UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

or

 

Commission file number 001-11504

 

Registrant’s telephone number, including area code:

(201) 808-8400

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

DOCUMENTS INCORPORATED BY REFERENCE

 

INDEX TO FORM 10-K

FOR THE YEAR ENDED APRIL 30, 20172021

As used in this Annual Report on Form 10-K (the "Annual Report"), “Champions Oncology, Inc.,” “Champions,” the “Company,” “we,” “ours,” and “us” refer to Champions Oncology, Inc. and its subsidiaries, except where the context otherwise requires or as otherwise indicated.

 

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") that inherently involve risk and uncertainties.  Forward-looking statements may be identified by the words “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” “may,” “likely” or similar expressions. Forward-looking statements in this Annual Report include statements about our business strategies and products development activities, including the anticipated benefits and risks associated with those strategies as well as statements about the sufficiency of our capital resources.  One should not place undue reliance on these forward-looking statements.  We cannot guarantee that we will achieve the plans, intentions or expectations expressed or implied in our forward-looking statement.  There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those expressed or implied in the forward-looking statements we make.  These important factors are described under “Risk Factors” set forth below.  In addition, any forward-looking statements we make in this Annual Report speak only as of the date of this document, and we do not intend to update any such forward-looking statements to reflect events or circumstances that occur after that date, except as required by law.  As a result of these and other factors, our stock price may fluctuate dramatically.

 

PART I

 

Overview

We are a technology-enabled research organization engaged in the development and sale of advancedcreating transformative technology solutions and products to personalize the development and use of oncology drugs.  Utilizing our TumorGraft Technology Platform, we provide select services to pharmaceutical and biotechnology companies seeking personalized approaches to drug development. By performing studies to predict the efficacy of oncology drugs, our Platform facilitatesbe utilized in drug discovery withand development. Our research center operates in both regulatory and non-regulatory environments and consists of a comprehensive set of computational and experimental research platforms. Our pharmacology, biomarker, and data platforms are designed to facilitate drug discovery and development at lower costs and increased speedspeeds.

Through our technology platforms, we have designed an important strategic effortecosystem of the company. We invest significantbusiness lines consisting of:

Translational Oncology Solutions (TOS) Business

We have performed more than 620 studies for approximately 100500 different pharmaceutical and biotechnology companies over the past six years. Weten years, have a high rate of repeat business, and contract with more than 75pharmaceutical and biotechnology companies having used our platformacross North America, Europe and Asia. Studies are performed in a preclinical non-regulatory environment, as well as a Good Clinical Regulatory Practice (GCLP) regulatory environment for more than one study.clinical evaluation. Typical studies are in the $125,000 price range, with an increasing number of studies in price from $50,000the $250,000 to $250,000. We have completed approximately fifteen studies with prices above $500,000.$500,000 range. Studies performed in a regulatory environment can be much larger than those performed within a non-regulatory environment. Revenue from this business segment has grown at a cumulativean average annual growth rate of 42%28% since 2016 and represents the primary source of our current management team joined the companyrevenue stream.

Our sales and marketing efforts are dependent on a dedicated sales force of approximately 31 professionals that sellssell our services directly to pharmaceutical and biotechnology companies. We have a team of eight professionals dedicated to this sales and marketing effort. TheOur research services team is focused

For the year ended April 30, 2017,2022, revenues from our TOS products and services totaled approximately $13.7$49.1 million, an increase of approximately 48.7%20% from the previous year.

Our Personalized Oncology Solutions ("POS") business offers physiciansCurrent Strategy

Our Growth and Expansion Strategy

Our strategy is to continue to use TumorGrafts as aour various platform technologytechnologies to drive multiple synergistic revenue streams.

Competition

 

Research and Development

 

For the years ended April 30, 20172022 and 2016,2021, we spent approximately $4.3$9.4 million and $4.2$7.2 million, respectively, to further develop our TumorGraft Technology Platform.platforms. We continue to expand our TumorBank throughvia the inclusion of tumor tissue and implanted models through research collaborations and relationships with hospitals and academic institutions. In addition, we expect to grow our TumorBank through our POS business. Our research and development efforts were focused on increasing our understanding of our TumorGraft models, their clinical predictability, improving growth and tumor take rates, and other biological and molecular characteristics of the models. We are investing in developing additional proprietary pharmacology platforms aimed at enhancing the scientific output and driving innovation in the oncology research sector.

