CHAMPIONS ONCOLOGY, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following discussion of our historical results of operations and our
liquidity and capital resources should be read in conjunction with the condensed
consolidated financial statements and related notes that appear elsewhere in
this report and our most recent annual report for the year ended April 30, 2021,
as filed on Form 10-K.

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

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

Forward-looking statements speak only as of the date the statements are made.
Factors that could cause actual results to differ from those discussed in the
forward-looking statements include, but are not limited to, those described in
"Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the
fiscal year ended April 30, 2021, as updated in our subsequent reports filed
with the SEC, including any updates found in Part II, Item 1A of this or other
reports on Form 10-Q, if any. You should not put undue reliance on any
forward-looking statements. We assume no obligation to update forward-looking
statements to reflect actual results, changes in assumptions, or changes in
other factors affecting forward-looking information, except to the extent
required by applicable securities laws. If we do update one or more
forward-looking statements, no inference should be drawn that we will make
additional updates with respect to those or other forward-looking statements.

Overview and Recent Developments
We are engaged in creating transformative technology solutions to be utilized in
oncology drug discovery and development. Our research center 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 speeds. We perform
studies which we believe may predict the efficacy of experimental oncology drugs
or approved drugs as stand-alone therapies or in combination with other drugs
and can stimulate the results of human clinical trials. These studies include in
vivo studies that rely on implanting multiple tumors from our TumorBank in mice
and testing the therapy of interest on these tumors. Studies may also include
bioinformatics analysis that reveal the differences in the genetic signatures of
the tumors that responded to a therapy as compared to the tumors that did not
respond. Additionally, we provide computational or experimental support to
identify novel therapeutic targets, select appropriate patient populations for
clinical evaluation, identify potential therapeutic combination strategies, and
develop biomarker hypothesis of sensitivity or resistance. These studies include
the use of our in vivo, ex vivo, analytical and computational platforms.

As part of our growth strategy, we launched Lumin Bioinformatics ("Lumin"), a
new oncology data-driven software program, during fiscal 2021. Our Lumin
software contains comprehensive information derived from our research services
and clinical studies. Lumin leverages Champions' large Datacenter coupled with
analytics and artificial intelligence to provide a robust tool for computational
cancer research. Insights developed using Lumin can provide the basis for
biomarker hypotheses, reveal potential mechanisms of therapeutic resistance, and
guide the direction of additional preclinical evaluations.

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
employ the use of our proprietary experimental platforms to rapidly validate
these targets for further drug development efforts.

We have a rich pipeline of targets at various stages of discovery and
validation, with a select group that has progressed to therapeutic development,
and we plan to continue investing in this research and development. Our
commercial strategy for the validated targets and therapeutics established from
this business is wide-ranging and still being developed. It will depend on many
factors, and will be specific for each target or therapeutic area identified.

Cash and capital resources

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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 cash on hand, working capital management, proceeds
from certain private placements and public offerings of our securities, and
sales of products and services. For the nine months ended January 31, 2022, the
Company had net income of approximately $892,000 and cash provided by operations
of $5.7 million. As of January 31, 2022, the Company had an accumulated deficit
of approximately $71.6 million, working capital of $2.3 million, and cash on
hand of $8.7 million. We believe that our cash on hand, together with expected
positive cash flows from operations for fiscal year 2022, are adequate to fund
operations through at least 12 months from the filing of this 10-Q. 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.

Operating results

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

For the three months ended January 31,

                                                                        % of                                    % of                    %
                                                    2022               Revenue              2021               Revenue               Change

Oncology services revenue                       $  13,193                 100.0  %       $ 10,812                 100.0  %               22.0  %

Costs and operating expenses:
Cost of oncology services                           6,406                  48.6             4,623                  42.8                  38.6
Research and development                            2,181                  16.5             1,879                  17.4                  16.1
Sales and marketing                                 1,549                  11.7             1,492                  13.8                   3.8
General and administrative                          2,227                  16.9             1,836                  17.0                  21.3

Total costs and operating expenses                 12,363                  93.7             9,830                  91.0                  25.8
Income from operations                          $     830                   6.3  %       $    982                   9.1  %              (15.5) %


                                                                           

For the nine months ended January 31,

                                                                        % of                                    % of                   %
                                                    2022               Revenue              2021               Revenue               Change

Oncology services revenue                       $  36,232                 100.0  %       $ 30,476                 100.0  %              18.9  %

Costs and operating expenses:
Cost of oncology services                          17,411                  48.1            15,603                  51.2                 11.6
Research and development                            6,783                  18.7             5,125                  16.8                 32.4
Sales and marketing                                 4,764                  13.1             4,048                  13.3                 17.7
General and administrative                          6,356                  17.5             4,686                  15.4                 35.6

Total costs and operating expenses                 35,314                  97.5            29,462                  96.6                 19.9
Income from operations                          $     918                   2.5          $  1,014                   3.3  %              (9.5) %



Oncology Services Revenue

Oncology services revenue, which is primarily derived from pharmacology studies,
was $13.2 million and $10.8 million for the three months ended January 31, 2022
and 2021, respectively, an increase of $2.4 million or 22.0%. Oncology services
revenue was $36.2 million and $30.5 million for the nine months ended January
31, 2022 and 2021, respectively, an increase of
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$5.8 million or 18.9%. The increase in revenue is due to the continued demand for our core services and the expansion of our platform and product lines, resulting in increased sales in both number and size of studies.

