Edgar Filing: CHAMPIONS ONCOLOGY, INC.

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended January 31, 2016

¨	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 incorporation or organization)	(I.R.S. Employer Identification No.)

One University Plaza, Suite 307	07601
Hackensack, New Jersey	(Zip Code)
(Address of principal executive offices)

(201) 808-8400

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 Web site, 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company þ
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

The number of Common Shares of the Registrant outstanding as of March 11, 2016 was 8,702,237.

DOCUMENTS INCORPORATED BY REFERENCE - None

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2016

	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Condensed Consolidated Balance Sheets as of January 31, 2016 (unaudited) and April 30, 2015	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended January 31, 2016 and 2015 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 31, 2016 and 2015 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	18

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	19

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CHAMPIONS ONCOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Per Share Amounts)

	January 31,			April 30,
	2016			2015
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,293		$	9,357
Accounts receivable, net		2,105			1,060
Prepaid expenses and other current assets		414			346

Total current assets		5,812			10,763

Restricted cash		150			163
Property and equipment, net		514			452
Goodwill		669			669

Total assets	$	7,145		$	12,047

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	1,515		$	1,414
Accrued liabilities		257			373
Deferred revenue		2,875			2,009

Total current liabilities		4,647			3,796

Other non-current liabilities		239			192

Total liabilities		4,886			3,988

Commitments and Contingencies

Stockholders’ equity:
Common stock, $.001 par value; 200,000,000 shares authorized; 8,963,590 shares issued and 8,702,237 shares outstanding as of January 31, 2016 and April 30, 2015, respectively		9			9
Treasury stock, at cost, 269,686 common shares as of January 31, 2016 and April 30, 2015		(1,252	)		(1,252	)
Additional paid-in capital		63,394			61,322
Accumulated deficit		(59,892	)		(52,020	)

Total stockholders’ equity		2,259			8,059

Total liabilities and stockholders’ equity	$	7,145		$	12,047

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

CHAMPIONS ONCOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

	Three Months Ended						Nine Months Ended
	January 31,						January 31,
	2016			2015			2016			2015
Operating revenue:
Personalized oncology solutions	$	416		$	453		$	1,387		$	1,245
Translational oncology solutions		2,136			1,376			6,958			4,377

Total operating revenue		2,552			1,829			8,345			5,622

Costs and operating expenses:
Cost of personalized oncology solutions		479			674			1,661			2,190
Cost of translational oncology solutions		1,627			1,301			4,683			3,225
Research and development		999			1,093			3,018			3,757
Sales and marketing		779			1,094			2,688			3,340
General and administrative		1,041			1,086			4,062			3,944

Total costs and operating expenses		4,925			5,248			16,112			16,456

Loss from operations		(2,373	)		(3,419	)		(7,767	)		(10,834	)

Other (expense) income:
Change in fair value of warrant liability		-			621			-			1,401
Other (expense)		(8	)		(6	)		(29	)		(3	)

Total other (expense) income		(8	)		615			(29	)		1,398

Loss before provision for income taxes		(2,381	)		(2,804	)		(7,796	)		(9,436	)
Provision for income taxes		31			12			76			27

Net loss	$	(2,412	)	$	(2,816	)	$	(7,872	)	$	(9,463	)

Net loss per common share outstanding
basic	$	(0.28	)	$	(0.51	)	$	(0.90	)	$	(1.70	)
and diluted	$	(0.28	)	$	(0.61	)	$	(0.90	)	$	(1.94	)

Weighted average common shares outstanding
basic		8,702,237			5,574,447			8,702,237			5,574,244
and diluted		8,702,237			5,603,798			8,702,237			5,603,595

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

CHAMPIONS ONCOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Nine Months Ended
	January 31,
	2016			2015
Operating activities:
Net loss	$	(7,872	)	$	(9,463	)

Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		2,090			2,284
Depreciation expense		114			166
Provision for bad debts		33			-
Change in fair value of warrant liability		-			(1,401	)
Changes in operating assets and liabilities:
Accounts receivable		(1,078	)		233
Prepaid expenses and other current assets		(68	)		125
Restricted cash		13			2
Accounts payable		101			381
Accrued liabilities		(116	)		(167	)
Other non-current liability		64			-
Deferred revenue		866			218

