Organovo(ONVO) - 2025 Q4 - Annual Report

Important Information Regarding Forward-Looking Statements This section highlights that the Annual Report contains forward-looking statements subject to risks and uncertainties detailed in Item 1A - The Annual Report contains forward-looking statements, identified by terms like "believe," "expect," and "anticipate," which are subject to risks and uncertainties detailed in Item 1A. "Risk Factors."[8] - All information in the report reflects the 1-for-12 reverse stock split of common stock, effective March 21, 2025.[9] PART I Item 1. Business VivoSim Labs, Inc. transitioned from a clinical-stage biotechnology company to a pharmaceutical and biotechnology services company, specializing in drug testing using proprietary 3D human tissue models - VivoSim Labs, Inc. (formerly Organovo Holdings, Inc.) transitioned its business model in March 2025 from developing FXR314 for IBD to providing testing services using 3D human tissue models.[12][13][15] - The company now focuses on liver and intestinal toxicology insights using New Approach Methodologies (NAM) models, anticipating accelerated adoption due to FDA's refined animal testing requirements.[12][16] - The FXR program was sold in March 2025 for $10.0 million upfront ($9.0 million at closing, $1.0 million in escrow), with potential future milestones up to $50.0 million.[14] - VivoSim's liver toxicology platform demonstrated best-in-class predictive power with 87.5% sensitivity for known liver-toxic drugs and 100% specificity for non-toxic compounds.[16] Overview This section provides a general description of the company's business and strategic direction Our Platform Technology This section describes the company's proprietary bioprinting technology and 3D human tissue models used for drug testing services Intellectual Property This section details the company's intellectual property portfolio, including in-licensed and company-owned patents covering bioprinting technology and engineered tissue products In-Licensed Intellectual Property This section describes the exclusive licenses obtained from universities for foundational 3D bioprinting technology and cellular aggregates - The company obtained worldwide exclusive licenses from the University of Missouri-Columbia (MU) and the Medical University of South Carolina in 2009 and 2010, covering foundational 3D bioprinting technology and cellular aggregates.[24] - These licenses provide intellectual property rights for creating engineered tissues and utilizing the NovoGen Bioprinter®, with ongoing royalty payments based on net sales.[24][25] Company Owned Intellectual Property This section outlines VivoSim's owned and exclusively licensed patents protecting its bioprinting platform and engineered tissue products - VivoSim owns or exclusively licenses 34 issued U.S. patents and over 50 international patents, plus 9 pending U.S. and over 5 pending international applications, covering bioprinting technology and engineered tissue products.[23] - The company's bioprinting platform is protected by 11 issued U.S. patents and 15 issued foreign patents, with remaining terms ranging from over 6 to over 9 years.[27] - NAMkind™ Human Liver Tissue is protected by 4 U.S. patents and several international patents, with remaining terms from over 8 to over 10 years.[28] - Past patent disputes with Cellink AB (BICO Group AB) regarding bioprinter technology were settled in February 2022, resulting in a non-exclusive license agreement.[30] Employees and Human Capital This section details the company's employee count and objectives for human capital management, including recruitment and retention strategies - As of June 1, 2025, VivoSim Labs had 13 employees, 5 of whom are full-time, and also retains former employees and expert consultants.[32] - Human capital objectives include identifying, recruiting, retaining, incentivizing, and integrating employees, with equity incentive plans used for motivation.[33] Corporate Information This section provides details on the company's name change, stock trading symbol, and principal executive offices - The company changed its name to VivoSim Labs, Inc. on April 24, 2025, and its common stock trades on Nasdaq Capital Market under the symbol "VIVS."[34] - Principal executive offices are located at 11555 Sorrento Valley Rd, Suite 100, San Diego CA 92121.[34] Available Information This section informs about the company's investor relations website where SEC filings will be provided free of charge - The company's investor relations website (https://www.vivosim.ai) is under development and will provide SEC filings free of charge.[35] Item 1A. Risk Factors This section details significant investment risks, including substantial operating losses, an unproven business strategy, funding requirements, and regulatory challenges - The company expects substantial additional operating losses and its business strategy of using 3D human tissue models for drug discovery is new and unproven.