As of April 30, 2017, the earliest tax year still subject to examination for state purposes is fiscal 2013. The Company’s tax years for periods ending April 30, 2001 and forward are subject to examination by the United States and certain states due to the carry-forward of unutilized net operating losses.
The following table indicates the changes to the Company’s uncertain tax positions for the period and years ended April 30, 2017 and 2016 in thousands:

| Year Ended April 30,
| 2017 |  | 2016
Balance, beginning of the year | $ | 165 |  |  | $ | 100 |
Addition based on tax positions related to prior years | — |  |  | 42 |
Payment made on tax positions related to prior years | (84 | ) |  | — |
Addition based on tax positions related to current year | 40 |  |  | 23 |
Balance, end of year | $ | 121 |  |  | $ | 165 |

F-19

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of April 30, 2017 the above amount of $121,000 was included in other long-term liabilities.
Note 9. Related Party Transactions
Related party transactions include transactions between the Company and its shareholders, management, or affiliates. The following transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the parties.
Consulting Services
For both years ended April 30, 2017 and 2016, the Company paid a member of its Board of Directors $72,000 for consulting services unrelated to his duties as board member. During the years ended April 30, 2017 and 2016, the Company paid a board member’s company $0 and $8,800, respectively, for consulting services unrelated to his duties as a board member. During the year ended April 30, 2017, the Company paid a board member $48,214 and granted 45,000 options that vest annually over a three year period and have a fair value of $94,192 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.
Note 10. Business Segment Information
The Company operates in two segments, POS and TOS. The accounting policies of the Company’s segments are the same as those described in Note 2. The Company evaluates performance of its segments based on profit or loss from operations before stock compensation expense, depreciation and amortization, interest expense, interest income, gain on sale of assets, special charges or benefits, and income taxes (“segment profit”). Management uses segment profit information for internal reporting and control purposes and considers it important in making decisions regarding the allocation of capital and other resources, risk assessment, and employee compensation, among other matters. The following tables summarize, for the periods indicated, operating results by business segment (in thousands):

Year Ended April 30, 2017 | Personalized Oncology Solutions (POS) |  | Translational Oncology Solutions (TOS) |  | Unallocated Corporate Overhead |  | Consolidated
Net revenue | $ | 1,720 |  |  | $ | 13,691 |  |  | $ | — |  |  | $ | 15,411 |
Direct cost of services | (1,431 | ) |  | (8,218 | ) |  | — |  |  | (9,649 | )
Sales and marketing costs | (540 | ) |  | (2,520 | ) |  | — |  |  | (3,060 | )
Other operating expenses | — |  |  | (4,077 | ) |  | (2,772 | ) |  | (6,849 | )
Stock compensation expense (1) | — |  |  | — |  |  | (2,662 | ) |  | (2,662 | )
Segment loss | $ | (251 | ) |  | $ | (1,124 | ) |  | $ | (5,434 | ) |  | $ | (6,809 | )

Year Ended April 30, 2016 | Personalized Oncology Solutions (POS) |  | Translational Oncology Solutions (TOS) |  | Unallocated Corporate Overhead |  | Consolidated
Net revenue | $ | 1,972 |  |  | $ | 9,210 |  |  | $ | — |  |  | $ | 11,182 |
Direct cost of services | (2,075 | ) |  | (6,553 | ) |  | — |  |  | (8,628 | )
Sales and marketing costs | (833 | ) |  | (2,414 | ) |  | — |  |  | (3,247 | )
Other operating expenses | — |  |  | (3,886 | ) |  | (3,138 | ) |  | (7,024 | )
Stock compensation expense (1) | — |  |  | — |  |  | (2,599 | ) |  | (2,599 | )
Segment loss | $ | (936 | ) |  | $ | (3,643 | ) |  | $ | (5,737 | ) |  | $ | (10,316 | )

(1) Stock compensation expense is shown separately and is excluded from direct costs of services, sales and marketing costs, and other operating expenses in the table above, as it is managed on a consolidated basis and is not used by management to evaluate the performance of its segments. See Note 6 for the allocation of stock compensation expense relative to the individual line items as it is reported on the Company's Consolidated Statement of Operations.
F-20

CHAMPIONS ONCOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
All of the Company’s revenue is recorded in the United States and substantially all of its long-lived assets are in the United States.
F-21

