Good day, ladies and gentlemen. And welcome to Champions Oncology Fourth Quarter and Fiscal Year 2017 Earnings Call. All lines have been placed on a listen-only mode and the floor will be open for questions and comments following the presentation. [Operator Instructions]. At this time, it is my pleasure to turn the floor over to your host, Ronnie Morris. Sir the floor is yours.

Good afternoon. I’m Ronnie Morris, the CEO of Champions Oncology. I’m joined today by David Miller, our Vice President of Finance and Administration. Thank you for joining us for our quarterly earnings call. Before I start, I will remind you that I we will make forward-looking statements during the call and actual results could differ materially from what is described in those statements. Additional information on factors that could cause results to differ is available in our Forms 10-Q and Form 10-K. Reconciliation of non-GAAP financial measures that may be discussed the call to GAAP financial measures in available in the earnings release. Overall we had another year of substantial progress for Champions Oncology. Several highlights include, we had record annual bookings and the continued growth and strength in our quarterly bookings gives us the confidence to provide forward-looking projections of strong growth for the current fiscal year. We had record annual revenues of $15.4 million, which was 38% increase year-over-year. The cost control efforts we established over the last two years continue to pay dividends and we are generating more revenue with a minimal increase in cost. Strategically, we began delivering on a number of new products discussed last year that provide us with plenty of runway to grow revenue at an accelerated pace. We just moved into our own new lab facility, which represents a major milestone for Champions Oncology. And finally, we are expecting strong Q1 results with at least 25% increase in revenue, as compared to Q1 last year. In terms of forecasting revenue, as we said in the past, it was the single more product indicator of our future success than bookings. As a reminder, we define bookings as the signing of a contract with a customer. These contracts include well-defined studies that are clear…

Thanks, Ronnie. Now let me review the financial results we announced. Our full results on Form 10-K will be filed on before July 31. Overall revenue for the fourth quarter was $3.7 million, a 31% increase year-over-year driven primarily by 49% percent growth in our TOS segment. The year-over-year increase in our fourth quarter revenue was due to the sustained strong bookings growth we have been discussing on our quarterly call. For fiscal 2017 total revenue was a record to $15.4 million, an increase of 38% over 2016, which had revenue of $11.2 million. Ronnie mentioned, 2017 was a strong year for Champions. And this can be seen with the year-over-year percentage revenue growth. However, we are still not satisfied and have further financial milestones to achieve. Now let me get into specific numbers for each business segment. TOS revenue was $3.4 million for the three months ended April 30th 2017, a 49% percent increase over $2.3 million revenue recognized in the fourth quarter of 2016. TOS revenue for the full fiscal year of 2017 was $13.7 million, also a 49% increase over fiscal 2016 TOS revenue of $9.2 million. TOS segment gross margin was 31% for the quarter compared to 16% in the same period last year. TOS gross margin for fiscal 2007 was 40% as compared to 29% for fiscal 2016. As our revenue continues to grow, we expect our gross margins to improve as we leverage our fixed costs against a higher revenue base. However, along with the growth at times variable cost may increase as we incur expenses at the start of new studies, putting short term pressure on margins. An increase in TOS cost of sales can often be viewed as an increase in study [ph] work being performed leading up to revenue which we…

Thank you. Thank you, David. And we are excited about the progress we made last year and we're certainly very excited about this coming year. So with that I will open it up to questions.

Thank you so much. The floor is now open for questions. [Operator Instructions] And our first question comes from Leonard Becker. Leonard, go ahead. Leonard, you’re live.

Yes. Hi, guys good quarter. Can you get me to the 200,000 cash burn from the $2.3 million? I know there's a lot of stock based compensation, non-cash. What else could there be?

You take that David. Go ahead.

Sorry. So in terms of - we ended the quarter - we ended the third quarter with a $3.5 million and we ended the fourth quarter with $3.3 million. Are you trying to understand how we only burn $200,000 worth of cash?

