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VivoSim Labs, INC.

VivoSim Labs, INC.VIVSEarnings & Financial Report

Nasdaq · Health Care · Biological Products, (No Diagnostic Substances)

VivoSim Labs, Inc. is a preclinical biotechnology company that develops advanced human organ and tissue simulation platforms. Its products are used by pharmaceutical firms, contract research organizations, and academic institutions to evaluate drug safety, efficacy, and toxicity, reducing reliance on traditional animal testing in global life sciences research segments.

What changed in VivoSim Labs, INC.'s 10-K — 2022 vs 2023

Top changes in VivoSim Labs, INC.'s 2023 10-K

218 paragraphs added · 183 removed · 135 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Our NovoGen 2 Bioprinters ® also serve as important components of our tissue prototyping and manufacturing platform, as they are able to rapidly and precisely fabricate intricate small-scale tissue models for in vitro use as well as larger-scale tissues suitable for in vivo use. Generation of bio-ink comprising human cells is the first step in our standard bioprinting.
Our NovoGen Bioprinters ® also serve as important components of our tissue prototyping and manufacturing platform, as they are able to rapidly and precisely fabricate intricate small-scale tissue models for in vitro use as well as larger-scale tissues suitable for in vivo use. Generation of bio-ink comprising human cells is the first step in our standard bioprinting.
The NovoGen Bioprinter® Platform Our NovoGen Bioprinters ® are automated devices that enable the fabrication of 3D living tissues comprised of mammalian cells. A custom graphic user interface (“GUI”) facilitates the 3D design and execution of scripts that direct precision movement of multiple dispensing heads to deposit defined cellular building blocks called bio-ink.
The NovoGen Bioprinter® Platform Our NovoGen Bioprinters ® are automated devices that enable the fabrication of 3D living tissues comprised of mammalian cells. A custom graphic user interface (“GUI”) facilitates the 3D design and execution of scripts that direct precision movement of multiple 2 dispensing heads to deposit defined cellular building blocks called bio-ink.
Vineyard Professor of Biophysics at MU, was one of the co-inventors of all of these works (collectively, the “Forgacs Intellectual Property”). The Forgacs Intellectual Property provides us with intellectual property rights relating to cellular aggregates, the use of cellular aggregates to create engineered tissues, and the use of cellular aggregates to create engineered tissue with no scaffold present.
Vineyard Professor of Biophysics at MU, was one of the co-inventors of all of these works (collectively, the “Forgacs Intellectual Property”). The Forgacs Intellectual Property provides us with intellectual property rights relating to cellular aggregates, the use of cellular aggregates to create engineered tissues, and the use of cellular aggregates to 3 create engineered tissue with no scaffold present.
The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of equity-based compensation awards. 4 Corporate Information We are operating the business of our subsidiaries, including Organovo, Inc., our wholly-owned subsidiary, which we acquired in February 2012. Organovo, Inc. was incorporated in Delaware in April 2007.
The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of equity-based compensation awards. 5 Corporate Information We are operating the business of our subsidiaries, including Organovo, Inc., our wholly-owned subsidiary, which we acquired in February 2012. Organovo, Inc. was incorporated in Delaware in April 2007.
Patent Nos. 9,855,369 and 9,149,952, which relate to our bioprinter technology, were the subject of IPR proceedings filed by Cellink AB and its subsidiaries, MatTek Incorporated and Visikol, Inc. (collectively, “BICO Group AB”), one of our competitors. Likewise, U.S. Patent Nos. 9,149,952, 9,855,369, 8,931,880, 9,227,339, 9,315,043 and 10,967,560 (all assigned to Organovo, Inc.) and U.S.
Patent Nos. 9,855,369 and 9,149,952, which relate to our bioprinter technology, were the subject of IPR proceedings filed by Cellink AB and its subsidiaries (collectively, “BICO Group AB”), one of our competitors. Likewise, U.S. Patent Nos. 9,149,952, 9,855,369, 8,931,880, 9,227,339, 9,315,043 and 10,967,560 (all assigned to Organovo, Inc.) and U.S.
The patent rights we obtained through these exclusive licenses are not only foundational within the field of 3D bioprinting but provide us with favorable priority dates. We are required to make ongoing royalty payments under these exclusive licenses based on net sales of products and services that rely on the intellectual property we in-licensed.
The patent rights we obtained through these exclusive licenses are not only foundational within the field of 3D bioprinting and FXR agonist therapies but provide us with favorable priority dates. We are required to make ongoing royalty payments under these exclusive licenses based on net sales of products and services that rely on the intellectual property we in-licensed.
We make them available on our website as soon as reasonably possible after we file them with the SEC. The reports we file with the SEC are also available on the SEC’s website ( http://www.sec.gov ). 5
We make them available on our website as soon as reasonably possible after we file them with the SEC. The reports we file with the SEC are also available on the SEC’s website ( http://www.sec.gov ). 6
We solely own or hold exclusive licenses to 26 issued U.S. patents and more than 95 issued international patents in foreign jurisdictions including Australia, Canada, China, Denmark, France, Great Britain, Germany, Ireland, Japan, South Korea, Sweden, the Netherlands and Switzerland.
We solely own or hold exclusive licenses to 32 issued U.S. patents and more than 115 issued international patents in foreign jurisdictions including Australia, Canada, China, Denmark, France, Great Britain, Germany, Ireland, Japan, South Korea, Sweden, the Netherlands and Switzerland.
With respect to our bioprinting platform, we have 8 issued U.S. patents and 14 issued foreign patents directed to our NovoGen Bioprinter ® and methods of bioprinting: U.S. Patent Nos. 8,931,880; 9,149,952; 9,227,339; 9,315,043; 9,499,779; 9,855,369; 10,174,276 and 10,967,560; Australia Patent Nos. 2011318437, 2015202836, 2016253591, 2013249569, and 2014296246; Canada Patent No. 2,812,766; China Patent Nos.
With respect to our bioprinting platform, we have 8 issued U.S. patents and 14 issued foreign patents directed to our NovoGen Bioprinter ® and methods of bioprinting: U.S. Patent Nos. 8,931,880; 9,149,952; 9,227,339; 9,315,043; 9,499,779; 9,855,369; 10,174,276, 10,967,560, 11,577,450, 11,577,451 and 11,413,805 ; Australia Patent Nos. 2011318437, 2015202836, 2016253591, 2013249569, and 2014296246; Canada Patent No. 2,812,766; China Patent Nos.
We solely or jointly own or hold exclusive licenses to 23 pending U.S. patent applications and more than 20 pending international applications in foreign jurisdictions including Australia, Canada, China, the European Patent Office, Japan and South Korea.
We solely or jointly own or hold exclusive licenses to 17 pending U.S. patent applications and more than 5 pending international applications in foreign jurisdictions including Australia, Canada, China, the European Patent Office, Japan and South Korea.
For additional information regarding our royalty obligations see “Note 4. Collaborative Research, Development, and License Agreements” in the Notes to the Consolidated Financial Statements included in this Annual Report. 3 Company Owned I ntellectual P roperty In addition to the intellectual property we have in-licensed, we have historically innovated and grown our intellectual property portfolio.
For additional information regarding our royalty obligations see “Note 5. Collaborative Research, Development, and License Agreements” in the Notes to the Consolidated Financial Statements included in this Annual Report. Company Owned Intellectual Property In addition to the intellectual property we have in-licensed, we have historically innovated and grown our intellectual property portfolio.
Item 1. Business. Overview Organovo Holdings, Inc. (“Organovo Holdings,” “we,” “us,” “our,” the “Company” and “our Company”) is an early-stage biotechnology company that focuses on building high fidelity, 3D tissues that recapitulate key aspects of human disease.
Item 1. Bu siness. Overview Organovo Holdings, Inc. (“Organovo Holdings,” “we,” “us,” “our,” the “Company” and “our Company”) is a biotechnology company that focuses on building high fidelity, 3D tissues that recapitulate key aspects of human disease.
We currently have pending numerous patent applications in the U.S. and globally that are directed to additional features on bioprinters, additional tissue types, their methods of fabrication, and specific applications. Our U.S.
We have additional U.S. patent applications pending in these families, as well as foreign counterpart applications in multiple countries. We currently have pending numerous patent applications in the U.S. and globally that are directed to additional features on bioprinters, additional tissue types, their methods of fabrication, and specific applications. Our U.S.
We recently completed a review and analysis of our full intellectual property portfolio to align it with our current business needs, strategies and objectives. Based on that review, a number of patents and patent applications in various countries were abandoned or allowed to lapse. The numbers provided herein are reflective of those changes.
On an ongoing basis we review and analyze our full intellectual property portfolio to align it with our current business needs, strategies and objectives. Based on that ongoing review, selected patents and patent applications in various countries are or will be abandoned or allowed to lapse. The numbers provided herein are reflective of those changes.
ZL201180050831.4 and ZL201480054148.1; European Patent Nos. 2838985, 2629975, and 3028042; Japan Patent Nos. 6333231, 6566426 and 6842918. These issued patents and pending patent applications carry remaining patent terms ranging from over 12 years to just over 6 years. We have additional U.S. continuation applications pending in these families as well foreign counterpart applications in multiple countries.
ZL201180050831.4 and ZL201480054148.1; European Patent Nos. 2838985, 2629975, and 3028042; Japan Patent Nos. 6333231, 6566426 and 6842918, and Russian Patent No. 2560393. These issued patents and pending patent applications carry remaining patent terms ranging from over 12 years to just over 6 years.
These patent families relate to our bioprinting technology and our engineered tissue products and services, including our various uses in areas of tissue creation, in vitro testing, utilization in drug discovery, and in vivo therapeutics.
These patent families relate to our bioprinting technology and our engineered tissue products and services, including our various uses in areas of tissue creation, in vitro testing, utilization in drug discovery, and in vivo therapeutics. In connection with the recent acquisition of the FXR program from Metacrine, we acquired the related patent portfolio by way of assignment.
Our ExVive™ Human Liver Tissue is protected by U.S. Patent Nos. 9,222,932, 9,442,105, 10,400,219 and 11,127,774; Australia Patent Nos. 2014236780 and 2017200691; and Canada Patent No. 2,903,844. Our ExVive™ Human Kidney Tissue is protected by U.S. Patent Nos. 9,481,868, 10,094,821 and 10,962,526; European Patent No. 3204488 and Japan Patent No. 7021177.
We have additional U.S. continuation applications pending in these families as well foreign counterpart applications in multiple countries. Our ExVive™ Human Liver Tissue is protected by U.S. Patent Nos. 9,222,932, 9,442,105, 10,400,219 and 11,127,774; Australia Patent Nos. 2014236780 and 2017200691; and Canada Patent No. 2,903,844. Our ExVive™ Human Kidney Tissue is protected by U.S.
