UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form
For the quarterly period ended
OR
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 1, 2023, a total of
ORGANOVO HOLDINGS, INC.
INDEX
Item 1. |
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Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and March 31, 2023 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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44 |
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Item 3. |
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45 |
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Item 4. |
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Item 5. |
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Item 6. |
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46 |
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2
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Organovo Holdings, Inc.
Condensed Consolidated Balance Sheets
(in thousands except for share and per share data)
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September 30, 2023 |
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March 31, 2023 |
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(Unaudited) |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Investment in equity securities |
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Prepaid expenses and other current assets |
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Total current assets |
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Fixed assets, net |
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Restricted cash |
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Operating lease right-of-use assets |
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Prepaid expenses and other assets, net |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current Liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Operating lease liability, current portion |
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Total current liabilities |
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Operating lease liability, net of current portion |
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Total liabilities |
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Stockholders’ Equity |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive income |
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Treasury stock, |
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Total stockholders’ equity |
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Total Liabilities and Stockholders’ Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Organovo Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss
(in thousands except share and per share data)
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Three Months Ended |
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Three Months Ended |
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Six Months Ended |
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Six Months Ended |
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September 30, 2023 |
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September 30, 2022 |
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September 30, 2023 |
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September 30, 2022 |
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Revenues |
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revenue |
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$ |
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$ |
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$ |
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$ |
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Total Revenues |
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Research and development expenses |
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Selling, general and administrative expenses |
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Total costs and expenses |
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Loss from Operations |
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Other Income (Expense) |
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(Loss) gain on investment in equity securities |
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Interest income |
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Total Other Income |
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Income Tax Expense |
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Net Loss |
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$ |
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$ |
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$ |
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$ |
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Other Comprehensive Loss: |
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Unrealized loss on available-for-sale debt securities |
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$ |
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$ |
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$ |
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$ |
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Comprehensive Loss |
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$ |
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$ |
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$ |
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Net loss per common share—basic and diluted |
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$ |
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$ |
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$ |
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Weighted average shares used in computing |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Organovo Holdings, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
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Three and Six Months Ended September 30, 2022 |
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Common Stock |
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Treasury Stock |
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Shares |
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Amount |
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Additional Paid-in Capital |
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Shares |
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Amount |
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Accumulated Deficit |
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Accumulated Other Comprehensive Income |
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Total |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock under employee and director stock option, RSU, and purchase plans |
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Stock-based compensation expense |
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Net loss |
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Balance at June 30, 2022 (Unaudited) |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock under employee and director stock option, RSU, and purchase plans |
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Stock-based compensation expense |
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Net loss |
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Balance at September 30, 2022 (Unaudited) |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Three and Six Months Ended September 30, 2023 |
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Common Stock |
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Treasury Stock |
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Shares |
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Amount |
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Additional Paid-in Capital |
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Shares |
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Amount |
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Accumulated Deficit |
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Accumulated Other Comprehensive Income |
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Total |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock under employee and director stock option, RSU, and purchase plans |
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Stock-based compensation |
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Net loss |
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Balance at June 30, 2023 (Unaudited) |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock under employee and director stock option, RSU, and purchase plans |
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Stock-based compensation |
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Net loss |
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Unrealized loss on available-for-sale debt securities |
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Balance at September 30, 2023 (Unaudited) |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Organovo Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
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Six Months Ended |
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Six Months Ended |
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September 30, 2023 |
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September 30, 2022 |
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Cash Flows From Operating Activities |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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(Gain) loss on investment in equity securities |
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Accretion on investments |
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Depreciation and amortization |
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Stock-based compensation |
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Increase (decrease) in cash resulting from changes in: |
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Accounts receivable |
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Prepaid expenses and other assets |
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Accounts payable |
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Accrued expenses |
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Operating lease right-of-use assets and liabilities, net |
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Net cash used in operating activities |
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Cash Flows From Investing Activities |
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Purchases of fixed assets |
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Purchases of investments |
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Maturities of investments |
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Purchases of equity securities |
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Sales of equity securities |
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Liquidation of equity securities |
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Net cash provided by (used in) investing activities |
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Cash Flows From Financing Activities |
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Net cash provided by financing activities |
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Net decrease in cash, cash equivalents, and restricted cash |
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Cash, cash equivalents, and restricted cash at beginning of period |
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Cash, cash equivalents, and restricted cash at end of period |
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$ |
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$ |
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Reconciliation of cash, cash equivalents, and restricted cash to the condensed |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents, and restricted cash |
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$ |
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$ |
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Supplemental Disclosure of Cash Flow Information: |
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Income taxes paid |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Organovo Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Description of Business
Nature of Operations
Organovo Holdings, Inc. (“Organovo Holdings,” “Organovo,” and the “Company”) is a pharmaceutical and biotechnology company that focuses on clinical drug development of the farnesoid X receptor (“FXR”) agonist FXR314. FXR is a mediator of gastrointestinal and liver diseases. FXR agonism has been tested in a variety of preclinical models of inflammatory bowel disease ("IBD"). FXR314 is the lead compound in the Company's established FXR program containing
The Company’s current clinical focus is in advancing FXR314 in IBD, including UC and Crohn’s disease (“CD”). The Company plans to start a Phase 2a clinical trial in UC in the calendar year 2024.