[38][39][42] - VivoSim will require substantial additional funding, which could dilute existing stockholders or restrict operations, and its independent auditor has expressed substantial doubt about its ability to continue as a going concern.[38][50][95] - The company faces intense competition, relies on a constant supply of human cells, and depends on third-party contractors for critical development aspects.[43][48][61] - Regulatory challenges, including potential changes in healthcare legislation and government funding for agencies like the FDA, could increase commercialization costs and affect drug pricing.[81][87] - The company's common stock may continue to be volatile, and there is a risk of failing to maintain Nasdaq listing requirements, which could harm liquidity and capital raising ability.[38][124][131] - Intellectual property protection is critical, but patents could be found invalid or unenforceable, and enforcing patent rights can be expensive and time-consuming.[142][150][154] Risk Factor Summary This section provides a high-level overview of the most significant risks that could materially affect the company's business, financial condition, and results of operations Risks Related to our Business This section outlines risks specific to the company's business model, including its unproven strategy, competition, and reliance on key resources and third parties Risks Related to Government Regulation This section addresses potential impacts of government regulations, healthcare legislation, and funding changes on the company's operations and commercialization efforts Risks Related to Our Capital Requirements, Finances and Operations This section details financial risks, including the need for additional funding, potential dilution, and the auditor's going concern doubt Risks Related to Our Common Stock and Liquidity Risks This section covers risks associated with the company's common stock, including price volatility, potential delisting from Nasdaq, and limitations on capital raising Risks Related to Our Intellectual Property This section discusses the challenges and uncertainties involved in protecting the company's intellectual property, including patent validity and enforcement costs Risks Related to Litigation This section addresses the potential impact of legal proceedings and claims on the company's financial condition and operations General Risk Factors This section covers broader risks that could affect the company, its industry, or the economy as a whole Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments.[175] Item 1C. Cybersecurity VivoSim Labs considers cybersecurity critical and has implemented a governance structure, processes, and third-party evaluations to assess and manage cybersecurity risks - Cybersecurity is critical for VivoSim Labs, which faces threats common in most industries, including ransomware and denial-of-service attacks.[176] - The company has a governance structure and processes to assess, identify, manage, and report cybersecurity risks, with oversight from the Audit Committee.[177] - VivoSim relies on third-party services for security control evaluations and requires subcontractors to report cybersecurity incidents.[178][179] Item 2. Properties VivoSim Labs leases approximately 10,943 square feet of lab and office space in San Diego, CA, under a lease agreement that commenced in December 2021 - VivoSim Labs leases 10,943 square feet of lab and office space at 11555 Sorrento Valley Road, San Diego, CA 92121.[181] - The permanent lease commenced in December 2021 for approximately sixty-two months.[181] Item 3. Legal Proceedings The company is involved in various claims and legal actions, including a complaint filed by H.C. Wainwright & Co., LLC alleging breach of a tail financing provision - H.C. Wainwright & Co., LLC filed a complaint against the company on August 27, 2024, alleging breach of a tail financing provision and seeking compensatory and consequential damages and attorneys' fees.[169][370] - The company recorded an accrual of $0.6 million for loss contingencies related to the H.C. Wainwright complaint, with $0.4 million in accrued expenses and $0.2 million as a liability to be settled in equity.[372] - Litigation outcomes are inherently unpredictable, and assessing contingencies requires significant judgment about future events.[183][371] Item 4. Mine Safety Disclosures This item is not applicable to VivoSim Labs, Inc - This item is not applicable.[186] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities VivoSim Labs' common stock trades on the Nasdaq Capital Market under "VIVS," with 2,599,797 outstanding shares and no anticipated cash dividends - Common stock trades on the Nasdaq Capital Market under the symbol "VIVS."