For more information regarding these proceedings, see the section titled Part I, Item 3 of this Annual Report on Form 10-K. COVID-19 Global health concerns relating to the COVID-19 pandemic continue to weigh on the macroeconomic environment, and the pandemic has significantly increased economic volatility and uncertainty.
For more information regarding these proceedings, see the section titled Part I, Item 3 of this Annual Report on Form 10-K.
We may also form partnerships around the development of targets or therapeutics for the treatment of IBD. We expect to broaden our work into additional therapeutic areas over time and are currently exploring specific tissues for development.
FXR agonism has been tested in a variety of preclinical models of IBD. The acquired program contains two clinically tested compounds and over 2,000 discovery or preclinical compounds. We expect to broaden our work into additional therapeutic areas over time and are currently exploring specific tissues for development.
These issued patents and pending patent applications carry remaining patent terms ranging from over 14 years to just over 11 years. We have additional U.S. patent applications pending in these families, as well as foreign counterpart applications in multiple countries.
These issued patents and pending patent applications carry remaining patent terms ranging from over 18 years to just over 15 years. Employees and Human Capital As of June 1, 2023, we had 24 employees, of which 15 are full-time.
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The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the rise of vaccine-resistant variants, the duration of the outbreak, and any travel bans, restrictions or other limitations that may be imposed in the future .
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We may also form partnerships around the development of targets or therapeutics for the treatment of IBD. In March of 2023, we entered into and closed an asset purchase agreement with Metacrine, Inc to acquire their farnesoid X receptor ("FXR") program. FXR is a mediator of gastrointestinal ("GI") and liver diseases.
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In particular, the continued COVID-19 pandemic could adversely impact various aspects of our operations, including among others, our ability to raise additional capital, the timing and ability to pursue our strategy, given the impact the pandemic may have on the manufacturing and supply chain, sales and marketing and clinical trial operations of potential strategic partners, and the ability to advance our research and development activities and pursue development of our pipeline products, each of which could have an adverse impact on our business and our financial results.
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This includes filings on the lead candidate, FXR314, and selected filings on the prior candidate (no longer in development), FXR125. With respect to this FXR portfolio, we solely own 6 issued patents and 14 international patents in jurisdictions, including Australia, China, Eurasia, India, Israel, Mexico, Japan and South Africa.
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Our employees and consultants have recently returned to working at our office and lab when necessary. We have developed guidelines and protocols to handle exposures and infections intended to keep disruptions to operations to a minimum. Employees and Human Capital As of June 1, 2022, we had 18 employees, of which 9 are full-time.
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We solely own 8 pending U.S. patent applications and more than 50 pending international applications in foreign jurisdictions, including Argentina, Australia, Brazil, Chile, Canada, Eurasia, Europe, Israel, India, Japan, South Korea, Mexico, Philippines, Singapore, South Africa, Hong Kong and Taiwan. These patent families relate to FXR125 and FXR314, including generic coverage, species coverage, methods of use, formulations and polymorph crystals.
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In connection with the acquisition of the FXR program from Metacrine in 2023, we were assigned and assumed a license agreement with the Salk Institute for Biological Studies requiring milestone and royalty payments based on the development and commercialization of FXR314.
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Patent Nos. 9,481,868, 10,094,821 and 10,962,526; Australian Patent No. 2015328173, Canadian Patent No. 2,962,778, European Patent No. 3204488 and Japan Patent No. 7021177. These issued patents and pending patent applications carry remaining patent terms ranging from over 14 years to just over 11 years.
Added
With respect to our FXR agonist program covering FXR314 and FXR125, we have 6 issued U.S. patents and 14 issued foreign patents directed to composition of matter protection (generic and specific) for FXR314 and FXR125, as well claims directed to methods of treatment of GI diseases, formulations of FXR314 and polymorphs of the FXR314 molecule including United States Patent Nos.11,214,538, 10,705,712, 10,927,082, 10,961,198, 11,136,071 and 11,084,817, granted Australian Patent Nos. 2016323992 and 2018236275, Chinese Patent Nos. 201680066917 and 269065, Eurasian Patent Nos. 040003 and 040704, Israeli Patent Nos. 258011, 296068 and 296065, Indian Patent No. 380510, Japanese Patent Nos. 6905530 and 717709, Mexican Patent Nos. 386,752 and 397265 and South African Patent No. 2018/01750.
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In addition, we have 8 pending U.S. patent applications and over 50 pending foreign patent applications, including U.S.
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Patent Application Nos. 18/156,069, 17/532,618, 18/174,393, 17/349,757, 17/276,787, 17/906,580, 17/906,582 and 17/906,585 and over 50 pending international patent applications in a number of countries including, Australia, Brazil, Canada, Chile, China, the Eurasian Patent Office, the European Patent Office, Israel, India, Japan, South Korea, Mexico, Singapore, 4 Philippines and Hong Kong.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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The amount of future losses and when, if ever, we will achieve profitability are uncertain.
The amount of future losses and when, if ever, we will achieve profitability are uncertain.
In particular, pursuant to an Asset Purchase and Non-Exclusive Patent License Agreement with Viscient, dated November 6, 2019, as amended, we have provided a paid up, worldwide, irrevocable, perpetual, non-exclusive license to Viscient under certain 15 of our patents and know-how to (a) make, have made, use, sell offer to sell, import and otherwise exploit the inventions and subject matter covered by certain patents regarding certain bioprinter devices and bioprinting methods, engineered liver tissues, engineered renal tissues, engineered intestinal tissue and engineered tissue for in vitro research use, (b) to use and internally repair the bioprinters, and (c) to make additional bioprinters for internal use only in connection with drug discovery and development research, target identification and validation, compound screening, preclinical safety, absorption, distribution, metabolism, excretion and toxicology (ADMET) studies, and in vitro research to complement clinical development of a therapeutic compound.
In particular, pursuant to an Asset Purchase and Non-Exclusive Patent License Agreement with Viscient, dated November 6, 2019, as amended, we have provided a paid up, worldwide, irrevocable, perpetual, non-exclusive license to Viscient under certain of our patents and know-how to (a) make, have made, use, sell offer to sell, import and otherwise exploit the inventions and subject matter covered by certain patents regarding certain bioprinter devices and bioprinting methods, engineered liver tissues, engineered renal tissues, engineered intestinal tissue and engineered tissue for in vitro research use, (b) to use and internally repair the bioprinters, and (c) to make additional bioprinters for internal use only in connection with drug discovery and development research, target identification and validation, compound screening, preclinical safety, absorption, distribution, metabolism, excretion and toxicology (ADMET) studies, and in vitro research to complement clinical development of a therapeutic compound.
If adequate funds are not available to us on a timely basis, we may be required to curtail or cease our operations. • We have a history of operating losses and expect to incur significant additional operating losses. • There is no assurance that an active market in our common stock will continue at present levels or increase in the future. • The price of our common stock may continue to be volatile, which could lead to losses by investors and costly securities litigation. • Patents covering our products could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad. • We may be involved in lawsuits or other proceedings to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.
If adequate funds are not available to us on a timely basis, we may be required to curtail or cease our operations. • We have a history of operating losses and expect to incur significant additional operating losses. • There is no assurance that an active market in our common stock will continue at present levels or increase in the future. 7 • The price of our common stock may continue to be volatile, which could lead to losses by investors and costly securities litigation. • Patents covering our products could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad. • We may be involved in lawsuits or other proceedings to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.
Our ability to generate revenue and achieve profitability will depend on, among other things: • successfully developing human tissues and disease models for drug discovery and development that enable us to identify drug candidates; • successfully outsourcing certain portions of our development efforts; • entering into collaboration or licensing arrangements with pharmaceutical companies to further develop and conduct clinical trials for any drug candidates we identify; • obtaining any necessary regulatory approvals for any drug candidates we identify; and • raising sufficient funds to finance our activities and long-term business plan.
Our ability to generate revenue and achieve profitability will depend on, among other things: 15 • successfully developing human tissues and disease models for drug discovery and development that enable us to identify drug candidates; • successfully outsourcing certain portions of our development efforts; • entering into collaboration or licensing arrangements with pharmaceutical companies to further develop and conduct clinical trials for any drug candidates we identify; • obtaining any necessary regulatory approvals for any drug candidates we identify; and • raising sufficient funds to finance our activities and long-term business plan.
Department of Health and Human Services has started soliciting feedback on some of these measures and, at the same time, is implementing others under its existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020.
Department of Health and Human Services has started soliciting feedback on some of these measures and, at the same time, is implementing others under its existing authority. For example, in May 14 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020.
For example, on December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017, which, among other things, eliminated the individual mandate requiring most Americans (other than those who qualify for a hardship exemption) to 12 carry a minimum level of health coverage, effective January 1, 2019. On December 14, 2018, a U.S.
For example, on December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017, which, among other things, eliminated the individual mandate requiring most Americans (other than those who qualify for a hardship exemption) to carry a minimum level of health coverage, effective January 1, 2019. On December 14, 2018, a U.S.
Moreover, we have the ability to sell up to $28.3 million of additional shares of our common stock to the public through an “at the market” offering pursuant to a Sales Agreement that we entered into with H.C. Wainwright & Co., LLC and Jones Trading Institutional Services LLC on March 16, 2018.
Moreover, we have the ability to sell up to $28.3 million of additional shares of our common stock to the public through an “at the market” offering pursuant to a Sales Agreement that 9 we entered into with H.C. Wainwright & Co., LLC and Jones Trading Institutional Services LLC on March 16, 2018 (the "Sales Agreement").
Any of these events could significantly harm our business, financial condition and prospects. Furthermore, the issuance of additional securities, whether equity or debt, by us, or the possibility of such 13 issuance, may cause the market price of our common stock to decline further and existing stockholders may not agree with our financing plans or the terms of such financings.
Any of these events could significantly harm our business, financial condition and prospects. Furthermore, the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline further and existing stockholders may not agree with our financing plans or the terms of such financings.
These complications could materially delay or substantially increase the anticipated costs and time to identify and develop viable drug candidates, which would have a material adverse effect on our business and financial condition and our ability to continue operations. 7 We will face intense competition in our drug discovery efforts.
These complications could materially delay or substantially increase the anticipated costs and time to identify and develop viable drug candidates, which would have a material adverse effect on our business and financial condition and our ability to continue operations. We will face intense competition in our drug discovery efforts.
Many of these competitors have significantly greater financial and technical resources, experience and expertise in the following areas than we have, including: • research and technology development; • development of or access to disease models; • identification and development of drug candidates; • regulatory processes and approvals; and • identifying and entering into agreements with potential collaborators.
Many of these competitors have significantly greater financial and technical resources, experience and expertise in the following areas than we have, including: • research and technology development; 8 • development of or access to disease models; • identification and development of drug candidates; • regulatory processes and approvals; and • identifying and entering into agreements with potential collaborators.
Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly. Our product manufacturing, research and development, and testing activities have involved the controlled use of hazardous materials, including chemicals, biological materials and infectious disease agents.
Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly. 12 Our product manufacturing, research and development, and testing activities have involved the controlled use of hazardous materials, including chemicals, biological materials and infectious disease agents.
Accordingly, if these initiatives are not successful, our business, financial condition and results of operations could be adversely affected. If these risks materialize, our stock price could be materially adversely affected. Any difficulties in such investments could have a material adverse effect on our business, financial condition and results of operations.
Accordingly, if these initiatives are not successful, our business, financial condition and results of operations could be adversely affected. If these risks materialize, our stock price could be materially 16 adversely affected. Any difficulties in such investments could have a material adverse effect on our business, financial condition and results of operations.
There can be no assurance that we will maintain compliance with the minimum bid price requirement or other listing requirements necessary for us to maintain the listing of our common stock on the Nasdaq Capital Market.
There can be no assurance that we will continue to maintain compliance with the minimum bid price requirement or other listing requirements necessary for us to maintain the listing of our common stock on the Nasdaq Capital Market.
Such third-party payors, including Medicare, may question the coverage of, and challenge the prices charged for, medical products and services, and many 11 third-party payors limit coverage of or reimbursement for newly approved healthcare products. In particular, third-party payors may limit the covered indications.
Such third-party payors, including Medicare, may question the coverage of, and challenge the prices charged for, medical products and services, and many third-party payors limit coverage of or reimbursement for newly approved healthcare products. In particular, third-party payors may limit the covered indications.
Our Certificate of Incorporation, as amended (“Certificate of Incorporation”), and Bylaws, as amended (“Bylaws”) contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable.
Our Certificate of Incorporation, as amended (“Certificate of Incorporation”), and Amended and Restated Bylaws, as amended (“Bylaws”) contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable.
As an investor, you should take note of the fact that a lack of a dividend can further affect the market value of our stock and could significantly affect the value of any investment. 17 Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.
As an investor, you should take note of the fact that a lack of a dividend can further affect the market value of our stock and could significantly affect the value of any investment. 20 Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.
There is no assurance that an active market in our common stock will continue at present levels or increase in the future. Our common stock is currently traded on the Nasdaq Capital Market, but there is no assurance that an active market in our common stock will continue at present levels or increase in the future.
There is no assurance that an active market in our common stock will continue at present levels or increase in the future. 19 Our common stock is currently traded on the Nasdaq Capital Market, but there is no assurance that an active market in our common stock will continue at present levels or increase in the future.
Even if we establish new strategic relationships, these relationships may never result in the successful development or regulatory approval for any drug candidates we identify for a number of reasons both within and outside of our control. 10 Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.
Even if we establish new strategic relationships, these relationships may never result in the successful development or regulatory approval for any drug candidates we identify for a number of reasons both within and outside of our control. 11 Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.
Third parties may also raise claims challenging the validity or enforceability of our patents before administrative bodies in the United States or abroad, even outside the context of litigation, including through re-examination, post-grant review, IPR, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., 19 opposition proceedings).
Third parties may also raise claims challenging the validity or enforceability of our patents before administrative bodies in the United States or abroad, even outside the context of litigation, including through re-examination, post-grant review, IPR, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., 22 opposition proceedings).
Our results of operations in any quarter may vary from quarter to quarter and are influenced by such factors as expenses related to: • evaluating and implementing strategic alternatives, technology licensing opportunities, potential collaborations, and other strategic transactions; • litigation; • research and development expenditures, including commencement of preclinical studies and clinical trials; • the timing of the hiring of new employees, which may require payments of signing, retention or similar bonuses; and • changes in costs related to the COVID-19 pandemic or the general global economy.
Our results of operations in any quarter may vary from quarter to quarter and are influenced by such factors as expenses related to: • evaluating and implementing strategic alternatives, technology licensing opportunities, potential collaborations, and other strategic transactions; • litigation; • research and development expenditures, including commencement of preclinical studies and clinical trials; • the timing of the hiring of new employees, which may require payments of signing, retention or similar bonuses; and • changes in costs related to the general global economy.
Item 1A. Risk Factors. Investment in our common stock involves a substantial degree of risk and should be regarded as speculative. As a result, the purchase of our common stock should be considered only by persons who can reasonably afford to lose their entire investment.
Item 1A. Ris k Factors. Investment in our common stock involves a substantial degree of risk and should be regarded as speculative. As a result, the purchase of our common stock should be considered only by persons who can reasonably afford to lose their entire investment.
There is also no guarantee that our remaining patents will be sufficiently broad to prevent others from using our technologies or from developing competing products and technologies. 18 We may not be able to protect our intellectual property rights throughout the world.
There is also no guarantee that our remaining patents will be sufficiently broad to prevent others from using our technologies or from developing competing products and technologies. 21 We may not be able to protect our intellectual property rights throughout the world.
In addition, if we seek funds through arrangements with collaborative partners, these arrangements may require us to relinquish rights to our technolog y or potential future product candidates or otherwise agree to terms unfavorable to us. We have a history of operating losses and expect to incur significant additional operating losses.
In addition, if we seek funds through arrangements with collaborative partners, these arrangements may require us to relinquish rights to our technology or potential future product candidates or otherwise agree to terms unfavorable to us. We have a history of operating losses and expect to incur significant additional operating losses.
A delisting from the Nasdaq Capital Market and commencement of trading on the OTCBB would likely result in a reduction in some or all of the following, each of which could have a material adverse effect on stockholders: • the liquidity of our common stock; • the market price of our common stock (and the accompanying valuation of our Company); • our ability to obtain financing or complete a strategic transaction; • the number of institutional and other investors that will consider investing in shares of our common stock; • the number of market markers or broker-dealers for our common stock; and • the availability of information concerning the trading prices and volume of shares of our common stock.
A delisting from the Nasdaq Capital Market and commencement of trading on the Over-the-Counter Bulletin Board would likely result in a reduction in some or all of the following, each of which could have a material adverse effect on stockholders: • the liquidity of our common stock; • the market price of our common stock (and the accompanying valuation of our Company); • our ability to obtain financing or complete a strategic transaction; • the number of institutional and other investors that will consider investing in shares of our common stock; • the number of market markers or broker-dealers for our common stock; and • the availability of information concerning the trading prices and volume of shares of our common stock.
We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug cand idates, if any, may be. In addition, increased scrutiny by the U.S.
We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be. In addition, increased scrutiny by the U.S.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as: • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • continued macroeconomic conditions related to the COVID-19 pandemic; • our ability to execute on our new strategic plan; • reduced government funding for research and development activities; • actual or anticipated variations in our operating results; • adoption of new accounting standards affecting our industry; • additions or departures of key personnel; • sales of our common stock or other securities in the open market; • degree of coverage of securities analysts and reports and recommendations issued by securities analysts regarding our business; • volume fluctuations in the trading of our common stock; and • other events or factors, many of which are beyond our control.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as: • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • our ability to execute on our new strategic plan; • reduced government funding for research and development activities; • actual or anticipated variations in our operating results; • adoption of new accounting standards affecting our industry; • additions or departures of key personnel; • sales of our common stock or other securities in the open market; • degree of coverage of securities analysts and reports and recommendations issued by securities analysts regarding our business; • volume fluctuations in the trading of our common stock; and • other events or factors, many of which are beyond our control.
If we were to breach the terms of these license agreements and the agreements were terminated as a result, our ability to continue to develop and commercialize our NovoGen Bioprinters and 3D tissue products and to operate our business could be adversely impacted. 20 We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
If we were to breach the terms of these license agreements and the agreements were terminated as a result, our ability to continue to develop and commercialize our NovoGen Bioprinters, 3D tissue products and the FXR314 agonist and to operate our business could be adversely impacted. 23 We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we identify deficiencies in our internal controls that are deemed to be material weaknesses, we may be required to incur significant additional financial and management resources to achieve compliance. 21 Item 1B. Unresolved Staff Comments. None.
Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we identify deficiencies in our internal controls that are deemed to be material weaknesses, we may be required to incur significant additional financial and management resources to achieve compliance. 24 Item 1B. Unresolve d Staff Comments. None.
Miner and our Chief Scientific Officer, is a co-founder, the Chief Scientific Officer and a significant stockholder of Viscient.
Jeffrey N. Miner and our Chief Scientific Officer, is a co-founder, the Chief Scientific Officer and a significant stockholder of Viscient.
We are authorized to issue 200,000,000 shares of common stock and 25,000,000 shares of preferred stock. As of March 31, 2022, there were an aggregate of 11,399,566 shares of our common stock issued and outstanding and available for issuance on a fully diluted basis and no shares of preferred stock outstanding.
We are authorized to issue 200,000,000 shares of common stock and 25,000,000 shares of preferred stock. As of March 31, 2023, there were an aggregate of 11,426,737 shares of our common stock issued and outstanding and available for issuance on a fully diluted basis and no shares of preferred stock outstanding.
We have generated operating losses each year since we began operations, including $11.5 million and $16.8 million for the years ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we had an accumulated deficit of $307.7 million. We expect to incur substantial additional operating losses over the next several years as our research and development activities increase.
We have generated operating losses each year since we began operations, including $17.7 million and $11.5 million for the years ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we had an accumulated deficit of $325.0 million. We expect to incur substantial additional operating losses over the next several years as our research and development activities increase.
If our board of directors decides that we should pursue further research and development activities than already proposed, we will require substantial additional funding to operate our proposed business, including expanding our facilities and hiring additional qualified personnel, and we would expect to finance these cash needs through a combination of equity offerings, debt financings, government or other third-party funding and licensing or collaboration arrangements. 8 To the extent that we raise additional capital through the sale of equity or convertible debt, the ownership interests of our stockholders will be diluted.
If our board of directors decides that we should pursue further research and development activities than already proposed, we will require substantial additional funding to operate our proposed business, including expanding our facilities and hiring additional qualified personnel, and we would expect to finance these cash needs through a combination of equity offerings, debt financings, government or other third-party funding and licensing or collaboration arrangements.
We, or any third party with whom we enter into a partnering or development agreement, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to earn development or milestone payments or for any drug candidates to obtain regulatory approval, including: • delays in or failure to reach agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • failure to obtain sufficient enrollment in clinical trials or participants may fail to complete clinical trials; • clinical trials of our drug candidates that may produce negative or inconclusive results, and as a result we, or any pharmaceutical company with who we enter into a partnering or development agreement, may decide, or regulators may require, additional clinical trials; • suspension or termination of clinical research, either by us, any third party with whom we enter into a partnering or development agreement, regulators or institutional review boards, for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; • additional or unanticipated clinical trials required by regulators or institutional review boards to obtain approval or any drug candidates may be subject to additional post-marketing testing requirements to maintain regulatory approval; • regulators may revise the requirements for approving any drug candidates, or such requirements may not be as anticipated; • the cost of clinical trials for any drug candidates may be greater than anticipated; 9 • the supply or quality of any drug candidates or other materials necessary to conduct clinical trials of our drug candidates may be insufficient or inadequate or may be delayed; • regulatory authorities may suspend or withdraw their approval of a product or impose restrictions on its distribution; and • delays due to the recent COVID-19 pandemic, including with respect to the receipt of drug candidates or other materials, submission of New Drug Applications (“NDAs”), filing of Investigational New Drug (“INDs”), and starting any clinical trials for other indications or programs.