Net cash used in operating activities		(5,853	)		(7,622	)

Investing activities:
Purchase of property and equipment		(176	)		(84	)

Net cash used in investing activities		(176	)		(84	)

Financing activities:
Proceeds from executive note financing		-			2,000
Payment of issuance costs related to March 2015 Private Placement		(18	)		-
Capital lease payments		(17	)		(5	)
Proceeds from exercise of options		-			2

Net cash (used in)/provided by financing activities		(35	)		1,997

Decrease in cash and cash equivalents..		(6,064	)		(5,709	)
Cash and cash equivalents, beginning of period		9,357			5,891

Cash and cash equivalents, end of period	$	3,293		$	182

Non-cash investing activities:
Purchase equipment under capital lease		-			124

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

CHAMPIONS ONCOLOGY, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Champions Oncology, Inc. (the “Company”), is engaged in the development and sale of advanced technology solutions and products to personalize the development and use of oncology drugs. The Company’s TumorGraft Technology Platform is a novel approach to personalizing cancer care based upon the implantation of human tumors in immune-deficient mice. The Company uses this technology, in conjunction with related services, to offer solutions for two consumer groups: Personalized Oncology Solutions (“POS”) and Translational Oncology Solutions (“TOS”). POS assists physicians in developing personalized treatment options for their cancer patients through tumor specific data obtained from drug panels and related personalized oncology services. The Company’s TOS business offers a technology platform to pharmaceutical and biotechnology companies using proprietary TumorGraft studies, which the Company believes may be predictive of how drugs may perform in clinical settings.

The Company has three operating subsidiaries: Champions Oncology (Israel), Limited, Champions Biotechnology U.K., Limited and Champions Oncology Singapore, PTE LTD. Champions Oncology Singapore, PTE LTD is currently inactive and is in the process of being closed. For the three and nine months ended January 31, 2016 and 2015, there were no material revenues earned by these subsidiaries.

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

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission or the SEC. All significant intercompany transactions and accounts have been eliminated. Certain information related to the Company’s organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States or GAAP has been condensed or omitted. The accounting policies followed in the preparation of these unaudited condensed consolidated financial statements are consistent with those followed in the Company’s annual consolidated financial statements for the year ended April 30, 2015, as filed on Form 10-K. In the opinion of management, these unaudited condensed consolidated financial statements contain all material adjustments necessary to fairly state our financial position, results of operations and cash flows for the periods presented and the presentations and disclosures herein are adequate when read in conjunction with the Company’s Annual Report on Form 10-K for the year ended April 30, 2015.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Liquidity

Our liquidity needs have typically arisen from the funding of our research and development programs and the launch of new products, working capital requirements, and other strategic initiatives. In the past, we have met these cash requirements through our sales of products and services, cash and cash equivalents, working capital management, and proceeds from certain private placements of our securities. As of January 31, 2016, we had positive working capital of $1.2 million and cash and cash equivalents on hand of $3.3 million. We believe that our cash and cash equivalents on hand at January 31, 2016 are adequate to fund our operations through at least April 2017. However, in order for us to continue as a going concern beyond this point, we may need to obtain capital from external sources. If we are unable to obtain additional financing, we may be required to reduce the scope of, or delay or eliminate, some of our research and development and other activities, which could harm our financial condition and operating results. Financing may not be available on acceptable terms or at all, and our failure to raise capital when needed could negatively impact our growth plans and our financial condition and results of operations. Additional equity financing may be dilutive to the holders of our common stock and debt financing, if available, may involve significant cash payment obligations and covenants and/or financial ratios that could restrict our ability to operate our business.

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 condensed consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the reverse stock split.

Earnings Per 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 nine months ended January 31, 2016, basic and dilutive loss per share were the same, as the potentially dilutive securities did not have a dilutive effect. Although there were net losses for the three and nine months ended January 31, 2015, the gain from the change in fair value of the warrant liability for these periods had a dilutive effect on earnings per share.