A second focus of the Company is building high fidelity, 3D tissues that recapitulate key aspects of human disease. The Company uses its proprietary technology to build functional 3D human tissues that mimic key aspects of native human tissue composition, architecture, function and disease. Management believes these attributes can enable critical complex, multicellular disease models that can be used to develop clinically effective drugs across multiple therapeutic areas.
As with the clinical development program, the Company is initially focusing on the intestine and has ongoing 3D tissue development efforts in human tissue models of UC and CD. The Company uses these models to identify new molecular targets responsible for driving these diseases and to explore the mechanism of action of known drugs including FXR314 and related molecules. The Company intends to initiate drug discovery programs around these new validated targets to identify drug candidates for partnering and/or internal clinical development.
The Company’s current understanding of intestinal tissue models and IBD disease models leads it to believe that it can create models that provide greater insight into the biology of these diseases than are generally currently available. The Company is creating high fidelity disease models, leveraging its prior work including the work found in its peer-reviewed publication on bioprinted intestinal tissues (Madden et al. Bioprinted 3D Primary Human Intestinal Tissues Model Aspects of Native Physiology and ADME/Tox Functions. iScience. 2018 Apr 27;2:156-167. doi: 10.1016/j.isci.2018.03.015.) Organovo’s advances include cell type-specific compartments, prevalent intercellular tight junctions, and the formation of microvascular structures.
Using these disease models, the Company intends to identify and validate novel therapeutic targets. After finding therapeutic drug targets, the Company intends to focus on developing novel small molecule, antibody, or other therapeutic drug candidates to treat the disease, and advance these novel drug candidates towards an Investigational New Drug (“IND”) filing and potential future clinical trials.
The Company expects to broaden its work into additional therapeutic areas over time and is currently exploring specific tissues for development. In the Company’s work to identify the areas of interest, it evaluates areas that might be better served with 3D disease models than currently available models as well as the potential commercial opportunity. In line with these plans, the Company is building upon both its external and in house scientific expertise, which will be essential to its drug development effort.
Except where specifically noted or the context otherwise requires, references to “Organovo Holdings”, “the Company”, and “Organovo” in these notes to the unaudited condensed consolidated financial statements refers to Organovo Holdings, Inc. and its wholly owned subsidiaries, Organovo, Inc., and Opal Merger Sub, Inc.
7
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not necessarily include all information and notes required by GAAP for complete financial statements. The condensed consolidated balance sheet at March 31, 2023 is derived from the Company’s audited consolidated balance sheet at that date.
The unaudited condensed consolidated financial statements include the accounts of Organovo and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, which are only normal and recurring, necessary for a fair statement of the Company’s financial position, results of operations, stockholders’ equity and cash flows. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023, as filed with the Securities and Exchange Commission (“SEC”). Operating results for any interim period are not necessarily indicative of the operating results for any other interim period or the Company’s full fiscal year ending March 31, 2024 (see “Note 1. Description of Business”).
Liquidity and Going Concern
The accompanying 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 September 30, 2023, the Company had cash and cash equivalents of approximately $
Through September 30, 2023, the Company has financed its operations primarily through the sale of common stock through public and at-the-market (“ATM”) offerings, the private placement of equity securities, from revenue derived from the licensing of intellectual property, products and research service-based services, grants, and collaborative research agreements, and from the sale of convertible notes. During the six months ended September 30, 2023, the Company issued
Based on the Company's current operating plan and available cash resources, it will need substantial additional funding to support future operating activities. The Company has concluded that the prevailing conditions and ongoing liquidity risks faced by it raise substantial doubt about its ability to continue as a going concern for at least one year following the date these financial statements are issued. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. As the Company continues its operations and is focusing its efforts on drug discovery and development, the Company will need to raise additional capital to implement this business plan. The Company cannot predict with certainty the exact amount or timing for any future capital raises. The Company will seek to raise additional capital through debt or equity financings, or through some other financing arrangement. However, the Company cannot be sure that additional financing will be available if and when needed, or that, if available, it can obtain financing on terms favorable to its stockholders. Any failure to obtain financing when required will have a material adverse effect on the Company’s business, operating results, and financial condition.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions.
Investments
Investments consist of investments in debt securities and investments in equity securities.