We, or any third party with whom we enter into a partnering or development agreement, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to earn development or milestone payments or for any drug candidates to obtain regulatory approval, including: • delays in or failure to reach agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • failure to obtain sufficient enrollment in clinical trials or participants may fail to complete clinical trials; • clinical trials of our drug candidates that may produce negative or inconclusive results, and as a result we, or any pharmaceutical company with who we enter into a partnering or development agreement, may decide, or regulators may require, additional clinical trials; • suspension or termination of clinical research, either by us, any third party with whom we enter into a partnering or development agreement, regulators or institutional review boards, for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; 10 • additional or unanticipated clinical trials required by regulators or institutional review boards to obtain approval or any drug candidates may be subject to additional post-marketing testing requirements to maintain regulatory approval; • regulators may revise the requirements for approving any drug candidates, or such requirements may not be as anticipated; • the cost of clinical trials for any drug candidates may be greater than anticipated; • the supply or quality of any drug candidates or other materials necessary to conduct clinical trials of our drug candidates may be insufficient or inadequate or may be delayed; and • regulatory authorities may suspend or withdraw their approval of a product or impose restrictions on its distribution; If we, or any third party with whom we enter into a partnering or development agreement, experience delays in the completion of, or termination of, any clinical trial of any drug candidates that we develop, or are unable to achieve clinical endpoints due to unforeseen events, the commercial prospects of our drug candidates will be harmed, and our ability to develop milestones, development fees or product revenues from any of these drug candidates will be delayed.
Any failure to obtain a reliable supply of sufficient human cells or a supply at cost effective prices, including any impact to suppliers due to the COVID-19 pandemic, would harm our business and our results of operations and could cause us to be unable to support our drug development efforts.
Any failure to obtain a reliable supply of sufficient human cells or a supply at cost effective prices would harm our business and our results of operations and could cause us to be unable to support our drug development efforts.
Raising additional capital would cause dilution to our existing stockholders and may restrict our operations or require us to relinquish rights to our technologies or to a product candidate. • Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and results of earlier studies and trials may not be predictive of future results. • The near and long-term viability of our drug discovery and development efforts will depend on our ability to successfully establish strategic relationships. • Current and future legislation may increase the difficulty and cost of commercializing our drug candidates and may affect the prices we may obtain if our drug candidates are approved for commercialization. • We may be unable to continue as a going concern in the future. • Additional funds may not be available when we need them on terms that are acceptable to us, or at all.
Raising additional capital would cause dilution to our existing stockholders and may restrict our operations or require us to relinquish rights to our technologies or to a product candidate. • Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and results of earlier studies and trials may not be predictive of future results. • The near and long-term viability of our drug discovery and development efforts will depend on our ability to successfully establish strategic relationships. • Current and future legislation may increase the difficulty and cost of commercializing our drug candidates and may affect the prices we may obtain if our drug candidates are approved for commercialization. • Management has performed an analysis and concluded that substantial doubt exists about our ability to continue as a going concern.
Risks Related to our Business We have recommenced our operations as an early-stage company focusing on 3D bioprinting technology to develop human tissues and disease models for drug discovery and development, which is an unproven business strategy that may never achieve profitability.
Risks Related to our Business We are a biotechnology company focusing on 3D bioprinting technology to develop human tissues and disease models for drug discovery and development, which is an unproven business strategy that may never achieve profitability.
That total for our common stock includes 1,929,504 shares of our common stock that may be issued upon the vesting of restricted stock units, the exercise of outstanding stock options, or is available for issuance under our equity incentive plans, and 59,435 shares of common stock that may be issued through our Employee Stock Purchase Plan (“ESPP”).
That total for our common stock includes 2,650,405 shares of our common stock that may be issued upon the vesting of restricted stock units, the exercise of outstanding stock options, or is available for issuance under our equity incentive plans, and 58,426 shares of common stock that may be issued through our Employee Stock Purchase Plan (“ESPP”).
In the U.S. and some foreign jurisdictions, there have been a number of adopted and proposed legislative and regulatory changes regarding the healthcare system that could prevent or delay regulatory approval of our drug candidates, restrict or regulate post-marketing activities and affect our ability to profitably sell any of our drug candidates for which we obtain regulatory approval.
Current and future legislation may increase the difficulty and cost of commercializing our drug candidates and may affect the prices we may obtain if our drug candidates are approved for commercialization. 13 In the U.S. and some foreign jurisdictions, there have been a number of adopted and proposed legislative and regulatory changes regarding the healthcare system that could prevent or delay regulatory approval of our drug candidates, restrict or regulate post-marketing activities and affect our ability to profitably sell any of our drug candidates for which we obtain regulatory approval.
We are party to license agreements with University of Missouri and Clemson University under which we were granted exclusive rights to patents and patent applications that are important to our business and to our ability to develop and commercialize our NovoGen Bioprinters and 3D tissue products fabricated using our NovoGen Bioprinters.
We are party to license agreements with University of Missouri, Clemson University and the Salk Institute for Biological Studies under which we were granted exclusive rights to patents and patent applications that are important to our business and to our ability to develop and commercialize our 3D tissue products fabricated using our NovoGen Bioprinters and our FXR314 agonist in gastrointestinal disease.
If we identify any material weaknesses or significant deficiencies that may exist, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, and our stock price may decline materially as a result. 14 Future strategic investments could negatively affect our business, financial condition and results of operations if we fail to achieve the desired returns on our investment.
If we identify any material weaknesses or significant deficiencies that may exist, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, and our stock price may decline materially as a result.
In addition, the terms of any equity or convertible debt we agree to issue may include liquidation or other preferences that adversely affect the rights of our stockholders.
To the extent that we raise additional capital through the sale of equity or convertible debt, the ownership interests of our stockholders will be diluted. In addition, the terms of any equity or convertible debt we agree to issue may include liquidation or other preferences that adversely affect the rights of our stockholders.
(collectively, “BICO Group AB”), one of our competitors. Likewise, U.S. Patent Nos. 9,149,952, 9,855,369, 8,931,880, 9,227,339, 9,315,043 and 10,967,560 (all assigned to Organovo, Inc.) and U.S.
Patent Nos. 9,855,369 and 9,149,952, which relate to our bioprinter technology, were the subject of IPR proceedings filed by Cellink AB and its subsidiaries (collectively, “BICO Group AB”), one of our competitors. Likewise, U.S. Patent Nos. 9,149,952, 9,855,369, 8,931,880, 9,227,339, 9,315,043 and 10,967,560 (all assigned to Organovo, Inc.) and U.S.
Keith Murphy, our Executive Chairman, is the Chief Executive Officer, Chairman and principal stockholder of Viscient, a private company that he founded in 2017 that is focused on drug discovery and development utilizing 3D tissue technology and multi-omics (genomics, transcriptomics, metabolomics). Jeffrey N.
We may experience conflicts of interest with Viscient Biosciences, Inc. with respect to business opportunities and other matters. Keith Murphy, our Executive Chairman, is the Chief Executive Officer, Chairman and principal stockholder of Viscient, a private company that he founded in 2017 that is focused on drug discovery and development utilizing 3D tissue technology and multi-omics (genomics, transcriptomics, metabolomics).
Additionally, the United Kingdom’s withdrawal from the European Union may increase the possibility that other countries may decide to leave the European Union again. Risks Related to Our Capital Requirements, Finances and Operations We may be unable to continue as a going concern in the future.
Additionally, the United Kingdom’s withdrawal from the European Union may increase the possibility that other countries may decide to leave the European Union again. Risks Related to Our Capital Requirements, Finances and Operations Management has performed an analysis and concluded that substantial doubt exists about our ability to continue as a going concern.
Any such unauthorized access, disclosure, or loss of information could cause competitive harm, result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and/or cause reputational harm. We may experience conflicts of interest with Viscient Biosciences, Inc. with respect to business opportunities and other matters.
Any such unauthorized access, disclosure, or loss of information could cause competitive harm, result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and/or cause reputational harm.
If adequate funds are not available to us on a timely basis, we may be required to curtail or cease our operations. Raising additional funding through debt or equity financing is likely to be difficult or unavailable altogether given the early stage of our technology and any drug candidates we identify.
Raising additional funding through debt or equity financing is likely to be difficult or unavailable altogether given the early stage of our technology and any drug candidates we identify.
We may also become involved in similar opposition proceedings in the European Patent Office or similar offices in other jurisdictions regarding our intellectual property rights with respect to our products and technology. We depend on license agreements with University of Missouri and Clemson University for rights to use certain patents, pending applications, and know how.
We may also become involved in similar opposition proceedings in the European Patent Office or similar offices in other jurisdictions regarding our intellectual property rights with respect to our products and technology.
In addition, we license, as well as cross-license, certain intellectual property to and from Viscient and expect to continue to do so in the future.
During fiscal 2023, we provided services to Viscient, and we expect to continue to provide services to Viscient and enter into additional agreements with Viscient in the future. 18 In addition, we license, as well as cross-license, certain intellectual property to and from Viscient and expect to continue to do so in the future.
As a result, an investor may find it difficult to dispose of our common stock on the timeline and at the volumes they desire.
As a result, an investor may find it difficult to dispose of our common stock on the timeline and at the volumes they desire. This factor limits the liquidity of our common stock and may have a material adverse effect on the market price of our common stock and on our ability to raise additional capital.
Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our business, share price, financial condition, or results of operations, including the sustainability of our business over time. Risks Related to Government Regulation In the past, we have used hazardous chemicals, biological materials and infectious agents in our business.
Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our business, share price, financial condition, or results of operations, including the sustainability of our business over time. Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.
This factor limits the liquidity of our common stock and may have a material adverse effect on the market price of our common stock and on our ability to raise additional capital. 16 The price of our common stock may continue to be volatile, which could lead to losses by investors and costly securities litigation.
The price of our common stock may continue to be volatile, which could lead to losses by investors and costly securities litigation.
Our ability to benefit from future external strategic investments depends on our ability to successfully conduct due diligence, evaluate prospective opportunities, and buy the equity of our target investments at acceptable market prices. Our failure in any of these tasks could result in unforeseen loses associated with the strategic investments.
Future strategic investments could negatively affect our business, financial condition and results of operations if we fail to achieve the desired returns on our investment. Our ability to benefit from future external strategic investments depends on our ability to successfully conduct due diligence, evaluate prospective opportunities, and buy the equity of our target investments at acceptable market prices.
Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. For example, our U.S. Patent Nos. 9,855,369 and 9,149,952, which relate to our bioprinter technology, were the subject of IPR proceedings filed by Cellink AB and its subsidiaries, MatTek Incorporated and Visikol, Inc.
Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. For example, our U.S.
We have recommenced our operations as an early-stage company with an unproven business strategy, and may never achieve profitability. Our success will depend upon the viability of our platform technology and any disease models we develop, as well as on our ability to determine which drug candidates we should pursue.
We are focusing our efforts on utilizing our 3D bioprinting technology to develop human tissues and disease models for drug discovery and development. Our success will depend upon the viability of our platform technology and any disease models we develop, as well as on our ability to determine which drug candidates we should pursue.
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively the “PPACA”), was enacted.
The new law also caps Medicare out-of-pocket drug costs at an estimated $4,000 a year in 2024 and, thereafter beginning in 2025, at $2,000 a year. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively the “PPACA”), was enacted.
Any shares of common stock issued in the at-the-market offering will result in dilution to our existing stockholders. Further, additional funds may not be available when we need them on terms that are acceptable to us, or at all.
Further, additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to curtail or cease our operations.
Removed
Risks Related to COVID-19 We face risks related to health epidemics, including the COVID-19 pandemic, which could have a material adverse effect on our business and results of operations. Global health concerns relating to the COVID-19 pandemic continue to weigh on the macroeconomic environment, and the pandemic has significantly increased economic volatility and uncertainty.
Added
Separately, our independent registered public accounting firm has included in its opinion for the year ended March 31, 2023 an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern, which may hinder our ability to obtain future financing. • Additional funds may not be available when we need them on terms that are acceptable to us, or at all.
Removed
The continued COVID-19 pandemic could adversely impact our operations, including among others, the impact it may have on the manufacturing and supply chain, sales and marketing and clinical trial operations of potential strategic partners, and the ability to advance our research and development activities and pursue 6 development of any of our pipeline products, each of which could have an adverse impact on our business and our financial results.
Added
Any shares of common stock issued in the at-the-market offering will result in dilution to our existing stockholders. We currently have an effective shelf registration statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”), which we may use to offer from time to time any combination of debt securities, common and preferred stock and warrants.
Removed
In particular, we require access to a constant, steady, reliable supply of human cells to support our development activities.
Added
On March 16, 2018, we entered into the Sales Agreement pursuant to which we have the ability to sell up to $28.3 million of additional shares of our common stock to the public through an “at the market” offering.
Removed
The COVID-19 pandemic could negatively impact our ability to obtain a reliable supply of sufficient human cells or a supply at cost effective prices, which would harm our business and our results of operations and could cause us to be unable to support our drug development efforts.
Added
In the event that the aggregate market value of our common stock held by non-affiliates (“public float”) is less than $75.0 million, the amount we can raise through primary public offerings of securities, including sales under the Sales Agreement, in any twelve-month period using shelf registration statements is limited to an aggregate of one-third of our public float.
Removed
In addition, the stock market has been unusually volatile during the COVID-19 pandemic and such volatility may continue. Our stock price has also experienced volatility during this time, including occasional significant increases and decreases. Such increases and decreases in our stock price may repeat or continue for the foreseeable future.
Added
As of June 1, 2023, our public float was less than $75.0 million, and therefore we are limited to an aggregate of one-third of our public float in the amount we could raise through primary public offerings of securities in any twelve-month period using shelf registration statements.
Removed
There are no comparable recent events which may provide guidance as to the effect of the COVID-19 pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic, or any similar health epidemic that may occur in the future, is highly uncertain and subject to change.
Added
Although we would still maintain the ability to raise funds through other means, such as through the filing of a registration statement on Form S-1 or in private placements, the rules and regulations of the SEC or any other regulatory agencies may restrict our ability to conduct certain types of financing activities, or may affect the timing of and amounts we can raise by undertaking such activities.
Removed
We do not yet know the full extent of COVID-19’s impact on our business, our operations, or the global economy as a whole. However, the effects may have a material adverse impact on our future results of operations.
Added
As widely reported, in the past several years, global credit and financial markets have experienced volatility and disruptions, including, for example, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.
Removed
Following the election of the new board of directors at our 2020 Annual Meeting of stockholders, we have recommenced operations and are focusing our efforts on utilizing our 3D bioprinting technology to develop human tissues and disease models for drug discovery and development.
Added
There can be no assurances that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions.
Removed
If we, or any third party with whom we enter into a partnering or development agreement, experience delays in the completion of, or termination of, any clinical trial of any drug candidates that we develop, or are unable to achieve clinical endpoints due to unforeseen events, such as the COVID-19 pandemic, the commercial prospects of our drug candidates will be harmed, and our ability to develop milestones, development fees or product revenues from any of these drug candidates will be delayed.
Added
If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive.
Removed
Current and future legislation may increase the difficulty and cost of commercializing our drug candidates and may affect the prices we may obtain if our drug candidates are approved for commercialization.
Added
Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and share price and could require us to delay or abandon clinical development plans.
Removed
We have had recurring losses from operations since inception and will likely not generate meaningful revenue for the foreseeable future. We believe that our existing cash, cash equivalents and interest thereon will be sufficient to fund our projected operating requirements under our current operating plan for at least the next 12 months.
Added
The impact of the Russian invasion of Ukraine on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations. The short and long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time.
Removed
However, if our operating plans change and our projected operating requirements increase, we may be unable to continue as a going concern.
Added
We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the United States and several European and Asian countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and other third parties with which we conduct business.

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Item 2. Properties

Properties — owned and leased real estate

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In December 2021, we took occupancy of our permanent lab and office space, located at 11555 Sorrento Valley Road, San Diego, CA 92121. See “Note 6. Leases” of the Notes to the Consolidated Financial Statements contained within this Annual Report for a further discussion of properties.
In December 2021, we took occupancy of our permanent lab and office space, located at 11555 Sorrento Valley Road, San Diego, CA 92121. See “Note 7. Leases” of the Notes to the Consolidated Financial Statements contained within this Annual Report for a further discussion of properties.
Item 2. Properties. In November 2020, we entered into a sixty-two month lease agreement for our long term permanent premises, consisting of approximately 8,051 square feet of lab and office space. In November 2021, we amended the permanent lease agreement to add an additional 2,892 square of office space in the same building.
Item 2. Pr operties. In November 2020, we entered into a sixty-two month lease agreement for our long term permanent premises, consisting of approximately 8,051 square feet of lab and office space. In November 2021, we amended the permanent lease agreement to add an additional 2,892 square of office space in the same building.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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In addition, damage amounts claimed in litigation against it may be unsupported, exaggerated or unrelated to possible outcomes, and as such are not meaningful indicators of its potential liability. We are not involved in any material legal proceedings or legal matters at this time. See “Note 7.
In addition, damage amounts claimed in litigation against it may be unsupported, exaggerated or unrelated to possible outcomes, and as such are not meaningful indicators of its potential liability. We are not involved in any material legal proceedings or legal matters at this time. See “Note 8.
Commitments and Contingencies” of the Notes to the Consolidated Financial Statements contained within this Annual Report for a further discussion of potential commitments and contingencies related to legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 22 PART II
Commitments and Contingencies” of the Notes to the Consolidated Financial Statements contained within this Annual Report for a further discussion of potential commitments and contingencies related to legal proceedings. Item 4. Mine Safe ty Disclosures. Not applicable. 25 PART II
Item 3. Legal Proceedings. In addition to commitments and obligations in the ordinary course of business, the Company may be subject, from time to time, to various claims and pending and potential legal actions arising out of the normal conduct of its business. The Company previously disclosed the following actions (collectively, the “Actions”): • In June 2021, the Company’s U.S.
Item 3. Legal Proceedings. In addition to commitments and obligations in the ordinary course of business, the Company may be subject, from time to time, to various claims and pending and potential legal actions arising out of the normal conduct of its business.
Removed
Patent Nos. 9,855,369 and 9,149,952, which relate to its bioprinter technology, became the subject of IPR proceedings filed by Cellink AB and its subsidiaries, MatTek Incorporated and Visikol, Inc. (collectively, “BICO Group AB”).
Removed
The Company filed a preliminary response to BICO Group AB’s IPR petition in September 2021, and the Patent Trial and Appeal Board (“PTAB”) denied institution of the proceedings in December 2021. • Also in June 2021, U.S. Patent Nos. 9,149,952, 9,855,369, 8,931,880, 9,227,339 and 9,315,043 (all assigned to Organovo, Inc.) and U.S.
Removed
Patent Nos. 7,051,654 and 9,752,116 (licensed exclusively to Organovo) were subject to a declaratory judgment complaint against the Company brought by BICO Group AB to obtain a declaration from the court that they do not infringe any claims of the noted patents (the “Action”). • Further, on July 28, 2021, the Company filed a complaint for patent infringement against BICO Group AB in the United States District Court for the Western District of Texas (the “Patent Complaint”).
Removed
The Patent Complaint alleged that BICO Group AB has infringed U.S. Patent Nos. 9,149,952, 9,855,369 and 9,315,043 (all assigned to Organovo, Inc.) and U.S. Patent No. 9,752,116 (licensed exclusively to Organovo). The Company sought an injunction against continuing infringement of the foregoing patents by BICO Group AB and monetary damages. The Company later amended the complaint to add U.S.
Removed
Patent No. 8,852,932. The case was transferred to the District of Delaware in December 2021 to be consolidated with BICO Group AB’s declaratory judgment action. • In addition, in September 2021, BICO Group AB filed two additional IPR proceedings against the Company’s U.S.
Removed
Patent Nos. 9,315,043 and 9,752,116 (exclusively licensed by the Company from the MUSC Foundation for Research and Development), which relate to its bioprinter technology. The Company filed preliminary responses to those proceedings in December 2021 and January 2022.
Removed
On February 22, 2022, the Company and BICO Group AB entered into a Settlement and Patent License Agreement fully and finally settling all matters between the parties regarding BICO Group AB’s alleged infringement of the Company’s patents. Concurrent with this settlement, the Delaware District Court action was dismissed and the remaining IPR proceeding was also dismissed.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Securities Authorized for Issuance under Equity Compensation Plans Information about securities authorized for issuance under equity compensation plans is set forth in Part III, Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report. Item 6. [Reserved] 24
Securities Authorized for Issuance under Equity Compensation Plans Information about securities authorized for issuance under equity compensation plans is set forth in Part III, Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report. Item 6. [Reserved] 27
The graph set forth below compares the cumulative total stockholder return data on our common stock with the cumulative return data of (i) the Nasdaq Stock Market Composite Index, and (ii) the Nasdaq Biotechnology Index over the five-year period ending March 31, 2022.
