VIVS 10-K & 10-Q changes, risk factors and insider trading

We are a pharmaceutical and biotechnology services company focusing on providing testing of drugs and drug candidates in 3D human tissue models, which is an unproven business strategy that may never achieve profitability.

We are a pharmaceutical and biotechnology services company that is focused on providing testing of drugs and drug candidates in three-dimensional (“3D”) human tissue models of liver and intestine. We offer our partners liver and intestinal toxicology insights using our new approach methodologies ("NAM") models. We anticipate accelerated adoption of human tissue models following the U.S. Food and Drug Administration ("FDA") announcement on April 10, 2025 to refine animal testing requirements in favor of these non-animal NAM methods. We willalso alsoexpect to offer bespoke services in the areas of investigational toxicology, mechanism of drug action elucidation, and other applications of these complex human tissue models. These models may not be accepted by our partners. We may not be able to partner or license our drug candidates. We may never achieve profitability, or even if we achieve profitability, we may not be able to maintain or increase our profitability.

There is an increasing focus from certain investors, employees, regulators, listing exchanges and other stakeholders concerning corporate responsibility and sustainability matters, including with regardingregard to environmental, social and governance (“ESG”) factors. Some investors and investor groups may use these factors—either positively or negatively—to guide their investment strategies and, in some cases, investors may choose not to invest in our Company if they believe our policies or practices relating to corporate responsibility and sustainability do not align with their expectations. Currently, a variety of third-party providers of corporate responsibility and sustainability ratings measure the performance of companies on ESG topics, and the results of these assessments are widely publicized. Investors, particularly institutional investors, use these ratings to benchmark companies against their peers, and major institutional investors have publicly emphasized the importance of ESG measures to their investment decisions. Topics taken into account in such assessments include, among others, companies’ efforts and impacts on climate change, human rights, business ethics and compliance, diversity, equity and inclusion (“DEI”) and the role of companies’ board of directors in overseeing various sustainability-related issues. In light of investors’ increased focus on sustainability matters, if we are, for example, are perceived as lagging in taking steps with respect to ESG initiatives, certain investors may seek to engage with us on improving our ESG disclosures or performance. They may also make voting decisions, or take other actions to hold us and our board of directors accountable.

The ability of the FDA to review and approve new products, to provide feedback on clinical trials and development programs, to meet with sponsors and to otherwise review regulatory submissions can be affected by a variety of factors, including government budget and funding levels, reductions in workforce, ability to hire and retain key personnel, and statutory, regulatory and policy changes. In addition, there may be delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government or contractor personnel. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. In addition, government shutdowns, if prolonged, could significantly impact the ability of government agencies upon which we rely, such as the FDA and SEC, to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Management has performed an analysis and concluded that substantial doubt exists about our ability to continue as a going concern. Separately, our independent registered public accounting firm has included in its opinion for the year ended March 31, 2025 an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern, which may hinder our ability to obtain future financing.

On March 25, 2025, we sold our FXR program and related assets to Eli Lilly and Company (the “FXR Asset Sale”). The consideration for the FXR Asset Sale included potential milestone payments by Eli Lilly and Company of up to $50.0 million in the aggregate, which are contingent upon the achievement of certain development, regulatory and commercial milestones. ThereIn July 2026, we received a milestone payment in the amount of $5.0 million upon the achievement of a certain development milestone related to the FXR Asset Sale; however, there can be no assurance that we will be entitled to receive any additional milestone payments, and there is risk that any or all of the remaining milestone events may not be achieved, that disagreements may occur regarding the achievement of such milestones and that any or all of the remaining payments tied to the achievement of the milestone events might not be received.

The regulatory framework for the collection, use, safeguarding, sharing, transfer, and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union, including personal health data, is subject to the EU General Data Protection Regulation (the “GDPR”), which took effect across all member states of the European Economic Area (the “EEA”) in May 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR increases our obligations with respect to clinical trials conducted in the EEA by expanding the definition of personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators. The GDPR increases our obligations with respect to clinical trials conducted in the EEA by expanding the definition of personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators. In addition, the GDPR imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States, and, as a result, increases the scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from such sites to countries that are considered to lack an adequate level of data protection, such as the United States. The GDPR also permits data protection authorities to require destruction of improperly gathered or used personal data and/or impose substantial fines for violations of the GDPR, which can be up to four percent of global revenues or 20 million Euros, whichever is greater, and it also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR provides that European Union member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.

Similar actions are either in place or under way in the United States. There are a broad variety of data protection and breach notification laws that are applicable to our activities, and a wide range of enforcement agencies at both the state and federal levels that can review companies for privacy and data security concerns based on general consumer protection laws. Each of these laws is subject to varying interpretations and the legislative landscape is constantly evolving and the Federal Trade Commission and state Attorneys General all are aggressive in reviewing privacy and data security protections for consumers. At the federal level, for example, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which establishes privacy and security standards that limit the use and disclosure of individually identifiable health information, or protected health information, and require the implementation of administrative, physical and technological safeguards to protect the privacy of protected health information and ensure the confidentiality, integrity and availability of electronic protected health information. We may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA. Depending on the facts and circumstances, we could be subject to civil, criminal, and administrative penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Requirements for compliance under HIPAA are also subject to change, as the U.S. Department of Health and Human Services Office of Civil Rights issued a proposed rule that would amend certain security compliance requirements for covered entities and business associates.

