Organovo(US:ONVO)2025-08-12 20:05markdown [PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%2E%20FINANCIAL%20INFORMATION) [ITEM 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents VivoSim Labs, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, business operations, equity changes, and commitments for the period ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Cash and cash equivalents | $9,055 | $11,312 | | Total current assets | $9,679 | $12,131 | | Total assets | $11,978 | $14,650 | | Total current liabilities | $2,142 | $3,737 | | Total liabilities | $2,440 | $4,158 | | Total stockholders' equity | $9,538 | $10,492 | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Royalty revenue | $37 | $25 | | Product revenue | $0 | $14 | | Total Revenues | $37 | $39 | | Cost of revenues | $0 | $2 | | Research and development expenses | $1,001 | $1,402 | | Selling, general and administrative expenses | $1,951 | $2,021 | | Total costs and expenses | $2,952 | $3,425 | | Loss from Operations | $(2,915) | $(3,386) | | Net Loss | $(2,843) | $(3,344) | | Net loss per common share—basic and diluted | $(1.14) | $(2.74) | | Weighted average shares used in computing net loss per common share—basic and diluted | 2,503,697 | 1,221,974 | [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) - For the three months ended June 30, 2025, the company issued **702 thousand** shares of common stock from a public offering, resulting in **$1.811 million** in net proceeds[16](index=16&type=chunk) - Stock-based compensation expense was **$78 thousand** for the three months ended June 30, 2025, compared to **$156 thousand** for the same period in 2024[16](index=16&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(3,940) | $(2,983) | | Net cash provided by investing activities | $0 | $20 | | Net cash provided by financing activities | $1,683 | $6,249 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(2,257) | $3,286 | | Cash, cash equivalents, and restricted cash at end of period | $9,198 | $6,330 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements, covering the company's business, accounting policies, equity, agreements, commitments, and related party transactions [Note 1. Description of Business](index=7&type=section&id=Note%201.%20Description%20of%20Business) VivoSim Labs, Inc. (formerly Organovo Holdings, Inc.) is a pharmaceutical and biotechnology services company focused on providing drug testing in 3D human tissue models of liver and intestine, leveraging new approach methodologies (NAM) models. The company sold its FXR program in March 2025 for $10.0 million and is advancing its Preclinical IBD Program with an IND application goal by December 2026 - VivoSim Labs, Inc. (formerly Organovo Holdings, Inc.) changed its name on April 24, 2025, to reflect its new business model focusing on 3D human tissue models for drug testing[25](index=25&type=chunk) - The company sold its FXR program in March 2025 for **$10.0 million**, with potential future milestones up to **$50.0 million**[24](index=24&type=chunk) - The company's liver toxicology platform demonstrated a best-in-class predictive power of **87.5% sensitivity** and **100% specificity** for challenging liver toxicity cases[27](index=27&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation for the unaudited condensed consolidated financial statements, prepared in accordance with GAAP for interim information. It also addresses the company's liquidity and going concern status, use of estimates, fair value measurement, insurance premium financing liability, net loss per share calculation, and revenue recognition policies [Basis of Presentation and Principles of Consolidation](index=9&type=section&id=Basis%20of%20Presentation%20and%20Principles%20of%20Consolidation) - Financial statements are prepared in accordance with U.S. GAAP for interim financial information and include VivoSim and its wholly-owned subsidiaries[31](index=31&type=chunk)[32](index=32&type=chunk) [Liquidity and Going Concern](index=9&type=section&id=Liquidity%20and%20Going%20Concern) Key Financial Metrics | Metric (in millions) | June 30, 2025 | | :------------------- | :------------ | | Cash and cash equivalents | $9.1 | | Restricted cash | $0.1 | | Accumulated deficit | $(345.0) | | Negative cash flows from operations (3 months) | $(3.9) | | Working capital | $7.6 | - The company needs substantial additional funding to support future operating activities and has