The graph set forth below compares the cumulative total stockholder return data on our common stock with the cumulative return data of (i) the Nasdaq Stock Market Composite Index, and (ii) the Nasdaq Biotechnology Index over the five-year period ending March 31, 2023.
This graph assumes the investment of $100 on March 31, 2017 in our common stock and each of the comparative indices and assumes the reinvestment of dividends. No cash dividends have been declared or paid on our common stock.
This graph assumes the investment of $100 on March 31, 2018 in our common stock and each of the comparative indices and assumes the reinvestment of dividends. No cash dividends have been declared or paid on our common stock.
The comparisons in the graph and related information is not intended to forecast or be indicative of possible future performance of our common stock, and we do not make or endorse any predictions as to future stockholder returns. 23 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Organovo Holdings, Inc., the Nasdaq Composite Index, and the Nasdaq Biotechnology Index * $100 invested on March 31, 2017 in stock or index, including reinvestment of dividends.
The comparisons in the graph and related information is not intended to forecast or be indicative of possible future performance of our common stock, and we do not make or endorse any predictions as to future stockholder returns. 26 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Organovo Holdings, Inc., the Nasdaq Composite Index, and the Nasdaq Biotechnology Index * $100 invested on March 31, 2018 in stock or index, including reinvestment of dividends.
The following table sets forth information with respect to shares of our common stock repurchased by us to satisfy certain tax withholding obligations during the three months ended March 31, 2022: (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid Per Share (or Unit) January 1, 2022 - January 31, 2022 — $ — February 1, 2022 - February 28, 2022 45 (1) $ 3.04 March 1, 2022 - March 31, 2022 — $ — Total 45 $ 3.04 (1) Represents shares of our common stock withheld from employees for the payment of taxes.
The following table sets forth information with respect to shares of our common stock repurchased by us to satisfy certain tax withholding obligations during the three months ended March 31, 2023: (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid Per Share (or Unit) January 1, 2023 - January 31, 2023 — $ — February 1, 2023 - February 28, 2023 34 (1) $ 2.64 March 1, 2023 - March 31, 2023 — $ — Total 34 $ 2.64 (1) Represents shares of our common stock withheld from employees for the payment of taxes.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities.
Market Information for Common Stock Our common stock is traded on the Nasdaq Capital Market under the symbol “ONVO.” Holders of Record As of March 31, 2022, we had 8,710,627 outstanding shares of common stock and approximately 43 holders of record of our common stock.
Market Information for Common Stock Our common stock is traded on the Nasdaq Capital Market under the symbol “ONVO.” Holders of Record As of March 31, 2023, we had 8,716,906 outstanding shares of common stock and approximately 81 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

45 edited+22 added−23 removed17 unchanged
Bioprinted 3D Primary Human Intestinal Tissues Model Aspects of Native Physiology and ADME/Tox Functions. iScience. 2018 Apr 27;2:156-167. doi: 10.1016/j.isci.2018.03.015.) Our current understanding of intestinal tissue models and IBD disease models leads us to believe that we can create models that provide greater insight into the biology of these diseases than are generally currently available.
Bioprinted 3D Primary Human Intestinal Tissues Model Aspects of Native Physiology and ADME/Tox Functions. iScience. 2018 Apr 27;2:156-167. doi: 10.1016/j.isci.2018.03.015.) Our current understanding of intestinal tissue models and IBD models leads us to believe that we can create models that provide greater insight into the biology of these diseases than are generally currently available.
These agreements can include one or more of the following: (i) non-refundable upfront fees and (ii) 26 royalties based on specified percentages of net product sales. At contract inception, we assess the goods or services agreed upon within each contract and assess whether each good or service is distinct and determine those that are performance obligations.
These agreements can include one or more of the following: (i) non-refundable upfront fees and (ii) royalties based on specified percentages of net product sales. At contract inception, we assess the goods or services agreed upon within each contract and assess whether each good or service is distinct and determine those that are performance obligations.
Stock-based compensation For purposes of calculating stock-based compensation, we estimate the fair value of stock options and shares acquirable under our Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”), our 2016 Employee Stock Purchase Plan (the “ESPP”) or our 2021 Inducement Equity Plan (the “Inducement Plan”) using a Black-Scholes option-pricing model.
Stock-based compensation For purposes of calculating stock-based compensation, we estimate the fair value of stock options and shares acquirable under our 2022 Equity Incentive Plan ("2022 Plan"), Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”), our 2016 Employee Stock Purchase Plan (the “ESPP”) or our 2021 Inducement Equity Plan (the “Inducement Plan”) using a Black-Scholes option-pricing model.
Effect of Inflation and Changes in Prices Management does not believe that inflation and changes in price will have a material effect on our operations. Recent Accounting Pronouncements For information regarding recently adopted and issued accounting pronouncements, see “Note 12. Recent Accounting Pronouncements” in the Notes to the Consolidated Financial Statements contained in this Annual Report.
Effect of Inflation and Changes in Prices Management does not believe that inflation and changes in price will have a material effect on our operations. Recent Accounting Pronouncements For information regarding recently adopted and issued accounting pronouncements, see “Note 13. Recent Accounting Pronouncements” in the Notes to the Consolidated Financial Statements contained in this Annual Report.
On January 29, 2021, we filed a prospectus supplement to the 2021 Shelf (the “ATM Prospectus Supplement”), pursuant to which we may offer and sell, from time to time through the Agents, shares of our common stock in ATM sales transactions having an aggregate offering price of up to $50.0 million.
On January 29, 2021, we filed a prospectus supplement to the 2021 Shelf (the “ATM Prospectus Supplement”), pursuant to which we could offer and sell, from time to time through the Agents, shares of our common stock in ATM sales transactions having an aggregate offering price of up to $50.0 million.
Except as required by applicable law we do not undertake any obligation to update our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report. Overview We are an early-stage biotechnology company that is focusing on building high fidelity, 3D tissues that recapitulate key aspects of human disease.
Except as required by applicable law we do not undertake any obligation to update our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report. Overview We are a biotechnology company that is focusing on building high fidelity, 3D tissues that recapitulate key aspects of human disease.
The 2021 Shelf was declared effective by the SEC on January 29, 2021 and replaced the 2018 Shelf at that time. On March 16, 2018, we entered into a Sales Agreement with H.C. Wainwright & Co., LLC and Jones Trading Institutional Services LLC (each an “Agent” and together, the “Agents”).
The 2021 Shelf registration statement was declared effective by the SEC on January 29, 2021 and replaced the 2018 Shelf at that time. On March 16, 2018, we entered into a Sales Agreement (“Sales Agreement”) with H.C. Wainwright & Co., LLC and Jones Trading Institutional Services LLC (each an “Agent” and together, the “Agents”).
Our full-time research and development staff increased from an average of two employees for the year ended March 31, 2021 to an average of nine employees for the year ended March 31, 2022.
Our full-time research and development staff increased from an average of nine employees for the year ended March 31, 2022 to an average of fifteen employees for the year ended March 31, 2023.
As of March 31, 2022, there was approximately $100.0 million available in future offerings under the 2021 Shelf (excluding amounts available but not yet issued under the ATM Prospectus Supplement), and approximately $28.3 million available for future offerings through our ATM program. 29 Having insufficient funds may require us to relinquish rights to our technology on less favorable terms than we would otherwise choose.
As of March 31, 2023, there was approximately $100.0 million available in future offerings under the 2021 Shelf, and approximately $28.3 million available for future offerings through our ATM program under the ATM Prospectus Supplement. Having insufficient funds may require us to relinquish rights to our technology on less favorable terms than we would otherwise choose.
Failure to obtain adequate financing could adversely affect our ability to operate as a going concern. If we raise additional funds from the issuance of equity securities, substantial dilution to our existing stockholders would likely result.
Failure to obtain adequate financing could adversely affect our operations. If we raise additional funds from the issuance of equity securities, substantial dilution to our existing stockholders would likely result.
If there is a difference between the assumptions used in determining our stock-based compensation expense and the actual factors that become known over time, specifically with respect to anticipated forfeitures, we may change the input factors used in determining stock-based compensation costs for future grants.
Accounting policies regarding stock-based compensation are considered critical, as they require significant assumptions. If there is a difference between the assumptions used in determining our stock-based compensation expense and the actual factors that become known over time, specifically with respect to anticipated forfeitures, we may change the input factors used in determining stock-based compensation costs for future grants.
Research and development activities consisted of $1.6 million in personnel related costs, $0.8 million in lab expenses, $0.7 million in facility costs, and $0.2 million in consulting fees, depreciation, and other miscellaneous expenses.
Research and development activities consisted of $2.4 million in personnel related costs, $5.2 million in lab and research expenses, $1.0 million in facility costs, and $0.3 million in consulting fees, depreciation, and other miscellaneous expenses.
In aggregate, issued and outstanding common stock and shares issuable under outstanding equity awards or reserved for future issuance under the 2008 Plan, the 2012 Plan, the Inducement Plan, and the 2016 ESPP total 11,399,566 shares of common stock as of March 31, 2022.
In 32 aggregate, issued and outstanding common stock and shares issuable under outstanding equity awards or reserved for future issuance under the 2022 Plan, the 2012 Plan, the Inducement Plan, and the ESPP total 11,426,737 shares of common stock as of March 31, 2023.
The net cash used in investing activities for both the years ended March 31, 2022 and March 31, 2021 was related to the purchase of fixed assets. Financing activities Net cash provided by financing activities was approximately $0.2 million and $23.8 million for the years ended March 31, 2022 and 2021, respectively.
The net cash used in investing activities for the year ended March 31, 2022 was related to the purchase of fixed assets. Financing activities Net cash provided by financing activities was zero and $0.2 million for the years ended March 31, 2023 and 2022, respectively.
The $1.5 million of royalty revenue for the year ended March 31, 2022, was an upfront payment related to the licensing of certain intellectual property (“IP”).
The $1.5 million of royalty revenue for the year ended March 31, 2022 was an upfront payment related to the licensing of certain intellectual property (“IP”). The $0.4 million of royalty revenue for the year ended March 31, 2023, was related to the sales-based royalty revenue earned from the aforementioned licensing of IP.
Through March 31, 2022, we have financed our operations primarily through the sale of common stock through public and ATM offerings, the private placement of equity securities, from revenue derived from the licensing of intellectual property, products and research-based services, grants, and collaborative research agreements, and from the sale of convertible notes.
Refer to “Operations funding requirements” below for further information regarding financing activities. 31 Operations funding requirements Through March 31, 2023, we have financed our operations primarily through the sale of common stock through public and ATM offerings, the private placement of equity securities, from revenue derived from the licensing of intellectual property, products and research-based services, grants, and collaborative research agreements, and from the sale of convertible notes.
If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict our ability to operate our business. As of March 31, 2022, we had 8,710,627 total issued and outstanding shares of common stock.
