UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(AMENDMENT NO. 1)

Mark One

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-17263

CHAMPIONS BIOTECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware		52-1401755
(State or other jurisdiction of organization)		(I.R.S. Employer Identification No.)

855 N. Wolfe Street, Suite 619, Baltimore, MD		21205
(Address of principal executive offices)		(Zip code)

(410) 369-0365

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 o No þ

Indicate by checkmark 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 (Section 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 o No o

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

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

As of December 15, 2008, the Registrant had a total of 33,272,718 shares of common stock outstanding.

 

 

Explanatory Note:

On June 19, 2009, the Audit Committee of the Board of Directors of Champions Biotechnology, Inc. (“Champions”, the “Company”, or as used in the context of “we”, “us” or “our”) concluded that our quarterly financial statements for the fiscal year April 30, 2009 and our financial statements for the year ended April 30, 2008 would need to be restated and should no longer be relied upon.

This Amendment No. 1 (the “Form 10-Q/A”) to our Quarterly Report on Form 10-Q for the for the three months ended October 31, 2008 (the “2009 Second Quarter 10-Q”) is being filed to restate our condensed financial statements as of October 31, 2008 and for the three and six month periods ended October 31, 2008 and October 31, 2007. In addition, we are concurrently filing Form 10-KSB/A to amend and restate our consolidated financial statements for the year ended April 30, 2008 and Form 10-Q/As to amend and restate our condensed consolidated financial statements for the quarterly periods ended July 31, 2008 (the “2009 First Quarter 10-Q”) and January 31, 2009 (the “2009 Third Quarter 10-Q”).

Background:

The Company has restated its condensed consolidated financial statements as of October 31, 2008 and April 30, 2008 and for the three and six month periods ended October 31, 2008 and 2007.

This restatement arose when the Company identified an error in its accounting for stock-based compensation related to stock options issued to non-employees for consulting services. Previously, the Company recognized a “contra equity” account called prepaid consulting for the fair value of the unvested stock based compensation awards. This prepaid consulting balance was amortized to compensation expense over the options vesting term. Additionally, when certain non-employees were hired as permanent employees, no modification to the accounting for their previously issued stock based compensation award was considered. Finally, the Company considered the grant date to be the measurement date for options awards issued to non-employees when no performance commitment existed. Upon further review and analysis of the relevant accounting literature related to stock based compensation, we determined the balance sheet should not present the fair value of the unvested portion of awards issued to non-employees as the awards were not fully vested when granted. Additionally, as no performance commitment existed as of the grant date, the measurement date related to non-employee stock option grants should have been measured at the date the non-employees performance was completed, or over the respective options vesting term. Lastly, when non-employees, who had previously received stock options, were hired as permanent employees, the unvested compensation should have been recognized as stock based compensation expense ratably over the remaining vesting period on a prospective basis.

Note 2 to our restated condensed consolidated financial statements describes the nature of the restatement adjustments and details the impact of the restatement on our condensed consolidated financial statements as of October 31, 2008 and April 30, 2008 and the three and six month periods ended October 31, 2008 and 2007.

In connection with the restatement, management has assessed the effectiveness of our disclosure controls and procedures and has included revised disclosure in this Form 10-Q/A under Item 4 of Part I, “Controls and Procedures”. Management identified a material weakness in our internal control over financial reporting with respect to our interpretation and application of Statement of Financial Accounting Standards No, 123(R), Share Based Payment, (“SFAS 123R”) and EITF 98-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, (“EITF 96-18) as they apply to the calculation of stock based compensation. As a result of this material weakness, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective at a reasonable assurance level as of April 30, 2008 and as of the date of this filing. As of the filing date of this Form 10-Q/A, we have implemented accounting practices that management believes complies with requirements of SFAS 123R and EITF 96-18. Management has taken and is taking steps, as described under Item 4 of Part I to remediate the material weakness in our internal control over financial reporting.

Because this Form 10-Q/A sets forth the 2008 Second Quarter Form 10-Q/A in its entirety, it includes items that have been changed as a result of the restatement and items that are unchanged from the original filing. Other than the amending of the disclosures relating to the restatement, the Form 10-Q/A speaks as of the original filing date of the 2008 Second Quarter Form 10-Q and has not been updated to reflect other events occurring subsequent to the original filing date. This includes forward-looking statements impacted by the restatement, which should be read in their historical context. This Form 10-Q/A should be read in conjunction with our Form 10-KSB/A for the year ended April 30, 2008.

The following items in this Form 10-Q/A have been amended as a result of the restatement:

Part I — Item 1. Financial Statements

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

Part I — Item 4. Controls and Procedures

CHAMPIONS BIOTECHNOLOGY, INC.
FORM 10-Q/A

INDEX

PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of October 31, 2008 (Unaudited) and April 30, 2008 (Audited)			4
Condensed Consolidated Statements of Operations for the six months and three months ended October 31, 2008 and 2007 (Unaudited)			5
Condensed Consolidated Statements of Cash Flows for the six months ended October 31, 2008 and 2007 (Unaudited)			6
Notes to Condensed Consolidated Financial Statements (Unaudited)			7-15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			19
Item 4. Controls and Procedures			19
PART II. Other Information
Item 1. Legal Proceedings			20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			20
Item 3. Defaults Upon Senior Securities			20
Item 4. Submission of Matters to a Vote of Security Holders			20
Item 5. Other Information			20
Item 6. Exhibits			20
Signatures			21
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I

Item 1.		Financial Statements

CHAMPIONS BIOTECHNOLOGY, INC.