Investments in debt securities consist of investments in U.S. Treasury bills. As of September 30, 2023, all investments that have original maturities of three months or less are classified as cash equivalents on the Condensed Consolidated Balance Sheets. Prior to
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December 31, 2022, the Company classified certain investments as held-to-maturity. All investments previously classified as held-to-maturity matured prior to December 31, 2022. As of September 30, 2023 and March 31, 2023, all investments are classified as available-for-sale, as the sale of such investments may be required prior to maturity to implement management strategies. Available-for-sale debt securities are recorded at fair value. Any unrealized gains and losses are included in accumulated other comprehensive income as a component of stockholders' equity until realized. As U.S. Treasury bills have minimal risk, any declines in fair value are considered temporary.
Investments in equity securities consist of investments in the common stock of entities traded in active markets. The Company does not have the ability to exercise significant influence over any entities. Therefore, initial investments are recorded at cost, and are remeasured at fair value as of the balance sheet date. Any gains or losses resulting from the change in fair value are recorded in net income. The investments in equity securities are classified as current assets.
Fair value measurement
Financial assets and liabilities are measured at fair value, which is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Net Loss Per Share
Basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. The weighted-average number of shares used to compute diluted loss per share excludes any assumed exercise of stock options, shares reserved for purchase under the Company’s 2016 Employee Stock Purchase Plan (“ 2016 ESPP”), the assumed vesting of restricted stock units (“RSUs”), and shares subject to repurchase as the effect would be anti-dilutive.
Common stock equivalents excluded from computing diluted net loss per share due to their anti-dilutive effect were approximately
Revenue recognition
The Company has generated revenues from payments received from licensing intellectual property.
The Company has entered into a license agreement with a company that includes the following: (i) non-refundable upfront fees and (ii) royalties based on specified percentages of net product sales, if any. At the initiation of the agreement, the Company has analyzed whether it results in a contract with a customer under Topic 606.
The Company has considered a variety of factors in determining the appropriate estimates and assumptions under these arrangements, such as whether the Company is a principal vs. agent, whether the elements are distinct performance obligations, whether there are determinable stand-alone prices, and whether any licenses are functional or symbolic. The Company has evaluated each performance obligation to determine if it can be satisfied and recognized as revenue at a point in time or over time. Typically, non-refundable upfront fees have been considered fixed, while sales-based royalty payments have been identified as variable consideration which must be evaluated to determine if it has been constrained and, therefore, excluded from the transaction price. Please refer to “Note 6: Collaborative Research, Development, and License Agreements” for further information.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies. Unless otherwise stated, the Company believes that the impact of the recently issued accounting
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pronouncements that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.
Note 3. Investments and Fair Value Measurement
Investments in debt securities
As of September 30, 2023, the Company held $
The following table summarizes the Company's investments in debt securities that are measured at fair value as of September 30, 2023 (in thousands):
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Amortized costs basis |
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|
Gross unrealized gains |
|
|
Gross unrealized losses |
|
|
Fair value |
|
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As of March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
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Investment in debt securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment in debt securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Investments in equity securities
For the six months ended September 30, 2023, there was $
The following table presents the activity for investments in equity securities measured at fair value for the six months ended September 30, 2023 (in thousands):
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|
Investment in Equity Securities |
|
|
Balance at March 31, 2023 |
|
$ |
|
|
Liquidation of equity securities |
|
|
( |
) |
Gain on investment in equity securities |
|
|
|
|
Balance at September 30, 2023 |
|
$ |
|
|
Note 4. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
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|
September 30, |
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|
March 31, |
|
||
Accrued compensation |
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$ |
|
|
$ |
|
||
Accrued legal and professional fees |
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|
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|
|
|
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Acquired in-process research and development |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Note 5. Stockholders’ Equity
Preferred Stock
The Company is authorized to issue
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Common Stock
In March 2021, the Company's Board of Directors ("Board") approved the 2021 Inducement Equity Incentive Plan ("Inducement Plan"). The Inducement Plan authorized the issuance of up to
On October 12, 2022, the Company's stockholders and the Board approved the 2022 Equity Incentive Plan ("2022 Plan"), and it became effective on that date. The 2022 Plan replaced the Amended and Restated 2012 Equity Incentive Plan ("2012 Plan") on the effective date. Upon the effective date, the Company ceased granting awards under the 2012 Plan and any shares remaining available for future issuance under the 2012 Plan were cancelled and are no longer available for future issuance. The 2012 Plan continues to govern awards previously granted under it. At the time the Board approved the 2022 Plan, an aggregate of
The Company previously had an effective shelf registration statement on Form S-3 (File No. 333-222929), declared effective by the SEC on February 22, 2018 (the “2018 Shelf”), which registered $