 

Government Regulation

 

The research, development, and marketing of our products, the performance of our legacy POS testing services, and the operation of our facilities are generally subject to federal, state, local, or foreign legislation, including licensure of our laboratorieslaboratory located in Baltimore,Rockville, Maryland and New York, New York by the StatesState of Maryland and New York, respectively, and compliance with federal, state, local or foreign legislation applicable to the use of live animals in scientific testing, research and education.

 

The FDA has claimed regulatory authority over laboratory developed tests such as our legacy POS products, but has generally not exercised it. The FDA has announced regulatory and guidance initiatives that could increase federal regulation of our business. We are subject to federal and international regulations with regard to shipment of hazardous materials, including the Department of Transportation and the International Air Transit Authority. These regulations require interstate, intrastate, and foreign shipments comply with applicable labeling, documentation, and training requirements.

 

 

As of July 15, 2017,2022, we had 79230 full-time employees, including 2578 with doctoral or other advanced degrees. Of our workforce, 64181 employees are engaged in research and development and laboratory operations, 831 employees are engaged in sales and marketing, and 718 employees are engaged in finance and administration.  

None of our employees are represented by a labor union or covered by collective bargaining agreements.  We have never experienced a work stoppage and believe our relationship with our employees is good.

 

Company History

 

We were incorporated as a merger and acquisition company under the laws of the State of Delaware on June 4, 1985, under the name “International Group, Inc.” In September 1985, the Company completed a public offering and shortly thereafter acquired the world-wide rights to the Champions sports theme restaurant concept and changed its name to “Champions Sports, Inc.” In 1997, the Company sold its Champions service mark and concept to Marriott International, Inc. and until 2005, was a consultant to Marriott International, Inc. and operated one Champions Sports Bar Restaurant. In January 2007, the Company changed its business direction to focus on biotechnology and subsequently changed its name to Champions Biotechnology, Inc. On May 18, 2007, the Company acquired Biomerk, Inc., at which time we began focusing on our current line of business. In April 2011, the Company changed its name to Champions Oncology, Inc. to reflect the Company's new strategic focus on developing advanced technologies to personalize the development and use of oncology drugs.

 

 

You should carefully consider the risks described below together with all of the other information included in this Annual Report.  The risks and uncertainties described below are not the only ones we face.  Additional risks not presently known, or those we currently consider insignificant, may also impair our business operations in the future.

For the years ended April 30, 20172022 and 2016,2021, the Company had a net lossincome of approximately $6.9 million$548,000 and $10.4 million,$362,000, respectively.  As of April 30, 2017,2022, the Company has an accumulated deficit of approximately $69.3$72.0 million. As of April 30, 2017,2022, we had negative working capital of $1.6$2.2 million and cash and cash equivalents of $3.3$9.0 million. As of July 15, 2017, we had $1.0 million in cash and cash equivalents. We believe that our cash andon hand, together with expected cash equivalents on handflows from operations, are adequate to fund our operations through at least August of 2018.2023.

The amount of our income or losses and liquidity requirements may vary significantly from year-to-year and quarter-to-quarter and will depend on, among other factors:

 

Currently, the Company derives revenue primarily from POS products and TOS products,research services, while pursuing efforts to further develop bioinformatics from its TumorBankSaaS and its TumorGraft Technology Platform.  In addition, wedrug discovery business units. We are buildinginvesting resources to further grow our sales and marketing operations to grow the salesof all of our TOS products.  Our POS products are not the focus of our growth moving forward. Accordingly, we expect to generate operating losses in the future until such time as we are able to generate significantly more revenue.business units.  

 

 

In order to grow revenues, we must invest capital to implement our sales and marketing efforts and to successfully develop our bioinformatics from our TumorBank and our TumorGraft Technology Platform. Because we do not have sufficient history of commercial efforts, ourtechnology platforms. Our sales and marketing efforts may never generate significant increases in revenues or achieve profitability and it is likelypossible that we will be required to raise additional capital to continue our operations as currently contemplated.operations. If we must devote a substantial amount of time to raising capital, it will delay our ability to achieve our business goals within the time frames that we now expect, which could increase the amount of capital we need. In addition, the amount of time expended by our management on fundraising distracts them from concentrating on our business affairs. If we require additional capital and are not successful in raising the needed capital, we may have to cease operations.