	Three Months Ended						Nine Months Ended
	January 31,						January 31,
	2016			2015			2016			2015
Basic loss per share computation
Net loss attributable to common stockholders	$	(2,412,381	)	$	(2,816,465	)	$	(7,872,115	)	$	(9,462,281	)
Weighted Average common shares – basic		8,702,237			5,574,447			8,702,237			5,574,244
Basic net loss per share	$	(0.28	)	$	(0.51	)	$	(0.90	)	$	(1.70	)

Diluted loss per share computation
Net loss attributable to common stockholders	$	(2,412,381	)	$	(2,816,465	)	$	(7,872,115	)	$	(9,462,281	)
Less: Gain on derivative warrant liability		-			620,687			-			1,401,314
Loss available to common stockholders	$	(2,412,381	)	$	(3,437,152	)	$	(7,872,115	)	$	(10,863,595	)

Weighted Average common shares		8,702,237			5,574,447			8,702,237			5,574,244
Incremental shares from assumed exercise of warrants and stock options		-			29,351			-			29,351
Adjusted weighted average share – diluted		8,702,237			5,603,798			8,702,237			5,603,595

Diluted net loss per share	$	(0.28	)	$	(0.61	)	$	(0.90	)	$	(1.94	)

The following table reflects the total potential share-based instruments outstanding at January 31, 2016 and 2015 that could have an effect on the future computation of dilution per common share:

	January 31,
	2016		2015

Stock options		2,212,571		1,999,167
Warrants		2,109,840		260,556

Total common stock equivalents		4,322,411		2,259,723

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 January 31, 2016 and 2015, 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 approximately $165,000 and $100,000 of unrecognized tax liabilities as of January 31, 2016 and April 30, 2015, 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 January 31, 2016 and April 30, 2015, 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.

The income tax provision for the nine months ended January 31, 2016 and 2015 was $76,000 and $27,000, respectively.

Note 2. Property and Equipment

Property and equipment is recorded at cost and consists of laboratory equipment, leasehold improvements, furniture and fixtures, and computer equipment and software. Depreciation 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 (table in thousands):

	January 31,			April 30,
	2016			2015
	(unaudited)
Furniture and fixtures	$	73		$	70
Computer equipment and software		710			685
Laboratory equipment		641			493
Leasehold improvements		2			2

Total property and equipment		1,426			1,250
Less: Accumulated depreciation		(912	)		(798	)

Property and equipment, net	$	514		$	452

Depreciation expense, excluding expense recorded under capital lease, was $31,000 and $52,000 for the three months ended January 31, 2016 and 2015, respectively, and $95,000 and $166,000 for the nine months ended January 31, 2016 and 2015, respectively. As of January 31, 2016 and April 30, 2015, property, plant and equipment included assets held under capital lease of $124,000. Related depreciation expense was $6,000 and $6,000, respectively, for the three months ended January 31, 2016 and 2015, and $19,000 and $12,000 for the nine months ended January 31, 2016 and 2015, respectively.

Capital Lease

In November 2014, the Company entered into a lease for laboratory equipment. The lease is a capital lease that has costs of approximately $149,000 and matures on 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 January 31, 2016 (table in thousands):

For the Years Ended April 30,	Total
2016 (remaining)	$	6
2017		24
2018		25
2019		27
2020		16

Total minimum payments		98
Less: amount representing interest		(10	)
Present value of minimum payments		88
Less: current portion		(24	)
	$	64

The present value of minimum future obligations shown above is calculated based on an 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 January 31, 2016 and April 30, 2015.

Note 3. Share-Based Payments

The Company has in place a 2010 Equity Incentive Plan and a 2008 Equity Incentive Plan. In general, these plans provide for stock-based compensation in the form of (i) Non-statutory Stock Options; (ii) Restricted Stock Awards; and (iii) Stock Appreciation Rights to the Company’s employees, directors and non-employees. The plans also provide for limits on the aggregate number of shares that may be granted, the term of grants and the strike price of option awards.