		October 31, 2008				April 30, 2008
		(Restated)				(Restated)
		(Unaudited)				(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	3,052,558			$	3,709,136
Accounts receivable			77,091				—
Prepaid expenses			152,242				52,873
Prepaid contract expenses			43,374				—
Total Current Assets			3,325,265				3,762,009
Intangibles assets			236,531				227,465
Goodwill			661,909				661,909
TOTAL ASSETS		$	4,223,705			$	4,651,383
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	307,828			$	147,971
Deferred revenue			461,838				504,622
Other accrued expenses			—				361,275
Total current liabilities			769,666				1,013,868
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, $10 par value; 56,075 shares authorized; 0 shares issued and outstanding
Common stock, $.001 par value; 50,000,000 shares authorized; 33,272,718 and 33,247,718 shares issued and outstanding at October 31, 2008 and April 30, 2008, respectively			33,273				33,248
Additional paid-in capital			11,227,330				11,119,343
Accumulated deficit			(7,806,564	)			(7,515,076	)
Total stockholders’ equity			3,454,039				3,637,515
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	4,223,705			$	4,651,383

The accompanying notes are an integral part of these condensed consolidated financial statements.

CHAMPIONS BIOTECHNOLOGY, INC.

		Six Months Ended October 31,								Three Months Ended October 31,
		2008				2007				2008				2007
		(Restated)				(Restated)				(Restated)				(Restated)
REVENUES
Personalized oncology and preclinical contract revenue		$	1,717,289			$	250,000			$	1,044,172			$	—
Total revenues			1,717,289				250,000				1,044,172				—
OPERATING EXPENSES
Research and development			636,567				105,910				419,404				30,910
Cost of personalized oncology and preclinical contract revenue			718,186				80,562				458,586				—
General and administrative			699,853				617,334				352,176				466,796
Total operating expenses			2,054,606				803,806				1,230,166				497,796
OPERATING LOSS			(337,317	)			(553,806	)			(185,994	)			(497,796	)
OTHER INCOME
Interest income			45,829				9,994				25,113				4,635
LOSS BEFORE TAXES			(291,488	)			(543,812	)			(160,881	)		$	(493,071	)
Provision for income taxes			—				—				—				—
NET LOSS		$	(291,488	)		$	(543,812	)		$	(160,881	)		$	(493,071	)
Loss per common share:
Basic and diluted		$	(0.01	)		$	(0.02	)		$	(0.00	)		$	(0.02	)
Shares used in calculating loss per common share:
Basic and diluted			33,270,816				31,233,353				33,272,718				31,624,658

The accompanying notes are an integral part of these condensed consolidated financial statements.

CHAMPIONS BIOTECHNOLOGY, INC.

		2008				2007
		(Restated)				(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(291,488	)		$	(543,812	)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Stock based compensation expense			100,512				470,104
Changes in:
(Increase) in accounts receivable			(77,091	)			—
(Increase) in prepaid expenses			(99,368	)			—
(Increase) in prepaid contract expenses			(43,374	)			—
Increase (decrease) in accounts payable			159,858				(7,561	)
(Decrease) in deferred revenue			(42,785	)			—
(Decrease) increase in other accrued expenses			(361,275	)			15,743
Net cash (used in) operating activities			(655,011	)			(65,526	)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of intangible assets			(9,067	)			—
Cash received in Biomerk, Inc. acquisition			—				471,377
Net cash (used in) provided by investing activities			(9,067	)			471,377
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of officers loan payable			—				(43,693	)
Proceeds from exercise of options			7,500				—
Net cash provided by (used in) financing activities			7,500				(43,693	)
Net (decrease) increase in cash and cash equivalents			(656,578	)			362,158
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD			3,709,136				3,758
CASH AND CASH EQUIVALENTS — END OF PERIOD		$	3,052,558			$	365,916
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid		$	—			$	—
Income tax paid		$	—			$	—
SUPPLEMENTAL SCHEDULE OF NON-CASH FLOW INVESTING AND FINANCING ACTIVITIES:
In May 2007, the Company issued 4,000,000 shares for 100% of Biomerk, Inc.

The accompanying notes are an integral part of these condensed consolidated financial statements.

CHAMPIONS BIOTECHNOLOGY, INC.

(1) ORGANIZATION AND BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of Champions Biotechnology, Inc. (“Champions” or the “Company”) as of and for the six months ended October 31, 2009 and 2008 are unaudited. The accompanying unaudited condensed consolidated balance sheets, statements of operations and statements of cash flows have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. The financial statements reflect all adjustments, consisting only of normal, recurring adjustments, which are in the opinion of management, necessary for a fair presentation for the interim periods. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and related revenue and expense accounts and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with GAAP. Actual results could differ materially from those estimates. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB/A for the fiscal year ended April 30, 2008. The results for the six months and three months ended October 31, 2008 may not be indicative of the results for the entire year.