 

 

We use reasonable efforts to assess and predict the expenses necessary to pursue our business strategies. However, implementing our business strategies may require more employees, capital equipment, supplies or other expenditure items than management has predicted. Similarly, the cost of compensating additional management, employees and consultants or other operating costs may be more than we estimate, which could result in ongoing and sustained losses.

 

Implementation of our business strategies will depend in large part on our ability to (i) attract and maintain a significant number of customers; (ii) effectively provide acceptable services to our customers; (iii) develop and license new products and technologies; (iv)  maintain appropriate internal procedures, policies, and systems; (v) hire, train, and retain skilled employees and management; (vi) continue to operate despite increasing competition in our industry; and (vii) establish, develop and maintain our name recognition. Our inability to obtain or maintain any or all these factors could impair our ability to implement our business strategies successfully, which could have material adverse effects on our results of operations and financial condition.

Our business could be adversely impacted by changes in FDA’s regulatory oversight of laboratory-developed tests such as our POS services that are currently under consideration or by other changes in the regulatory requirements applicable to our POS services imposed by the FDA or regulatory authorities in other countries in which our services are provided.

 

Our TumorGraft productsresearch services are performed in laboratories that are subject to state regulation and licensure requirements. Such regulation and requirements are subject to change, and may result in additional costs or delays in providing our products to our customers. In addition, the healthcare industry in general is highly regulated in the United States at both the federal and state

 

We currently utilize twoseveral office suites where our laboratories in Baltimore, Maryland and New York, New York to perform the work of our tumor studies and develop and bank our TumorGraft Technology Platform models. The lab in Baltimore is where a majority of the work is performed. We will be opening a laboratoryare located within one facility in Rockville, Maryland during the first quarter of fiscal 2018 and will start to transition our activities from the Baltimore lab to this new facility.Maryland. If this facility or, to a lesser degree, any of our other facilities, werewas to be significantly damaged or destroyed, we could suffer a loss of our ongoing and future drug studies, as well as our TumorBank. In addition, we lease the space for each of these laboratories from a third party. If we had a dispute with any of our landlordslandlord or otherwise could not utilize thisour space, it would take time to find and move to a new facility, which could negatively affect our results of operations.

Our TumorGraftresearch services operations depend on having a colony of live mice available. If this population experienced a health crisis, such as a virus or other pathogen, such crisis would affect the success of our existing POS and TOS business and future business, as we would have to rebuild the population and repeat current TumorGrafts.studies.

 

Currently, we rely on the internet, word of mouth, and a small sales force to market our services. We have to compete with other pharmaceutical, biotechnology and life science technology and service companies to recruit, hire, train, and retain marketing and sales personnel. However, there can be no assurance that we will be able to develop in-house sales, and as a result, we may not be able to generate product revenue. 

 

Our success, currently, is dependent upon the efforts of several full-time key employees, the loss of the services of one or more of which would have a material adverse effect on our business and financial condition. We intend to continue to develop our management team and attract and retain qualified personnel in all functional areas to expand and grow our business. This may be difficult in the healthcare industry where competition for skilled personnel is intense.

Because our industry is very competitive and many of our competitors have substantially greater capital resources and more experience in research and development, we may not succeed in selling or increasing sales of our products and technologies.

 

We are engaged in a rapidly changing and highly competitive field. Potential competitors in the United States and abroad are numerous and include providers of clinical research services, most of which have substantially greater capital resources and more experience in research and development capabilities. Furthermore, new companies will likely enter our market from the United States and abroad, as scientific developments surrounding other pre-clinical and clinical services grow in the multibillion dollar oncology marketplace.  Our competitors may succeed in selling their products to our pharmaceutical and biotech customers more effectively than we sell our products.  In addition, academic institutions, hospitals, governmental agencies, and other public and private research organizations also may conduct similar research, seek patent protection, and may develop and commercially introduce competing products or technologies on their own or through joint ventures. If one or more of our competitors succeeds in developing similar technologies and products that are more effective or successful than any of those that we currently sell or will develop, our results of operations will be significantly adversely affected.