Cost of oncology services

Cost of oncology services for the three months ended January 31, 2022 and 2021
were $6.4 million and $4.6 million, respectively.  For the three months ended
January 31, 2022 and 2021, gross margins were 51.4% and 57.2%, respectively.
Cost of oncology services for the nine months ended January 31, 2022 and 2021
were $17.4 million and $15.6 million, respectively.  For the nine months ended
January 31, 2022 and 2021, gross margins were 51.9% and 48.8%, respectively.
Cost of sales for the three months ended January 31, 2021 were atypically low
resulting in an unusually high gross margin. The gross margins for the nine
month periods ended January 2022 and 2021, respectively, were more indicative of
margin trends. The current year to date improvement was primarily due to the
reduction in outsourced lab work which offset the increase in compensation and
lab supply expenses resulting from the increase in study volume. Additionally,
the increase in gross margin demonstrated the inherent leverage in our operating
model.

 Research and Development

Research and development expenses for the three months ended January 31, 2022
and 2021 were $2.2 million and $1.9 million, respectively, an increase of
approximately $302,000 or 16.1%. Research and development expenses for the nine
months ended January 31, 2022 and 2021 were $6.8 million and $5.1 million,
respectively, an increase of approximately $1.7 million or 32.4%. The increase
for the three and nine month periods was mainly due to increased compensation
and sequencing costs related to our increased investment in our therapeutic
target discovery platform.

Sales and Marketing

Sales and marketing expenses for the three months ended January 31, 2022 and
2021 were $1.5 million, respectively. Sales and marketing expenses for the nine
months ended January 31, 2022 and 2021 were $4.8 million and $4.0 million,
respectively, an increase of $716,000, or 17.7%. The increase for the nine month
period is mainly due to compensation expense driven by the expansion of our
research services business development team and the addition of a Software as a
Service ("SaaS") business development team.

General and administrative

General and administrative expenses for the three months ended January 31, 2022
and 2021 were $2.2 million and $1.8 million, an increase of $391,000, or 21.3%.
General and administrative expenses for the nine months ended January 31, 2022
and 2021 were $6.4 million and $4.7 million, an increase of $1.7 million, or
35.6%. The increase was primarily due to an increase in compensation as well as
an increase in IT related expenses to support the overall infrastructure growth
of the organization.


Cash Flows

The following discussion covers the main components of our cash flows:

Cash flow from operating activities

Net cash provided by operating activities was $5.7 million compared to net cash
provided by operations of $299,000 for the nine months ended January 31, 2022
and 2021, respectively. The cash generated from operating activities during the
current period was primarily due to improving operating income excluding stock
compensation and depreciation and amortization expenses.

Cash flow from investing activities

Net cash used in investing activities was $1.9 million and $2.3 million for the nine months ended January 31, 2022 and 2021, respectively. Cash flow used in investing activities was primarily for investment in additional laboratory equipment and software development.

Cash flow from financing activities

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Net cash provided by financing activities was $191,000 for the nine months ended
January 31, 2022 compared to cash provided by financing activities $1.1 million
for the nine months ended January 31, 2021. Cash provided by financing
activities decreased primarily due to a reduction in the number of options
exercised compared to the prior year.

Critical accounting estimates and policies

The preparation of these condensed consolidated financial statements in
conformity with accounting principles generally accepted in the United States
requires management to apply methodologies and make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Significant estimates of the Company include, among other things, accounts
receivable realization, revenue recognition (replacement of licensed tumors),
valuation allowance for deferred tax assets, valuation of goodwill, and stock
compensation and warrant assumptions. Actual results could differ from those
estimates. The Company's critical accounting policies are summarized in the
Company's Annual Report on Form 10-K, filed with the SEC on July 26, 2021.

Recent accounting pronouncements

For detailed information regarding recently issued accounting pronouncements and
the expected impact on our condensed consolidated financial statements, see Note
2, "Significant Accounting Policies" in the accompanying Notes to Condensed
Consolidated Financial Statements included in Item 1 of this Report on Form
10-Q.

Off-balance sheet financing

We have no off-balance sheet debt or similar obligations. We have no transactions or obligations with related parties that are not disclosed, consolidated or reflected in our reported results of operations or financial condition. We do not guarantee any third party debt.

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