On December 28, 2020, we entered into an intercompany agreement with Viscient and Organovo, Inc., our wholly-owned subsidiary (the “Intercompany Agreement”). Pursuant to the Intercompany Agreement and subsequent statements of work entered into pursuant thereto, we agreed to provide Viscient certain services related to 3D bioprinting technology, which includes, but is not limited to, histology services, cell isolation, and proliferation of cells, and Viscient agreed to provide us certain services related to 3D bioprinting technology, including bioprinter training, bioprinting services, and qPCR assays, in each case on payment terms specified in the Intercompany Agreement and as may be further determined by the parties. In addition, Viscient and we each agreed to share certain facilities and equipment and, subject to further agreement, to each make certain employees available for specified projects to the other party at prices to be determined in good faith by the parties. During the second quarter of fiscal 2025 and first quarter of fiscal 2026, the companies added Statements of Work to the Intercompany Agreement, where Viscient agreed to provide us with certain testing services related to our ongoing research and development. Under the Intercompany Agreement, each party will retain its own prior intellectual property and will obtain new intellectual property rights within their respectively defined fields of use.

The Nasdaq Stock Market LLC (“Nasdaq”) has established continued listing requirements, including a requirement to maintain a minimum closing bid price of at least $1 per share. If a company trades for 30 consecutive business days below such minimum closing bid price, it will receive a deficiency notice from Nasdaq. Assuming it is in compliance with the other continued listing requirements, Nasdaq would provide such company a period of 180 calendar days in which to regain compliance by maintaining a closing bid price at least $1 per share for a minimum of ten consecutive business days. Our common stock is currently trading below $1 per share and if it continues to trade below the minimum bid price for 30 consecutive business days, we expect that we will receive a deficiency notice from Nasdaq and would be required to regain compliance. 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.Market or, if we are not in compliance with the listing requirements necessary for us to maintain the listing of our common stock on the Nasdaq Capital Market, that we will be able to regain compliance with such listing requirements.

On March 21, 2025, we effectedAs a 1-for-12 reverse stock splitresult of ourprior commonnon-compliance stock (the “Reverse Stock Split”). On March 27, 2025,with the HearingsNasdaq Panel granted us an exception until April 15, 2025requirement to demonstrate compliance with Rule 5550(a)(2) and Rule 5550(b)(1). On April 30, 2025, we receivedmaintain a letterminimum fromof $2,500,000 in stockholders’ equity, as set forth in Nasdaq (the “April 30, 2025 Letter”) notifying us that we had demonstrated compliance with Rule 5550(a)(2) andListing Rule 5550(b)(1) as(“Rule required5550(b)(1)”), bywe the Hearings Panel’s March 27, 2025 decision. We will bewere subject to a one year Mandatory Panel Monitor for a period of one year from the date of the April 30, 2025 Letter pursuant to Nasdaq Listing Rule 5815(d)(4)(B).Monitor. If, within that one-year monitoring period, the Listing Qualifications Staff findsof Nasdaq (the “Staff”) found us again out of compliance with Rule 5550(b)(1), notwithstanding Nasdaq Listing Rule 5810(c)(2), we willwould not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and the Staff willwould not be permitted to grant additional time for us to regain compliance with respect to that deficiency, nor will we be afforded an applicable cure or compliance period pursuant to Nasdaq Listing Rule 5810(c)(3). Instead, the Staff willwould issue a Delist Determination Letter and we willwould have an opportunity to request a new hearing with the initial Hearings Panel or a newly convened Hearings Panel if the initial Hearings Panel is unavailable. We willwould have the opportunity to respond/present to the Hearings Panel as provided by Nasdaq Listing Rule 5815(d)(4)(C). Our securities may be at that time delisted from Nasdaq.

the number of market markersmakers or broker-dealers for our common stock; and the availability of information concerning the trading prices and volume of shares of our common stock.

our ability to execute on our newcurrent strategic plan;

We are authorized to issue 200,000,000 shares of common stock and 25,000,000 shares of preferred stock. As of March 31, 2025,2026, there were an aggregate of 1,898,06810,209,676 shares of our common stock issued and outstanding and available for issuance on a fully diluted basis and no shares of preferred stock outstanding. That total for our common stock includes 2,894,519 shares issued and outstanding, 348,419 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 3,708 shares of common stock that may be issued through our 2023 Employee Stock Purchase Plan, and 539,0606,963,030 shares of our common stock that may be issued upon the exercise of outstanding warrants.