 

It is important in the healthcare industry to obtain patent and trade secret protection for new technologies, products, and processes. Our success will depend, in part, upon our ability to obtain, enjoy, and enforce protection for any products we have, develop or acquire under United States and foreign patent laws and other intellectual property laws, preserve the confidentiality of our trade

 

It also is unclear whether efforts to secure our trade secrets will provide useful protection. While we will use reasonable efforts to protect our trade secrets, our employees or consultants may unintentionally or willfully disclose our proprietary information to competitors resulting in a loss of protection. Enforcing a claim that someone else illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Finally, our competitors may independently develop equivalent knowledge, methods and know-how.

We rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also seek to enter into confidentiality and invention assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties by other means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

Claims by others that our products infringe their patents or other intellectual property rights could adversely affect our financial condition.

 

The healthcare industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Patent applications are maintained in secrecy in the United States and also are maintained in secrecy outside the United States until the application is published. Accordingly, we can conduct only limited searches to determine whether our technology

Our revenue is primarily derived from studies performed for pharmaceutical and biotechnology companies to assist in the development of oncology drugs. There are many factors that could result in the change of our customers development plans for specific drugs, including without limitation to their research and development budgets and drug development strategies. These changes could lead to the cancellation or modification of on-going or planned studies. This would have a negative impact on the Company’s revenue growth and profit margin.

Under Section 382 of the Internal Revenue Code of 1986, as amended, referred to as the Internal Revenue Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carry-forwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We believe that our recent2016 public offering, taken together with our private placements and other transactions that have occurred over the past three years, wesince then, may have triggered an “ownership change” limitation. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carry-forwards to offset U.S. federal taxable income may be subject to limitations, which potentially could result in increased future tax liability to us.

Trading activity in our common stock is and has been limited. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of our common stock. There can be no assurance that a more active market for our common stock will develop, or if one should develop, there is no assurance that it will be sustained. This could severely limit the liquidity of our common stock, and would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital. Furthermore, like many stocks quoted on the Nasdaq Capital Market, trading in our common stock is thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance.

 

We may issue additional shares of common stock, which will reduce shareholders’ percentage ownership and may dilute per share value. Our Certificatecertificate of Incorporationincorporation authorizes the issuance of 200,000,000 shares of common stock. As of July 15, 2017,20, 2022, we had 11,251,84413,522,441 shares of common stock issued and 10,982,159 shares outstanding. The future issuance of all or part of the remaining authorized common stock would result in substantial dilution in the percentage of the common stock held by existing

     

To the extent that we raise additional funds by issuing equity securities or convertible debt securities in the future, our stockholders may experience significant dilution. Sale of additional equity and/or convertible debt securities at prices below certain levels will trigger anti-dilution provisions with respect to certain securities we have previously sold. If additional funds are raised through a credit facility or the issuance of debt securities or preferred stock, lenders under the credit facility or holders of these debt securities or preferred stock would likely have rights that are senior to the rights of holders of our common stock, and any credit facility or additional securities could contain covenants that would restrict our operation.

 

We have historically supported our operations through the issuance of equity and expect tomay continue to do so in the future. Although we may not be successful in obtaining financing through equity sales on terms that are favorable to us, if at all, any such sales that do occur could result in substantial dilution to the interests of existing holders of our common stock.

Additionally, the sale of a substantial number of shares of our common stock or other equity securities to any new investors, or the anticipation of such sales, could cause the trading price of our common stock to fall.

 

The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price they paid for it. The market price for our common stock may be influenced by many factors, including:

 

 

Certain provisions of our certificate of incorporation and bylaws, and our contractual agreements could make it difficult for or prevent a third party from acquiring control of us or changing our board of directors and management. These provisions include:

 

The Delaware General Corporation Law containcontains provisions that may have the effect of making it more difficult or delaying attempts by others to obtain control of us, even when these attempts may be in the best interests of our stockholders. We also are subject to the anti-takeover provisions of the Delaware General Corporation Law, which prohibit us from engaging in a “business combination” with an “interested stockholder” unless the business combination is approved in a prescribed manner and prohibit the voting of shares held by persons acquiring certain numbers of shares without obtaining requisite approval. The statutes have the effect of making it more difficult to effect a change in control of a Delaware company.