Impact of Recent Accounting Pronouncements

The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurement, (“SFAS 157”) on May 1, 2008. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and SFAS 157 details the disclosures that are required for items measured at fair value. In February 2008, the Financial Accounting Standards Board issued Staff Position No. 157-2 (FSP 157-2), which delays the effective date of SFAS 157 for one year for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company does not have nonfinancial assets and nonfinancial liabilities that are required to be measured at fair value on a recurring basis.

The Company did not elect the fair value measurement option under SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities, (“SFAS 159”) and presently, the Company does not have any financial assets and liabilities that would need to be measured under the fair measurement option under SFAS 159.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements: an amendment of ARB No. 51, (“SFAS 160”). SFAS No. 160 replaces the term minority interests with the newly-defined term of non-controlling interests and establishes this line item as an element of stockholders’ equity, separate from the parent’s equity. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest. The Company is continuing to review the provisions of SFAS No. 160, which is effective the first quarter of fiscal 2010, and currently does not expect this new accounting standard to have a significant impact on the Financial Statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities: an amendment of FASB Statement No. 133, (“SFAS 161”). SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. The Company is reviewing the provisions of SFAS No. 161, which is effective the first quarter of fiscal 2010, and currently does not anticipate that this new accounting standard will have a significant impact on the Financial Statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, (“SFAS 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting principles used in the preparation of financial statements. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The effective date of SFAS No. 162 has not yet been determined. The implementation of this standard will not have a material impact on the Financial Statements.

Reclassifications

The Company has reclassified certain amounts for the six months and three months ended October 31, 2007 to conform to the presentation of the October 31, 2008 amounts. The reclassifications have no effect on the net income for the periods ended October 31, 2007.

(2) RESTATEMENT OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has restated its consolidated financial statements as of October 31, 2008 and April 30, 2008 and for the three and six month periods ended October 31, 2008 and 2007.

The restatement arose when the Company identified an error in its accounting for stock-based compensation related to stock options issued to non-employees for consulting services. Previously, the Company recognized a “contra equity” account called prepaid consulting for the fair value of the unvested stock based compensation awards. This prepaid consulting balance was amortized to compensation expense over the options vesting term. Additionally, when certain non-employees were hired as permanent employees, no modification to the accounting for their previously issued stock based compensation award was considered. Finally, the Company considered the grant date to be the measurement date for options awards issued to non-employees when no performance commitment existed. Upon further review and analysis of the relevant accounting literature related to stock-based compensation, we determined the balance sheet should not present the fair value of the unvested portion of awards issued to non-employees as the awards were not fully vested when granted. Additionally, as no performance commitment existed as of the grant date, the measurement date related to non-employee stock option grants should have been measured at the date the non-employees performance was completed, or over the respective options vesting term. Lastly, when non-employees, who had previously received stock options, were hired as permanent employees, the unvested compensation should have been recognized as stock based compensation expense ratably over the remaining vesting period on a prospective basis.

The Company’s management performed a detailed review of Statement of Financial Accounting Standards No, 123R, Share Based Payment, (“SFAS 123R”), EITF 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, (“EITF 96-18”) and EITF 00-18, Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees, (“EITF 00-18”) as they apply to stock options granted to non-employees. After evaluating this accounting literature, the Company determined the balance sheet should not be grossed up for the unvested value of compensation expense. Additionally, the compensation expense related to non-employee stock option grants should calculated based on the fair market value of the options on the grant date and re-measured at the end of each subsequent reporting period over the options vesting term. Lastly, when non-employees who had previously received stock options were hired as permanent employees, the unvested compensation as of the hire date should have been recognized ratably on a prospective basis over the remaining vesting term.

The following is a summary of the effects of the restatement on the Company’s condensed consolidated balance sheet as of October 31, 2008 and April 30, 2008, its condensed consolidated statements of operations for the three and six month periods ended October 31, 2008 and 2007, and its condensed consolidated statements of cash flows for the six month periods ended October 31, 2008 and 2007:

CONDENSED CONSOLIDATED BALANCE SHEET
As of October 31, 2008

		As Previously				Restatement
		Reported				Adjustments				As Restated
Current assets:
Cash and cash equivalents		$	3,052,558			$	—			$	3,052,558
Accounts receivable			77,091								77,091
Prepaid expenses			152,242								152,242
Prepaid contract expenses			43,374								43,374
Total current assets			3,325,265				—				3,325,265
Intangible assets			236,531								236,531
Goodwill			661,909								661,909
Total assets		$	4,223,705			$	—			$	4,223,705
Current liabilities:
Accounts payable		$	307,828			$	—			$	307,828
Deferred revenue			461,838								461,838
Total current liabilities			769,666				—				769,666
Commitments and contingencies
Stockholders’ equity:
Common stock			33,273								33,273
Additional paid-in capital			11,643,233				(415,903	)			11,227,330
Accumulated deficit			(7,467,619	)			(338,945	)			(7,806,564	)
Prepaid consulting fees			(754,848	)			754,848				—
Total stockholders’ equity			3,454,039				—				3,454,039
Total liabilities and stockholders’ equity		$	4,223,705			$	—			$	4,223,705