concluded that there is substantial doubt about its ability to continue as a going concern for at least one year[36](index=36&type=chunk) [Use of Estimates](index=11&type=section&id=Use%20of%20Estimates) - Financial statements rely on management estimates and assumptions, which are subject to ongoing review and may differ from actual results[37](index=37&type=chunk) [Fair value measurement](index=11&type=section&id=Fair%20value%20measurement) - Fair value measurements use a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[38](index=38&type=chunk)[44](index=44&type=chunk) [Insurance Premium Financing Liability](index=11&type=section&id=Insurance%20Premium%20Financing%20Liability) | Metric (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Insurance premium financing liability | $0 | $128 | [Net Loss Per Share](index=11&type=section&id=Net%20Loss%20Per%20Share) - Approximately **0.7 million** and **0.9 million** common stock equivalents were excluded from diluted net loss per share calculations for the three months ended June 30, 2025 and 2024, respectively, due to their anti-dilutive effect[41](index=41&type=chunk) [Revenue recognition](index=11&type=section&id=Revenue%20recognition) - Royalty revenue for the three months ended June 30, 2025, and 2024, was **$37,000** and **$25,000**, respectively, derived from sales-based royalties from a license agreement with BICO Group AB[42](index=42&type=chunk)[43](index=43&type=chunk)[76](index=76&type=chunk) [Product revenue, net](index=13&type=section&id=Product%20revenue%2C%20net) - The company's former Mosaic division, which generated product revenue, ceased commercial operations during the third quarter of fiscal 2025[45](index=45&type=chunk) [Recent Accounting Pronouncements](index=13&type=section&id=Recent%20Accounting%20Pronouncements) - The company is evaluating the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures) on its financial statements[47](index=47&type=chunk)[48](index=48&type=chunk) [Note 3. Accrued Expenses](index=13&type=section&id=Note%203.%20Accrued%20Expenses) Accrued expenses decreased from $1.226 million at March 31, 2025, to $0.727 million at June 30, 2025, primarily due to a reduction in accrued payroll and other employee benefits | Accrued Expenses (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------ | :------------ | :------------- | | Accrued payroll and other employee benefits | $152 | $652 | | Accrued legal and professional fees | $565 | $515 | | Other accrued expenses | $10 | $59 | | **Total** | **$727** | **$1,226** | [Note 4. Stockholders' Equity](index=13&type=section&id=Note%204.%20Stockholders%27%20Equity) This note details changes in stockholders' equity, including common stock issuances from ATM offerings and a public offering, stock-based compensation, and RSU/stock option activity. It also outlines shares reserved for future issuance under various equity plans and warrants [Preferred Stock](index=13&type=section&id=Preferred%20Stock) - **25,000,000** shares of preferred stock are authorized, but none are currently outstanding[50](index=50&type=chunk) [Common Stock](index=13&type=section&id=Common%20Stock) - During Q2 2025, **701,729** common shares were issued via ATM offerings, generating **$1.8 million** in net proceeds[56](index=56&type=chunk) - As of June 30, 2025, **$3.1 million** is available for future ATM offerings under the 2024 ATM Prospectus[56](index=56&type=chunk) [May 2024 Best Efforts Public Offering](index=15&type=section&id=May%202024%20Best%20Efforts%20Public%20Offering) - The May 2024 public offering generated approximately **$4.5 million** in net proceeds[60](index=60&type=chunk) - All **416,666** Pre-Funded Warrants issued in the May 2024 offering were exercised by March 31, 2025[58](index=58&type=chunk) [Restricted Stock Units](index=17&type=section&id=Restricted%20Stock%20Units) | RSU Activity | Number of Shares | Weighted Average Price | | :----------- | :--------------- | :--------------------- | | Unvested at March 31, 2025 | 8,165 | $6.57 | | Unvested at June 30, 2025 | 8,165 | $6.57 | [Stock Options](index=17&type=section&id=Stock%20Options) | Stock Option Activity | Options Outstanding | Weighted Average Exercise Price | | :-------------------- | :------------------ | :------------------------------ | | Outstanding at March 31, 2025 | 141,397 | $22.66 | | Options granted | 7,974 | $1.93 | | Options cancelled / forfeited | (1,923) | $15.76 | | Options expired | (3,904) | $38.68 | | Outstanding at June 30, 2025 | 143,544 | $21.16 | | Vested and Exercisable at June 30, 2025 | 38,227 | $58.02 | [Warrants](index=17&type=section&id=Warrants) | Common Warrant Activity | Number of Warrants | Exercise Price | | :---------------------- | :----------------- | :------------- | | Outstanding at March 31, 2025 | 539,060 | $9.60 | | Outstanding at June 30, 2025 | 539,060 | $9.60 | [Employee Stock Purchase Plan](index=19&type=section&id=Employee%20Stock%20Purchase%20Plan) - No shares were issued under the ESPP during the three months ended June 30, 2025[68](index=68&type=chunk) - As of June 30, 2025, **3,708** shares remain available for purchase under the ESPP[68](index=68&type=chunk) [Common Stock Reserved for Future Issuance](index=19&type=section&id=Common%20Stock%20Reserved%20for%20Future%20Issuance) | Category | Shares Reserved at June 30, 2025 | | :---------------------------------------------------------------- | :------------------------------- | | Common stock issuable pursuant to options outstanding and reserved under the 2012 Plan | 27,804 | | Common stock issuable pursuant to options outstanding and reserved under the A&R 2022 Plan | 111,574 | | Common stock reserved under the A&R 2022 Plan | 196,627 | | Common stock reserved under the ESPP | 3,708 | | Common stock reserved under the 2021 Inducement Equity Plan | 83 | | Common stock issuable pursuant to restricted stock units outstanding under the A&R 2022 Plan | 8,165 | | Common stock issuable pursuant to options outstanding and reserved under the Inducement Plan | 4,166 | | Common stock issuable pursuant to outstanding common warrants | 539,060 | | **Total at June 30, 2025** | **891,187** | [Stock-based Compensation Expense and Valuation Information](index=19&type=section&id=Stock-based%20Compensation%20Expense%20and%20Valuation%20Information) Key Financial Metrics | Stock-based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | | Research and development | $13 | $26 | | General and administrative | $65 | $130 | | **Total** | **$78** | **$156** | - The total unrecognized compensation cost for unvested stock options was approximately **$0.5 million**, expected to vest over **2.41 years**[71](index=71&type=chunk) - The weighted average grant date fair value for stock options decreased from **$9.64** in Q2 2024 to **$1.68** in Q2 2025[73](index=73&type=chunk) [Note 5. Collaborative Research, Development, and License Agreements](index=21&type=section&id=Note%205.%20Collaborative%20Research%2C%20Development%2C%20and%20License%20Agreements) This note details the company's license agreements, including one with BICO Group AB for bioprinting patents, generating royalty revenue, and an amended agreement with the University of Missouri for in-licensed technology [BICO Group AB](index=21&type=section&id=BICO%20Group%20AB) - Royalty revenue from BICO Group AB increased by **48%** to **$37,000** for the three months ended June 30, 2025, from **$25,000** in the prior year[76](index=76&type=chunk) [University of Missouri](index=23&type=section&id=University%20of%20Missouri) - The license agreement with the University of Missouri was amended in December 2022, making the intellectual property fully paid up for a single **$50,000** payment, removing future royalty obligations[79](index=79&type=chunk) [Note 6. Commitments and Contingencies](index=23&type=section&id=Note%206.%20Commitments%20and%20Contingencies) The company is subject to various claims and legal actions, including a complaint filed by H.C. Wainwright & Co., LLC alleging breach of a tail financing provision. An accrual of $0.6 million has been recognized for loss contingencies related to this matter [Legal Matters](index=23&type=section&id=Legal%20Matters) - H.C. Wainwright & Co., LLC filed a complaint against the company in August 2024 for alleged breach of a tail financing provision[81](index=81&type=chunk) - The company recognized a **$0.6 million** accrual for loss contingencies related to the H.C. Wainwright complaint, comprising **$0.4 million** in accrued expenses and **$0.2 million** as a liability to be settled in equity[83](index=83&type=chunk) [Note 7. Leases](index=24&type=section&id=Note%207.