[188] Common Stock Information (as of May 20, 2025) | Metric | Value | | :----- | :---- | | Outstanding Shares | 2,599,797 | | Holders of Record | ~64 | - The company has never declared or paid cash dividends and does not anticipate doing so, intending to retain earnings for future expansion.[189][136] Item 6. [Reserved] This item is reserved and contains no information - This item is reserved.[192] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses VivoSim Labs' financial condition, operational results, business model transition, critical accounting policies, and going concern uncertainty - VivoSim Labs transitioned its business model to providing testing services using 3D human tissue models for liver and intestinal toxicology, following the sale of its FXR program in March 2025.[194][196][197][198] - The company has incurred recurring operating losses and negative cash flows, with an accumulated deficit of $342.2 million as of March 31, 2025, leading to substantial doubt about its ability to continue as a going concern.[96][221][227][250][279][282] - Critical accounting policies include stock-based compensation and revenue recognition, which involve significant estimates and judgments.[201][202] Overview This section provides a summary of the company's business model transition, financial performance, and strategic focus on 3D human tissue models Critical Accounting Policies, Estimates, and Judgments This section outlines the key accounting policies that require significant management judgment and estimates, such as stock-based compensation and revenue recognition Stock-based compensation This section details the methodology for estimating the fair value of stock-based compensation, including the use of Black-Scholes and Monte Carlo simulations - Stock-based compensation fair value is estimated using a Black-Scholes option-pricing model, with assumptions for expected volatility, life, risk-free interest rate, and dividends.[203] - For options with market conditions, Monte Carlo simulations are used; for performance criteria, expense is adjusted based on achievement probability.[203] Revenue This section describes the company's revenue recognition policies for royalty revenue from license agreements and product revenue from its former Mosaic Cell Sciences division - Royalty revenue from license agreements is recognized based on sales-based royalties, with variable consideration evaluated for constraint.[206][208] - Product revenue from the former Mosaic Cell Sciences division was recognized upon customer control of products, typically at delivery, but commercial operations ceased in Q3 fiscal 2025.[209][214] Sale of FXR Program This section details the sale of the FXR program to Eli Lilly and Company, including the upfront payment and potential future milestone payments - The FXR program was sold to Eli Lilly and Company on March 25, 2025, for $10.0 million upfront ($9.0 million at closing, $1.0 million in escrow) and potential milestone payments up to $50.0 million.[210] - The transaction was recorded as other income under ASC Topic 610, with future milestone payments constrained due to uncertainty.[211] Results of Operations This section provides a comparative analysis of the company's financial performance for the years ended March 31, 2025 and 2024, across various income statement line items Comparison of the Years Ended March 31, 2025 and 2024 This section presents a detailed comparison of the company's financial results for the fiscal years 2025 and 2024 Results of Operations (in thousands, except percentages) | Metric | Year Ended March 31, 2025 | Year Ended March 31, 2024 | Increase (decrease) $ | Increase (decrease) % | | :-------------------------------- | :------------------------ | :------------------------ | :-------------------- | :-------------------- | | Royalty revenue | $119 | $109 | $10 | 9% | | Product revenue | $25 | $— | $25 | 100% | | Cost of revenues | $5 | $— | $5 | 100% | | Research and development | $5,025 | $5,498 | $(473) | (9%) | | Selling, general and administrative | $7,730 | $9,697 | $(1,967) | (20%) | | Other income | $10,130 | $417 | $9,713 | 2,329% | Revenues This section analyzes the company's total revenue, primarily from royalty income, and notes the cessation of product revenue from the Mosaic division - Total revenue was $0.1 million for both years ended March 31, 2025 and 2024, primarily from royalty revenue.[213] - Product revenue of $25,000 in 2025 was from the former Mosaic division, which ceased commercial operations in Q3 fiscal 2025.[213][214] Cost of Revenues This section discusses the cost of revenues, which was minimal in 2025 and related to the sales of finished goods inventory from the Mosaic division - Total cost of revenues was less than $0.1 million in 2025, related to Mosaic's finished goods inventory sales, compared to zero in 2024.