CONDENSED CONSOLIDATED BALANCE SHEET
As of April 30, 2008

		As Previously				Restatement
		Reported				Adjustments				As Restated
Current assets:
Cash and cash equivalents		$	3,709,136			$	—			$	3,709,136
Prepaid expenses			52,873								52,873
Total current assets			3,762,009				—				3,762,009
Intangible assets			227,465								227,465
Goodwill			661,909								661,909
Total assets		$	4,651,383			$	—			$	4,651,383
Current liabilities:
Accounts payable		$	147,971			$	—			$	147,971
Deferred revenue			504,622								504,622
Other accrued expenses			361,275								361,275
Total current liabilities			1,013,868				—				1,013,868
Commitments and contingencies
Stockholders’ equity:
Common stock			33,248								33,248
Additional paid-in capital			11,715,182				(595,839	)			11,119,343
Accumulated deficit			(7,068,547	)			(446,529	)			(7,515,076	)
Prepaid consulting fees			(1,042,368	)			1,042,368				—
Total stockholders’ equity			3,637,515				—				3,637,515
Total liabilities and stockholders’ equity		$	4,651,383			$	—			$	4,651,383

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended October 31, 2008

		As Previously				Restatement
		Reported				Adjustments				As Restated
Operating revenue:
Personalized oncoloy services and and preclinical contract review		$	1,717,289			$	—			$	1,717,289
Total operating revenue			1,717,289				—				1,717,289
Operating expenses:
Research and development			636,567								636,567
Cost of personalized oncology services and preclinical contract review			718,186								718,186
General and administrative			807,437				(107,584	)			699,853
Total operating expenses			2,162,190				(107,584	)			2,054,606
Operating loss			(444,901	)			107,584				(337,317	)
Other income:
Interest income			45,829								45,829
Loss before income taxes			(399,072	)			107,584				(291,488	)
Income taxes			—								—
Net loss		$	(399,072	)		$	107,584			$	(291,488	)
Loss per common share:
Basic and diluted		$	(0.01	)		$	0.00			$	(0.01	)
Shares used in calculating loss per common share:
Basic and diluted			33,270,816				33,270,816				33,270,816

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended October 31, 2007

		As Previously				Restatement
		Reported				Adjustments				As Restated
Operating revenue:
Personalized oncoloy services		$	250,000			$	—			$	250,000
Total operating revenue			250,000				—				250,000
Operating expenses:
Research and development			105,910								105,910
Cost of personalized oncology services			80,562								80,562
General and administrative			210,517				406,817				617,334
Total operating expenses			396,989				406,817				803,806
Operating loss			(146,989	)			(406,817	)			(553,806	)
Other income:
Interest income			9,994								9,994
Loss before income taxes			(136,995	)			(406,817	)			(543,812	)
Income taxes			—								—
Net loss		$	(136,995	)		$	(406,817	)		$	(543,812	)
Loss per common share:
Basic and diluted		$	(0.00	)		$	(0.02	)		$	(0.02	)
Shares used in calculating loss per common share:
Basic and diluted			31,233,353				31,233,353				31,233,353

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended October 31, 2008

		As Previously				Restatement
		Reported				Adjustments				As Restated
Operating revenue:
Personalized oncoloy services and preclinical contract review		$	1,044,172			$	—			$	1,044,172
Total operating revenue			1,044,172				—				1,044,172
Operating expenses:
Research and development			419,404								419,404
Cost of personalized oncology services and preclinical contract review			458,586								458,586
General and administrative			422,885				(70,709	)			352,176
Total operating expenses			1,300,875				(70,709	)			1,230,166
Operating loss			(256,703	)			70,709				(185,994	)
Other income:
Interest income			25,113								25,113
Loss before income taxes			(231,590	)			70,709				(160,881	)
Income taxes			—								—
Net loss		$	(231,590	)		$	70,709			$	(160,881	)
Loss per common share:
Basic and diluted		$	(0.01	)		$	0.01			$	(0.00	)
Shares used in calculating loss per common share:
Basic and diluted			33,272,718				33,272,718				33,272,718

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended October 31, 2007

		As Previously				Restatement
		Reported				Adjustments				As Restated
Operating expenses:
Research and development		$	30,910			$	—			$	30,910
General and administrative			119,288				347,508				466,796
Total operating expenses			150,198				347,508				497,706
Operating loss			(150,198	)			(347,508	)			(497,706	)
Other income:
Interest income			4,635								4,635
Loss before income taxes			(145,563	)			(347,508	)			(493,071	)
Income taxes			—								—
Net loss		$	(145,563	)		$	(347,508	)		$	(493,071	)
Loss per common share:
Basic and diluted		$	(0.00	)		$	(0.02	)		$	(0.02	)
Shares used in calculating loss per common share:
Basic and diluted			31,624,658				31,624,658				31,624,658