%20Leases) The company has an operating lease for lab and office space in San Diego, which commenced in December 2021. As of June 30, 2025, operating lease right-of-use assets were $755,000 and total lease liabilities were $822,000 [Operating Leases](index=24&type=section&id=Operating%20Leases) Key Financial Metrics | Lease Metric (in thousands) | June 30, 2025 | | :-------------------------- | :------------ | | Operating lease right-of-use assets | $755 | | Total lease liabilities | $822 | | Weighted average remaining lease term | 1.58 years | | Weighted average discount rate | 6% | - Cash outflows for operating leases were **$134,000** for the three months ended June 30, 2025, compared to **$130,000** for the same period in 2024[88](index=88&type=chunk) [Note 8. Concentrations](index=26&type=section&id=Note%208.%20Concentrations) The company's financial instruments, primarily cash equivalents and short-term investments, are subject to credit risk, though no material losses have been experienced. Receivables are concentrated among a small number of customers, but management does not believe significant credit risk exists [Credit risk and significant customers](index=26&type=section&id=Credit%20risk%20and%20significant%20customers) - The company's credit risk is concentrated in cash equivalents and short-term investments, but no material losses have occurred[90](index=90&type=chunk) - Receivables are from a small number of customers, but management believes no significant credit risk exists as of June 30, 2025[91](index=91&type=chunk) [Note 9. Related Parties](index=26&type=section&id=Note%209.%20Related%20Parties) The company has ongoing agreements with Viscient Biosciences, an entity where VivoSim's Executive Chairman, Keith Murphy, serves as CEO and President. These agreements involve service provision and equipment sharing, with R&D consulting expenses incurred from Viscient [Viscient Biosciences](index=26&type=section&id=Viscient%20Biosciences) - VivoSim's Executive Chairman, Keith Murphy, also serves as CEO and President of Viscient Biosciences[93](index=93&type=chunk) - VivoSim incurred **$72,000** in R&D consulting expenses from Viscient for the three months ended June 30, 2025, with no such expenses in the prior year[94](index=94&type=chunk) [Note 10. Business Segment Information](index=26&type=section&id=Note%2010.%20Business%20Segment%20Information) In fiscal 2026, the company identified one operating segment: Research & Development (R&D). This segment focuses on providing drug testing services using 3D human tissue models of liver and intestine, aiming to reduce drug development risks and costs [Research & Development](index=26&type=section&id=Research%20%26%20Development) - The company operates a single R&D segment focused on 3D human tissue models for liver and intestinal toxicology insights[96](index=96&type=chunk) Key Financial Metrics | Disaggregated Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Royalty revenue | $37 | $25 | | Product revenue | $0 | $14 | | Research and development expenses (a)(b) | $932 | $1,318 | | Selling, general, and administrative expenses (a)(b) | $1,881 | $1,879 | | Non-cash stock-based compensation | $78 | $156 | | Depreciation and amortization | $61 | $70 | | Consolidated operating loss | $(2,915) | $(3,386) | [Note 11. Subsequent Events](index=28&type=section&id=Note%2011.%20Subsequent%20Events) Subsequent events include a letter agreement with Aegis Capital Corp. for financial advisory services and an additional Statement of Work with Viscient Biosciences for R&D services [Letter Agreement with Aegis](index=28&type=section&id=Letter%20Agreement%20with%20Aegis) - On July 25, 2025, the company engaged Aegis Capital Corp. as a non-exclusive financial advisor for **12 months**[99](index=99&type=chunk) - Adam Stern, a member of the company's board of directors, is the Head of Private Equity Banking at Aegis[100](index=100&type=chunk) [Statement of Work to Intercompany Agreement with Viscient](index=28&type=section&id=Statement%20of%20Work%20to%20Intercompany%20Agreement%20with%20Viscient) - Effective July 4, 2025, Viscient Biosciences agreed to provide additional R&D services to the company under an amended Intercompany Agreement[101](index=101&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended June 30, 2025, compared to 2024, highlighting the business model transition, financial performance, liquidity challenges, and future funding requirements [Basis of Presentation](index=29&type=section&id=Basis%20of%20Presentation) - The financial statements are unaudited and prepared according to SEC instructions for Form 10-Q, with interim results not necessarily indicative of full-year