For example, on August 27, 2024, H.C. Wainwright & Co., LLC (“H.C. Wainwright”) filed a complaint against us in the State of New York alleging that we breached a tail financing provision included in an engagement agreement we entered into with H.C. Wainwright in May 2023. In its complaint, H.C. Wainwright is seeking compensatory and consequential damages and attorneys’ fees. On October 18, 2024, we filed an answer to the complaint.complaint and on September 2, 2025, we filed counterclaims for rescission, fraudulent inducement, and breach of contract against H.C. Wainwright. H.C. Wainwright moved to dismiss our counterclaims in November 2025. The parties fully briefed that motion between November 2025 and January 2026 and the court has set oral argument for July 15, 2026. We are defending theseagainst H.C. Wainwright's claims and pursuing our own counterclaims vigorously, but there is no guarantee that we will be successful in these efforts.

We are a pharmaceutical and biotechnology services company that is focused on providing testing of drugs and drug candidates in three-dimensional (“3D”) human tissue models of liver and intestine. We offer partners liver and intestinal toxicology insights using our new approach methodologies ("NAM") models. We anticipate accelerated adoption of human tissue models following the U.S. Food and Drug Administration (“FDA") announcement on April 10, 2025 to refine animal testing requirements in favor of these non-animal NAM methods. We willalso alsoexpect to offer bespoke services in the areas of investigational toxicology, mechanism of drug action elucidation, and other applications of these complex human tissue models.

In March 2025, we sold our FXR program for $10.0 million, with $9.0 million paid at closing and $1.0 million held in escrow for a period of 15 months, with future milestones of up to $50.0 million in the aggregate to be paid if the lead asset, FXR314, hits key development, regulatory and commercial milestones. In July 2026, we received a milestone payment in the amount of $5.0 million upon the achievement of a certain development milestone related to FXR314.

We are now offering liver toxicology predictive screening and research services as well as working on predicting and studying the intestinal side effect profiles of drugs that are therapeutic candidates of pharmaceutical and biotech companies at all stages of drug development. Our services offer the potential benefit of reducing the significant risk and cost of bringing therapeutics to market through the regulatory process. It is estimated that less than 10% of drug candidates entering clinical trials are approved, with a portion of the failures due to unexpected liver toxicity or intestinal intolerability. In addition, even approved drugs are occasionally withdrawn after liver toxicity is determined to be caused by the drug in a phenomenon called drug induced liver injury. We presented findings at the May 2025 Digestive Disease Week scientific conference showing that our liver toxicology platform had a best-in-class predictive power. Our liver predictive power was shown to be 87.5% for a set of challenging liver toxicity cases – inclusive of classic cases of “liver tox misses” drugs with unforeseen liver toxicity found in clinical trials or drugs that were withdrawn from the market after liver toxicity issues emerged later. The platform identified correctly that 87.5% of the known liver-toxic drugs could be seen as liver toxic using NAMkind™ liver. This is known as the sensitivity of the platform, which we believe at 87.5% is a world’s best. Importantly, the specificity was 100%, meaning that none of the compounds tested that are not liver toxic were incorrectly identified as having liver toxicity issues by the platform.

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles. Any reference in this Annual Report to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates of the Financial Accounting Standards Board. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments used in preparing our financial statements and related disclosures, none of which are considered critical.disclosures. All estimates affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. 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.

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. 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 compensationcompensation, revenue, and revenuecommon stock warrant liabilities 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. These changes, if any, may materially impact our results of operations in the period such changes are made.

On March 25, 2025, we sold our FXR program and related assets to Eli Lilly and Company (the “FXR Asset Sale”). The consideration for the FXR Asset Sale consisted of (i) an upfront cash payment by Lilly to us equal to $10.0 million, of which $9.0 million was paid at closing and the remaining $1.0 million was deposited into escrow for 15 months to satisfy claims for indemnification, (ii) the assumption by Eli Lilly and Company of certain liabilities related to the FXR program, and (iii) potential milestone payments by Eli Lilly and Company of up to $50.0 million in the aggregate, which are contingent upon the achievement of certain development, regulatory and commercial milestones. In July 2026, we received a milestone payment in the amount of $5.0 million upon the achievement of a certain development milestone related to FXR314.

For each of the years ended March 31, 20252026 and 2024,2025, total revenue was $0.1 million. Royalty revenue for each of the years ended March 31, 20252026 and 2024,2025, was related to the sales-based royalty revenue earned from licensing intellectual property. Product revenue iswas related to the sale of human cells developed by ourCompany's former division,Mosaic Mosaic.division As wewhich ended Mosaic's commercial operations during the third quarter of fiscal year2025. 2025,Going thereforward, willwe beexpect noto productgenerate revenueservice fromrevenues Mosaicrelated goingto forward.our service model.

For the years ended March 31, 20252026 and 2024,2025, total cost of revenues was zero and less than $0.1 million and zero,million, respectively, and iswas related to the saleCompany's former Mosaic division which ended operations during the third quarter of finishedfiscal goods2025. inventoryGoing byforward, Mosaic.we expect cost of revenues to increase as we execute our service model.

Total research and development expenses decreased by $0.5$0.8 million, or 9%,17%, from approximately $5.5 million for the year ended March 31, 2024 to approximately $5.0 million for the year ended March 31, 2025.2025 to approximately $4.2 million for the year ended March 31, 2026. Our full-time research and development staff decreased from an average of sixteen employees for the year ended March 31, 2024 to an average of thirteen employees for the year ended March 31, 2025.2025 to an average of ten employees for the year ended March 31, 2026. The decrease in total research and development activities consisted of a $0.3$0.6 million decrease in personnel related costscosts, which includes stock-based compensation, due to the decrease in headcount, including one executive, and a $0.1$0.5 million decrease in facilitiesmaterial andrelated materialscosts costmainly due to ourthe effortswrite-down toof reduceinventory spendingin andthe extendprior ourfiscal cashyear. runway,The whichdecreases waswere offset by ana inventory$0.3 write-off.million increase in consulting costs related to specific research and development work to expand commercial service offerings to future customers.

Net cash used in operating activities was approximately $9.5$10.8 million and $14.7$9.5 million for the years ended March 31, 20252026 and 2024,2025, respectively. The $5.2$1.3 million decreaseincrease in operating cash usage, for the year ended March 31, 2025,2026, was attributable primarily to the $2.0$0.6 million cash payment in fiscaloffering 2024expenses forrelated acquiredto inthe processMarch research2026 Offering and development, in addition to an increase in working capital requirements, including a $3.6$0.8 million increasedecrease to accounts payable and accrued expenses, offset by a $0.3 million decrease in receivables and prepaid expenses.

Net cash provided by investing activities was approximately $9.0$0.1 million and $0.8$9.0 million for the years ended March 31, 20252026 and 2024,2025, respectively. Net cash provided by investing activities for the year ended March 31, 2026 consisted of proceeds of previously liquidated equity securities. Net cash provided by investing activities for the year ended March 31, 2025 consisted primarily of the sale of our FXR program resulting in $9.0 million of proceeds. Net cash provided by investing activities for the year ended March 31, 2024 consisted of the liquidation of equity securities of $0.7 million and $0.1 million of investment income.

Net cash provided by financing activities was approximately $8.8$4.4 million and $1.4$8.8 million for the years ended March 31, 20252026 and 2024,2025, respectively. FinancingDuring the year ended March 31, 2026, financing activities consisted of a public offering of common stock and accompanying common warrants and pre-funded warrants with gross proceeds of approximately $3.0 million, the sale of common stock through at-the-market (“ATM”) share offerings andwith anet public offeringproceeds of commonapproximately stock$1.8 million, and accompanyingthe commonrepayment warrantsof andan pre-fundedinsurance warrants.premium financing liability of approximately $0.4 million. Refer to "Operations funding requirements" below for further information regarding financing activities.

Through March 31, 2025,2026, we have financed our operations primarily through the sale of common stock through public offerings, including our ATM program, 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, the sale of our FXR program, and from the sale of convertible notes.

During the year ended March 31, 2025,2026, we sold 493,372701,729 shares of common stock in ATM offerings for net proceeds of approximately $4.9$1.8 millionmillion, all of which were sold pursuant to the 2024 Shelf. As of March 31, 2025,2026, we have sold an aggregate of 496,4051,198,134 shares of common stock in ATM offerings under the 2024 ATM Prospectus, with grossnet proceeds of approximately $5.0$6.7 million. As of March 31, 2025,2026, there was approximately $142.7$140.1 million available in future offerings under the 2024 Shelf, and approximately $2.3 million available for future offerings through our ATM program under the 2024 ATM Prospectus. As of June 1, 2025, we had approximately $3.1 million available for future offerings through our ATM program under the 2024 ATM Prospectus, as amended on April 11, 2025.

We have operating lease arrangements for office space in San Diego, California. As of March 31, 2025,2026, we had total undiscounted lease payment obligations of $0.5 million payable in the 12 months following March 31, 2025 and $0.5 million payable thereafter.2026.

Risk factors marked with an asterisk (*) below include a substantive change from or an update to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025,2026, filed with the SEC on JuneJuly 5,14, 2025.2026.

We are a pharmaceutical and biotechnology services company focusing on providing testing of drugs and drug candidates in 3D human tissue models, which is an unproven business strategy that may never achieve profitability.

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. On March 16, 2018, we entered into the Sales Agreement pursuant to which we have the ability to sell shares of our common stock to the public through an ATM offering. As of DecemberJune 31,30, 2025,2026, we have issued and sold pursuant to the Sales Agreement an aggregate of 1,530,001 shares of our common stock for gross proceeds of approximately $52.0 million. However, 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. As of the date of filing this quarterly report, 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, with such public float recalculated at the time of sale. If our public float meets or exceeds $75.0 million at any time, we will no longer be subject to the restrictions set forth in General Instruction I.B.6 of Form S-3. 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.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on potential product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Our ability to effectively monitor and respond to the rapid and evolving developments and expectations relating to sustainability, including environmental, social and governance factors may impose unexpected costs or resultsresult in reputational or other harm that could have a material adverse effect on our business.