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended October 31, 2008

		As Previously				Restatement
		Reported				Adjustments				As Restated
Cash flows from operating activities:
Net loss		$	(399,072	)		$	107,584			$	(291,488	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Share based compensation expense			208,096				(107,584	)			100,512
Changes in operating assets and liabilities:
(Increase) in accounts receivable			(77,091	)							(77,091	)
(Increase) in prepaid expenses			(99,368	)							(99,368	)
(Increase) in prepaid contract expenses			(43,374	)							(43,374	)
Increase in accounts payable			159,858								159,858
(Decrease) in deferred revenue			(42,785	)							(42,785	)
(Decrease) in other accrued expenses			(361,275	)							(361,275	)
Net cash (used in) operating activities			(655,011	)			—				(655,011	)
Cash flows from investing activities:
Purchase of intangible assets			(9,067	)							(9,067	)
Net (used in) investing activities			(9,067	)			—				(9,067	)
Cash flows from financing activities:
Proceeds from exercise of stock warrants			7,500								7,500
Net cash provided by financing activities			7,500				—				7,500
Net decrease in cash and cash equivalents			(656,578	)		$	—				(656,578	)
Cash and cash equivalents — Beginning of period			3,709,136								3,709,136
Cash and cash equivalents — End of period		$	3,052,558							$	3,052,558

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended October 31, 2007

		As Previously				Restatement
		Reported				Adjustments				As Restated
Cash flows from operating activities:
Net loss		$	(136,995	)		$	(406,817	)		$	(543,812	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share based compensation expense			63,287				406,817				470,104
Changes in operating assets and liabilities:
(Decrease) in accounts payable			(7,561	)							(7,561	)
Increase in other accrued expenses			15,743								15,743
Net cash (used in) operating activities			(65,526	)			—				(65,526	)
Cash flows from investing activities:
Cash received in Biomerk, Inc. acquisition			471,377								471,377
Net provided by investing activities			471,377				—				471,377
Cash flows from financing activities:
Payment of officers loan payable			(43,693	)							(43,693	)
Net cash (used in) financing activities			(43,693	)			—				(43,693	)
Net decrease in cash and cash equivalents			362,158			$	—				362,158
Cash and cash equivalents — Beginning of period			3,758								3,758
Cash and cash equivalents — End of period		$	365,916							$	365,916

(3) NET (LOSS) PER SHARE

Basic earnings per common share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding during the period increased to include all additional common shares that would have been outstanding assuming potentially dilutive common share equivalents had been issued. Dilutive common share equivalents include (1) the dilutive effect of in-the-money shares related to stock options, which is calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an option, the average amount of compensation cost, if any, for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital, if any, when the option is exercised, are assumed to be used to repurchase shares in the current period.

The following is a reconciliation of the computation for basic and diluted EPS for the six month periods ended October 31, 2008 and 2007:

		October 31,				October 31,
		2008				2007
Net (loss)		$	(291,488	)		$	(543,812	)
Weighted-average common shares outstanding (basic and diluted)			33,270,816				31,233,353

(4) COMMITMENTS AND CONTINGENCIES

Operating leases

The Company leases, as tenant, space under an operating lease, which expires February 29, 2009.

Rental expense during the six months and three months ended October 31, 2008 was $39,364 and $20,084, respectively. Rental expenses for the six months and three months ended October 31, 2007 was $0.

(5) SHARE BASED COMPENSATION

The total share based compensation cost that was recognized in results of operations for the six and three months ended October 31, 2008 was $100,512 and $38,795, respectively. As of October 31, 2008, there was $487,770 unrecognized compensation cost related share based compensation arrangements. The cost is expected to be recognized over a weighted average period of 2.69 years.

(6) PROVISION FOR INCOME TAXES

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s consolidated tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

At October 31, 2008 and April 30, 2008 deferred tax assets consist of the following:

		October 31,				April 30,
		2008				2008
Deferred tax asset		$	2,732,297			$	2,630,277
Less: valuation allowance			(2,732,297	)			(2,630,277	)
Net deferred tax asset		$	-0-			$	-0-

At October 31, 2008 and April 30, 2008, the Company had federal net operating loss carryforwards in the approximate amounts of $7,806,564 and $7,515,076 available to offset future taxable income subject to Section 382 analysis limitations. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.

(7) RELATED PARTY TRANSACTIONS

The Chairman of the Company participates in conducting and providing the Company’s personalized oncology services. During the six months and three months ended October 31, 2008, the Company paid compensation to the Chairman for these services which are provided in the ordinary course of business. The Company believes the compensation is on the same basis as if the same services were provided by unrelated parties. The Chairman of the Company is a director of certain companies which have entered into contracts for the Company to perform services. During the six and three months ended October 31, 2008, the Company recorded revenue of $77,091 and $12,345 from these companies. During the six and three months ended October 31, 2008, the Company recorded revenue of $62,843 and had deferred revenue of $135,607 from these companies. All services provided under these contracts are in the ordinary course of business at prices and on terms and conditions that the Company believes are the same as those that would result from arm’s length negotiations between unrelated parties.

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

As used in this Quarterly Report 10-Q/A, “Champions Biotechnology,” “Champions,” “we,” “ours,” and “us” refer to Champions Biotechnology, Inc., except where the context otherwise requires or as otherwise indicated.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (“Exchanges Act”) that inherently involve risk and uncertainties. The Company generally uses words such as “believe,” “may,” “could,” “will,” “intend,” “estimate,” “expect,” “anticipate,” “plan,” “likely,” “promise” and similar expressions to identify forward-looking statements. One should not place undue reliance on these forward-looking statements. The Company’s actual results could differ materially from those anticipated in the forward-looking statements for many unforeseen factors, which may include, but are not limited to, changes in general economic conditions, the ongoing threat of terrorism, ability to have access to financing sources on reasonable terms and other risks. Those risks include, but are not limited to, the risks identified in our periodic reports filed with the Securities and Exchange Commission, including our most recent Annual Report on form 10-KSB. Although the Company believes the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and the Company’s future results, levels of activity, performance or achievements may not meet these expectations. The Company does not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in the Company’s expectations, except as required by law.