Collectively, our officers, our directors and sixthree significant stockholders own or exercise voting and investment control of approximately 52%67% of our outstanding common stock as of July 15, 2017.20, 2022. As a result, investors may be prevented from affecting matters involving our company, including:

Furthermore, this concentration of voting power could have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders. This significant concentration of share

We have not paid any cash dividends in the past and have no plans to issue cash dividends in the future, which could cause the value of our common stock to have a lower value than other similar companies which do pay cash dividends.

We have not paid any cash dividends on our common stock to date and do not anticipate any cash dividends being paid to holders of our common stock in the foreseeable future. While our dividend policy will be based on the operating results and capital needs of the business, it is anticipated that any earnings will be retained to finance our future expansion. As we have no plans to issue cash dividends in the future, our common stock could be less desirable to other investors and as a result, the value of our common stock may decline, or fail to reach the valuations of other similarly situated companies who have historically paid cash dividends in the past.

The trading market for our common stock may be influenced by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any analyst who may cover us was to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our common stock or trading volume to decline.

 

The Company currently leases its office facilities.and laboratory facilities under non-cancelable operating leases. Rent expense for operating leases is recognized on a straight-line basis over the lease term from the lease commencement date through the scheduled expiration date. Rent expenses totaled $398,000$1.9 million and $304,000$1.3 million for the years ended April 30, 20172022 and 2016,2021, respectively. The Company considers its facilities adequate for its current operational needs.

None.

 

 

 

PART II

Principal Market or Markets

 

Our shares of common stock are currently quoted on the Nasdaq Capital Market under the symbol “CSBR.” Our common stock commenced trading on the Nasdaq Capital Market on August 21, 2015. Prior to such date, our shares of common stock were traded over-the-counter and quoted on the OTCQB Marketplace.

    

The table below sets forth the high and low bid prices of our common stock, as reported on Nasdaq or the OTCQB Marketplace for the periods shown (as adjusted for the reverse stock split of our outstanding shares of common stock at a ratio of 1-for-12 that became effective on August 12, 2015):shown:

Approximate Number of Holders of Common Stock

 

As of July 15, 2017,20, 2022 there were approximately 1,9071,900 record holders of the Company’s common stock.

 

Dividends

 

Holders of our common stock are entitled to receive such dividends as may be declared by our Board of Directors.  No dividends have been declared or paid with respect to our common stock and no dividends are anticipated to be paid in the foreseeable future.  Any future decisions as to the payment of dividends will be at the discretion of our Board of Directors, subject to applicable law.

Recent Sales by the Company of Unregistered Securities

 

None.

 

Repurchases of Securities

None.

Use of Proceeds

 

Overview and Recent Developments

We are engaged in the development and sale of advanced technology solutions and products to personalize the development and use of oncology drugs.drugs through our Translational Oncology Solutions ("TOS"). This technology ranges from computational-based discovery platforms, unique oncology software solutions, and innovative and proprietary experimental tools such as in vivo, ex vivo and biomarker platforms. Utilizing our TumorGraft Technology Platform ("The Platform"), a comprehensive Bank of unique, well characterized models, we provide select services to pharmaceutical and biotechnology companies seeking personalized approaches to drug development. By performing studies to predict the efficacy of oncology drugs, our Platform facilitates drug discovery with lower costs and increased speed of drug development as well as increased adoption of existing drugs.

Our drug discovery and development business leverages the computational and experimental capabilities within our platforms. Our discovery strategy utilizes our rich and unique Datacenter, coupled with artificial intelligence and other advanced computational analytics, to identify novel therapeutic targets. We then employ the underwriteruse of our proprietary experimental platforms to purchase an additional 258,749 sharesrapidly validate these targets for further drug development efforts.

Results of Operations

 

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

 

Operating revenues for the years ended April 30, 2017 and 2016 were $15.4Oncology services revenue, which is primarily derived from research services, was $49.1 million and $11.2 million, respectively, an increase of $4.2 million, or 37.8%, driven by the increase in TOS revenue.