[215] Research and Development Expenses This section details the changes in research and development expenses, highlighting decreases due to reduced personnel and facilities costs Research and Development Expenses (in thousands, except percentages) | Metric | Year Ended March 31, 2025 | Year Ended March 31, 2024 | Increase (decrease) $ | Increase (decrease) % | | :------------------------------ | :------------------------ | :------------------------ | :-------------------- | :-------------------- | | Research and development | $4,712 | $5,133 | $(421) | (8%) | | Non-cash stock-based compensation | $86 | $138 | $(52) | (38%) | | Depreciation and amortization | $227 | $227 | $— | 0% | | Total R&D expenses | $5,025 | $5,498 | $(473) | (9%) | - Total R&D expenses decreased by $0.5 million (9%) to $5.0 million in 2025, driven by a $0.3 million decrease in personnel costs due to reduced headcount and a $0.1 million decrease in facilities/materials costs.[216] Selling, General and Administrative Expenses This section analyzes the decrease in selling, general, and administrative expenses, primarily attributed to lower personnel-related and investor relations costs Selling, General and Administrative Expenses (in thousands, except percentages) | Metric | Year Ended March 31, 2025 | Year Ended March 31, 2024 | Increase (decrease) $ | Increase (decrease) % | | :-------------------------------- | :------------------------ | :------------------------ | :-------------------- | :-------------------- | | Selling, general and administrative | $7,245 | $8,274 | $(1,029) | (12%) | | Non-cash stock-based compensation | $446 | $1,370 | $(924) | (67%) | | Depreciation and amortization | $39 | $53 | $(14) | (26%) | | Total SG&A expenses | $7,730 | $9,697 | $(1,967) | (20%) | - Total SG&A expenses decreased by $2.0 million (20%) to $7.7 million in 2025, primarily due to a $1.3 million decrease in personnel-related costs (including $0.9 million from reduced stock-based compensation and $0.4 million from prior year severance) and a $0.6 million decrease in investor relations expenses.[217] Other Income (Expense) This section explains the significant increase in other income, mainly driven by the gain from the sale of the FXR program - Other income significantly increased to $10.1 million in 2025 from $0.4 million in 2024, primarily due to the $10.0 million gain from the sale of the FXR program, partially offset by a $0.3 million decrease in net interest income.[218] Financial Condition, Liquidity and Capital Resources This section analyzes the company's cash flows from operating, investing, and financing activities, its funding requirements, and going concern status Operating activities This section details the changes in net cash used in operating activities, primarily influenced by a cash payment for R&D and working capital adjustments - Net cash used in operating activities decreased by $5.2 million, from $14.7 million in 2024 to $9.5 million in 2025, primarily due to a $2.0 million cash payment for acquired in-process R&D in 2024 and increased working capital.[223] Investing activities This section highlights the significant increase in net cash provided by investing activities, mainly due to proceeds from the sale of the FXR program - Net cash provided by investing activities significantly increased to $9.0 million in 2025 from $0.8 million in 2024, primarily from the $9.0 million proceeds from the sale of the FXR program.[224] Financing activities This section describes the increase in net cash provided by financing activities, driven by ATM share offerings and a public offering of common stock and warrants - Net cash provided by financing activities increased to $8.8 million in 2025 from $1.4 million in 2024, driven by ATM share offerings and a public offering of common stock and warrants.[225] Operations funding requirements This section discusses the company's ongoing need for substantial additional funding and the auditor's substantial doubt about its ability to continue as a going concern - The company has financed operations through equity sales, licensing revenue, grants, and the FXR program sale, but requires substantial additional funding for future activities.[226][227] - Management concluded that substantial doubt exists about the company's ability to continue as a going concern for at least one year.[227][228] - As of March 31, 2025, approximately $142.7 million was available under the 2024 Shelf registration statement, and $2.3 million for ATM offerings, with limitations if public float is below $75.0 million.[232][233] - A public offering in May 2024 generated net proceeds of approximately $4.5 million from the sale of common stock and warrants.