CHAMPIONS ONCOLOGY INC

Previous wording

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. Recently, we have met these cash requirements through cash, working capital management, and sales of products and services. In the past, we have also received proceeds from certain private placements and public offerings of our securities. For the nine months ended January 31, 2024, the Company had a net loss of approximately $7.2 million and cash used in operations of approximately $4.3 million. As of January 31, 2024, the Company had an accumulated deficit of approximately $84.5 million and cash on hand of approximately $4.5 million. We believe that our cash on hand, together with expected cash flows from operations to be provided for during fiscal 2025, are adequate to fund operations through at least 12 months from the filing of this Report. However, should our revenue expectations not materialize, we believe we have cost reduction strategies that could be implemented without disrupting the business or restructuring the Company. 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.

Current wording

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. Most recently, we have met these cash requirements through cash on hand, working capital management, and sales of products and services. In the past, we have also received proceeds from certain private placements and public offerings of our securities. For the three months ended July 31, 2024, the Company had net income of approximately $1.3 million and cash provided by operations of approximately $311,000. As of July 31, 2024, the Company had an accumulated deficit of approximately $83.3 million and cash on hand of approximately $2.9 million. While we believe we have strategies to increase our revenues and reduce our costs which can be implemented without disrupting the business or completely restructuring the Company, there can be no assurances. In order to continue to fund our operations we may need to raise additional equity or debt capital in the near term and cannot provide any assurance that we will be successful in doing so, and if we can, on whether the terms will be acceptable to us. If we are unable to obtain additional financing in the near future, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws.

Previous wording

Cost of oncology services for the three months ended January 31, 2024 and 2023 were $7.8 million and $7.7 million, respectively, an increase of $150,000 or 1.9%. Cost of oncology services for the nine months ended January 31, 2024 and 2023 were $22.2 million and $22.2 million, respectively, a slight decrease of $43,000 or 0.2%. The net increase in cost of oncology services for the three months ended January 31, 2024 was primarily from an increase in compensation expense and mouse costs. For the three months ended January 31, 2024 and 2023, margins were 34.7% and 39.7%, respectively. For the nine months ended January 2024 and 2023, margins were 38.7% and 45.6%, respectively. The lower margin for both the three months and nine months ended January 31, 2024 resulted primarily from a decline in top line revenue against a generally unchanged cost base.

Current wording

Cost of oncology services for the three months ended July 31, 2024 and 2023 were $7.1 million and $7.7 million, respectively, a decrease of $612,000 or 8.0%. The decrease in cost of sales was primarily from a decline in outsourced lab services.

Previous wording

Research and development expenses for the three months ended January 31, 2024 and 2023 were $2.2 million and $3.2 million, respectively, a decrease of approximately $1.0 million or 31.7%. Research and development expenses for the nine months ended January 2024 and 2023 were $7.5 million and $8.7 million, respectively, a decrease of approximately $1.2 million or 13.8%. The decrease in both the three and nine month periods was primarily due to a reduction in investment related to our target discovery program.

Current wording

Research and development expense for the three months ended July 31, 2024 and 2023 were $1.5 million and $2.8 million, respectively, a decrease of approximately $1.3 million or 47.9%. The decrease in the three month period was primarily due to a reduction in investment in our developmental programs including target discovery.

Previous wording

Sales and marketing expenses for the three months ended January 31, 2024 and 2023 were $1.8 million and $1.8 million, respectively, a slight increase of $36,000 or 2.0%. Sales and marketing expenses for the nine months ended January 2024 and 2023 were $5.3 million and $5.2 million, respectively, an increase of $135,000 or 2.6%. Sales and marketing expenses are primarily comprised of compensation expenses to support business development.

Current wording

Sales and marketing expenses for the three months ended July 31, 2024 and 2023 were $1.7 million, with a slight decrease of $17,000 or 1.0%. Sales and marketing expenses are primarily comprised of compensation expenses to support business development.

Previous wording

General and administrative expenses for the three months ended January 31, 2024 and 2023 were $2.8 million and $2.6 million, respectively, an increase of $195,000, or 7.6%. General and administrative expenses for the nine months ended January 31, 2024 and 2023 were $8.3 million and $7.5 million, respectively, an increase of $811,000, or 10.8%. General and administrative expenses are primarily comprised of compensation, insurance, professional fees, IT and depreciation and amortization expenses. The increase for the nine months ended January 31, 2024 was primarily from compensation and recruiting expenses and an increase in allowances for credit losses and bad debt reserves.

Current wording

General and administrative expenses for the three months ended July 31, 2024 and 2023 were $2.5 million and $2.9 million, respectively, a decrease of $413,000, or 14.0%. General and administrative expenses are primarily comprised of compensation, insurance, professional fees, IT and depreciation and amortization expenses. The decrease for the three months ended July 31, 2024 was primarily from a decrease in compensation and employee recruitment expenses.

Previous wording

Net cash used in investing activities was $947,000 and $2.1 million for the nine months ended January 31, 2024 and 2023, respectively. The cash used in investing activities was for the investment in additional lab and computer equipment.

Current wording

Net cash used in investing activities was $0 and $668,000 for the three months ended July 31, 2024 and 2023, respectively. The cash used in investing activities for the prior year period was for the investment in additional lab and computer equipment.

Previous wording

Net cash used in financing activities was $382,000 for the nine months ended January 31, 2024. The cash used was for the Company's stock repurchase program, offset by cash received from stock option exercises.

Current wording

Net cash used in financing activities was $37,000 for the three months ended July 31, 2024 and $590,000 for the three months ended July 31, 2023. The cash used in the current year was for financing lease payments. The cash used in the prior year period was for the Company's stock repurchase program offset slightly by cash received from stock option exercises.

Previous wording

Our results of operations may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East. We cannot at this time fully predict the likelihood of one or more of the above events, their duration, or magnitude or the extent to which they may negatively impact our business.

Current wording

Our results of operations may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the effects of the resurgence of COVID-19 and/or its variants or the emergence of new viruses, and geopolitical instability, such as the military conflicts in Ukraine and the Middle East. We cannot at this time fully predict the likelihood of one or more of the above events, their duration, or magnitude or the extent to which they may negatively impact our business.

Previous wording

The preparation of these condensed consolidated financial statements in conformity with GAAP in the United States requires management to apply methodologies and make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company include, among other things, accounts receivable realization, revenue recognition (replacement of licensed tumors), valuation allowance for deferred tax assets, valuation of goodwill, and stock-based compensation and warrant assumptions. Actual results could differ from those estimates. The Company’s critical accounting policies are summarized in our 2023 Annual Report.

Current wording

The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to apply methodologies and make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company include, among other things, accounts receivable realization, revenue recognition, and stock-based compensation assumptions. Actual results could differ from those estimates. The Company’s critical accounting policies are summarized in our 2024 Annual Report.