Stock-based compensation in the amount of $567,000 and $657,000 was recognized for the three months ended January 31, 2016 and 2015, respectively, and $2,090,000 and $2,284,000 for the nine months ended January 31, 2016 and 2015, respectively. Stock-based compensation expense was recognized as follows (table in thousands):

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
	2016		2015		2016		2015

General and administrative	$	488	$	474	$	1,600	$	1,530
Sales and marketing		27		114		173		447
Research and development		49		65		262		267
TOS cost of sales		2		2		28		20
POS cost of sales		1		2		27		20

Total stock-based compensation expense	$	567	$	657	$	2,090	$	2,284

Stock Option Grants

Black-Scholes assumptions used to calculate the fair value of options granted during the three and nine months ended January 31, 2016 and 2015 were as follows:

	Three Months Ended		Nine Months Ended
	January 31,		January 31,
	2016	2015	2016	2015

Expected term in years	2.5 - 6	-	2.5 - 6	3 - 6
Risk-free interest rates	0.995% - 1.75%	-	0.995% - 1.77%	0.79% - 1.94%
Volatility	82.72% - 91.98%	-	82.72% - 92.32%	85.8% - 102.1%
Dividend yield	0%	-	0%	0%

The weighted average fair value of stock options granted during the three months ended January 31, 2016 and 2015 was $3.12 and nil, respectively. The weighted average fair value of stock options granted during the nine months ended January 31, 2016 and 2015 was $3.60 and $8.04, respectively. The Company’s stock options activity for the nine months ended January 31, 2016 was as follows:

												Weighted
										Weighted		Average
				Directors						Average		Remaining		Aggregate
	Non-			and						Exercise		Contractual		Intrinsic
	Employees			Employees			Total			Price		Life (Years)		Value

Outstanding, May 1, 2015		57,917			1,946,085			2,004,002		$	5.74		6.7	$	4,166,000
Granted		-			331,582			331,582			5.33		8.9		-
Exercised		-			-			-			-
Forfeited		-			(38,140	)		(38,140	)		6.64
Expired		(6,667	)		(78,206	)		(84,873	)		6.91

Outstanding, January 31, 2016		51,250			2,161,321			2,212,571			5.61		6.4	$	1,000

Vested and expected to vest as of January 31, 2016		51,250			2,161,321			2,212,571			5.61		6.4	$	1,000

Exercisable as of January 31, 2016		34,271			1,644,223			1,678,494			5.76		5.8	$	1,000

Included in the balances outstanding in the table above are 224,663 options (which vest based on service criteria) granted to each of the Company’s Chief Executive Officer and its President as of November 5, 2013 as part of their employment agreements. In addition to the above, there are 224,663 additional options granted to each of the Company’s Chief Executive Officer and President which vest based on both service and performance criteria. The service-based conditions of these options provide for vesting to occur monthly over a period of three years. The service-based options are expensed on a straight-line basis. Since the straight-line method is not available for performance or market-based share-based payments, the 224,663 performance-based options will be expensed on an accelerated basis once the Company determines it is probable that the performance-based conditions will be met.

Stock Purchase Warrants

As of January 31, 2016 and April 30, 2015, the Company had warrants outstanding for the purchase of 2,109,840 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 as further discussed in Note 7 in the Company’s Form 10-K for the fiscal year ended April 30, 2015. Activity related to these warrants, which expire at various dates through January 2019, is summarized as follows:

					Weighted
			Weighted		Average
	Number		Average		Remaining		Aggregate
	of		Exercise		Contractual		Intrinsic
	Shares		Price		Life (Years)		Value

Outstanding, May 1, 2015		2,109,840	$	5.54		4.6	$	3,764,871
Granted		-		-		-		-
Exercised		-		-		-		-
Expired		-		-		-		-

Outstanding, January 31, 2016		2,109,840	$	5.54		3.9	$	-

Note 4. Related Party Transactions

Related party transactions include transactions between the Company and its shareholders, management, or affiliates. The following transactions, which are pre-approved by the Board of Directors, were in the normal course of operations and were measured and recorded at the exchange amount, which is the amount of consideration established and agreed to by the parties.

