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SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended October 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from

to
 Commission file number 0-17263
 CHAMPIONS
BIOTECHNOLOGY, INC.
  Delaware
    
    52-1401755(State or other jurisdiction of incorporation
    
    (I.R.S. Employer Identification No.)or organization)855 N. Wolfe Street, Suite 619, Baltimore, MD
    
    21205(Address of principal executive
offices)
    
    (Zip code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed from
last report)
 þ o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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CHAMPIONS BIOTECHNOLOGY, INC.
FORM 10-Q
 INDEX
 PART I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of October 31, 2009
(unaudited) and April 30, 2009
    
    
    3Condensed Consolidated Statements of Operations
for the three and six months ended October 31, 2009 and 2008 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the
six months ended October 31, 2009 and 2008 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II. Other InformationItem 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults Upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    18SignaturesExhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
 CHAMPIONS BIOTECHNOLOGY, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 October 31, 
2009
    
    
    April 30, 
2009(unaudited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    394,000
    
    
    $
    1,728,000Short term investments
    
    
    
    
    
    
    1,017,000Accounts receivable
    
    
    72,000
    
    
    
    Prepaid expenses, deposits, and other receivables
    
    
    692,000
    
    
    
    1,125,000Total current assets
    
    
    1,158,000
    
    
    
    3,870,000Property and equipment, net
    
    
    97,000
    
    
    
    81,000Goodwill
    
    
    669,000
    
    
    
    669,000TOTAL ASSETS
    
    $
    1,924,000
    
    
    $
    4,620,000LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    1,185,000
    
    
    $
    1,414,000Accrued liabilities
    
    
    106,000
    
    
    
    67,000Deferred revenue
    
    
    131,000
    
    
    
    1,223,000Total current liabilities
    
    
    1,422,000
    
    
    
    2,704,000COMMITMENTS AND CONTINGENCIESAccrued stock repurchase
    
    
    219,000
    
    
    
    STOCKHOLDERS EQUITYPreferred stock, $10 par value; 56,075 shares
authorized; 0 shares issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 50,000,000 shares
authorized; 33,844,000 and 33,579,000 issued at October
31, 2009 and April 30, 2009, respectively,
and 32,865,000 and 32,989,000 shares outstanding at
October 31, 2009 and April 30, 2009, respectively
    
    
    34,000
    
    
    
    34,000Treasury stock, at cost, 979,000 and 590,000 shares at
October 31, 2009 and April 30, 2009, respectively
    
    
    (188,000
    )
    
    
    (1,000
    )Additional paid-in capital
    
    
    11,783,000
    
    
    
    11,640,000Accumulated deficit
    
    
    (11,344,000
    )
    
    
    (9,757,000
    )Accumulated other comprehensive income
    
    
    (2,000
    )
    
    
    Total stockholders equity
    
    
    283,000
    
    
    
    1,916,000TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    1,924,000
    
    
    $
    4,620,000
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CHAMPIONS BIOTECHNOLOGY, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2009
    
    
    2008
    
    
    2009
    
    
    2008OPERATING REVENUEPersonalized oncology services
    
    $
    589,000
    
    
    $
    864,000
    
    
    $
    1,488,000
    
    
    $
    1,480,000Preclinical eValuation services
    
    
    700,000
    
    
    
    180,000
    
    
    
    763,000
    
    
    
    237,000Total operating revenue
    
    
    1,289,000
    
    
    
    1,044,000
    
    
    
    2,251,000
    
    
    
    1,717,000COSTS AND OPERATING EXPENSESCost of Personalized oncology services
    
    
    (13,000
    )
    
    
    369,000
    
    
    
    621,000
    
    
    
    595,000Cost of Preclinical eValuation services
    
    
    350,000
    
    
    
    90,000
    
    
    
    384,000
    
    
    
    123,000Research and development
    
    
    645,000
    
    
    
    417,000
    
    
    