[234][348] Nasdaq Deficiency Notices & Reverse Stock Split This section details the Nasdaq deficiency notices received by the company, the subsequent reverse stock split, and the regained compliance status - The company received Nasdaq deficiency notices in July 2024 for failing to maintain a minimum bid price of $1.00 and in February 2025 for not meeting the minimum stockholders' equity requirement.[236][239][283][285] - A 1-for-12 reverse stock split was effected on March 21, 2025, and Nasdaq granted an exception until April 15, 2025, to regain compliance, which was achieved by April 30, 2025.[240][286] - The company is subject to a Mandatory Panel Monitor for one year, with stricter delisting rules if non-compliance recurs.[240][287] Contractual Obligations and Commitments This section outlines the company's contractual obligations, including cancellable supplier contracts and operating lease payment commitments - The company has cancellable contracts with suppliers and service providers, generally with less than six months' notice.[241] - As of March 31, 2025, total undiscounted operating lease payment obligations were $0.5 million payable within 12 months and $0.5 million thereafter.[242][368] Effect of Inflation and Changes in Prices Management does not believe that inflation and changes in price will have a material effect on operations - Management does not believe that inflation and changes in price will have a material effect on operations.[243] Recent Accounting Pronouncements This section refers to Note 13 of the Consolidated Financial Statements for details on recently adopted and issued accounting pronouncements - Information regarding recently adopted and issued accounting pronouncements is detailed in Note 13 to the Consolidated Financial Statements.[244] Item 7A. Quantitative and Qualitative Disclosures About Market Risk VivoSim Labs' primary market risk is interest income sensitivity due to changes in U.S. interest rates, with limited foreign currency risk - The company's primary market risk is interest income sensitivity, influenced by changes in U.S. interest rates, as investments are in cash, cash equivalents, and short-term interest-bearing securities.[245] - VivoSim Labs does not hedge interest rate exposure and has limited foreign currency risk.[245] - As of March 31, 2025, all investments, consisting of U.S. Treasury bills, had matured.[245][321] Item 8. Consolidated Financial Statements This section presents audited consolidated financial statements for 2025 and 2024, including auditor's report, balance sheets, and cash flows, noting going concern uncertainty - The independent registered public accounting firm expressed substantial doubt about the company's ability to continue as a going concern due to recurring losses and negative cash flows.[250] Consolidated Financial Highlights (Years Ended March 31, 2025 and 2024, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------------------- | :----- | :----- | :--------- | :--------- | | Total Revenues | $144 | $109 | $35 | 32% | | Loss from Operations | $(12,616) | $(15,086) | $2,470 | (16%) | | Net Loss | $(2,488) | $(14,671) | $12,183 | (83%) | | Cash and Cash Equivalents | $11,312 | $2,901 | $8,411 | 290% | | Total Current Assets | $12,131 | $3,936 | $8,195 | 208% | | Total Current Liabilities | $3,737 | $1,860 | $1,877 | 101% | | Working Capital | $8,400 | $2,076 | $6,324 | 305% | | Accumulated Deficit | $(342,157) | $(339,669) | $(2,488) | 1% | - Net cash used in operating activities decreased by $5.2 million, from $14.7 million in 2024 to $9.5 million in 2025, primarily due to a $2.0 million cash payment for acquired in-process R&D in 2024 and increased working capital.[223] - Net cash provided by investing activities significantly increased to $9.0 million in 2025, primarily from the $9.0 million proceeds from the sale of the FXR program.[224] - Net cash provided by financing activities increased to $8.8 million in 2025, driven by ATM share offerings and a public offering of common stock and warrants.[225] Report of Independent Registered Public Accounting Firm This section contains the independent auditor's report on the consolidated financial statements, including an emphasis paragraph on the company's going concern uncertainty Consolidated Balance Sheets This section presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2025 and 2024 Consolidated Statements of Operations and Other Comprehensive Loss This section provides a detailed breakdown of the company's revenues, expenses, and net loss for the fiscal years ended March 31, 2025 and 2024 Consolidated Statements of Stockholders' Equity This section presents the changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit, for the fiscal years ended March 31, 2025 and 2024 Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities for the fiscal years ended March 31, 2025 and 2024 Notes to Consolidated Financial Statements This section provides additional information and explanations for the amounts presented in the consolidated financial statements Note 1. Description of Business and Summary of Significant Accounting Policies This note describes VivoSim Labs' business model transition, significant accounting policies, and the going concern uncertainty - VivoSim Labs transitioned its business model to providing testing services using 3D human tissue models for liver and intestinal toxicology, following the sale of its FXR program in March 2025.