Consulting Services

During the nine months ended January 31, 2016 and 2015, the Company paid a member of its Board of Directors $54,000 and $75,000, respectively, for consulting services unrelated to his duties as a board member. During the nine months ended January 31, 2016 and 2015, the Company paid a board member’s company $8,800 and nil, respectively, for consulting services unrelated to his duties as a board member. All of the amounts paid to these related parties have been recognized and expensed in the period the services were performed.

Note 5. Commitments and Contingencies

Operating Leases

As of January 31, 2016, we lease 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. The lease expires in November 2016. The Company recognized $64,000 of rental costs relative to this lease for each of the nine months ended January 31, 2016 and 2015, 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 June 2016. The Company recognized $65,000 of rental costs relative to this lease for each of the nine months ended January 31, 2016 and 2015.

57 Mohamed Sultan Road, Singapore, which served as office headquarters for Champions Oncology, Singapore. The lease expired in January 2015. The Company has not renewed this lease. The Company recognized nil and $4,000 of rental expense for the nine months ended January 31, 2016 and 2015, respectively.

450 East 29^th Street, New York, New York, 10016, which is a laboratory at which we implant tumors. The Company recognized $87,000 and $35,000 of rental expense for the nine months ended January 31, 2016 and 2015, respectively. The lease expires in September 2016 and can be renewed by the Company for subsequent one year terms.

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 and is discussed more fully in Note 7 in the Company’s Form 10-K for the fiscal year ended April 30, 2015. 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 does not believe it is probable that such penalty payments will be made and, accordingly, has not accrued for such potential penalties as of January 31, 2016.

Note 6. Teva Agreement

On July 30, 2013, the Company entered into an agreement with Teva Pharmaceutical Industries Ltd. (“Teva”), 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. Revenue recognized related to this agreement for the nine months ended January 31, 2016 and 2015, was $48,000 and $574,000, respectively.

Note 7. Fair Value

The carrying value of cash and cash equivalents, accounts receivable, 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 currently has no assets or liabilities measured at fair value on a recurring basis.

Note 8. Segment Information

The Company operates in two reportable segments, POS and TOS. The accounting policies of the Company’s segments are the same as those described in Note 2 of the Company’s annual financial statements for the year ended April 30, 2015, as filed on Form 10-K. 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 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 reportable segment (table in thousands):

Three Months Ended January 31, 2016	Personalized Oncology Solutions (POS)			Translational Oncology Solutions (TOS)			Unallocated Corporate Overhead			Consolidated
Net revenue	$	416		$	2,136		$	-		$	2,552
Direct cost of services		(479	)		(1,624	)		-			(2,103	)
Sales and marketing costs		(183	)		(569	)		-			(752	)
Other operating expenses		-			(950	)		(553	)		(1,503	)
Stock- based compensation expense (1)		-			-			(567	)		(567	)

Segment profit (loss)	$	(246	)	$	(1,007	)	$	(1,120	)	$	(2,373	)

Three Months Ended January 31, 2015	Personalized Oncology Solutions (POS)			Translational Oncology Solutions (TOS)			Unallocated Corporate Overhead			Consolidated
Net revenue	$	453		$	1,376		$	-		$	1,829
Direct cost of services		(672	)		(1,300	)		-			(1,972	)
Sales and marketing costs		(366	)		(613	)		-			(979	)
Other operating expenses		-			(1,028	)		(612	)		(1,640	)
Stock- based compensation expense (1)		-			-			(657	)		(657	)

Segment profit (loss)	$	(585	)	$	(1,565	)	$	(1,269	)	$	(3,419	)

Nine Months Ended January 31, 2016	Personalized Oncology Solutions (POS)			Translational Oncology Solutions (TOS)			Unallocated Corporate Overhead			Consolidated
Net revenue	$	1,387		$	6,958		$	-		$	8,345
Direct cost of services		(1,634	)		(4,654	)		-			(6,288	)
Sales and marketing costs		(716	)		(1,800	)		-			(2,516	)
Other operating expenses		-			(2,755	)		(2,463	)		(5,218	)
Stock- based compensation expense (1)		-			-			(2,090	)		(2,090	)