    1,141,000
    
    
    
    649,000General and administrative
    
    
    891,000
    
    
    
    354,000
    
    
    
    1,697,000
    
    
    
    688,000Total costs and operating expenses
    
    
    1,873,000
    
    
    
    1,230,000
    
    
    
    3,843,000
    
    
    
    2,055,000LOSS BEFORE OTHER INCOME
    
    
    (584,000
    )
    
    
    (186,000
    )
    
    
    (1,592,000
    )
    
    
    (338,000
    )Interest income
    
    
    
    
    
    
    25,000
    
    
    
    5,000
    
    
    
    46,000LOSS BEFORE PROVISION FOR INCOME TAXES
    
    
    (584,000
    )
    
    
    (161,000
    )
    
    
    (1,587,000
    )
    
    
    (292,000
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (584,000
    )
    
    $
    (161,000
    )
    
    $
    (1,587,000
    )
    
    $
    (292,000
    )NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.02
    )
    
    $
    (0.00
    )
    
    $
    (0.05
    )
    
    $
    (0.01
    )WEIGHTED AVERAGE SHARES OUTSTANDING
 BASIC AND DILUTED
    
    
    32,713,000
    
    
    
    33,273,000
    
    
    
    32,736,000
    
    
    
    33,271,000
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CHAMPIONS BIOTECHNOLOGY, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Six Months Ended 
October 31,2009
    
    
    2008OPERATING ACTIVITIESNet loss
    
    $
    (1,587,000
    )
    
    $
    (292,000
    )Adjustments to reconcile net loss to net cash
used in operating activities:Common stock issued for patent
    
    
    175,000
    
    
    
    Stock-based compensation
    
    
    184,000
    
    
    
    101,000Depreciation
    
    
    16,000
    
    
    
    Changes in operating assets and liabilities:Prepaid expenses, deposits, and other receivables
    
    
    362,000
    
    
    
    (220,000
    )Accounts payable
    
    
    (229,000
    )
    
    
    160,000Accrued liabilities
    
    
    39,000
    
    
    
    (361,000
    )Deferred revenue
    
    
    (1,092,000
    )
    
    
    (43,000
    )Net cash used in operating activities
    
    
    (2,132,000
    )
    
    
    (655,000
    )INVESTING ACTIVITIESProceeds from certificate of deposit
    
    
    1,017,000
    
    
    
    Purchase of property and equipment
    
    
    (32,000
    )
    
    
    Purchase of intangibles
    
    
    
    
    
    
    (9,000
    )Net cash provided by (used in) investing activities
    
    
    985,000
    
    
    
    (9,000
    )FINANCING ACTIVITIESPurchase of treasury stock
    
    
    (188,000
    )
    
    
    Proceeds from exercise of options and warrants
    
    
    3,000
    
    
    
    7,000Net cash (used in) provided by financing activities
    
    
    (185,000
    )
    
    
    7,000Exchange rate effect on cash and cash equivalents
    
    
    (2,000
    )
    
    
    NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,334,000
    )
    
    
    (657,000
    )CASH AND
CASH EQUIVALENTS 
BEGINNING OF PERIOD
    
    
    1,728,000
    
    
    
    3,709,000CASH AND CASH EQUIVALENTS  END OF PERIOD
    
    $
    394,000
    
    
    $
    3,052,000
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CHAMPIONS BIOTECHNOLOGY, INC.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Organization, Use of Estimates and Basis of Presentation
      Note 2. Summary of Significant Accounting Policies
 Unaudited Interim Financial Information
  Principles of Consolidation
   6




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Segment Reporting
  Reclassifications
  Cash and Cash Equivalents
  Fair Value of Financial Instruments
  Goodwill
  Revenue Recognition
   7




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Research and Development
  Recent Accounting Pronouncements
     8




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Note 3. Basic and Dilutive Loss Per Common Share
  Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Stock options
    