[271][273][274][275] - The company has incurred recurring operating losses and negative cash flows, with an accumulated deficit of $342.2 million as of March 31, 2025, leading to substantial doubt about its ability to continue as a going concern.[279][282] - The company regained Nasdaq compliance for minimum bid price and stockholders' equity after a 1-for-12 reverse stock split on March 31, 2025, but remains under a one-year Mandatory Panel Monitor.[286][287] Note 2. Investments and fair value measurement This note details the company's investments in debt securities and their fair value measurement, noting the maturity of all investments by March 31, 2025 - As of March 31, 2025, all investments in U.S. Treasury bills had matured, resulting in approximately $0.1 million of interest income for the year.[321] Investments in Debt Securities (as of March 31, 2024, in thousands) | Metric | Amortized costs basis | Gross unrealized gains | Gross unrealized losses | Fair value | | :----------------------- | :-------------------- | :--------------------- | :-------------------- | :--------- | | Investments in debt securities | $996 | $2 | $— | $998 | Note 3. Prepaid Expenses and Other Current Assets This note provides a breakdown of prepaid expenses and other current assets as of March 31, 2025 and 2024 Prepaid Expenses and Other Current Assets (in thousands) | Category | March 31, 2025 | March 31, 2024 | | :------------------------------ | :------------- | :------------- | | Prepaid insurance | $417 | $445 | | Prepaid expenses | $360 | $256 | | Other current assets | $12 | $4 | | Total | $789 | $705 | Note 4. Fixed Assets This note details the company's fixed assets, including laboratory equipment, furniture, and computer equipment, along with accumulated depreciation Fixed Assets (in thousands) | Category | March 31, 2025 | March 31, 2024 | | :------------------------ | :------------- | :------------- | | Laboratory equipment | $1,630 | $1,617 | | Furniture and fixtures | $66 | $66 | | Computer software and equipment | $244 | $244 | | Fixed Assets, gross | $1,940 | $1,927 | | Less accumulated depreciation | $(1,521) | $(1,258) | | Fixed Assets, net | $419 | $669 | - Depreciation expense for both years ended March 31, 2025 and 2024 was approximately $0.3 million.[324] Note 5. Accrued Expenses This note provides a breakdown of accrued expenses, including payroll, legal, and other general accrued liabilities, as of March 31, 2025 and 2024 Accrued Expenses (in thousands) | Category | March 31, 2025 | March 31, 2024 | | :------------------------------ | :------------- | :------------- | | Accrued payroll and other employee benefits | $652 | $536 | | Accrued legal and professional fees | $515 | $93 | | Other accrued expenses | $59 | $98 | | Total accrued expenses | $1,226 | $727 | Note 6. Collaborative Research, Development, and License Agreements This note details the company's various license agreements, including royalty revenues, payments, and terminations - The company recorded $119,000 and $109,000 in royalty revenue for the years ended March 31, 2025 and 2024, respectively, from a non-exclusive license agreement with BICO Group AB.[326] - An amended license agreement with the University of Missouri in December 2022 made the licensed intellectual property fully paid up for a $50,000 upfront payment, eliminating future royalty obligations.[329] - The license agreement with Clemson University Research Foundation terminated in May 2024 upon patent expiration; no royalty expense was recorded for 2025 due to legal expense offsets.[330][331] - Following the sale of the FXR program, the company paid $100,000 to the Salk Institute for Biological Studies as a royalty expense.[333] Note 7. Stockholders' Equity This note provides information on the company's authorized and outstanding shares, equity offerings, and stock-based compensation expenses - The company is authorized to issue 200,000,000 shares of common stock and 25,000,000 shares of preferred stock; as of March 31, 2025, 1,898,068 common shares were outstanding and no preferred shares.[259][334][335] - During fiscal year 2025, 493,372 shares of common stock were sold through ATM offerings for net proceeds of approximately $4.9 million.[232][342] - A May 2024 public offering included 130,202 common shares and 416,666 pre-funded warrants, generating approximately $4.5 million in net proceeds.