performance[104](index=104&type=chunk) [Overview](index=29&type=section&id=Overview) - The company's core business is providing drug testing services using 3D human tissue models for liver and intestinal toxicology insights[105](index=105&type=chunk) - The FXR program was sold in March 2025 for **$10.0 million**, with potential milestones up to **$50.0 million**[107](index=107&type=chunk) - The Preclinical IBD Program is advancing, with a goal for an IND Application with the FDA by December 2026[109](index=109&type=chunk) [Critical Accounting Policies, Estimates, and Judgments](index=31&type=section&id=Critical%20Accounting%20Policies%2C%20Estimates%2C%20and%20Judgments) - No significant changes to critical accounting policies have occurred since March 31, 2025[114](index=114&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's financial performance for the three months ended June 30, 2025, and 2024, across various revenue and expense categories [Revenues](index=32&type=section&id=Revenues) | Revenue (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Royalty revenue | $37 | $25 | $12 | 48% | | Product revenue | $0 | $14 | $(14) | (100%) | | **Total Revenues** | **$37** | **$39** | **$(2)** | **(5%)** | [Cost of Revenues](index=32&type=section&id=Cost%20of%20Revenues) | Cost of Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | | Cost of revenues | $0 | $2 | $(2) | (100%) | [Research and Development Expenses](index=32&type=section&id=Research%20and%20Development%20Expenses) Key Financial Metrics | R&D Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Research and development | $932 | $1,318 | $(386) | (29%) | | Non-cash stock-based compensation | $13 | $26 | $(13) | (50%) | | Depreciation and amortization | $56 | $58 | $(2) | (3%) | | **Total research and development expenses** | **$1,001** | **$1,402** | **$(401)** | **(29%)** | - Average full-time R&D staff decreased from **fifteen** to **ten** employees year-over-year[119](index=119&type=chunk) [Selling, General and Administrative Expenses](index=32&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) Key Financial Metrics | SG&A Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Selling, general and administrative | $1,881 | $1,879 | $2 | 0% | | Non-cash stock-based compensation | $65 | $130 | $(65) | (50%) | | Depreciation and amortization | $5 | $12 | $(7) | (58%) | | **Total selling, general and administrative expenses** | **$1,951** | **$2,021** | **$(70)** | **(3%)** | - Average full-time SG&A staff decreased from **five** to **three** employees year-over-year[121](index=121&type=chunk) [Other Income](index=33&type=section&id=Other%20Income) | Other Income (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Other income | $72 | $44 | [Financial Condition, Liquidity and Capital Resources](index=33&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) The company's financial condition as of June 30, 2025, shows $9.1 million in cash and cash equivalents, an accumulated deficit of $345.0 million, and negative operating cash flow of $3.9 million for the quarter. These factors raise substantial doubt about its ability to continue as a going concern, necessitating additional funding Key Financial Metrics | Metric (in millions) | June 30, 2025 | March 31, 2025 | | :------------------- | :------------ | :------------- | | Cash and cash equivalents | $9.1 | $11.3 | | Restricted cash | $0.1 | $0.1 | | Accumulated deficit | $(345.0) | $(342.2) | | Working capital | $7.6 | $8.4 | - The company had negative cash flow from operations of approximately **$3.9 million** for the three months ended June 30, 2025[124](index=124&type=chunk) - Management has concluded that substantial doubt exists about the company's ability to continue as a going concern for at least one year, requiring additional funding[131](index=131&type=chunk) [Operating activities](index=33&type=section&id=Operating%20activities) | Cash Flow (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(3,940) | $(2,983) | [Investing activities](index=33&type=section&id=Investing%20activities) | Cash Flow (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | | Net cash provided by investing activities | $0 | $20 | [Financing activities](index=33&type=section&id=Financing%20activities) | Cash Flow (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | | Net cash provided by financing activities | $1,683 | $6,249 | - Financing activities in Q2 2025 included **$1.8 million** from