Segment profit (loss)	$	(963	)	$	(2,251	)	$	(4,553	)	$	(7,767	)

Nine Months Ended January 31, 2015	Personalized Oncology Solutions (POS)			Translational Oncology Solutions (TOS)			Unallocated Corporate Overhead			Consolidated
Net revenue	$	1,245		$	4,377		$	-		$	5,622
Direct cost of services		(2,171	)		(3,205	)		-			(5,376	)
Sales and marketing costs		(1,243	)		(1,650	)		-			(2,893	)
Other operating expenses		-			(3,490	)		(2,413	)		(5,903	)
Stock- based compensation expense (1)		-			-			(2,284	)		(2,284	)

Segment profit (loss)	$	(2,169	)	$	(3,968	)	$	(4,697	)	$	(10,834	)

(1) Stock compensation expense is shown separately and is excluded from direct costs of services, sales and marketing costs, and other operating expenses, as it is managed on a consolidated basis and is not used by management to evaluate the performance of its segments.

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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our historical results of operations and our liquidity and capital resources should be read in conjunction with the condensed consolidated financial statements and related notes that appear elsewhere in this report and our most recent annual report for the year ended April 30, 2015, as filed on Form 10-K.

Forward-Looking Statements

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

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

Forward-looking statements speak only as of the date the statements are made. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2015, as updated in our subsequent reports filed with the SEC, including any updates found in Part II, Item 1A of this or other reports on Form 10-Q. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Overview and Recent Developments

Champions Oncology, Inc. 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 products, to offer solutions for two customer groups:

Our Personalized Oncology Solutions, or POS, business, which provides services to physicians and patients looking for information to help guide the development of personalized treatment plans.

Our Translational Oncology Solutions, or TOS, business, which provides services to pharmaceutical and biotechnology companies seeking personalized approaches to drug development that will lower costs and increase the speed of developing new drugs, as well as increase the adoption of existing drugs.

We plan to continue our efforts to expand our TumorGraft Technology Platform in order to expand our POS and TOS programs.

Liquidity and Capital Resources

Operating Results

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

	For the Three Months Ended January 31,
				% of						% of			%
	2016			Revenue			2015			Revenue			Change
Operating revenue:
Personalized oncology solutions	$	416			16.3	%	$	453			24.8	%		(8.2	)%
Translational oncology solutions		2,136			83.7			1,376			75.2			55.2

Total operating revenue		2,552			100.0			1,829			100.0			39.5

Costs and operating expenses:
Cost of personalized oncology solutions		479			18.8			674			36.9			(28.9	)
Cost of translational oncology solutions		1,627			63.8			1,301			71.1			25.1
Research and development		999			39.1			1,093			59.8			(8.6	)
Sales and marketing		779			30.5			1,094			59.8			(28.8	)
General and administrative		1,041			40.8			1,086			59.4			(4.1	)

Total costs and operating expenses		4,925			193.0			5,248			286.9			(6.2	)
Operating loss	$	(2,373	)		(93.0	)%	$	(3,419	)		(186.9	)%		(30.6	)

	For the Nine Months Ended January 31,
				% of						% of			%
	2016			Revenue			2015			Revenue			Change
Operating revenue:
Personalized oncology solutions	$	1,387			16.6	%	$	1,245			22.1	%		11.4	%
Translational oncology solutions		6,958			83.4			4,377			77.9			59.0

Total operating revenue		8,345			100.0			5,622			100.0			48.4

Costs and operating expenses:
Cost of personalized oncology solutions		1,661			19.9			2,190			39.0			(24.2	)
Cost of translational oncology solutions		4,683			56.1			3,225			57.4			45.2
Research and development		3,018			36.2			3,757			66.8			(19.7	)
Sales and marketing		2,688			32.2			3,340			59.4			(19.5	)
General and administrative		4,062			48.7			3,944			70.2			3.0

Total costs and operating expenses		16,112			193.1			16,456			292.7			(2.1	)
Operating loss	$	(7,767	)		(93.1	)%		(10,834	)		(192.7	)%		(28.3	)

Operating Revenues

Operating revenues were $2.6 million and $1.8 million for the three months ended January 31, 2016 and 2015, respectively, an increase of $800,000 or 39.5%. Operating revenues were $8.3 million and $5.6 million for the nine months ended January 31, 2016 and 2015, respectively, an increase of $2.7 million or 48.4%.

