VIVS

Business Context and Reporting Period

Company: VivoSim Labs, Inc. (formerly Organovo Holdings, Inc.)
Filing Type: Form 10-K (Annual Report)
Period Ended: March 31, 2026
Business Model: The Company has pivoted from a clinical-stage biotechnology firm to a pharmaceutical and biotechnology services provider. It focuses on testing drugs and drug candidates using three-dimensional (3D) human tissue models of the liver and intestine (NAMkind™). This shift follows the sale of its FXR314 drug program in March 2025. The Company anticipates accelerated adoption of its non-animal testing models following an FDA announcement in April 2025.

Key Financial Metrics

Other Key Metrics:
- Other Income/Expense: Net expense of $2.4 million in 2026 (driven by a $2.7 million loss on warrant issuance) vs. $10.1 million income in 2025 (driven by FXR asset sale).
- Research & Development Expenses: $4.2 million (down 17% from prior year).
- Stock-Based Compensation: $0.3 million total expense.

Material Changes vs. Prior Period

• Strategic Pivot: Sold the FXR314 drug program to Eli Lilly in March 2025 for $10.0 million upfront (plus potential milestones). Received a $5.0 million milestone payment in July 2026 (subsequent event). Shifted focus entirely to 3D tissue services.
• Financial Performance: Net loss widened significantly to $13.8 million in 2026 compared to $2.5 million in 2025. This increase is primarily due to the absence of the $10.0 million gain from the FXR sale in the prior year and a $2.7 million non-cash loss on the issuance of common stock warrants in the current year.
• Liquidity: Cash reserves decreased by approximately $6.3 million, from $11.3 million to $5.0 million, due to negative operating cash flows of $10.8 million.
• Capital Structure: Completed a "Best Efforts" public offering in March 2026, raising approximately $3.0 million in gross proceeds. This resulted in a significant warrant liability of $5.7 million.
• Equity Position: Stockholders' equity turned negative, moving from a positive $10.5 million to a deficit of $1.1 million.

Guidance, Outlook, Risks, and Contingencies

Going Concern: Management and the independent auditors have expressed substantial doubt about the Company's ability to continue as a going concern for at least one year following the report date. The Company requires substantial additional funding to support operations and expects to incur significant losses in the future.

Outlook: The Company expects to generate service revenues from its liver and intestinal toxicology platforms. It anticipates total operating expenses of approximately $10.7 million for the fiscal year ending March 31, 2027.

Key Risks:

• Liquidity Risk: Dependence on equity financings (ATM offerings, public offerings) which may be restricted due to public float limitations (currently under $75 million).
• Nasdaq Compliance: The Company is not in compliance with Nasdaq Rule 5550(b)(1) regarding minimum stockholders' equity ($2.5 million) and faces potential delisting risks. Stock price is also below the $1.00 minimum bid price requirement.
• Warrant Liability: The $5.7 million warrant liability from the March 2026 offering is subject to fair value remeasurement, creating earnings volatility.
• Legal Proceedings: Ongoing litigation with H.C. Wainwright & Co. regarding a tail financing provision; the Company has filed counterclaims.
• Related Party Transactions: Significant reliance on Viscient Biosciences (affiliated with Executive Chairman) for R&D services and shared facilities.

Investor Verification Checklist

• Capital Runway: Verify the sufficiency of the $5.0 million cash balance against the projected $10.7 million operating expense for the upcoming fiscal year.
• Financing Restrictions: Confirm the impact of the "public float" being under $75 million on the Company's ability to raise capital via shelf registration (limited to one-third of public float).
• Delisting Status: Monitor the Company's progress in regaining compliance with Nasdaq minimum stockholders' equity and minimum bid price requirements.
• Warrant Liability Volatility: Assess the sensitivity of the $5.7 million warrant liability to changes in the Company's stock price and volatility assumptions.
• Revenue Realization: Evaluate the timeline and probability of generating meaningful service revenue from the new 3D tissue business model to offset operating losses.