[234][344][348] - Total stock-based compensation expense was $532,000 in 2025, down from $1,508,000 in 2024, with unrecognized compensation cost for unvested stock options at $0.6 million.[359] Note 8. Leases This note describes the company's operating lease for office and lab space, including lease terms, liabilities, and cash outflows - The company's operating lease for 10,943 square feet of office and lab space in San Diego commenced in December 2021 for approximately 62 months, with monthly payments of about $40,800 and annual escalators.[364] Lease Liabilities and Right-of-Use Assets (as of March 31, 2025, in thousands) | Category | Amount | | :------------------------------ | :----- | | Operating lease right-of-use assets | $867 | | Operating lease liability, current | $521 | | Operating lease liability, noncurrent | $421 | | Total lease liabilities | $942 | | Weighted average remaining lease term | 1.83 years | | Weighted average discount rate | 6% | - Cash outflows for operating leases were $524,000 in 2025 and $509,000 in 2024.[367] Note 9. Commitments and Contingencies This note outlines the company's legal commitments and contingencies, including a complaint filed by H.C. Wainwright & Co., LLC and related accruals - The company is defending a complaint filed by H.C. Wainwright & Co., LLC on August 27, 2024, alleging breach of a tail financing provision.[370] - An accrual of $0.6 million was recorded for loss contingencies related to the H.C. Wainwright complaint, with $0.4 million in accrued expenses and $0.2 million as a liability to be settled in equity.[372] Note 10. Income Taxes This note provides details on the company's income tax provision, deferred tax assets, valuation allowance, and net operating loss carryforwards Provision (benefit) for income taxes (in thousands, except percentages) | Category | March 31, 2025 | % | March 31, 2024 | % | | :------------------------------------------ | :------------- | :-- | :------------- | :-- | | Tax computed at federal statutory rate | $(522) | 21.0% | $(3,081) | 21.0% | | State income tax, net of federal benefit | $(35) | 1.4% | $(110) | 0.7% | | Stock-based compensation | $75 | -3.0% | $721 | -4.9% | | Removal of net operating losses and research development credits | $615 | -24.7% | $1,910 | -13.0% | | Valuation allowance | $(177) | 7.1% | $527 | -3.6% | | Provision (benefit) for income taxes | $2 | -0.1% | $2 | 0.0% | - A full valuation allowance has been established against deferred tax assets due to uncertainty of realization, which decreased by $177,000 in 2025.[374] - As of March 31, 2025, the company had federal net operating loss carryforwards of $222.2 million (some indefinite, some expiring from 2028) and state NOLs of $44.3 million (expiring from 2028).[375] - Federal and state research tax credit carryforwards were $5.3 million and $4.8 million, respectively, as of March 31, 2025, with federal credits expiring from 2028 and state credits not expiring.[376] Note 11. Related Parties This note discloses transactions and agreements with related parties, specifically with Viscient Biosciences, an entity sharing an executive chairman - The company has an intercompany agreement with Viscient Biosciences, an entity where VivoSim's Executive Chairman also serves as CEO and President.[381][382] - Under this agreement, VivoSim incurred $118,000 in R&D consulting expenses from Viscient in fiscal 2025 and provided $3,000 in histology services to Viscient.[382] Note 12. Defined Contribution Plan This note describes the company's 401(k) plan, including employer matching provisions and the amounts expensed for contributions - The company's 401(k) plan includes an employer matching provision for up to 6% of employee contributions.[383] - Amounts expensed under the 401(k) plan were approximately $66,000 in 2025 and $61,000 in 2024.[383] Note 13. Recent Accounting Pronouncements This note outlines recently adopted and issued accounting pronouncements and their potential impact on the company's financial statements Recently Adopted Accounting Pronouncements This section details accounting pronouncements that the company has recently adopted and their impact on its financial statements - The company adopted ASU 2023-07, Segment Reporting, in November 2023, which did not materially impact its consolidated financial statements.[385] Recently Issued Accounting Pronouncements This section describes recently issued accounting pronouncements that are not yet effective and their potential future impact on the company - ASU 2023-09 (Income Taxes) requires enhanced annual disclosures for tabular rate reconciliation and disaggregated income taxes paid, effective for annual periods after December 15, 2024.[386] - ASU 2024-03 (Income Statement - Expense Disaggregation) aims to improve expense disclosures, effective for annual periods after December 15, 2026.