POS revenues were $416,000 and $453,000 for the three months ended January 31, 2016 and 2015, respectively, a decrease of $37,000, or (8.2%). The decrease is due to a decline of $215,000 in implant and panel revenue offset by an increase of $162,000 in sequencing revenue. POS revenues were $1.39 million and $1.25 million for the nine months ended January 31, 2016 and 2015, respectively, an increase of $140,000, or 11.4%. The increase is the result of growth in our sequencing revenue offset by a decline in implant and panel revenue.

TOS revenues were $2.1 million and $1.4 million for the three months ended January 31, 2016 and 2015, respectively, an increase of $700,000, or 55.2%. TOS revenues were $7 million and $4.4 million for the nine months ended January 31, 2016 and 2015, respectively, an increase of $2.6 million, or 59%. The increase is due to increased bookings, both in the number and size of the studies, in prior quarters due to the expansion of the TOS sales team and growth of the platform.

Cost of Personalized Oncology Solutions

Cost of POS for the three months ended January 31, 2016 and 2015 were $479,000 and $674,000, respectively, a decrease of $195,000, or (28.9%). Cost of POS for the nine months ended January 31, 2016 and 2015 were $1.7 million and $2.2 million, respectively, a decrease of $500,000 or (24.2%). For the three months ended January 31, 2016 and 2015, gross margins for POS were (15.1%) and (48.8%), respectively. For the nine months ended January 31, 2016 and 2015, gross margins for POS were (19.8)% and (75.9)%, respectively. The improvement in gross margin is attributed to the increase in higher margin, sequencing revenue, and aggressively managing our lab costs.

Cost of Translational Oncology Solutions

Cost of TOS for the three months ended January 31, 2016 and 2015 were $1.6 million and $1.3 million, respectively, an increase of $300,000, or 25.1%. Cost of TOS for the nine months ended January 31, 2016 and 2015 were $4.7 million and $3.2 million, respectively, an increase of $1.5 million, or 45.2%. For the three months ended January 31, 2016 and 2015, gross margins for TOS were 23.8% and 5.5%, respectively. For the nine months ended January 31, 2016 and 2015, gross margins for TOS were 32.7% and 26.3%, respectively. Gross margins vary quarterly based on timing differences between expense and revenue recognition. The improvement in gross margin was due to higher TOS revenue leveraged off the fixed cost component of the lab and effective management of the variable lab costs.

Research and Development

Research and development expenses for the three months ended January 31, 2016 and 2015 were $1 million and $1.1 million, respectively, a decrease of $100,000, or (8.6%). Research and development expenses for the nine months ended January 31, 2016 and 2015 were $3 million and $3.8 million, respectively, a decrease of $800,000, or (19.7%). The decrease is due to lower expenses in genomic characterization of our Champions TumorGraft Bank.

Sales and Marketing

Sales and marketing expenses for the three months ended January 31, 2016 and 2015 were $779,000 and $1.1 million, respectively, a decrease of $321,000, or (28.8%). Sales and marketing expenses for the nine months ended January 31, 2016 and 2015 were $2.7 million and $3.3 million, respectively, a decrease of $600,000, or (19.5%). The decrease is due to the consolidation of the sales and marketing resources of the POS and TOS division, including combining both under one commercial business leader.

General and Administrative

General and administrative expenses for the three months ended January 31, 2016 and 2015 were $1.04 million and $1.09 million, respectively, a decrease of $50,000, or (4.1%). General and administrative expenses for the nine months ended January 31, 2016 and 2015 were $4.1 million and $3.9 million, respectively, an increase of $200,000, or 3%. The increase is due to an increase in stock based compensation for the President and CEO.