Yes, given the income statement and what that’s so adjusting, just compared to if you would to reconcile, to see if – thus you can, if you would?

So if you – our deferred revenue increases because we - as we book more studies, we receive cash in advance of work performed. That's a big – that’s a big factor.

Okay. That was my next question if you reached cash and up front.

Yes.

So, you’re – am I right in estimating that your contribution margin is around high 60%?

Yes.

Okay. And on the savings that you're going to realize once you move into that new lab, is it all fixed or is there any savings in the variable cost?

It's a combination of both. So as opposed to outsourcing even though we give all the work without own tech, as opposed to outsourcing the lab maintenance that will all be done in house. So we will have both a reduction in our variable cost and in our fixed cost.

Okay. One other the thing, research and development costs, what actions do those go towards. Is any of that software and do you capitalize it?

So it's not software and that would probably be the only thing would be allowed to capitalize.

Great.

But it's not, so you might capitalize the R&D expense?

What if the R&D go towards if you would?

I mean, I know Ronnie, you want to take, in terms of the…

Yes, sure. So the R&D expense goes towards different collaboration, building more unique models for the bank, number one. Number two, we're involved in a lot of new areas where as we mentioned the immuno-oncology trying to find the right model for that huge field. So those are the two examples working with different academic medical centers to work on special projects that we think eventually will be innovative for the pharmaceutical companies and give us an advantage over our competitions.

Okay. Last question. What is - ff you could as far as the mice are concerned, I'm just trying to - if I could follow the mouse from start to finish, who handles it and who does what in the value chain? Just so I can understand. I mean, is there other third parties that you outsource to do certain things and I'm just curious on how that works…

Yeah. We have a couple of suppliers of the mouse suppliers, they send us the mice. We basically do all that work in-house from the implantation of the tumors to the pharmacology and then we do all the posts analysis as well afterwards. So all that's done by us in-house. We don't really outsource any of that.

Okay. Okay, great. Thanks for the clarification. All right. Those are all my questions. Thank you.

Sure.

[Operator Instructions] And our next question comes from Joshua Horowitz from Palm Small Cap Funds. Go ahead, Josh.

Thank you very much. Good quarter. Curious you know, you’re starting to get some real scale in the business, you know, have guided to some pretty substantial revenue growth going forward. Maybe you could help us understand as you get to the scale you know, what is a reasonable range for operating margin, say, you know a year or two out?

So we certainly see you know, our gross margins should really be closer to 60% as opposed to the 40% which we just recorded. A lot of times I think I mentioned, we incur cost initially and we don't recognize revenue to several months later. So there's a mismatch between our revenue and our expenses. But if we would be able to or suggest actually match them, which is a principle, we would be closer to 60% an as we move to our new lab we actually see that rising.

So help me understand what the operating margins of the business could be say, you know, at $40 million in sales?

So we think that that can be closer you know, close to 50%, you know, we’ve mild it out and we can certainly – we’ll certainly fine tune as we move into our new lab, I think that it's important that we actually have a concrete handle on the actual cost. Obviously projecting significant cost savings, but this is a big move and we'll be able to fine tune those projections as we actually move it.

Do you think that you know, most of your competitors are competing on price or have you sort of you know, as you’ve grown the company you’ve been able to make inroads with certainties, based on the quality of your service and thus you’re able to charge higher rates?

Yes, I think that’s a combination. We are certainly not the low priced player in the market where these premium price play in the market. I think two advantages we've had and allowing for our growth is one, our network that we've built up over the years with the academic medical centers allow us to get these unique patients which have unique models, which are very interesting to the pharmaceutical companies. So we get patient models and then we build models in our bank that are advanced cancers and people that have these very unique mutational profiles. And because of that a lot of the pharmaceutical companies want to work with us. I think we also have a reputation for high quality work. A lot of a good scientific rigor goes into our work. So I think those are the two main competitive advantages that we have. A lot of our competitors to just get tumors from a local hospital, they don't really have any control about which patients they're building models for. We are able to build unique cohorts and cohorts that the pharmacy companies that are looking for as they try to mimic their clinical trials. They want to do work in PDX models that are actually going to - as close as possible resemble the patients that they're going to enrol in the trial. So that makes it very important for them. So I think those are two competitive advantages.