    
    439,598
    
    
    
    373,440
    
    
    
    454,927
    
    
    
    361,448Warrants
    
    
    431,605
    
    
    
    444,353
    
    
    
    449,850
    
    
    
    467,774Restricted stock
    
    
    5,684
    
    
    
    
    
    
    
    2,842
    
    
    
    Total common stock
equivalents
    
    
    876,887
    
    
    
    817,793
    
    
    
    907,619
    
    
    
    829,222
 Note 4. Property and Equipment
  October 31,
    
    
    April 30,2009
    
    
    2009Laboratory equipment
    
    $
    28,000
    
    
    $
    4,000Furniture and fixtures
    
    
    32,000
    
    
    
    26,000Computer hardware and software
    
    
    55,000
    
    
    
    55,000Leasehold improvements
    
    
    2,000
    
    
    
    Total property and equipment
    
    $
    117,000
    
    
    $
    85,000Less accumulated depreciation
    
    
    (20,000
    )
    
    
    (4,000
    )Property and equipment, net
    
    $
    97,000
    
    
    $
    81,000
  Note 5. Licensing agreements
 TAR-1 license agreement
   Benzoylyphenylerea license agreement
   9




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Note 6. Stock-Based Compensation
    Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Cost of personalized oncology services
    
    $
    4,000
    
    
    $
    
    
    
    $
    11,000
    
    
    $
    Research and development
    
    
    44,000
    
    
    
    (2,000
    )
    
    
    32,000
    
    
    
    12,000General and administrative
    
    
    86,000
    
    
    
    40,000
    
    
    
    141,000
    
    
    
    88,000Total stock-based compensation expense
    
    $
    134,000
    
    
    $
    38,000
    
    
    $
    184,000
    
    
    $
    100,000
  Three Months Ended
    
    
    
    Six Months EndedOctober 31,
    
    
    
    October 31,2009
    
    
    
    2008
    
    
    
    2009
    
    
    
    2008Expected term in years
    
    
    6.0
    
    
    
    3.4
    
    
    
    6.0
    
    
    
    3.4  6.0Risk free interest rates
    
    
    2.8%
    
    
    
    2.1%
    
    
    
    2.8%  3.1%
    
    
    
    2.1%  2.4%Volatility
    
    
    94%
    
    
    
    102%
    
    
    
    94%
    
    
    
    69%  102%Dividend yield
    
    
    0%
    
    
    
    0%
    
    
    
    0%
    
    
    
    0%
 Stock options and restricted stock
    Warrants
   10




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Stock Option Plans
  Note 7. Related Party Transactions
       11




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Note 8. Stockholders Equity
  Note 9. Subsequent Events
 Bithionol license agreement
   Change in Management
   12




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The following discussion of our historical results of operations and our liquidity and capital
resources should be read in conjunction with the financial statements and related notes that appear
elsewhere in this report.
 Forward-Looking Statements
 Managements Discussion and Analysis of
Financial Condition and Results of Operations
   Overview
    13




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Results of Operations
 Three Months Ended October 31, 2009 and 2008
 Revenues
    Operating Expenses
     14




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Interest Income
  Net Loss
  Six Months Ended October 31, 2009 and 2008
 Revenues
    Operating Expenses
     15




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Interest Income
  Net Loss
  Liquidity and Capital Resources
  
 Commitments and Contractual Obligations
  Ability to Continue As a Going Concern
  Off Balance Sheet Arrangements
   16




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Item 3.
    
    Quantitative and
Qualitative Disclosures About Market Risk.
  
 Item 4T.
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
    17




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PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3.
    
    Defaults Upon Senior Securities.
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders.
  
 Item 5.
    
    Other Information.
  
 Item 6.
    
    Exhibits.
 Exhibit 31.1+
    
    Certification by the Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 31.2+
    
    Certification by the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 32.1+
    
    Certification by the Principal Executive Officer and the Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
  18