 

Research and development expense was $4.3$9.4 million and $4.2$7.2 million for the years ended April 30, 20172022 and 2016,2021, respectively, an increase of $100,000$2.2 million or 2.4%30.3%. The increase was primarily due to the investments in new service capabilities and our drug discovery and development programs with the increase coming primarily from compensation and lab supply expenses.

 

General and administrative expense was $5.0$9.1 million and $5.2$6.5 million for the years ended April 30, 20172022 and 2016,2021, respectively, a decrease of $200,000,$2.6 million, or 4.1%40.0%. General and administrative expenses were primarily comprised of compensation, insurance, professional fees, IT, and depreciation and amortization expenses. The decrease isgeneral and administrative expenses increase was primarily due to aggressive cost management.increases in non-cash expenses, compensation and IT expenses for data storage and to support the overall infrastructure growth of the company.

Other Expenseexpense was ($56,000)$24,000 and ($38,000)other income was $71,000 for the years ended April 30, 20172022 and 2016,2021, respectively. The currentOther expense for the year expense is mainly dueended April 30, 2022 resulted primarily from foreign currency transaction losses. Other income for the year ended April 30, 2021 was primarily attributable to a $75,000 gain on operating lease termination offset by foreign currency transaction losses.

 

Liquidity and Capital Resources

 

Our liquidity needs have typically arisen from the funding of our research and development programs and the launch of new products, working capital requirements, and other strategic initiatives. In the past, we have met these cash requirements through our cash and cash equivalents,on hand, working capital management, proceeds from certain private placements and public offerings of our securities and sales of products and services. For the years ended April 30, 20172022 and 2016,2021, the Company had a net lossincome of approximately $6.9 million$548,000 and $10.4 million,$362,000, respectively. As of April 30, 2017,2022, the Company had an accumulated deficit of approximately $69.3$72.0 million, negative working capital of $1.6$2.2 million and cash and cash equivalents of $3.3$9.0 million. We believe that our cash andon hand, together with expected cash equivalents on handflows from operations, are adequate to fund operations through at least August 2018.2023. Should the Company be required to raise additional capital, there can be no assurance that management would be successful in raising such capital on terms acceptable to us, if at all.

Cash Flows

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

 

Net cash used inprovided by (used in) operating activities was $2.8$6.5 million and $6.4($1.7) million for the years ended April 30, 20172022 and 2016,2021, respectively. The decrease of $3.6 millionincrease in cash used in operations relatesprovided was primarily due to improving cash based operational results and an increase in revenuesdeferred revenue. The increase in conjunction withdeferred revenue was primarily driven by cash received upon signing new studies, an indicator of the reductionstrength of fixed costs and effective managementthe Company’s sales pipeline. Changes in our working capital accounts were in the ordinary course of variable lab costs.business operating activities.

Net cash used in investing activities was $766,000$2.4 million and $322,000$3.2 million for the years ended April 30, 20172022 and 2016,2021, respectively. TheseThe cash flows relate toused was for the purchase of propertyinvestment in lab and equipment.computer equipment and software development.

 

Critical Accounting Policies

 

 

 

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States or GAAP. The preparation of the consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. Significant estimates of the Company include, among other things, accounts receivable realization, revenue recognition (replacement of licensed tumors), valuation allowance for deferred tax assets, valuationrecoverability of goodwill,capitalized software development costs, and stockstock-based compensation and warrant assumptions. We have not identified any estimates that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. We base our estimates on historical experience, our observance of trends in particular areas and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated.

 

Stock-Based Payments

 

We typically recognize expense for stock-based payments based on the fair value of awards on the date of grant. We use the Black-Scholes option pricing model to estimate fair value. The option pricing model requires us to estimate certain key assumptions such as expected life, volatility, risk free interest rates, and dividend yield to determine the fair value of stock-based awards. These assumptions are based on historical information and management judgment. We expense stock-based payments over the period that the awards are expected to vest, netvest. In the event of estimated forfeitures.  If actual forfeitures, differ from management’s estimates, compensation expense is adjusted. We report cash flows resulting from tax deductions in excess of the compensation cost recognized from those options (excess tax benefits) as financing cash flows when the cash tax benefit is received.