Restatement

The Company has restated its condensed consolidated financial statements as of October 31, 2008 and April 30, 2008 and for the three and six month periods ended October 31, 2008 and 2007.

This restatement arose when the Company identified an error in its accounting for stock based compensation related to stock options issued to non-employees for consulting services. Previously, the Company recognized a “contra equity” account called prepaid consulting for the fair value of the unvested stock based compensation awards. This prepaid consulting balance was amortized to compensation expense over the options vesting term. Additionally, when certain non-employees were hired as permanent employees, no modification to the accounting for their previously issued stock based compensation award was considered. Finally, the Company considered the grant date to be the measurement date for options awards issued to non-employees when no performance commitment existed. Upon further review and analysis of the relevant accounting literature related to stock based compensation, we determined the balance sheet should not present the fair value of the unvested portion of awards issued to non-employees as the awards were not fully vested when granted. Additionally, as no performance commitment existed as of the grant date, the measurement date related to non-employee stock option grants should have been measured at the date the non-employees performance was completed, or over the respective options vesting term. Lastly, when non-employees, who had previously received stock options, were hired as permanent employees, the unvested compensation should have been recognized as stock based compensation expense ratably over the remaining vesting period on a prospective basis.

Note 2 to our restated condensed consolidated financial statements describes the nature of the restatement adjustments and details the impact of the restatement on our condensed consolidated financial statements as of October 31, 2008 and April 30, 2008 and the six and three month periods ended October 31, 2008 and 2007.

Overview

The Company is engaged in the development of advanced preclinical platforms and predictive tumor specific data to enhance and accelerate the value of oncology drugs. Our Preclinical Platform is a novel approach based upon the implantation of primary human tumor fragments in immune deficient mice followed by propagation of the resulting engraftments (Biomerk Tumorgrafts™) in a manner that preserves the biological characteristics of the original human tumor. We believe that Biomerk Tumorgrafts closely reflect human cancer biology and their response to drugs is more predictive of clinical outcomes in cancer patients. The Company is building its Biomerk Tumorgraft platform through the procurement, development and characterization of numerous Tumorgrafts within each of several cancer types. Tumorgrafts are procured through agreements with a growing number of institutions in the United States and Europe and developed and tested through agreement with a U.S. based preclinical facility.

We are leveraging our preclinical platform to evaluate oncology drug candidates and to develop a portfolio of novel or reposition drug candidates through pre-clinical or early clinical trials. As drugs progress through this early stage of development, the Company plans to sell, partner or license them to pharmaceutical and/or biotechnology companies, as appropriate. We believe this strategy will enable us to leverage the competencies of these partners or licensees to maximize our return on investment in a time frame that is shorter than for traditional drug development. We believe that this model is unlike that of many new biotechnology companies that look to bring the process of drug development through all phases of discovery, development, regulatory approvals, and marketing, which requires a very large financial commitment and a long development period, typically more than a decade, to commercialize. Thus far we have acquired two oncology drug candidates and we have begun preclinical development of the most promising candidate, SG410, through the use of contract facilities. We have secured preclinical supply of SG410 drug substance and it is our intention to develop a soluble form of the compound and evaluate its efficacy in Biomerk Tumorgrafts from several cancer types. If results are promising it is our intention to continue preclinical development and then sell, partner or license SG410 for its remaining clinical development.

We also offer our Biomerk Tumorgraft predictive preclinical platform and tumor specific data to physicians to provide information that may enhance personalized patient care options and to companies for evaluation of oncology drugs in a platform that integrates predictive testing with biomarker discovery. We provide personalized oncology services to physicians in the field of oncology by establishing and administering expert medical information panels for their patients to (i) arrange for testing, analysis and study of cancer tissues, as appropriate, (ii) analyze medical records and test results, and (iii) assist in understanding conventional and research options. The Company also develops and performs testing on Personalized Tumorgrafts to provide patients’ physicians personalized data on treatment drug options. In fiscal 2008, the Company generated all its revenue from its growing personalized oncology services while it continued development of its Biomerk Tumorgraft platform.

In late fiscal year 2008, as we expanded our number of Biomerk Tumorgraft models, we began to offer leading pharmaceutical and biotechnology companies the benefits of our Biomerk Tumorgrafts for their preclinical evaluation programs. We provide preclinical eValuation services that we believe are more predictive of clinical outcomes and that might provide for a faster and less expensive path for drug approval. These services utilize Biomerk Tumorgrafts to evaluate tumor sensitivity/resistance to various single and combination standard and novel chemotherapy agents. The preclinical eValuation services we offer also include biomarker discovery and the identification of novel drug combinations. In the fourth quarter of fiscal year 2008 we established an agreement with ImClone Systems Incorporated (“ImClone”) for the preclinical evaluation of certain therapeutic antibodies in ImClone’s clinical development pipeline. As part of the agreement, ImClone will utilize our Biomerk Tumorgrafts in the initial preclinical evaluation.