If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict our ability to operate our business.
These changes, if any, may materially impact our results of operations in the period such changes are made. Revenue We assess whether our license agreements are considered a contract with a customer under ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”) or an arrangement with a collaborator subject to guidance under ASC Topic 808, Collaborative Arrangements (“Topic 808”).
Revenue We assess whether our license agreements are considered a contract with a customer under ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”) or an arrangement with a collaborator subject to guidance under ASC Topic 808, Collaborative Arrangements (“Topic 808”).
These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
These 28 estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Our significant accounting policies are set forth in “Note 1.
The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. For stock options, prior to fiscal year 2020, we used a blend of historical volatility and implied volatility of comparable companies.
The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. Expected volatility is based on the Company-specific historical volatility rate.
Other Income (Expense) Other income was less than $0.1 million for the years ended March 31, 2022 and March 31, 2021. For the year ended March 31, 2022, other income consisted of a sale of a bioprinter asset to an academic research institution as well as interest income.
For the year ended March 31, 2023, interest income was approximately $0.5 million, due to higher interest rates compared to prior years. For the year ended March 31, 2022, other income consisted of a sale of a bioprinter asset to an academic research institution as well as interest income.
The expected life of the stock options is based on historical and other economic data trended into the future. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of our stock options. The dividend yield assumption is based on our history and expectation of no dividend payouts.
For shares acquirable under our ESPP, we use our Company-specific volatility rate. The expected life of the stock options is based on historical and other economic data trended into the future. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of our stock options.
No exercise price or other monetary payment is required for receipt of the shares issued in settlement of the respective award; instead, consideration is furnished in the form of the participant’s service to us. The expense for PBRSUs with pre-defined performance criteria is adjusted with the probability of achievement of such performance criteria at each period end.
No exercise price or other monetary payment is required for receipt of the shares issued in settlement of the respective award; instead, consideration is furnished in the form of the participant’s service to us.
If there is a difference between the assumptions used in determining our stock-based compensation expense and the actual factors that become known over time, specifically with respect to anticipated forfeitures, we may change the input factors used in determining stock-based compensation costs for future grants.
If there is a difference between the assumptions used in determining our stock-based compensation expense and the actual factors that become known over time, we may change the input factors used in determining stock-based compensation costs for future grants. These changes, if any, may materially impact our results of operations in the period such changes are made.
Additionally, 75,000 shares of common stock have been reserved for issuance under the 2016 ESPP, of which 59,435 shares remain available for future issuance as of March 31, 2022. Finally, 750,000 shares of common stock have been reserved for issuances under our Inducement Plan, of which 700,000 remain available for issuance as of March 31, 2022.
Finally, 51,000 shares of common stock have been reserved for issuances under our Inducement Plan, of which 1,000 remain available for future issuance as of March 31, 2023.
Differences in the allocation of the transaction price between delivered and undelivered performance obligations can impact the timing of revenue recognition but do not change the total revenue recognized under any agreement.
In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price. 29 Differences in the allocation of the transaction price between delivered and undelivered performance obligations can impact the timing of revenue recognition but do not change the total revenue recognized under any agreement.
The 2012 Equity Incentive Plan (the “2012 Plan”), as amended, provides for the issuance of up to 2,327,699 shares of our common stock, of which 710,333 shares remain available for issuance as of March 31, 2022, to executive officers, directors, advisory board members, employees and consultants.
The 2022 Plan provides for the issuance of up to 1,236,738 shares of our common stock, of which 1,071,471 shares remain available for issuance as of March 31, 2023, to executive officers, directors, advisory board members, employees and consultants.
Results of Operations Comparison of the Years Ended March 31, 2022 and 2021 The following table summarizes our results of operations for the years ended March 31, 2022 and 2021 (in thousands, except percentages): Year Ended March 31, Increase (decrease) 2022 2021 $ % Revenues $ 1,500 $ - $ 1,500 100 % Research and development $ 3,320 $ 1,103 $ 2,217 201 % Selling, general and administrative $ 9,659 $ 15,723 $ (6,064 ) (39 %) Other income $ 33 $ 2 $ 31 1,550 % Revenues We had $1.5 million of royalty revenue for the year ended March 31, 2022 compared to no revenue for the year ended March 31, 2021.
Results of Operations Comparison of the Years Ended March 31, 2023 and 2022 The following table summarizes our results of operations for the years ended March 31, 2023 and 2022 (in thousands, except percentages): Year Ended March 31, Increase (decrease) 2023 2022 $ % Revenues $ 370 $ 1,500 $ (1,130 ) (75 %) Research and development $ 8,885 $ 3,320 $ 5,565 168 % Selling, general and administrative $ 9,216 $ 9,659 $ (443 ) (5 %) Other income $ 474 $ 33 $ 441 1,336 % Revenues We had $0.4 million of royalty revenue for the year ended March 31, 2023, compared to $1.5 million revenue for the year ended March 31, 2022.
We had negative cash flows from operations of $8.5 million and $13.3 million for the years ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we had total current assets of approximately $29.5 million and current liabilities of approximately $1.4 million, resulting in working capital of $28.1 million.
As of March 31, 2023, we had total current assets of approximately $17.0 million and current liabilities of approximately $3.7 million, resulting in working capital of $13.3 million. At March 31, 2022, we had total current assets of approximately $29.5 million and current liabilities of approximately $1.4 million, resulting in working capital of $28.1 million.
At March 31, 2021, we had total current assets of approximately $38.4 million and current liabilities of approximately $0.7 million, resulting in working capital of $37.7 million . 28 The following table sets forth a summary of the primary sources and uses of cash for the years ended March 31, 20 2 2 and 20 2 1 (in thousands): Year Ended March 31, 2022 2021 Net cash (used in) provided by: Operating activities $ (8,453 ) $ (13,323 ) Investing activities (409 ) (393 ) Financing activities 205 23,835 Net increase (decrease) in cash, cash equivalents, and restricted cash $ (8,657 ) $ 10,119 Operating activities Net cash used in operating activities was approximately $8.5 million and $13.3 million for the years ended March 31, 2022 and 2021, respectively.
The following table sets forth a summary of the primary sources and uses of cash for the years ended March 31, 2023 and 2022 (in thousands): Year Ended March 31, 2023 2022 Net cash (used in) provided by: Operating activities $ (12,408 ) $ (8,453 ) Investing activities (966 ) (409 ) Financing activities — 205 Net decrease in cash, cash equivalents, and restricted cash $ (13,374 ) $ (8,657 ) Operating activities Net cash used in operating activities was approximately $12.4 million and $8.5 million for the years ended March 31, 2023 and 2022, respectively.
Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities.
We continually evaluate our estimates and judgments used in preparing our financial statements and related disclosures, none of which are considered critical. All estimates affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities.
If factors change and we employ different assumptions, our stock-based compensation expense may differ significantly from what we have recorded in the past. For purposes of calculating stock-based compensation, we estimate the fair value of restricted stock units (“RSUs”) and performance-based restricted stock units (“PBRSUs”) with pre-defined performance criteria, based on the closing stock price on the date of grant.
For purposes of calculating stock-based compensation, we estimate the fair value of restricted stock units (“RSUs”) with pre-defined performance criteria, based on the closing stock price on the date of grant.
We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For the year ended March 31, 2023, the performance obligations assessed were sales-based royalties on a quarterly basis.
We expect our total operating expense for the fiscal year ending March 31, 2023 to be between $10.0 million and $12.0 million. Based on our current operating plan and available cash resources, we believe we have sufficient resources to fund our business for at least the next twelve months.
We expect our total operating expense for the fiscal year ending March 31, 2024 to be between $12.0 million and $14.0 million. Based on our current operating plan and available cash resources, we will need substantial additional funding to support future operating activities.
Of those policies, we believe that the policies discussed below may involve a higher degree of judgment and may be more critical to an accurate reflection of our financial condition and results of operations. Accounting policies regarding stock-based compensation are considered critical, as they require significant estimates, judgements, and assumptions.
Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements contained within this Annual Report. Of those policies, we believe that the policies discussed below may involve a higher degree of judgment and may be more critical to an accurate reflection of our financial condition and results of operations.
The $4.8 million decrease in operating cash usage, for the year ended March 31, 2022, can be attributed primarily to our operational restructuring. Investing activities Net cash used in investing activities was $0.4 million for the years ended March 31, 2022 and 2021, respectively.
Investing activities Net cash used in investing activities was $1.0 million and $0.4 million for the years ended March 31, 2023 and 2022, respectively.
As of March 31, 2022, we have sold an aggregate of 1,580,862 shares of common stock in ATM offerings under the Sales Agreement, with gross proceeds of approximately $21.7 million.
Any shares offered and sold are issued pursuant to our 2021 Shelf. During the year ended March 31, 2023, we sold no shares of common stock in ATM offerings. As of March 31, 2023, we have sold an aggregate of 1,580,862 shares of common stock in ATM offerings under the ATM Prospectus Supplement, for gross proceeds of approximately $21.7 million.
Research and Development Expenses The following table summarizes our research and development expenses for the years ended March 31, 2022 and 2021 (in thousands, except percentages): Year Ended March 31, Increase (decrease) 2022 2021 $ % Research and development $ 2,787 $ 972 $ 1,815 187 % Non-cash stock-based compensation 419 105 314 299 % Depreciation and amortization 114 26 88 338 % Total research and development expenses $ 3,320 $ 1,103 $ 2,217 201 % Research and development expenses increased by $2.2 million, or 201%, from approximately $1.1 million for the year ended March 31, 2021 to approximately $3.3 million for the year ended March 31, 2022 as we materially increased research and development activities following the change of control on September 15, 2020.
Research and Development Expenses The following table summarizes our research and development expenses for the years ended March 31, 2023 and 2022 (in thousands, except percentages): Year Ended March 31, Increase (decrease) 2023 2022 $ % Research and development $ 8,247 $ 2,787 $ 5,460 196 % Non-cash stock-based compensation 473 419 54 13 % Depreciation and amortization 165 114 51 45 % Total research and development expenses $ 8,885 $ 3,320 $ 5,565 168 % Research and development expenses increased by $5.6 million, or 168%, from approximately $3.3 million for the year ended March 31, 2022 to approximately $8.9 million for the year ended March 31, 2023, as we significantly increased research and development activities.
As of April 1, 2019, we were using the Company-specific historical volatility rate as it was more reflective of market conditions and a better indicator of expected volatility. For certain options granted with vesting criteria contingent on market conditions, we engage with valuation specialists to calculate fair value and requisite service periods using Monte Carlo simulations.
For certain options granted with vesting criteria contingent on market conditions, we engage with valuation specialists to calculate fair value and requisite service periods using Monte Carlo simulations. For certain options granted with vesting criteria contingent on pre-defined Company performance criteria, we periodically assess and adjust the expense based on the probability of achievement of such performance criteria.