Goodwill represents the excess ofThe Company accounts for the cost of computer software obtained or developed for internal use as well as the software development and implementation costs associated with a hosting arrangement ("internal-use software") that is a service contract

Capitalized software development costs are stated at gross cost less accumulated amortization. Recoverability of these capitalized costs is tested annually, or more frequently, if circumstances indicate potential impairment,determined at each balance sheet date by comparing its fair value to its carrying amount.  The determination of whether or not goodwill is impaired involves significant judgment.  Although we believe our goodwill is not impaired, changes in strategy or market conditions could significantly impact the judgmentsforecasted future revenues from the related product, based on management’s best estimates using appropriate assumptions and may require future adjustmentsprojections at the time, to the carrying value of goodwill.  We use a two-step process to test for goodwill impairment.  The first step is to screen for potential impairment, while the second step measures the amount of the impairment, if any.  The first step of the goodwill impairment test compares the fair value of each reporting unit with its carrying amount, including goodwill.  If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired.capitalized software development costs. If the carrying value of the reporting unit’s net assets, including goodwill, exceeds the fair value of the reporting unit, then we determine the implied fair value of goodwill.  If the carrying value of goodwill exceeds its implied fair value, then an impairment of goodwill has occurred andis determined not to be recoverable from future revenues, an impairment loss would beis recognized forequal to the difference betweenamount by which the carrying amount andexceeds the implied fair value of goodwill as a component of operating income.  The implied fair value of goodwill is calculated by subtracting the fair value of tangible and intangible assets associated with the reporting unit from the fair value of the unit.future revenues.

 

We use the asset and liability method to account for income taxes. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets.  In preparing the consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate.  This process involves estimating the actual current tax liability together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, depreciation on property, plant and equipment, goodwill and losses for tax and accounting purposes.  These differences result in deferred tax assets, which include tax loss carry-forwards, and liabilities, which are included within the consolidated balance sheet.  We then assess the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, a valuation allowance is established. To the extent a valuation allowance is established or increased in a period, we include an expense within the tax provision of the consolidated statements of operations. As of April 30, 20172022 and 2016,2021, we have established a full valuation allowance for all deferred tax assets.

 

As of April 30, 20172022 and 2016,2021, we recognized a liability for uncertain tax positions on the balance sheet relative to foreign operations in the amount of $121,000 and $165,000, respectively.$181,000. We do not anticipate any significant unrecognized tax benefits

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.

 

 

Conclusion Regarding the Effectiveness ofManagement's Report on Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Principal Executive Officer (our Chief Executive Officer) and Principal Financial Officer and our principal financial and accounting officer, have reviewed and(our Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures (asas of April 30, 2022, the end of our fiscal year covered by this annual report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act Rule 13a-15(e))of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of April 30, 2022, that consider remediation efforts commenced by the endCompany as a result of the period covered by this Form 10-K.  Based on that evaluation, our management, includingmaterial weakness noted during the assessment of the effectiveness of the Company’s internal controls over financial reporting as of and for the year ended April 30, 2021, our Chief Executive Officer and our principal financial and accounting officer,Chief Financial Officer have concluded that, as of April 30, 2022, our disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K.are effective.

Management’s Annual Report on Internal Control Overover Financial Reporting

For the year ended April 30, 2021, we identified a material weakness in the consolidated financial statements close process. Specifically, our risk assessment procedures over certain of our contractual arrangements requiring the payment of royalties for the licensing of technology from third-parties did not adequately identify the risks and consider the Company’s obligations based on the recognition of oncology services revenue. As a result, the Company had missing process level controls over the review of royalty arrangements and the timely determination and recognition of related liabilities. Although no material misstatements were identified in our consolidated financial statements, these control deficiencies resulted in immaterial misstatements to our previously issued consolidated financial statements which were corrected in the consolidated financial statements included in the Form 10-K for our fiscal year ended April 30, 2021.

Changes in Internal Controls

ThereOther than the remediation of the prior year material weakness, there were no other changes in ourthe Company’s internal controls over financial reporting during the quarteryear ended April 30, 2017,2022, that have materially affected, or arewere reasonably likely to materially affect ourthe Company’s internal control over financial reporting.

 

PART III

 

 

 

 

PART IV

(a)1. Financial Statements

 

 

(a)2. Financial Statement Schedules

(a)3. Exhibits required to be filed by Item 601 of Regulation S-K.

* Filed herewith

SIGNATURES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS