Vivosim Labs, INC. quarterly report, Q1 FY2021

Filing identity and reporting period

The supplied filing is Organovo Holdings, Inc.’s Form 10-Q, not a filing identified as Vivosim Labs, Inc. It reports the three months ended June 30, 2020—Organovo’s first fiscal quarter of 2021—and was signed August 10, 2020.

Business context and strategic direction

Organovo was an early-stage biotechnology company developing 3D-bioprinted human tissues. In August 2019 it suspended its therapeutic-tissue and other in-house pipeline development after concerns about performance variability and development timelines, and began pursuing strategic alternatives. A proposed merger with Tarveda was not approved by stockholders in April 2020 and was terminated.

Under a July 14, 2020 cooperation agreement, Keith Murphy and Adam Stern joined the board, and additional board changes were proposed for the 2020 annual meeting. If the advisory director proposal passed, the proposed new board intended to restart operations around 3D tissue models and drug discovery and development. These plans were conditional, not established operating results.

Financial results and liquidity

Revenue and cost of revenue were zero as commercial and research activities had been halted or wound down. With no revenue in the quarter, a revenue margin comparison is not meaningful. Lower losses primarily reflected the restructuring and cessation of research and development; SG&A fell 16% to $2.786 million. Interest income also declined.

At June 30, 2020, cash and cash equivalents were $24.787 million, total assets $25.621 million, current liabilities $835,000, and working capital approximately $24.7 million. Stockholders’ equity was $24.786 million; the balance sheet lists no debt. Cash declined $2.569 million during the quarter. Accumulated deficit was $282.234 million.

Changes, outlook, and risks

• R&D expense fell from $3.823 million to zero; average R&D headcount fell from 41 to zero. SG&A headcount averaged six, versus 21 a year earlier.
• Management stated that cash on hand was expected to cover financial obligations for at least 12 months under the then-current plan. Restarting the proposed drug-discovery business would require additional capital; financing availability and terms were uncertain.
• If the proposed board changes triggered a change of control, the company estimated cash outlays of about $3.0 million for severance and about $2.0 million for six-year D&O tail coverage, or $1.7 million net of returned premium.
• The proposed strategy contemplated rebuilding staff and laboratory operations, with a goal of beginning human clinical testing for at least one drug candidate within three to four years. The company warned the strategy was unproven and could entail substantial additional losses.
• Other stated alternatives if the proposal failed included pursuing another transaction, restarting other business activities, or seeking stockholder approval to dissolve and liquidate.
• Nasdaq had given the company until September 4, 2020 to regain compliance with price-based listing requirements after a tolling period. The company intended to use a previously stockholder-approved 20:1 to 40:1 reverse split, subject to board approval; delisting remained a risk.
• COVID-19 effects were uncertain. Management said operations had not otherwise been negatively affected at that time, while warning the pandemic could hinder strategic transactions, supply chains, research, and potential clinical development.
• The company disclosed an SEC inquiry into prior disclosures and related operations and said it was cooperating with a subpoena. It also described a stockholder demand letter. No loss contingency accrual was recorded, and no probable or reasonably estimable loss was identified.

Important facts for investors to verify

• Confirm the issuer and period: this is Organovo Holdings’ quarter ended June 30, 2020, not a Vivosim Labs filing.
• Check the outcome of the 2020 annual-meeting advisory proposal, resulting board composition, and whether the proposed business restart occurred.
• Verify subsequent cash usage, any capital raises, and whether the stated 12-month liquidity expectation remained valid after potential change-of-control costs.
• Check whether the reverse split occurred and whether Nasdaq listing compliance was regained by the applicable deadline.
• Review later disclosures on the SEC inquiry, the stockholder demand, and any related legal or financial developments.