Going forward, in line with our renewed research and development efforts, we expect to hire additional employees and incur significantly more research and development expenses. 27 Selling, General and Administrative Expenses The following table summarizes our selling, general and administrative expenses for the years ended March 31, 2022 and 2021 (in thousands, except percentages): Year Ended March 31, Increase (decrease) 2022 2021 $ % Selling, general and administrative $ 7,794 $ 10,257 $ (2,463 ) (24 %) Non-cash stock-based compensation 1,837 5,451 (3,614 ) (66 %) Depreciation and amortization 28 15 13 87 % Total selling, general and administrative expenses $ 9,659 $ 15,723 $ (6,064 ) (39 %) Selling, general and administrative expenses decreased approximately $6.0 million, or 39%, from $15.7 million for the year ended March 31, 2021 to approximately $9.7 million for the year ended March 31, 2022.
Selling, General and Administrative Expenses The following table summarizes our selling, general and administrative expenses for the years ended March 31, 2023 and 2022 (in thousands, except percentages): Year Ended March 31, Increase (decrease) 2023 2022 $ % Selling, general and administrative $ 7,184 $ 7,794 $ (610 ) (8 %) Non-cash stock-based compensation 1,904 1,837 67 4 % Depreciation and amortization 128 28 100 357 % Total selling, general and administrative expenses $ 9,216 $ 9,659 $ (443 ) (5 %) Selling, general and administrative expenses decreased approximately $0.4 million, or 5%, from $9.7 million for the year ended March 31, 2022 to approximately $9.2 million for the year ended March 31, 2023.
Our initial plan is to focus on IBD, including CD and UC with a goal of broadening our work into additional therapeutic areas over time. In connection with our new strategy, we intend to rebuild our research and development functions to support our screening and drug development efforts.
Financial Condition, Liquidity and Capital Resources Going forward, we intend to leverage our proprietary technology platform to develop therapeutic drugs. Our initial plan is to focus on IBD, including CD and UC with a goal of broadening our work into additional therapeutic areas over time.
As of March 31, 2022, we had cash and cash equivalents of approximately $28.7 million and an accumulated deficit of $307.7 million. As of March 31, 2021, we had cash and cash equivalents of $37.4 million and an accumulated deficit of $296.3 million.
As of March 31, 2022, we had cash and cash equivalents of $28.7 million and an accumulated deficit of $307.7 million. We had negative cash flows from operations of $12.4 million and $8.5 million for the years ended March 31, 2023 and 2022, respectively.
We may also form partnerships around the development of targets or therapeutics for the treatment of IBD. We expect to broaden our work into additional therapeutic areas over time and are currently exploring specific tissues for development.
FXR agonism has been tested in a variety of preclinical models of IBD. The acquired program contains two clinically tested compounds and over 2,000 discovery or preclinical compounds. We expect to broaden our work into additional therapeutic areas over time and are currently exploring specific tissues for development.
Our employees and consultants have recently returned to working at our office and lab when necessary. We have developed guidelines and protocols to handle exposures and infections intended to keep disruptions to operations to a minimum. 25 Critical Accounting Policies, Estimates, and Judgments Our financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
Critical Accounting Policies, Estimates, and Judgments Our financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
We evaluate each performance obligation to determine if it can be satisfied at a point in time or over time. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.
We evaluate the performance obligation to determine if it can be satisfied at a point in time or over time. For agreements that include sales-based royalties, we estimate and recognize revenue in the period the underlying sales occur.
Removed
COVID-19 Global health concerns relating to the COVID-19 pandemic continue to weigh on the macroeconomic environment, and the pandemic has significantly increased economic volatility and uncertainty.
Added
We may also form partnerships around the development of targets or therapeutics for the treatment of IBD. In March of 2023, we entered into and closed an asset purchase agreement with Metacrine, Inc to acquire their farnesoid X receptor ("FXR") program. FXR is a mediator of GI and liver diseases.
Removed
The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the rise of vaccine-resistant variants, the duration of the outbreak, and any travel bans, restrictions or other limitations that may be imposed in the future .
Added
The dividend yield assumption is based on our history and expectation of no dividend payouts. If factors change and we employ different assumptions, our stock-based compensation expense may differ significantly from what we have recorded in the past.
Removed
In particular, the continued COVID-19 pandemic could adversely impact various aspects of our operations, including among others, our ability to raise additional capital, the timing and ability to pursue our revised strategy, given the impact the pandemic may have on the manufacturing and supply chain, sales and marketing and clinical trial operations of potential strategic partners and the ability to advance our research and development activities and pursue development of our pipeline products each of which could have an adverse impact on our business and our financial results.
Added
Key factors considered in the estimate include sales of products that include the underlying licensed IP and the location of customers related to the jurisdictions of the licensed IP.
Removed
We continually evaluate our estimates and judgments, the most critical of which are those related to revenue recognition and the valuation of stock-based compensation expense. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances.
Added
Of the $5.2 million in lab and research expenses, $4.0 million relates to acquired in-process research and development ("IPR&D") of Metacrine's FXR program, related research data, and IP.
Removed
Since March 31, 2021, the significant change to our critical accounting policies includes adding revenue recognition related items. Our significant accounting policies are set forth in “Note 1. Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements contained within this Annual Report.
Added
Overall, the decrease year over year is due to a significant decrease in general corporate costs, most notably legal costs, as we were involved in litigation in fiscal 2022 which was resolved by the end of fiscal 2022.
Removed
For certain options granted with vesting criteria contingent on pre-defined Company performance criteria, we periodically assess and adjust the expense based on the probability of achievement of such performance criteria. For shares acquirable under our ESPP, we use our Company-specific volatility rate.
Added
For the year ended March 31, 2022, we had an average of four full-time employees, which 30 increased to an average of five full-time employees for the year ended March 31, 2023.
Removed
All of the above accounting policies regarding stock-based compensation are considered critical, as they require significant estimates, judgements, and assumptions.
Added
Year over year, we had an increase in personnel related costs of approximately $0.4 million, an increase in consulting costs of approximately $0.3 million, an increase in depreciation and amortization of approximately $0.1 million.
Removed
As part of the accounting for these agreements, we must develop estimates and assumptions that require judgment of management to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations.
Added
These increases were offset by a $1.2 million decrease in general corporate costs, mostly attributable to a decrease in legal costs related to litigation regarding patent enforcement that occurred and ended in fiscal 2022. Other Income (Expense) Other income was $0.5 million and less than $0.1 million for the years ended March 31, 2023 and March 31, 2022, respectively.
Removed
For agreements that include license fees, we recognize revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For agreements that include sales-based royalties, we recognize revenue in the period the underlying sales occur.
Added
The accompanying consolidated financial statements have been prepared on the basis that we are a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of March 31, 2023, we had cash and cash equivalents of approximately $15.3 million and an accumulated deficit of $325.0 million.
Removed
Overall, the decrease year over year is due to the change in business operations from fiscal 2021 to fiscal 2022.
Added
The $3.8 million increase in operating cash usage, for the year ended March 31, 2023, can be attributed primarily to an increase in our research and development activities. Operating cash usage includes $2.0 million of cash outflows for acquired IPR&D of Metacrine's FXR drug compound, related research data, and IP.
Removed
During the year ended March 31, 2021, the majority of our costs were for personnel and general corporate costs, as we were in the midst of a strategic alternatives process and at the time we had an average of five full-time employees, three of whom were executives.
Added
The net cash used in investing activities for the year ended March 31, 2023 was attributed to $0.4 million of fixed asset purchases, $0.7 million of purchases of equity securities, net of sales, which was slightly offset by $0.1 million of investment income.
Removed
A change in control occurred in September 2020, which triggered the resignations and related severance costs for the three executives. This included the accelerated vesting of any outstanding share based compensation. During the year ended March 31, 2022, we had an average of four full-time employees, only one of whom is an executive.
Added
The net cash provided for the year ended March 31, 2022, was primarily driven by at-the-market ("ATM") share offerings.
Removed
This decrease in headcount and a shift in business operations resulted in the decrease of personnel related costs by approximately $7.1 million year over year, which was offset by a $0.1 million increase in consulting costs year over year, as we utilized part-time consultants for officer positions in the Company as well as various other consultants for operations.
Added
We have concluded that the prevailing conditions and ongoing liquidity risks faced by us raise substantial doubt about our ability to continue as a going concern for at least one year following the date these financial statements are issued.
Removed
Lastly, we had an increase in corporate costs of $1.0 million year over year, which was a result of a shift in business operations. Our corporate costs during the year ended March 31, 2022 were approximately $5.5 million.
Added
The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
Removed
Of these corporate costs, approximately $0.5 million are legal costs directly related to IPR proceedings and $1.4 million are legal costs directly related to litigation regarding patent enforcement. As of March 31, 2022, these legal matters were closed and no further costs are expected.
Added
We cannot be sure that additional financing will be available if and when needed, or that, if available, we can obtain financing on terms favorable to our stockholders. Any failure to obtain financing when required will have a material adverse effect on our business, operating results, and financial condition.
Removed
For the year ended March 31, 2021, a loss of less than $0.1 million from the disposal of fixed assets was offset by interest income of less than $0.1 million.
Added
As of March 31, 2023, we had 8,716,906 total issued and outstanding shares of common stock. On October 12, 2022, our stockholders and the Board of Directors ("Board") approved the 2022 Plan, and it became effective on that date. The 2022 Plan replaced the 2012 Plan on the effective date.
Removed
Financial Condition, Liquidity and Capital Resources We originally devoted our efforts to developing a platform technology to produce and study living tissues, with a focus on liver tissue, that emulate key aspects of human biology and disease, raising capital and building infrastructure.
Added
Upon the effective date, we ceased granting awards under the 2012 Plan and any shares remaining available for future issuance under the 2012 Plan were cancelled and are no longer available for future issuance. The 2012 Plan continues to govern awards previously granted under it.
Removed
Following the decision to explore strategic alternatives, we took steps to manage our resources and extend our cash runway.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Due to the nature of our short-term investments, we believe that we are not subject to any material market risk exposure. We have limited foreign currency risk exposure as our business operates primarily in U.S. dollars. We do not have significant foreign currency nor any other derivative financial instruments. 30
Due to the nature of our short-term investments, we believe that we are not subject to any material market risk exposure. We have limited foreign currency risk exposure as our business operates primarily in U.S. dollars. We do not have significant foreign currency nor any other derivative financial instruments. 33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We invest our excess cash in short term, high quality interest bearing securities including US government and US government agency securities and high-grade corporate commercial paper. The primary objective of our investment activities is to preserve our capital for the purpose of funding our operations.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk. We invest our excess cash in short term, high quality interest bearing securities including US government and US government agency securities and high-grade corporate commercial paper. The primary objective of our investment activities is to preserve our capital for the purpose of funding our operations.

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