Once we enter into an agreement with a pharmaceutical or biotechnology company to perform Biomerk Tumorgraft testing services it takes several months to propagate the Tumorgrafts prior to beginning the drug testing. In the second quarter of fiscal 2009 we performed drug testing under several contracts. We are currently providing services or in discussions to provide services to a number of other companies.

Results of Operations

We expanded our operations as a biotechnology company after we acquired Biomerk, Inc. in May 2007. Accordingly, the results described below for the 2007 period are for less than a full six months.

Three Months Ended October 31, 2008 and 2007

Revenues. For the three months ended October 31, 2008, the Company’s operating revenue was $1,044,172, compared to zero for the comparable three months ended October 31, 2007. For the 2008 period, we primarily derived our revenue from our personalized oncology business and, to a lesser extent, our Preclinical eValuation business. We began to generate revenue from our Preclinical eValuation business in the first quarter of fiscal 2009 and grew it in the second quarter as we completed portions of studies for our contractual customers during the quarter; those studies and others continue or are in progress. Expectations for growth in the future are from continued personalized oncology services and use of our preclinical eValuation services. Our revenue is described as personalized oncology and preclinical contract revenue in the Condensed Consolidated Statements of Operations.

At October 31, 2008, we had deferred revenue of $461,838 which represents payments in advance on future personalized oncology services and Preclinical eValuation services which will be recognized as earned when operations are performed. At October 31, 2007, we had no deferred revenue.

Expenses (Restated). For the three months ended October 31, 2008, our operating expenses were $1,230,166, compared to $497,706 for the three months ended October 31, 2007, an increase of 147%.

•

Research and development expenses. For the three months ended October 31, 2008, research and development expenses were $419,404, compared to $30,910 for the three months ended October 31, 2007. The increase of $388,494 or 1,256% for the three months ended October 31, 2008 was primarily a result of the increase in Tumorgrafts acquired and their propagation, characterization and development for utilization in preclinical studies. Increases also resulted from development activities directed toward building our drug pipeline and evaluating synergistic technologies as well as preclinical development expenses for the Company’s lead oncology drug candidate, SG410.

•

Cost of personalized oncology and preclinical contract services. For the three months ended October 31, 2008, the costs of personalized oncology and preclinical contract services were $458,586, compared to zero for the corresponding 2007 period. The fiscal 2008 costs were primarily for conducting the Company’s personalized oncology services, including medical information panels and the development and testing of personalized Tumorgrafts, but also include costs related to preclinical evaluation studies in progress under contract.

•

General and administrative expenses (Restated). For the three months ended October 31, 2008, general and administrative expenses were $352,176, compared to $466,796 for the three months ended October 31, 2007, a decrease of $114,620 or 25%. Share based compensation decreased by $355,162 from $393,957 for the three months ended October 31, 2007 to $38,795 for the three months ended October 31, 2008. General and administrative expenses other than share based compensation were $313,381 for the three months ended October 31, 2008 compared to $72,839 for the three months ended October 31, 2007. The increase of $240,542 or 330% was due to increased expenses as we built and grew our infrastructure including the addition of personnel, consultants and other initiatives to facilitate current and future growth.

Expenses are expected to increase in the future, commensurate with our increased levels of activity and growth, including our increasing business development efforts in pursuing prospective drug candidates to add to the Company’s pipeline and synergistic technologies.

Net Loss (Restated). Our net loss for the three months ended October 31, 2008 was $160,881 and our net loss for the three months ended October 31, 2007 was $493,071, a decrease of 67%. As explained in the above analysis of our revenues and expenses, the primary reason for our decreased loss in the 2008 quarter was due to lower share based compensation during the three months ended October 31, 2008 compared to 2007. This was partially offset by our increased investments to grow our preclinical platform, increase revenues from our personalized oncology and preclinical eValuation businesses, grow our drug pipeline and continue preclinical development of our oncology drug candidate, SG410.

Six Months Ended October 31, 2008 and 2007

Revenues. For the six months ended October 31, 2008, the Company’s operating revenue was $1,717,289 compared to $250,000 for the comparable six months ended October 31, 2007, an increase of $1,467,289 or 587%. For the 2008 period, we primarily derived our revenue from our personalized oncology business and, to a lesser extent, our preclinical eValuation business. We began to generate revenue from our preclinical eValuation business in the first quarter of fiscal 2009 and grew this revenue in the second quarter. Expectations for growth in the future are from continued personalized oncology services and use of our preclinical eValuation services. Our revenue is described as personalized oncology and preclinical contract revenue in the Condensed Consolidated Statements of Operations.

At October 31, 2008, we had deferred revenue of $461,838 which represents payments in advance on future personalized oncology services and preclinical eValuation services which will be recognized as earned when operations are performed. At October 31, 2007, we had no deferred revenue recorded.

Expenses (Restated). For the six months ended October 31, 2008, our operating expenses were $2,054,606, compared to $803,806 for the six months ended October 31, 2007, an increase of $1,250,800 or 156%.