[387][388] Note 14. Restructuring This note details the company's restructuring efforts, including workforce reductions and associated costs and savings - In August 2023, the company reduced its workforce by approximately 24% (six employees) to focus on the FXR314 clinical program and extend cash runway.[389] - Restructuring costs of approximately $0.4 million for severance were incurred and paid in fiscal 2024, resulting in annual cost savings of about $1.4 million for fiscal 2025.[389] Note 15. Business Segment Information This note explains the company's transition from two operating segments to a single segment following the cessation of Mosaic Cell Sciences operations - The company transitioned from two operating segments (Research & Development and Mosaic Cell Sciences) to a single operating segment in Q4 fiscal 2025 after Mosaic ceased commercial operations.[390][392][393] - The R&D segment now focuses on providing drug testing services using 3D human tissue models after the sale of the FXR program.[391] - The closing of the Mosaic segment was not reported as a discontinued operation as it did not represent a strategic shift with a major effect on operations.[394][395] Note 16. Subsequent Events This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - Between April 1, 2025, and the filing date, the company issued 701,729 shares of common stock in ATM offerings for net proceeds of approximately $1.8 million.[398] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its accountants on accounting and financial disclosure matters - There were no changes in or disagreements with accountants on accounting and financial disclosure.[400] Item 9A. Controls and Procedures Management concluded that VivoSim Labs' disclosure controls and internal control over financial reporting were effective as of March 31, 2025, with no material changes - Management concluded that disclosure controls and procedures were designed and operating effectively as of March 31, 2025.[402] - Internal control over financial reporting was assessed as effective as of March 31, 2025, based on the COSO framework.[404] - No material changes in internal control over financial reporting occurred during the fourth quarter of fiscal year 2025.[405] Item 9B. Other Information No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the fiscal quarter ended March 31, 2025 - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the fiscal quarter ended March 31, 2025.[407] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to VivoSim Labs, Inc - This item is not applicable.[408] PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the proxy statement for the 2025 annual meeting of stockholders - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 proxy statement.[411] Item 11. Executive Compensation Information relating to executive compensation is incorporated by reference from the proxy statement for the 2025 annual meeting of stockholders - Executive compensation information is incorporated by reference from the 2025 proxy statement.[412] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section provides a summary of the company's equity compensation plans as of March 31, 2025, including outstanding securities and those available for future issuance Equity Compensation Plan Summary (as of March 31, 2025) | Plan Category | Number of securities to be issued upon exercise/vesting of outstanding options, warrants, units and rights (A) | Weighted-average exercise price of outstanding options, warrants, units and rights (B) | Number of securities available for future issuance under Equity Compensation Plans (C) | | :------------------------------------------------- | :--------------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | 145,396 | $22.34 | 202,482 | | Equity compensation plans not approved by security holders | 4,166 | $33.00 | 83 | Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the proxy statement for the 2025 annual meeting of stockholders - Information on related party transactions and director independence is incorporated by reference from the 2025 proxy statement.[415] Item 14. Principal Accountant Fees and Services Information relating to principal accountant fees and services is incorporated by reference from the proxy statement for the 2025 annual meeting of stockholders - Information on principal accountant fees and services is incorporated by reference from the 2025 proxy statement.[416] PART IV Item 15. Exhibits and Financial Statement Schedules This item lists the exhibits and financial statement schedules filed as part of the Annual Report, with schedules omitted as not applicable - The item includes a list of exhibits and financial statement schedules filed with the Annual Report.[421][423] - Financial statement schedules are omitted as not applicable for the years ended March 31, 2025 and 2024.[421]