There is an increasing focus from certain investors, employees, regulators, listing exchanges and other stakeholders concerning corporate responsibility and sustainability matters, including with regarding environmental, social and governance (“ESG”) factors. Some investors and investor groups may use these factors—either positively or negatively—to guide their investment strategies and, in some cases, investors may choose not to invest in our Company if they believe our policies or practices relating to corporate responsibility and sustainability do not align with their expectations. Currently, a variety of third-party providers of corporate responsibility and sustainability ratings measure the performance of companies on ESG topics, and the results of these assessments are widely publicized. Investors, particularly institutional investors, use these ratings to benchmark companies against their peers, and major institutional investors have publicly emphasized the importance of ESG measures to their investment decisions. Topics taken into account in such assessments include, among others, companies’ efforts and impacts on climate change, human rights, business ethics and compliance, diversity, equity and inclusion (“DEI”) and the role of companies’ board of directors in overseeing various sustainability-related issues. In light of investors’ increased focus on sustainability matters, if we are, for example, are perceived as lagging in taking steps with respect to ESG initiatives, certain investors may seek to engage with us on improving our ESG disclosures or performance. They may also make voting decisions, or take other actions to hold us and our board of directors accountable.

*Current and future legislation may increase the difficulty and cost of commercializing drug candidates and may affect the prices that can be charged if drug candidates are approved for commercialization.

Significant disruptions to the operations of government agencies, including from prolonged or repeated shutdown of the federal government, could adversely affect our business, financial condition and results of operations. Recently, from January 31, 2026 to February 3, 2026, the U.S. government partially shut down. Additionally, beginning on October 1, 2025, the U.S. government shut down and remained shut down until November 12, 2025, during which time certain regulatory agencies, such as the FDA and the SEC, has furloughed certain employees and stopped certain activities. Additionally, on October 10, 2025, the U.S. government implemented substantial layoffs and workforce reductions in connection with the ongoing federal government shutdown, which has resulted in the suspension or delay of various government-funded programs. The ability of the FDA to review and approve new products, to provide feedback on clinical trials and development programs, to meet with sponsors and to otherwise review regulatory submissions can be affected by a variety of factors, including government budget and funding levels, reductions in workforce, ability to hire and retain key personnel and accept the payment of user fees, substantial changes in leadership and shifting policy priorities as a result of changes in the presidential administration and its appointees tasked to oversee the agency,personnel, and statutory, regulatory and policy changes. In addition, there may be delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government or contractor personnel. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other agencies onthat whichfund ourresearch operationsand maydevelopment relyactivities is subject to the political process, which is inherently fluid and unpredictable. In addition, government shutdowns, if prolonged, could significantly impact the ability of government agencies upon which we rely, such as the FDA and SEC, to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

*Management has performed an analysis and concluded that substantial doubt exists about our ability to continue as a going concern. Separately, our independent registered public accounting firm has included in its opinion for the year ended March 31, 20252026 an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern, which may hinder our ability to obtain future financing.

Our financial statements as of DecemberJune 31,30, 20252026 have been prepared under the assumption that we will continue as a going concern for the next twelve months. Management has performed an analysis and concluded that substantial doubt exists about our ability to continue as a going concern. Separately, our independent registered public accounting firm included in its opinion for the year ended March 31, 20252026 an explanatory paragraph referring to our recurring losses from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, obtain government grants, reduce expenditures and generate significant revenue. Our financial statements as of DecemberJune 31,30, 20252026 do not include any adjustments that might result from the outcome of this uncertainty. The reaction of investors to the inclusion of a going concern statement by management and our auditors, and our potential inability to continue as a going concern, in future years could materially adversely affect our share price and our ability to raise new capital or enter into strategic alliances.

*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.

As of DecemberJune 31,30, 2025,2026, we had total current assets of approximately $6.0$3.2 million and current liabilities of approximately $2.5$1.9 million, resulting in working capital of $3.5$1.3 million. We have generated operating losses each year since we began operations, including $8.3$2.8 million and $9.5$2.9 million for the ninethree months ended DecemberJune 31,30, 20252026 and 2024,2025, respectively. As of DecemberJune 31,30, 2025,2026, we had an accumulated deficit of $350.2$357.3 million. We expect to incur substantial additional operating losses over the next several years as our research and development activities increase.

We may identify material weaknesses in our internal control over financial reporting in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements.

On March 25, 2025, we sold our FXR program and related assets to Eli Lilly and Company (the “FXR Asset Sale”). The consideration for the FXR Asset Sale included potential milestone payments by Eli Lilly and Company of up to $50.0 million in the aggregate, which are contingent upon the achievement of certain development, regulatory and commercial milestones. ThereIn July 2026, we received a milestone payment in the amount of $5.0 million upon the achievement of a certain development milestone related to the FXR314 Asset sale; however, there can be no assurance that we will be entitled to receive any additional milestone payments, and there is risk that any or all of the additional milestone events may not be achieved, that disagreements may occur regarding the achievement of such milestones and that any or all of the payments tied to the achievement of the additional milestone events might not be received.

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 loseslosses associated with the strategic investments.

We may also discover deficiencies in internal controls, data adequacy and integrity, product quality, regulatory compliance, product liabilities or other undisclosed liabilities that we did not uncover prior to our investment, which could result in us becoming subject to asset impairments, including potential loss of our investment capital. In addition, if we do not achieve the anticipated benefits of an external investment as rapidly as expected, or at all, investors or analysts may downgrade our stock.

On December 28, 2020, we entered into an intercompany agreement with Viscient and Organovo, Inc., our wholly-owned subsidiary (the “Intercompany Agreement”). Pursuant to the Intercompany Agreement and subsequent statements of work entered into pursuant thereto, we agreed to provide Viscient certain services related to 3D bioprinting technology, which includes, but is not limited to, histology services, cell isolation, and proliferation of cells, and Viscient agreed to provide us certain services related to 3D bioprinting technology, including bioprinter training, bioprinting services, and qPCR assays, in each case on payment terms specified in the Intercompany Agreement and as may be further determined by the parties. In addition, Viscient and we each agreed to share certain facilities and equipment and, subject to further agreement, to each make certain employees available for specified projects to the other party at prices to be determined in good faith by the parties. During the second quarter of fiscal 20252027 and first, second, and third quarters of fiscal 2026, the companies added Statements of Work to the Intercompany Agreement, where Viscient agreed to provide us with certain testing services related to our ongoing research and development. Under the Intercompany Agreement, each party will retain its own prior intellectual property and will obtain new intellectual property rights within their respectively defined fields of use.

our ability to execute on our newcurrent strategic plan;

The stock market is subject to significant price and volume fluctuations. The trading price of our common stock is, and is likely to continue to be, volatile. For example, during the quarter ended DecemberJune 31,30, 2025,2026, our closing stock price ranged from $1.81$1.03 to $3.46$1.71 per share. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.

We are authorized to issue 200,000,000 shares of common stock and 25,000,000 shares of preferred stock. As of DecemberAugust 31,10, 2025,2026, there were an aggregate of 3,499,14925,285,144 shares of our common stock issued and outstanding and available for issuance on a fully diluted basis and no shares of preferred stock outstanding. That total for our common stock includes 14,850,612 shares issued and outstanding, 348,419 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, 3,708 shares of common stock that may be issued through our 2023 Employee Stock Purchase Plan (“ESPP”), and 539,06010,082,405 shares of our common stock that may be issued upon the exercise of outstanding warrants.

*Claims, litigation, government investigations and other proceedings may adversely affect our business, operating results and financial condition.

For example, on August 27, 2024, H.C. Wainwright & Co., LLC (“H.C. Wainwright”) filed a complaint against us in the State of New York alleging that we breached a tail financing provision included in an engagement agreement we entered into with H.C. Wainwright in May 2023. In its complaint, H.C. Wainwright is seeking compensatory and consequential damages and attorneys’ fees. On October 18, 2024, we filed an answer to the complaint and on September 2, 2025, we filed an amended answer and counterclaimedcounterclaims for rescission,recission, fraudulent inducement, and breach of contract,contract allegingagainst thatH.C. the Court should rescind the engagement agreement and award us damages, interest, costs, and attorneys’ fees becauseWainwright. H.C. Wainwright misrepresented the services it would provide and breached its duties to us under the engagement agreement. We have briefed H.C. Wainwright's motionmoved to dismiss our counterclaims.counterclaims in November 2025, and the Court granted that motion in July 2026. We are defending against H.C. Wainwright’s claims and pursuing our counterclaims vigorously, but there is no guarantee that we will be successful in these efforts.

The unaudited condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with the Securities and Exchange Commission (the “SEC”) instructions to Quarterly Reports on Form 10-Q. Accordingly, the unaudited condensed consolidated financial statements presented elsewhere in this Form 10-Q and discussed below are unaudited and do not contain all the information required by U.S. generally accepted accounting principles (“GAAP”) to be included in a full set of financial statements. The audited financial statements for the year ended March 31, 2025,2026, filed with the SEC on Form 10-K on JuneJuly 5,14, 2025,2026, include a summary of our significant accounting policies and should be read in conjunction with this Form 10-Q. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in this Form 10-Q. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results of operations for the entire year.

We are a pharmaceutical and biotechnology services company that is focused on providing testing of drugs and drug candidates in three-dimensional (“3D”) human tissue models of liver and intestine. We offer partners liver and intestinal toxicology insights using our new approach methodologies ("NAM") models. We anticipate accelerated adoption of human tissue models following the U.S. Food and Drug Administration (“FDA") announcement on April 10, 2025 to refine animal testing requirements in favor of these non-animal NAM methods. We willalso alsoexpect to offer bespoke services in the areas of investigational toxicology, mechanism of drug action elucidation, and other applications of these complex human tissue models.

We also advance product candidates to treat inflammatory bowel disease ("IBD") discovered and developed using our complex human tissue intestinal models. Prior to March 2025, we were a clinical stage biotechnology company that was focused on developing FXR314 in IBD,inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC"), based on demonstration of clinical promise in 3D human tissues as well as strong preclinical data. Our clinical focus was in advancing FXR314 in IBD, including UC and Crohn’s disease ("CD"). We planned to start a Phase 2a clinical trial in UC in the calendar year 2025 and were also exploring the potential for combination therapies using FXR314 and approved mechanisms in preclinical animal studies and our IBD disease models. We have also advanced a second program since 2023, a novel drug that will be a new chemical entity (“NCE”) to an undisclosed target discovered in our intestinal models to have activity for UC and CD. This drug program (the “Preclinical IBD Program”) has now left the in-silico phase in recent quarters, and has moved to medicinal chemistry stage, the real-world synthesis of novel candidate compounds.

In March 2025, we sold our FXR program for $10.0 million, with $9.0 million paid at closing and $1.0 million held in escrow for a period of 15 months, with future milestones of up to $50.0 million in the aggregate to be paid if the lead asset, FXR314, hits key development, regulatory and commercial milestones. In July 2026, we received a milestone payment in the amount of $5.0 million upon the achievement of a certain development milestone related to FXR314. Additionally, in July 2026, the $1.0 million held in escrow was released to us.

We are now offering liver toxicology predictive screening and research services as well as working on predicting and studying the intestinal side effect profiles of drugs that are therapeutic candidates of pharmaceutical and biotech companies at all stages of drug development. We plan to not only market this directly to pharmaceutical and biotech companies, but also partner with specific contract research organizations to complement our offering and to quickly grow our portfolio of clients. Our services offer the potential benefit of reducing the significant risk and cost of bringing therapeutics to market through the regulatory process. It is estimated that less than 10% of drug candidates entering clinical trials are approved, with a portion of the failures due to unexpected liver toxicity or intestinal intolerability. In addition, even approved drugs are occasionally withdrawn after liver toxicity is determined to be caused by the drug in a phenomenon called drug induced liver injury. We presented findings at the May 2025 Digestive Disease Week scientific conference showing that our liver toxicology platform had a best-in-class predictive power. Our liver predictive power was shown to be 87.5% for a set of challenging liver toxicity cases – inclusive of classic cases of “liver tox misses” drugs with unforeseen liver toxicity found in clinical trials or drugs that were withdrawn from the market after liver toxicity issues emerged later. The platform identified correctly that 87.5% of the known liver-toxic drugs could be seen as liver toxic using NAMkind™ liver. This is known as the sensitivity of the platform, which at 87.5% is a world’s best. Importantly, the specificity was 100%, meaning that none of the compounds tested that are not liver toxic were incorrectly identified as having liver toxicity issues by the platform.

We have also used these human disease models to identify new molecular targets responsible for driving IBD and to explore the mechanism of action of known drugs including JAK inhibitors and related molecules. A portion of our internal research continues to focus on early stage internal drug discovery programs, validating targets, and testing potentially licensable or transactable external drug compounds to identify drug candidates for partnering and/or internal clinical development. This includes the Preclinical IND Program, which has reached a more mature stage than other efforts in this area.

There have been no significant changes to our critical accounting policies since March 31, 2025.2026. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our condensed consolidated financial statements, refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 1. Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended March 31, 2025,2026, filed with the SEC on JuneJuly 5,14, 2025.2026.

Comparison of the three months ended DecemberJune 31,30, 20252026 and 20242025:

The following table summarizes our results of operations for the three months ended DecemberJune 31,30, 20252026 and 20242025 (in thousands, except %):

For the three months ended DecemberJune 31,30, 20252026 and 2024,2025, total revenue was less than $0.1 million. Royalty revenue is related to sales-based royalties from licensing intellectual property. We expect royalty revenue to remain consistent with the current quarter going forward. Product revenue was zero and less than $0.1 million for the three months ended December 31, 2025 and 2024, respectively. Product revenue is related to the Company's former Mosaic division which ended operations during the third quarter of fiscal 2025. Going forward, we expect to generate service revenues related to our service model.

The following table summarizes our research and development expenses for the three months ended DecemberJune 31,30, 20252026 and 20242025 (in thousands, except %):

For the three months ended DecemberJune 31,30, 2025,2026, total research and development expenses were $1.1 million, aan decreaseincrease of approximately $0.6$0.1 million, or 36%,13%, from the prior year period. Our average full-time research and development staff decreasedincreased from an average of thirteen full-time employees for the three months ended December 31, 2024, to an average of ten full-time employees for the three months ended DecemberJune 31,30, 2025.2025, to an average of eleven full-time employees for the three months ended June 30, 2026. Our operations for the three months ended DecemberJune 31,30, 20252026 as compared to the three months ended DecemberJune 31,30, 20242025 resulted in a $0.1 million decreaseincrease in personnel related expenses, which includedincludes salarystock-based and share-based compensation expense,compensation, due to the decreaseincrease in headcount. There was also a $0.5 million decrease in material related expenses mainly due to the write-down of inventory in the prior fiscal year. Going forward, we expect personnel related expenses to increase due to an increase in headcount. We also expect other research and development expenses to increaseremain consistent with the current quarter, followed by a relative shift from research and development expenses to cost of services provided as we execute our service model.revenue commences in the upcoming quarters.

The following table summarizes our selling, general and administrative expenses for the three months ended DecemberJune 31,30, 20252026 and 20242025 (in thousands, except %):

For the three months ended DecemberJune 31,30, 2025,2026, total selling, general and administrative expenses were approximately $1.6$1.7 million, a decrease of approximately $0.1$0.3 million, or 4%,16%, from the prior year period. Our average full-time selling, general and administrative staff remainedincreased atfrom an average of three full-time employees for the three months ended June 30, 2025, to an average of four full-time employees for each of the three months ended DecemberJune 31,30, 2025 and 2024.2026. Our operations for the three months ended DecemberJune 31,30, 20252026 as compared to the three months ended DecemberJune 31,30, 20242025 resulted in a $0.2$0.1 million increase in personnel related expenses, which includes stock-based compensation, due to the increase in headcount. The increase in personnel costs were offset by a $0.4 million decrease in corporate related expenses,expenses mostly due to decreasesthe Company selling its FXR program during the year ended March 31, 2025, which resulted in legalsignificant general and IP related costs during the closing of the sale and investortech relations costs, which was offset by $0.1 increasetransfer in consultingthe expenses.three months ended June 30, 2025. Going forward, we expect selling, general and administrative expenses to remain consistent with the current quarter.

Other income was approximately $0.1$1.4 million andfor the three months ended June 30, 2026, due to a gain on the change in fair value of common stock warrant liabilities. Other income was less than $0.1 million for the three months ended DecemberJune 31,30, 20252025, andmainly 2024, respectively, which was relateddue to interest income.

Going forward, we intend to offer partners liver and intestinal toxicology insights using NAM models. We plan to work with pharmaceutical and biotech companies at all stages of drug development to reduce the significant risk and cost of bringing therapeutics to market through the regulatory process. We also will also offer bespoke services in the areas of investigational toxicology, mechanism of drug action elucidation, and other applications of these complex human tissue models.

The accompanying Condensed 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 DecemberJune 31,30, 2025,2026, we had cash and cash equivalents of approximately $4.3$1.7 million, restricted cash of approximately $0.1 million and an accumulated deficit of $350.2$357.3 million. The restricted cash was pledged as collateral for a letter of credit that the Company is required to maintain as a security deposit under the terms of the lease agreement for its facilities. We had negative cash flow from operations of approximately $8.6$3.2 million during the ninethree months ended DecemberJune 31,30, 2025.2026. At March 31, 2025,2026, we had cash and cash equivalents of approximately $11.3$5.0 million, restricted cash of approximately $0.1 million and an accumulated deficit of approximately $342.2$356.0 million.

The following table summarizes the primary sources and uses of cash for the ninethree months ended DecemberJune 31,30, 20252026 and 20242025 (in thousands):

Net cash used in operating activities for the ninethree months ended DecemberJune 31,30, 2025,2026, was approximately $8.6$3.2 million as compared to $7.4$3.9 million used in operating activities for the ninethree months ended DecemberJune 31,30, 2024.2025. This $1.2$0.7 million increasedecrease in operating cash usage can be attributed primarily to the timing of payables and R&Daccrued projects.expenses.

ThereNet werecash noused in investing activities for the ninethree months ended DecemberJune 31,30, 2025. Net cash provided by investing activities2026, was less than $0.1 million forand was attributed to the nine months ended December 31, 2024, which consistedpurchase of interestfixed income.assets, specifically lab equipment.

Net cash used in financing activities for the three months ended June 30, 2026, was $0.1 million and consisted of the repayment of the insurance premium financing liability. Net cash provided by financing activities was $1.6 million and $5.7$1.7 million for the ninethree months ended DecemberJune 31,30, 20252025, and 2024, respectively. Financing activities consisted of the sale of common stock through at-the-market (“ATM”) share offerings for proceeds of approximately $1.8 million as well as the repayment of the insurance premium financing liability of $0.2$0.1 million for the nine months ended December 31, 2025. Financing activities consisted of the sale of common stock through at-the-market ("ATM") share offerings and a public offering of common stock and accompanying common warrants and pre-funded warrants for the nine months ended December 31, 2024.million.

Through DecemberJune 31,30, 2025,2026, we have financed our operations primarily through the sale of common stock through public offerings, including our ATM program, from revenue derived from the licensing of intellectual property, products and research-based services, grants, and collaborative research agreements, the sale of our FXR program,program and related developmental milestone payments, and from the sale of convertible notes.

Our ongoing cash requirements include research and development expenses, compensation for personnel, consulting fees, legal and accounting support, insurance premiums, facilities, maintenance of our intellectual property portfolio, license and collaboration agreements, listing on the Nasdaq Capital Market, and other miscellaneous fees to support our operations. We expect our total operating expense for the fiscal year ending March 31, 20262027 to be between $10 million and $12$10.7 million. Based on our current operating plan and available cash resources, we will need substantial additional funding to support future operating activities. 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. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

During the ninethree months ended DecemberJune 31,30, 2025,2026, we issueddid 701,729not issue any shares of common stock for net proceeds of approximately $1.8 million, all of which were sold pursuant to the 2024 Shelf. As of DecemberJune 31,30, 2025,2026, we have sold an aggregate of 1,198,134 shares of common stock in ATM offerings under the 2024 ATM Prospectus, with gross proceeds of approximately $6.9 million and net proceeds of approximately $6.7 million. As of DecemberJune 31,30, 2025,2026, there was approximately $140.1 million available for future offerings under the 2024 Shelf, and approximately $3.1 million available for future offerings through our ATM program under the 2024 ATM Prospectus, as amended on April 11, 2025.