•

Research and development expenses. For the six months ended October 31, 2008, research and development expenses were $636,567, compared to $105,910 for the corresponding 2007 period. The increase of $530,657 or 501% was primarily a result of the increase in Tumorgrafts acquired and their propagation, characterization and development for utilization in preclinical studies. Increases also resulted from development activities directed toward building our drug pipeline and evaluating synergistic technologies as well as preclinical development expenses for the Company’s oncology drug candidate, SG410.

•

Cost of personalized oncology and preclinical contract services. For the six months ended October 31, 2008, the costs of personalized oncology and preclinical contract services were $718,186, compared to $80,562 for the six months ended October 31, 2007, an increase of $637,624 or 791%. These costs were primarily for conducting the Company’s personalized oncology services, including medical information panels and the development and testing of personalized tumorgrafts, but also include costs related to preclinical evaluation studies in progress under contract.

•

General and administrative expenses (Restated). For the six months ended October 31, 2008, general and administrative expenses were $699,853, compared to $617,334 for the six months ended October 31, 2007, an increase of $82,519 or 13%. The increase is primarily due to higher expenses in 2008 as we built and grew our infrastructure including the addition of personnel, consultants and other initiatives to facilitate current and future growth. The overall increase was partially offset by lower share based compensation expense for the six months ended October 31, 2008 compared to the 2007 six month period.

Expenses are expected to increase in the future, commensurate with our increased levels of activity and growth, including our increasing efforts in pursuing attractive prospective drug candidates and technologies.

Net Loss (Restated). Our net loss for the six months ended October 31, 2008 was $291,488, and our net loss for the six months ended October 31, 2007 was $543,812, a decrease of $252,324 or 46%. As explained in the above analysis of our revenues and expenses, the primary reason for our decreased loss in the 2008 period was higher revenue recorded for the six months ended October 31, 2008.

Financial Condition and Liquidity

The Company’s cash position on October 31, 2008, was $3,052,558 compared to $3,709,136 as of April 30, 2008. For the six months ended October 31, 2008, the net cash used by operating activities was $655,011.

Our working capital as of October 31, 2008 was $2,555,599 compared to $2,748,141 at April 30, 2008. The decrease in working capital was primarily due to the decrease in cash of $656,578 from April 30, 2008 to October 31, 2008.

The Company believes it has sufficient resources to provide for the next twelve months of operations based on its current level of expenditure, its anticipated level of future expenditure and revenue growth and its ability to curtail expenditures if needed.

Critical Accounting Policies

In the notes to our Annual Report on Form 10-KSB/A for the year ended April 30, 2008, we discussed the accounting policies that are considered to be significant in determining the results of operations and our financial position. We believe that the accounting principles utilized by us conform to accounting principles generally accepted in the United States of America.

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

None.

Item 4.		Controls and Procedures

Management of the Company is responsible for establishing and maintaining adequate disclosure controls and procedures and for the assessment of the effectiveness of disclosure controls and procedures. The Company’s disclosure controls and procedures is a process designed under the supervision of the Company’s chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with United States generally accepted accounting principles (“U.S. GAAP”).

Our Principal Executive Officer and Chief Financial Officer have concluded that during the period covered by this report, such internal control over financial reporting were not effective as more fully described below. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls and that may be considered “material weaknesses”. The Public Company Accounting Oversight Board has defined a material weakness as a “deficiency, or combination of deficiencies, in internal control over financial reporting (ICFR) such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s ICFR.”

The material weaknesses identified in our internal control over financial reporting and disclosure controls relate to the following:

Our auditors identified a material weakness which consisted primarily of inadequate staffing and supervision that could lead to the untimely identification and resolution of accounting and disclosure matters and failure to perform timely and effective reviews.

The second material weakness related to our accounting for stock-based compensation under SFAS 123R and EITF 96-18, where the Company improperly calculated the measurement date for non-employees of the Company and we did not take into consideration changes in employee status. In addition, we misclassified the fair value of the unvested portion of non-employee awards as a “contra equity” account called prepaid consulting.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can only provide reasonable assurances with respect to financial statement preparation and presentation. In addition, any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions in the future.

Remediation of Material Weaknesses

In light of the conclusion that our Company’s internal control over financial reporting was not effective, our management has developed a plan intended to remediate such ineffectiveness and to strengthen our internal controls over financial reporting through the implementation of certain remedial measures, which include:

1) Continue enhancing our U.S. GAAP training program for our existing personnel.

2) Hiring of an Assistant Controller to directly handle the day to day accounting functions of the company.

3) The licensing of a SFAS 123R software program to assist in the proper accounting for stock based compensation.

We will continue these efforts until we are satisfied that all “material weaknesses” have been eliminated. We expect that resolution of all of these issues will take place in fiscal 2010.

PART II — OTHER INFORMATION

Item 1.		Legal Proceedings

None.

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

None.

Item 3.		Defaults Upon Senior Securities

None.

Item 4.		Submission of Matters to a Vote of Security Holders

None.

Item 5.		Other Information

None.

Item 6. Exhibits

Exhibit No.
	31.1			Rule 13a-14(a)/15d-14(a) Certification of President and Principal Executive Officer
	31.2			Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
	32.1			Section 1350 Certifications

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.

EXHIBIT INDEX

Exhibit
No.				Description
	31.1			Rule 13a-14(a)/15d-14(a) Certification of President and Principal Executive Officer
	31.2			Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
	32.1			Section 1350 Certifications