Exhibit Index

Exhibit No. |  |
3.1 |  | Amended and Restated Articles of Incorporation (incorporated by reference to Appendix A to the Company’s Information Statement on Schedule 14C filed March 7, 2011)
3.1.1 |  | Certificate of Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3(i) to the Company’s Current Report on Form 8-K filed April 28, 2015)
3.2 |  | Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed May 9, 2017)
10.2 |  | Employment Agreement, dated November 5, 2013, between the Company and Ronnie Morris, M.D. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed November 12, 2013)
10.3 |  | Amendment to Employment Agreement, dated March 16, 2015, between the Company and Ronnie Morris (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed March 20, 2015)
10.4 |  | Offer letter dated June 3, 2013 between the Company and David Miller (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 3, 2013)
10.5 |  | Master Supply and Services Contract, made on December 3, 2013, between Pfizer, Inc. and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended January 31, 2014, filed March 14, 2013) **
10.6 |  | 2010 Equity Incentive Plan (incorporated by reference to Appendix B to the Company’s Definitive Information Statement on Schedule 14C filed March 7, 2011)
10.7 |  | Form of Note Purchase Agreement, dated December 1, 2014, between the Company and each of Joel Ackerman and Ronnie Morris (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 5, 2014)
10.8 |  | Form of Convertible Promissory Note, dated December 1, 2014, issued to each of Joel Ackerman and Ronnie Morris in connection with the Note Purchase Agreement, dated December 1, 2014 between the Company and each of Joel Ackerman and Ronnie Morris incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 5, 2014)
10.8.1 |  | Amendment No. 1 to Convertible Promissory Note, dated December 1, 2014 issued to Joel Ackerman in connection with the Note Purchase Agreement, dated December , 2014, between the Company and each of Joel Ackerman and Ronnie Morris (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 2, 2015)
10.8.2 |  | Amendment No. 1 to Convertible Promissory Note, dated December 1, 2014 issued to Ronnie Morris in connection with the Note Purchase Agreement, dated December , 2014, between the Company and each of Joel Ackerman and Ronnie Morris (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 2, 2015)
10.9 |  | Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 30, 2011)
10.9.1 |  | Amendment No. 1 to Securities Purchase Agreement, dated January 29, 2014, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 6, 2014)
10.9.2 |  | Amended and Restated 2011 Securities Purchase Agreement, dated March 13, 2015, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 17, 2015)

10.10 |  | Amended and Restated Registration Rights Agreement, dated January 28, 2013, between the Company and each person or entities that are signatories to (i) the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature page thereto, and (ii) the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed January 30, 2013)
10.11 |  | Form of warrant issued to each person or entities that are signatories to the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed January 30, 2013)
10.11.1 |  | Amendment No. 1 to warrants, dated March 13, 2015, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.12 |  | Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 30, 2013)
10.12.1 |  | Amendment No. 1 to Securities Purchase Agreement, dated January 29, 2014, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 6, 2014)
10.12.2 |  | Amended and Restated 2013 Securities Purchase Agreement, dated March 13, 2015, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.14 |  | Form of warrant issued to each person or entities that are signatories to the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed January 30, 2013)
10.14.1 |  | Amendment No. 1 to warrants, dated March 13, 2015, between the Company and each person or entities that are signatories to the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.15 |  | Put Right Agreement, dated January 29, 2014, between the Company and each of Joel Ackerman and Ronnie Morris (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 6, 2014)
10.16 |  | Securities Purchase Agreement, dated March 11, 2015, between the Company and each investor identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 12, 2015)
10.17 |  | Amended and Restated Registration Rights Agreement, dated March 13, 2015, between the Company and each person or entities that are signatories to (i) the Securities Purchase Agreement, dated March 24, 2011, between the Company and each investor identified on the signature page thereto, (ii) the Securities Purchase Agreement, dated January 28, 2013, between the Company and each investor identified on the signature page thereto, and (iii) the Securities Purchase Agreement, dated March 11, 2015, between the Company. And each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 17, 2015)
10.18 |  | Form of Investor Warrant issued to each person or entities that are signatories to the Securities Purchase Agreement, dated March 11, 2015, between the Company and each investor identified on the signature page thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K field March 17, 2015)
10.19 |  | Option Exchange Agreement, dated March 16, 2015, between the Company and Joel Ackerman (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 20, 2015)
10.20 |  | Option Exchange Agreement, dated March 16, 2015, between the Company and Ronnie Morris (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 20, 2015)

10.21 |  | Option Exchange Agreement, dated March 16, 2015, between the Company and James McGorry (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 20, 2015)
10.22 |  | Option Exchange Agreement, dated March 16, 2015, between the Company and David Miller (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed March 20, 2015)
14 |  | Code of Ethics (incorporated by reference to Exhibit 14 of the April 30, 2008 Form 10-KSB)
21 |  | List of Subsidiaries*
23.1 |  | Consent of Independent Registered Public Accounting Firm*
31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer*
31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer*
32.1 |  | Section 1350 Certifications***
101.INS* |  | XBRL Instance Document.
101.SCH* |  | XBRL Taxonomy Extension Schema Document.
101.CAL* |  | XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* |  | XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* |  | XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* |  | XBRL Taxonomy Extension Presentation Linkbase Document.

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* Filed herewith
** Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.
*** Furnished hereto.