ATM share offerings and **$0.1 million** repayment of insurance premium financing liability[129](index=129&type=chunk) [Operations funding requirements](index=35&type=section&id=Operations%20funding%20requirements) - Expected total operating expenses for fiscal year 2026 are between **$10 million** and **$11 million**[131](index=131&type=chunk) - The company's public float is less than **$75.0 million**, limiting primary public offerings to one-third of its public float[136](index=136&type=chunk) - Failure to obtain adequate financing will have a material adverse effect on the company's business, operating results, and financial condition[137](index=137&type=chunk) [Off-Balance Sheet Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company has no off-balance sheet arrangements that are expected to have a material effect on its financial condition[138](index=138&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, VivoSim Labs, Inc. is not required to provide quantitative and qualitative disclosures about market risk under Item 305(e) of Regulation S-K - The company is a smaller reporting company and is not required to provide market risk disclosures[139](index=139&type=chunk) [ITEM 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with the participation of its principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were designed and operating effectively. No material changes in internal control over financial reporting occurred during the quarter [Disclosure Controls and Procedures](index=37&type=section&id=Disclosure%20Controls%20and%20Procedures) - Disclosure controls and procedures were evaluated and concluded to be designed and operating effectively as of June 30, 2025[141](index=141&type=chunk) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[142](index=142&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=37&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) - Control systems have inherent limitations, including resource constraints, human error, and potential for circumvention, providing only reasonable assurance[143](index=143&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to Note 6, "Commitments and Contingencies," for a discussion of its legal proceedings and contingencies, including a complaint filed by H.C. Wainwright & Co., LLC - Legal proceedings and contingencies are discussed in Note 6 of the financial statements[145](index=145&type=chunk) [ITEM 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines substantial risks associated with investing in the company's common stock, including significant operating losses, unproven business strategy, funding requirements, intense competition, and regulatory challenges [Risk Factor Summary](index=38&type=section&id=Risk%20Factor%20Summary) - Key risks include substantial operating losses, unproven platform technology, need for reliable human cell supply, and significant additional funding requirements[148](index=148&type=chunk)[149](index=149&type=chunk) - The company's ability to continue as a going concern is in substantial doubt, which may hinder future financing[149](index=149&type=chunk) [Risks Related to our Business](index=39&type=section&id=Risks%20Related%20to%20our%20Business) - The company's business strategy using 3D human tissue models for drug testing is new and unproven, with no guarantee of profitability[150](index=150&type=chunk) - The company will incur substantial additional operating losses as services and R&D activities proceed, with profitability being uncertain[151](index=151&type=chunk) - The company requires a constant, steady, reliable supply of human cells for its services and R&D, and failure to secure this could harm operations[160](index=160&type=chunk) [Risks Related to Government Regulation](index=48&type=section&id=Risks%20Related%20to%20Government%20Regulation) - The company's past use of hazardous chemicals and biological materials poses risks of claims and substantial costs for improper handling or disposal[184](index=184&type=chunk)[185](index=185&type=chunk) - Failure to obtain and sustain adequate reimbursement for potential products from third-party payors would materially adversely affect future sales and profitability[186](index=186&type=chunk)[191](index=191&type=chunk) - Current and future legislation, such as the PPACA and Inflation Reduction Act of 2022, may increase commercialization costs, affect drug prices, and reduce demand for drug