Other Income (Expense)

Other income (expense) for the three months ended January 31, 2016 and 2015 were ($8,000) and $615,000, a decrease in income of $623,000. Other income (expense) for the nine months ended January 31, 2016 and 2015 were ($29,000) and $1.4 million, a decrease in income of $1.4 million. The change is mainly due to the gain on fair value of warrants that were accounted for as liabilities in during fiscal year 2015 which were reclassified into equity. See the Company’s annual report on Form 10-K, footnote 7, filed on July 29, 2015 for further discussion.

Inflation

Inflation does not have a meaningful impact on the results of our operations.

Cash Flows

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

Cash Flows from Operating Activities

Net cash used in operating activities were $5.9 million and $7.6 million for the nine months ended January 31, 2016 and 2015, respectively, a decrease of $1.7 million. The decrease in net cash used is due to higher revenues and aggressively managing cost.

Cash Flows from Investing Activities

Net cash used in investing activities were $175,000 and $84,000 for the nine months ended January 31, 2016 and 2015, respectively. These cash outflows primarily relate to the purchase of property and equipment.

Cash Flows from Financing Activities

Net cash (used in)/provided by financing activities were ($35,000) and $2 million for the nine months ended January 31, 2016 and 2015, respectively. The cash outflows in 2016 relate to issuance costs for a 2015 private placement and capital lease payments as compared to a significant capital raise in the prior year.

Critical Accounting Estimates and Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to apply methodologies and make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company include, among other things, accounts receivable realization, revenue recognition (replacement of licensed tumors), valuation allowance for deferred tax assets, valuation of goodwill, and stock compensation and warrant assumptions. Actual results could differ from those estimates. The Company’s critical accounting policies are summarized in the Company’s Annual Report on Form 10-K, filed with the SEC on July 29, 2015.

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 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

It is management’s responsibility to establish and maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Our management, with the participation of our Chief Executive Officer and our Vice President, Finance, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our Chief Executive Officer and our Vice President, Finance, have concluded that our disclosure controls and procedures were effective as of January 31, 2016 at the reasonable assurance level in ensuring that information required to be disclosed in the reports that we file or submit under the Securities Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and our Vice President, Finance, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

We may not be able to meet our cash requirements beyond April 2017 without reducing the scope of our activities or obtaining additional capital from external sources, and if we are unable to do so, we may not be able to continue as a going concern.

As of January 31, 2016, we had working capital of $1.2 million and cash and cash equivalents of $3.3 million. We believe that our cash and cash equivalents on hand at January 31, 2016 are adequate to fund our operations through at least April 2017. However, in order for us to continue as a going concern beyond this point, we may need to reduce the scope of our activities or obtain capital from external sources.

We have generated net losses for our past recent history. For the years ended April 30, 2015 and 2014, the Company had a net loss of approximately $13.1 million and $7.4 million, respectively, and for the nine months ended January 31, 2016, we had a net loss of $7.9 million. We will not be able to continue as a going concern without additional financing. Even if we do raise sufficient capital to support our operating expenses beyond April 2017, there can be no assurances that the proceeds raised will be sufficient to enable our business to reach a level where it will generate profits from operations. 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 our TOS and POS products. Accordingly, we expect to generate operating losses in the future until such time as we are able to generate significantly more revenue.

If we are unable to obtain additional financing, we may be required to reduce the scope of, or delay or eliminate, some of our research and development and other activities, which could harm our financial condition and operating results. Financing may not be available on acceptable terms or at all, and our failure to raise capital when needed could negatively impact our growth plans and our financial condition and results of operations. Additional equity financing may be dilutive to the holders of our common stock and debt financing, if available, may involve significant cash payment obligations and covenants and/or financial ratios that restrict our ability to operate our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

No.		Exhibit
31.1*		8650 Section 302 Certification of Principal Executive Officer
31.2*		8650 Section 302 Certification of Principal Financial Officer
32.1**		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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)

(** = furnished herewith)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHAMPIONS ONCOLOGY, INC.
	(Registrant)

Date: March 16, 2016	By:	/s/ Joel Ackerman
		Joel Ackerman
		Chief Executive Officer
		(principal executive officer)

Date: March 16, 2016	By:	/s/ David Miller
		David Miller
		Vice President, Finance
		(principal financial officer)