Thank you very much.

And our next question comes from Adam Kipling from Hollywood Business [ph]. Go ahead, Adam.

Hey, good morning, guys. Can you just explain to me exactly what Hayden IR has been doing to increase shareholder value and also maybe if you can tell what they cost, what they're costing per quarter?

David, do you want to take that one?

So be lucky, to beat that one. So they’ve been - we've been meeting with investors trying to get the story out in terms of getting more exposure to our company. So that's something that they've certainly have been heavily involved with, encouraging and helping us with IR releases et cetera. In terms of the cost, I don't know if we want to get into the specific cost, what they’ve costing us. But it's a reasonable fee in my opinion.

Okay. Because it's just a little frustrating for investors to go three months without really hearing anything and listening to the conference call and seeing some of the highlights. There seemed to have been plenty of things that could have been communicated to shareholders and that's what I thought investor relations is for. So I'm kind of thinking that any money that goes to them can be better used, if it's not really increasing shareholder interest or investor interest. I really am not seeing the fruits of any labor from them. So…

So I think it's on us to come out with more press releases. I think we are probably too rigid in terms of what we consider noteworthy. We're holding ourselves to higher standard. Yes, so a lot of things that occur on a daily basis that could be noteworthy, but I think we maybe – so maybe we need to lower our own internal standard, so that that will be discussed.

And let me add, I think that over the next quarter or two, I think you'll be seeing more press releases from Champions Oncology on some of the stuff that's been going on.

And our next question comes from Steve Krueger from Foresight Investing. Please go ahead.

Good afternoon. Thanks for taking the question. Do you have any data on the correspondence between efficacy in mouse to model and ultimate efficacy in humans? You know, what percentage of the time where drug shows great efficacy in a mouse tumor model. Does that translate into efficacy in treating humans?

Yes. So one of one the other competitive advantages we've had over a lot of our competitors is that we have actually tracked that very carefully, because we - one of the ways our tumors and we collected our tumors over the first four or five years of our activity was working with patients and oncologist to actually implant their tumors, follow the patients, as well as follow what happens to them in real life. But follow what happens to their PDX tumors. So from our own experiences there was an incredibly high concordance rate between what happens in the mouse, what happens in the patient in the actual clinic? The concordance rate was in a high 80% range if you. And that was with patients who actually already had multiple treatments since there - since their mouse is implanted. If you actually you know, took the time element out and just looked at the next treatment the patient got, the next treatment the mouse got, it was almost 100%. Subsequent to that, the Mayo Clinic has put out a big study on concordance of these PDX models and many other academic institutions have done it and they're all finding the same thing, that there's almost 100% match between what happens in these PDX models and what happens in the in the patient. That is true for solid tumors in PDX. What we're trying to do and we found the same thing for the leukaemia models. What we're trying to do now is work in immuno-oncology space to try to prove the same type of accuracy and efficacy in the immuno-oncology models. That's a lot harder, it’s taking us a lot longer in terms of R&D, but our feeling is if we can crack the code it's going to have a huge upside for us and it's going to really help the patients and the pharmaceutical companies.

So, all right. Said another way, and if drug shows a high degree of efficacy in treating a mouse's tumor the chances are very high that that same drug will be effective in treating humans with that same cancer?

Correct. Correct. And that's the whole purpose and that's why I think our company is growing, because it's very expensive for the pharmaceutical companies in terms of these human trials and it's also expensive for them if they're going to have a failed trial. So it's very important for them to really have a sense upfront whether or not this drug is going to make it through. So they want to work on these PDX models because there is a lot of accuracy.

Okay. Great. Thank you very much.

You’re welcome.

[Operator Instructions]