candidates[192](index=192&type=chunk)[194](index=194&type=chunk)[197](index=197&type=chunk) - Changes in government funding for agencies like the FDA and SEC could hinder their ability to review and approve products, causing delays and negatively impacting the business[198](index=198&type=chunk)[199](index=199&type=chunk)[202](index=202&type=chunk) [Risks Related to Our Capital Requirements, Finances and Operations](index=54&type=section&id=Risks%20Related%20to%20Our%20Capital%20Requirements%2C%20Finances%20and%20Operations) - Management and auditors have expressed substantial doubt about the company's ability to continue as a going concern without additional capital[205](index=205&type=chunk)[206](index=206&type=chunk) - The company has a history of operating losses, with an accumulated deficit of **$345.0 million** as of June 30, 2025, and expects to incur significant additional losses[209](index=209&type=chunk) - Inability to raise sufficient additional capital on acceptable terms could force the company to delay, limit, or eliminate business opportunities and adversely affect its financial condition[208](index=208&type=chunk) [Risks Related to Our Intellectual Property](index=68&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - The company's success depends on obtaining and maintaining adequate patent protection for its technologies, intellectual property, and service offerings, which is uncertain[251](index=251&type=chunk)[252](index=252&type=chunk) - Patents covering the company's products could be found invalid or unenforceable if challenged in court or before administrative bodies, potentially reducing scope or invalidating rights[259](index=259&type=chunk) - The company depends on license agreements with the University of Missouri, and failure to comply with or maintain these obligations could materially harm its business[274](index=274&type=chunk) - Changes in U.S. patent law (e.g., Leahy-Smith Act, Supreme Court rulings) or international patent law (e.g., European unitary patent system) could diminish the value of patents and impair protection[270](index=270&type=chunk)[272](index=272&type=chunk) [Risks Related to Litigation](index=76&type=section&id=Risks%20Related%20to%20Litigation) - The company is involved in various claims and litigation, including a complaint from H.C. Wainwright & Co., LLC, which can be costly and divert management attention[282](index=282&type=chunk)[283](index=283&type=chunk) - Litigation outcomes are unpredictable, and unfavorable resolutions could result in losses exceeding recorded amounts, materially affecting financial statements[284](index=284&type=chunk) [General Risk Factors](index=76&type=section&id=General%20Risk%20Factors) - Compliance with federal securities laws and Sarbanes-Oxley Act reporting requirements is expensive[285](index=285&type=chunk) - Failure to comply with Section 404 of the Sarbanes-Oxley Act or discovery of material weaknesses could lead to sanctions, declining stock price, and increased costs[286](index=286&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds occurred during the period[287](index=287&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=76&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - No defaults upon senior securities occurred during the period[288](index=288&type=chunk) [ITEM 4. Mine Safety Disclosure](index=78&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This item is not applicable to the company - Mine Safety Disclosure is not applicable to the company[289](index=289&type=chunk) [ITEM 5. Other Information](index=78&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[290](index=290&type=chunk) [ITEM 6. Exhibits](index=79&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including various agreements, certificates of incorporation, common warrants, and certifications required by the Sarbanes-Oxley Act - The exhibits include the Asset Purchase Agreement, Certificate of Incorporation amendments, Common Warrant form, and Section 302 and 906 certifications[292](index=292&type=chunk) [SIGNATURES](index=80&type=section&id=SIGNATURES) The report is duly signed on behalf of VivoSim Labs, Inc. by Keith Murphy, Executive Chairman (Principal Executive Officer), and Norman Staskey, Chief Financial Officer (Principal Financial Officer), on August 12, 2025 - The report was signed by Keith Murphy, Executive Chairman, and Norman Staskey, Chief Financial Officer, on August 12, 2025[297](index=297&type=chunk)